Saudi Arabia is rolling out a broad tourism offering across the country as a central part of its Vision 2030 national transformation strategy. Following the launch of the tourist visa programme in September 2019 and the subsequent downturn associated with the Covid-19 pandemic, 2021 and 2022 have featured an ambitious calendar of events ranging from the Formula 1 Grand Prix, to arts and cultural festivals. In October 2021 the Ministry of Tourism announced a $1trn investment package for the sector over the next 10 years. This reflects the Kingdom’s ambitions to become one of the top tourist destinations both regionally and globally.
Leisure tourism offerings, with a particular focus on medium- and high-income tourists, are set to expand as a series of mega-project destinations come on-line through to 2030. Saudi Arabia is developing an array of destinations, tailored to the geographic and environmental variety of the country. Many of the Kingdom’s new tourism destinations are along the west coast, bringing newfound importance to this part of Saudi Arabia, following the previous development focus on the east as the centre of the energy economy.
The Kingdom’s new giga- and mega-projects are driving the sector’s growth, in addition to a series of projects focused on heritage and upgrading existing destinations. To facilitate the rapid growth of tourism, significant infrastructure is currently under development, including new hotels, commercial facilities and transport networks. The recent expansion of the tourism sector represents one of the most visible signs of the country’s transformation, in line with its efforts to attract more tourists and investment.
In addition to unlocking significant international tourism potential, one of the sector’s central aims is to capture the domestic tourism market while enhancing the quality of life of Saudi Arabia’s population through a range of new attractions. The industry is being seen as key to both creating more job opportunities for Saudi citizens and harnessing new revenue streams.
Structure & Oversight
There have been a number of structural changes as the tourism sector has grown and developed in recent years. In 2020 three new tourism entities were established to oversee the sector and support its expansion: the Ministry of Tourism, the Saudi Tourism Authority and the Tourism Development Fund. The Ministry of Tourism, formerly the Saudi Commission for Tourism and National Heritage, is responsible for defining strategy and policy in addition to regulating the sector. The Saudi Tourism Authority is responsible for promoting Saudi Arabia as a global tourism destination and developing the country’s tourism brand. The authority is also charged with developing the sector by building commercial partnerships and coordinating with local tourism destinations to attract more tourists to the country. The Tourism Development Fund, meanwhile, is responsible for executing the ministry’s investment strategy, which includes designing investment plans and providing funding for the sector. The fund has a $4bn endowment to invest in the sector and provides support for businesses operating in and seeking to enter the Saudi tourism market.
Diversification
The country aims to make tourism one of the biggest industries after energy, with the national leadership viewing it as vital to the realisation of Vision 2030. The Kingdom has an official target to raise the contribution of the sector from 3% of GDP in 2016 to 10% by 2030. In 2022 public officials announced that the sector is expected to exceed this target and account for up to 15% of GDP by 2030.
The Kingdom has a target of 100m overnight visitors per year by 2030, 45% of which are expected to be domestic and 55% international. According to a 2022 report by Entrepreneurship Middle East, by 2030, 50% of tourists are expected to visit for leisure, 32% for religious tourism, 10% for visiting friends and family (VFR), and 9% for business tourism. In comparison, there were a total of 45m visits in 2019, 40% of which were leisure tourists, at approximately 18m, 38% religious tourists, 13% VFR tourists and 9% business tourists. In this breakdown, visits include any domestic or international tourist arrival, meaning that a single tourist may account for multiple visits to different locations. To accommodate these arrivals, the Kingdom seeks to add 500,000 hotel rooms across the country by 2030.
The tourism sector will also be highly important for job creation. In March 2022 Qusai Al Fakhri, CEO of the Tourism Development Fund, said at an event in Riyadh that the tourism sector is expected to create 1m new tourism jobs by 2030. New jobs in adjacent sectors such as construction and transport are also expected to be created as the sector expands.
Strategies
Saudi Arabia’s National Tourism Strategy identified 10 key destinations in the Kingdom that present opportunities for investors across the tourism value chain. These are Jouf, Hail, Al Ula, Medina, Riyadh, Eastern Province, Jeddah, Taif, Al Baha and Aseer. Meanwhile, the Tourism Development Fund has identified six high-growth segments with opportunities for investors. These are tourism destinations and attractions, tourism and travel services, accommodation, tourism experiences and activities, food and beverages at tourist destinations, and tourism retail.
In February 2022 the Kingdom launched its Digital Tourism Strategy, designed to deliver the next stage of the sector’s expansion and development, and accelerate progress towards the goals of the National Tourism Strategy. The strategy aims to implement agile digital and technology procedures throughout the sector in order to provide tourists and stakeholders with a more seamless experience. The strategy focuses on a number of areas, including promoting a Kingdom-wide culture of innovation and future-proof regulations, pioneering new digital business models to increase market demand for service providers, and upskilling and reskilling the country’s tourism workforce. The strategy consists of nine programmes and 31 initiatives that are set to be implemented over a period of three years.
In line with job creation, human capital is an important strategic focus for the sector. In June 2022 the Ministry of Tourism launched a new programme that will see 100,000 Saudis trained in key hospitality skills needed for the tourism sector throughout 2022.
Size & Performance
Saudi Arabia’s tourism sector is forecast to grow by an average of 11% annually over the next decade, according to a 2022 report from the World Travel & Tourism Council, making it the fastest growing in the Middle East. As the world emerges from the pandemic, the tourism sector is seeing a return to growth and resuming the path towards expansion established in 2019. According to the Saudi Tourism Authority, the tourism sector accounted for 5.3% of GDP, with 836,000 jobs created as of 2022.
Record domestic travel was registered in 2021. In May 2022 Fahd Hamidaddin, CEO of the Saudi Tourism Authority, reported the country witnessed 62m tourist visits in 2021. Of this figure, 32.5m were domestic visits and 29.5m were international arrivals. Hamidaddin also noted that visits were up 130% in the first quarter of 2022 compared with the fourth quarter of 2019.
This performance has been supported by sustained efforts to finance expansion. In November 2021 the Tourism Development Fund told local press that between June 2020 and September 2021 it had deployed $533m, with an additional $1.1bn of funding coming from the private sector.
Hotels
In the hotel industry, the number of branded keys reached approximately 61,400 in the first quarter of 2022, representing an increase of more than 4% compared to the same period in 2021, according to real estate consultancy Colliers. The firm expects the market to increase at a compound annual growth rate of 11% from 2022 to 2024, with an additional 23,300 keys expected to be added to the market. Moreover, the Kingdom moved up 10 places in the 2021 World Economic Forum Travel and Tourism Development Index, ranking 33rd compared to 43rd in 2019. The index covers some 117 countries.
A number of major global hotel chains have announced new expansion plans in the Kingdom. In June 2021 hotel group Accor announced it had 33 properties in the pipeline, with 10,060 keys to be added to its existing 39 properties in the Kingdom. Hilton also announced in 2021 that it had 46 hotels under development, which would add to its existing 15 hotels in the country. It plans to expand its operations to more than 75 properties over the next few years. IHG, meanwhile, announced in December 2021 that it had 23 hotels in the development pipeline, to add to the 37 hotels it already operates. The company’s developments are expected to open between 2025 and 2027.
Global property consultancy Knight Frank reported in 2022 that this was the biggest hotel supply pipeline ever seen in the region. The firm forecasts a 63.2% surge in four- and five-star hotel rooms by 2030.
Giga-projects
Growing demand for leisure tourism dovetails with the development of giga-projects. A number of these mega-developments are being purpose built for the domestic and international tourism markets. According to Knight Frank, giga-projects account for nearly 73% of the hotel supply pipeline.
In March 2022 NEOM – the $500bn smart and sustainable city project spearheaded by the Public Investment Fund on the north-west coast – announced a new global destination for mountain tourism called Trojena. Situated in the centre of NEOM, the year-round destination will consist of a ski village, a man-made freshwater lake, ultra-luxury family and wellness resorts, a nature reserve, retail stores and restaurants, and water sports and mountain biking activities. The project is expected to be completed by 2026 and attract 700,000 visitors and 7000 permanent residents by 2030. It is estimated the project will create more than 10,000 jobs and add $800m to GDP by 2030. Trojena’s climate is designed to be one of the project’s most attractive features. The average temperature throughout the year is 10 °C lower than other cities across the region and temperatures drop below zero in winter. The area is situated in a mountain range with peaks that reach 2600 metres.
Elsewhere in the Kingdom, phase one of The Red Sea Project is set for completion in 2024, and will include 16 hotels with 3000 rooms across four islands and two inland sites. The first three hotels are set to open in early 2023. Once the site is fully operational in 2030, the project is expected to include 50 hotels with 8000 hotel rooms and more than 1000 residential properties across 22 islands and six inland sites. It is forecast to contribute $5.9bn to GDP and cap visitors to 1m per year by 2030, in line with sustainability efforts. The 28,000-sq-km site on the west coast includes more than 90 islands, kilometres of desert dunes, dormant volcanoes and mountain landscapes.
Amaala, another giga-project under Vision 2030, is being constructed further north along the Red Sea coast. The family wellness destination will be composed of three parts: Triple Bay, The Coastal Development and The Island. Phase one of Triple Bay is under way and is set to be complete in 2024. It will consist of eight resorts offering upwards of 1300 hotel keys. As of September 2022 more than 300 contracts had been awarded, worth more than SR6.6bn ($1.8bn).
Once complete, Amaala will be home to more than 3000 hotel rooms across 25 hotels, and approximately 900 residential villas, apartments, and estate homes, alongside retail and dining establishments, wellness centres and recreational facilities.
Meanwhile, construction on Diriyah gate, the Kingdom’s $50bn heritage and tourism project, officially began in 2021. Located 15 minutes north-west of Riyadh’s city centre, the 7-sq-km development will be a mixed-use cultural, heritage and lifestyle destination with a series of luxury restaurants, hotels, residences, museums and cultural attractions. Diriyah’s buildings, inspired by traditional Arab architecture, will be in a pedestrianised zone. At its centre is the At-Turaif mudbrick city, the historic home of the Al Saud family and a UNESCO World Heritage site that has been preserved and restored over recent years. The project is set to have a phased opening starting in 2022 and continuing through to 2030. Diriyah is expected to put Riyadh on the global tourism map, with a target of 30m local and international visitors by 2030.
The Diriyah project will include 180,000 sq metres of retail space and 110,000 sq metres of office space, as well as more than 3000 luxury apartments, townhouses and villas. In December 2021 the first 14 of the project’s planned 38 hotel brands were announced. The development is expected to have a permanent population of 100,000 upon completion.
New Destinations
In April 2021 a new tourism master plan was announced for Al Ula, one of the country’s flagship tourist destinations located in north-west. Al Ula is home to ancient ruins, 2000-year-old rock-cut tombs, date farms, and a landscapes similar to the Petra archaeological site in Jordan and its neighbouring Wadi Rum desert. In 2008 UNESCO designated Hegra, a Nabataean archaeological site, also known as Mada’in Saleh, as Saudi Arabia’s first World Heritage site. The region is located along the historic incense route, a 2000-year-old trading route that transported frankincense and myrrh from Yemen and Oman to areas along the Mediterranean Sea.
Al Ula’s new master plan, Journey Through Time, aims to turn the area into a global destination for travellers focused on heritage, nature, art and culture. It envisages Al Ula becoming a living museum by showcasing 200,000 years of natural and human history. At the centre of the development will be a historical tram line inspired by the Hijaz Railway, that will connect five distinct districts across the area.
Al Ula officially opened to international travellers in 2020. In March 2021 Al Ula’s airport opened to international flights following an expansion project that quadrupled its capacity to 400,000 travellers a year. Much larger expansions of the airport are due to be implemented in the coming years to facilitate an expected influx of visitors. In February 2022 Amr Al Madani, the CEO of the Royal Commission for Al Ula, told local press that the destination aims to draw 250,000 visitors by 2023. Al Ula has an ultimate goal of attracting 2m visitors by 2035.
In order to accomplish its aims, the government launched a $13.3bn strategy for the development of its south-western Aseer region under the title of the Arabian Highland. The strategy aims to turn the region into year-round international tourism destination and attract more than 10m visitors annually by 2030. Earlier in 2021 Saudi Arabia launched the Soudah Development Company to develop a luxury mountain destination in the south-western Aseer region around Saudi Arabia’s highest mountain, Al Soudah, at 3015 metres. The mountain currently attracts around 1m visitors a year but the new development aims to increase this to 2m annual visitors and make the Soudah area an international tourist destination. Approximately $3bn is being invested in the project, which will see the development of 2700 hotel rooms, 1300 residential units, and 30 commercial and entertainment attractions. It will cover an area of 627 sq km and focus on sustainable tourism and environmental preservation. The destination is set to be launched at the end of 2023 and is expected to contribute $7.7bn to GDP by 2030.
Outlook
Tourism is helping to reposition and reshape Saudi Arabia. The country’s diverse offering – from the ancient history and cultural heritage of Al Ula, to the coast of the Red Sea – offers a unique experience for tourists. The array of projects under development demonstrate its aspirations to become a more diverse destination for both foreign investment and visitors.
Tourism will continue to be important over the coming decade, particularly because a thriving tourism sector is central to the Kingdom’s plans to create a more diversified and sustainable economy. Continued government support for the sector demonstrates the importance of tourism in efforts to help the Kingdom reduce its reliance on hydrocarbons and diversify sources of revenue. If the country’s ambitions are realised, the sector will be well positioned to be at the centre of diversification efforts in the coming years.
