As the birthplace of Islam and with a history stretching back thousands of years, Saudi Arabia’s tourism appeal has been deeply intertwined with its religious significance. However, apart from the Hajj and Umrah pilgrimages and typical business travel, the Kingdom’s rich cultural tapestry and natural wonders remained largely closed to international visitors for decades. This changed in September 2019 when the Kingdom introduced tourist visas for the first time.
Fuelled by Vision 2030’s long-term national development goals, Saudi Arabia has embarked on an ambitious path of transformation, seeking to position itself as a global tourism destination. Recognising the industry as a vital catalyst for diversification and job creation, the Kingdom has implemented a comprehensive range of reforms and investment programmes aimed at reshaping its image, promoting its diverse tourism offerings and establishing the sector as a leading non-oil GDP contributor.
Opening Up
By easing visa procedures, broadening the array of travel destinations and implementing a robust investment pipeline for leisure infrastructure, Saudi Arabia has increased its competitiveness and elevated its regional profile. With UNESCO World Heritage sites in Diriyah and Mada’in Saleh, pristine coastal regions of the Red Sea, and several ongoing giga-projects, among them the futuristic NEOM smart city, along with hosting high-profile events like the Saudi Arabian Grand Prix, the Dakar Rally and the 2022 World Travel & Tourism Council (WTCC) Global Summit, the Kingdom is now in the spotlight for its leisure and entertainment value proposition. This was validated by its election as the chair of the executive council of the UN World Tourism Organisation (UNWTO) for 2023, the first country in the GCC to be selected to hold the post.
Despite initial setbacks due to Covid-19 travel restrictions, Saudi Arabia’s tourism sector has experienced a rapid rebound, poised to not only meet but surpass its targets. As a result, the Kingdom emerged as one of the top tourism destinations in 2022, according to the UNWTO.
With 16.6m foreign arrivals that year, Saudi Arabia has ascended 12 places to claim the 13th spot in the UNWTO ranking, eclipsing its pre-pandemic position of 25th. Similarly, in the World Economic Forum (WEF) Travel and Tourism Index, the Kingdom achieved the second-biggest improvement among 117 featured countries, climbing to the 33rd spot from 43rd between 2019 and 2021. These accomplishments have propelled Saudi Arabia ahead of its G20 counterparts, firmly on track to unleash its socio-economic transformation.
Structure & Oversight
To steer its burgeoning tourism industry, the Kingdom established a core ecosystem in 2020. This ecosystem consists of three key public entities: the Ministry of Tourism (MoT), the Saudi Tourism Authority (STA) and the Tourism Development Fund (TDF). Each entity has distinct responsibilities and plays a vital role in overseeing, promoting and supporting the sector’s growth.
Replacing the Saudi Commission for Tourism and National Heritage, which had been the first government agency responsible for the tourism sector since 2000, the MoT is entrusted with defining the national tourism strategy, issuing licences, formulating policies and regulations, and fostering an attractive environment and human capital development. Conversely, the STA’s primary role is to showcase Saudi Arabia as an enticing tourism destination, develop its tourism brand and cultivate partnerships with relevant stakeholders to attract more visitors.
Meanwhile, the TDF focuses on executing the MoT’s investment strategy, which includes designing investment plans, providing funding for both large and small tourism businesses, and enhancing the appeal of the tourism sector for lenders and investors. With an initial endowment of $4bn, the TDF had 23 projects under development as of April 2023, with a total investment of approximately $4.26bn.
Strategy
Saudi Arabia’s tourism aspirations revolve around its ambitious National Tourism Strategy, which outlines a set of targets to be achieved by 2030. These include attracting 100m overnight tourists annually, with a 45% domestic and 55% international split, boosting the contribution of tourism to 10% of GDP, a figure revised upwards to 15% in 2022, and generating 1m new jobs within the sector.
To support these goals, Saudi Arabia has adopted an ambitious investment strategy, allocating $1trn through to the end of the decade to reshape the nation into a premier leisure destination, with a focus on improving infrastructure, hospitality, tourism and residential facilities. It also aims to create new destinations beyond the major cities of Riyadh and Jeddah, extending to various other regions.
Within the Kingdom, Saudi Arabia has identified 10 key destinations that present significant investment opportunities across the entire tourism value chain. These include Jouf, Hail, Al Ula, Medina, Riyadh, Eastern Province, Jeddah, Taif, Al Baha and Aseer.
In tandem with expanding leisure infrastructure, Saudi Arabia is actively working towards increasing foreign arrivals by enhancing transport capacity. A key development in this regard was the unveiling of the master plan for the new King Salman International Airport in November 2022. Spanning approximately 57 sq km, allowing and projected to accommodate as many as 120m travellers by 2030, the project aims to create one of the world’s largest airports.
Additionally, in February 2023 the Kingdom announced the launch of Riyadh Air, a new carrier wholly owned by Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF). Riyadh Air is projected to serve 100 destinations and play an important role in tripling annual passenger traffic to 330m by 2030, along with expanding the number of destinations to 250 from the current 99.
To complement improved connectivity, the MoT has implemented 11 advertising campaigns aimed at introducing the Kingdom’s tourism offerings to 35 countries. In addition to brick-and-mortar investments, the Kingdom embarked on a three-year Digital Tourism Strategy in February 2022, aiming to propel the sector’s growth and position Saudi Arabia as a global leader in digital tourism.
With a focus on leveraging technology, this strategy encompasses nine programmes and 31 core initiatives, all designed to digitise and simplify processes across the tourism industry’s value chain, enhancing the experience of tourists and stakeholders alike. The strategy places emphasis on nurturing a culture of innovation, pioneering new digital business models, and empowering the tourism workforce through upskilling and reskilling initiatives.
Regulatory Reforms
Expanding on its regulatory ecosystem, Saudi Arabia’s Cabinet approved a new tourism law in August 2022. This legislation incorporates 10 policies that focus on enhancing the ease of conducting business and elevating quality control standards within the industry. Taking into account best practices observed and implemented in the top-20 countries of the WEF’s Travel and Tourism Competitiveness Index, the law came into effect in March 2023. This grants the MoT increased regulatory authority over a wide range of tourism services providers, establishing regulations, monitoring compliance and imposing penalties on violators.
To further augment the Kingdom’s appeal to investors, the MoT is simplifying licensing procedures by establishing a unified platform that serves as a onestop shop for all tourism stakeholders. Additionally, the new law mandates the creation of an updated and accessible information database, which includes statistics and information on all aspects of Saudi tourism. Crucially, the law empowers the MoT to collaborate with the private sector to establish work plans and training programmes to boost human capital development and facilitate tax breaks, creating incentives for businesses to invest in the sector.
To foster innovation and cope with a growing number of inbound travellers, the MoT approved a new by-law in January 2023 enabling citizens to rent out their homes to tourists for the first time, paving the way for Airbnb-style businesses. Under the by-law, Saudi citizens can apply for a permit to rent out their property, meeting minimum quality standards that are cost-effective and manageable for small businesses. A dedicated portal will be launched for citizens to apply for permits and advertise their properties through an official tourism service provider. The Kingdom has also implemented laws to safeguard tourists’ rights and ensure accurate representation of properties and prices in both Arabic and English. The new by-law allows a maximum of three permits issued per property, with durations ranging from one to three years.
Visas
To maximise the positive impact of foreign arrivals, Saudi Arabia has implemented significant visa reforms, broadening the eligibility criteria for entering the Kingdom. The introduction of tourist visas garnered immediate attention, with more than 24,000 visitors in the first 10 days alone.
Subsequently, the visa application process, both in-person at embassies and electronically, has been simplified and expanded. From an initial base of 49 countries eligible to apply for a visa in 2019, this was extended to foreign nationals holding residence or visas issued by a Schengen member state, the UK or the US. GCC residents, albeit those on an approved occupation list, were also included. In January 2023 Saudi Arabia introduced a new free transit visa, allowing stopover passengers to stay for up to four days. This is issued in conjunction with plane tickets from Saudia and Flynas, and can be used for leisure, business or religious purposes. Further expanding the visa programme, in March 2023 GCC residents became eligible for Saudi tourist visas for multiple or single entries, regardless of their profession.
Small Businesses
The surge in tourism presents opportunities for tourism-related small and medium-sized enterprises (SMEs) as entrepreneurs increasingly look to cater to the needs and preferences of both domestic and international travellers. Moreover, the Kingdom’s commitment to promoting entrepreneurship through programmes and incentives empowers tourism-related businesses to thrive.
A prime example is the AWN Tourism and Hospitality programme, launched by the TDF in December 2022, offering flexible financing loans of up to SR10m ($2.7m) and a repayment period of up to 10 years.
This programme builds on the success of the $80m Tourism Finance Programme, a collaboration between the TDF and the Arab National Bank, which provides tailored solutions and soft financing products for small and micro enterprises, which comprise up to 90% of establishments within the tourism sector.
These initiatives are further complemented by the cooperation agreement between the TDF and the General Authority for Small and Medium Enterprises (Monsha’at), aimed at expediting projects that support SMEs and identifying talented entrepreneurs. With the value of SME projects under development already surpassing SR1bn ($266.6m), the agreement aims to foster further growth in this space.
Skills & Training
The Kingdom’s sustainable growth ambitions rely on public-private collaboration to deliver training programmes that create job opportunities for Saudi nationals. In 2022 the sector recorded a 15% increase in employment, resulting in the creation of 880,000 jobs for Saudis, with women comprising 44% of the workforce.
With tourism projected to create over 1m jobs by 2030, human capital training of Saudi youth has become as critical as ever. In response to this need, a memorandum of understanding was signed in March 2023 between the MoT and King Faisal Charitable Foundation, establishing the King Faisal International Academy for Tourism and Hospitality and Royal Services. This academy is envisioned as a platform to incubate and empower Saudi talent to become future leaders in the hospitality industry. With accredited programmes from leading international institutions, the academy will set rigorous standards for the qualification of hospitality professionals, equipping the new generation to compete globally and contribute to the improvement of the Kingdom’s tourism sector.
In June 2022 Saudi Arabia launched the $100m Tourism Trailblazers programme, training 100,000 young Saudis with essential hospitality skills for careers in the tourism industry. The government aims to achieve a 60% Saudiisation target by 2030, and over 6000 Saudis are currently undergoing technical training for roles in the growing tourism sector by the end of 2022, as reported by Saudi Arabia’s Technical and Vocational Training Corporation (TVTC).
TVTC focuses on specialised training programmes to prepare citizens for leadership and technical roles in tourism and hospitality. The tourism sector’s growth presents opportunities to reduce the Kingdom’s unemployment rate from 11.6% to 7% by 2030.
In August 2022 TVTC announced had received over 230,000 trainees in more than 260 training facilities and partnership institutes across the country. Additionally, the TDF has partnered with the Project Management Institute to enhance tourism management skills, develop educational programmes, and provide training for the fund’s employees, clients and investors. Together, they will collaborate on defining an action plan to improve the Kingdom’s tourism sector, while sharing knowledge and expertise in the field.
Size & Performance
By the first quarter of 2023 the Middle East became the first region worldwide to fully recover pre-pandemic tourism numbers, growing by 15% compared with the first quarter of 2019. Saudi Arabia stood out, witnessing a 64% surge in international tourist arrivals over the same period, totalling 7.8m visitors. This performance not only marked Saudi Arabia’s highest quarterly figures but also solidified its position as the second-fastest growing tourism market in the Middle East. In 2022 the Kingdom recorded a 121% increase from pre-pandemic levels, as recognised by the UNWTO “World Tourism Barometer”. This positioned Saudi Arabia as the second-largest Arab market for tourist arrivals in 2022, with over 16.6m visitors. The Kingdom’s growth trajectory has been maintained in 2023, with 2.4m and 2.5m foreign visitors recorded in January and February, respectively. This sets Saudi Arabia on course to achieve a total of 25m foreign arrivals in 2023, outperforming the approximately 17.5m visitors in 2019.
Similarly, according to the UNWTO “World Tourism Barometer”, Saudi Arabia’s international tourism revenue index jumped 16 places over a three-year period, ranking 11th globally in 2022 compared with 27th in 2019. The total tourism expenditure in 2022 reached SR185bn ($49.3bn), marking a 93% year-onyear increase and accounting for approximately 7.2% of GDP. Although travel and tourism’s contribution to GDP fell from 9.7% (SR291.6bn, $77.4bn) in 2019 to 6.6% (SR190.6bn, $50.8bn) in 2020 due to the pandemic, projections indicate that by 2023, the sector’s contribution will surpass pre-pandemic levels by 2%, reaching nearly SR297bn ($79.2bn).
The WTTC forecasts an average annual growth rate of 11% for Saudi Arabia’s tourism sector between 2022 and 2032, positioning it as the fastest-growing market in the Middle East region. The WTTC’s “Economic Impact Report” predicts that by 2032, the sector will contribute SR635bn ($169.3bn), accounting for 17.1% of the economy.
Hotel Infrastructure
To cope with sustained growth, the Kingdom has significantly expanded its pipeline of hotel rooms, aiming to surpass its regional competitors. According to a May 2022 report by global real estate consultancy Knight Frank, the Kingdom is projected to triple its current hotel supply by 2030. Although currently behind the UAE’s 200,000 rooms, Saudi Arabia is expected to overtake its rivals with 315,000 new hotel rooms by the end of the decade, representing an estimated $110bn in development costs. As of March 2023 Saudi Arabia already led the Middle East and Africa region in hotel construction activity, with 42,033 rooms compared to the UAE’s 22,324 rooms, as reported by hotel research firm STR.
A major catalyst for added hotel supply is the domestic tourism segment, with Knight Frank indicating that 65% of Saudis already travel within the Kingdom one to three times a month. Consequently, occupancy rates have also rebounded since the pandemic has lifted, keeping pace with increased supply.
In February 2023 Riyadh hotels achieved their highest occupancy for that month since 2008, reaching 75.5%, including several days with 90% occupancy. Similarly, Makkah recorded 100% occupancy during Ramadan 2023, the highest level since the pandemic, while Jeddah reached a 64% occupancy rate in May 2023, the highest since September 2019. The Knight Frank report reveals only 17% of the planned hotel supply for 2030 falls within the three-star or lower category. Instead, the majority is evenly split between five-star (37%) and four-star (36%) accommodations.
As 58% of Saudis opt not to stay at hotels citing cost, quality and location as key factors, particularly among the 56% of the population aged below 35, there will be a growing need for more a diverse supply.
Several global hotel chains have revealed their expansion plans in Saudi Arabia. Accor, currently the largest hotel operator in the Kingdom with 42 hotels and 16,334 rooms, has 56 ongoing property developments that will add over 10,000 keys to its portfolio. These include a 230-room Raffles hotel, a 250-room Sofitel Serviced Residence and a 60-villa MG allery resort, all set to open by 2027 as part of the SR4.2bn ($1.1bn) Al Yasmin District, being developed in partnership with Erth Real Estate.
Additionally, Accor entered a strategic partnership with Amsa Hospitality in 2023 to develop and franchise 18 Accor hotels in multiple second-tier cities by 2032. Hilton, the Kingdom’s second-largest hotel operator, announced a strategic partnership with the TDF and various public and private developers during the WTTC Global Summit 2022 to expand its footprint. With 16 hotels under its portfolio, Hilton has 51 more in the pipeline and plans to grow to over 75 hotels in the coming years. Similarly, Marriott International, which already has 36 properties and over 10,000 rooms across 11 brands in the Kingdom, recently announced an agreement with Rua Al Madinah Holding Company to open up eight hotels in Medina. This expansion will add 4400 rooms across eight brands, including The Ritz-Carlton, JW Marriott, and Westin Hotels and Resorts, among others.
Giga-Projects
In January 2023 the PIF unveiled its fifth giga-project, Diriyah, a $50.6bn project aimed at transforming a 300-year-old city and the birthplace of the nation, serving as the ancestral seat of the Al Saud family. Spanning 14 sq km, Diriyah is home to the Turaif District UNESCO World Heritage site, offering visitors an immersive experience of Saudi Arabia’s rich history and culture. To enhance its appeal as a tourism destination, Diriyah will feature a lineup of 38 new hotels and resorts, including globally recognised brands such as Ritz-Carlton, Park Hyatt and Raffles.
The project will include six museums, including the House of Al Saud Museum, which is set to become the largest Islamic museum worldwide, 26 cultural attractions, over 400 luxury and lifestyle outlets, and more than 100 souqs and bazaars. Furthermore, the destination is placing significant emphasis on hosting various events, including the Diriyah ePrix, the Diriyah Urban Festival, and a range of music concerts.
The scale and scope of the PIF’s five giga-projects – NEOM, Red Sea, Qiddiya, Roshn and Diriyah – have been instrumental in economic diversification and infrastructure development for tourism. According to Knight Frank, giga-projects account for nearly 73% of the Kingdom’s hotel supply pipeline. NEOM in particular, a $500bn smart and sustainable project in the north-west coast of Saudi Arabia, is expected to accommodate up to 2m people by 2030, with Trojena and Sindalah as key attractions.
Luxury Resorts
Trojena is an all-year-round destination with a ski village, a man-made freshwater lake, luxurious family and wellness resorts, a nature reserve, and water sport and mountain biking activities. The project is scheduled to be completed by 2026 and is projected to attract 700,000 visitors and accommodate 7000 permanent residents by 2030.
In addition, Sindalah, a luxury island destination spanning an area of approximately 840,000 sq metres, features an 86-berth marina, 413 ultra-premium hotel rooms, 333 top-end serviced apartments, a beach club, yacht club, 38 culinary offerings, and a golf course. With its planned opening in the first quarter of 2024, Sindalah will be the first region in NEOM to welcome guests.
Saudi Arabia’s other mega-projects are equally impressive in size and ambition. For instance, the Red Sea Project, which spans 28,000 sq km along the west coast of the Kingdom and is envisioned to have 50 resorts, with a total of 8000 hotel rooms and over 1000 residential buildings spread across 22 islands and six inland areas by 2030. The project’s vision goes beyond luxury, as it also aspires to become a regenerative tourism destination. Plans include the creation of new coral reefs, achieving net-zero operations, implementing renewable energy solutions and planting more than 50m mangrove trees.
In 2023 Red Sea Global is set to debut its first hotel openings, the 76-room Six Senses, the 90-villa St. Regis, and 82-room Nujama, a Ritz-Carlton Reserve. With its proximity to the Red Sea, home to the world’s fourth-largest barrier reef and over 90 islands, the Red Sea project aims to position the Kingdom as a premier global destination. To support this vision a dedicated airport called the Red Sea International Airport (RSI) is under construction and expected to accommodate 1m tourists annually by 2030.
Moreover, the Kingdom has unveiled the master plan for the Qiddiya project, a collaboration with New York- and Copenhagen-based architecture firm Bjarke Ingels Group, which aims to build the largest entertainment city in the world. Launched in 2019, the $8bn project is set to inaugurate several prominent attractions, including a $750m water park, the Kingdom’s first and the Middle East’s largest, and a 32-ha Six Flags theme park, which is set to host the world’s tallest and fastest roller coaster, in addition to over 300 planned facilities.
Sport Tourism
In 2020 the global sport tourism market was valued at $323.4bn, with a projected growth to reach $1.8trn by 2030. The Middle East, following its successful hosting of renowned global sporting events in 2022, including the FIFA World Cup in Qatar and the Formula 1 Abu Dhabi Grand Prix, has witnessed a substantial windfall in its tourism economy. According to Musafir.com, a UAE-based online travel agency, the region witnessed an augmentation of up to 30% by the fourth quarter of 2022. This achievement has positioned the Middle East as the world’s fastest-growing sport tourism destination, valued at an estimated $600bn, according to the World Trade Organisation, and solidified the significant role of sport in destination branding and boosting the region’s tourism appeal.
Recognising the potential of sport in fulfilling its tourism vision, the Kingdom has embraced sport as a focal point, aligning investments and creating a robust pipeline of sporting events to expand the Kingdom’s offerings and generate multiplier effects. Since hosting its inaugural Formula 1 Grand Prix in December 2021 the Kingdom has seen a proliferation of diverse and high-profile events, including the Dakar Rally, the Rage on the Red Sea boxing tournament in 2022; the Saudi Cup horse race, inaugurated in 2020; WrestleMania; and the Diriyah Tennis Cup.
With upcoming events such as the FIFA Club World 2023 and the 2027 AFC Asian Cup, the Kingdom is poised not only to generate substantial revenue and sponsorship opportunities through events but also to foster the development of a vibrant sporting culture that resonates with both locals and visitors. Through a multifaceted effort, which includes the organisation of diverse spectator and participant sporting events, targeted promotion of sport tourism to new markets and infrastructure upgrades, tourism has emerged as a growing contributor to the Kingdom’s economy.
Constituting 0.2% of the GDP in 2022, the government aims to increase the sport sector’s share to 0.6% by 2030. To accelerate this trend, Saudi Arabia created the $3.7bn Events Investment Fund in January 2023 focused on venue financing and development. Simultaneously, the General Entertainment Authority, established in 2016, initiates and organises cultural, tourism and sporting events across the country.
Notably, a significant milestone was achieved in June 2023 when the PGA Tour, the world’s premier membership organisation for touring professional golfers, agreed to merge with PIF-backed LIV Golf. This collaboration brings together the expertise and resources of both organisations, elevating the profile of golf in Saudi Arabia on the global stage.
Outlook
Through a deliberate combination of leveraging its abundant natural and historical heritage and making strategic investments in infrastructure and destination development, Saudi Arabia has successfully established its presence on the global tourism stage. Despite entering the tourism sector relatively late, the Kingdom has swiftly unveiled ambitious plans not only to enhance its appeal as a diverse and world-class destination but also to play a significant role in its broader diversification objectives.
Helped by continued government support and a collaborative effort involving various stakeholders, the tourism industry is poised to become a pivotal force in the Kingdom’s economy in the coming decade, serving as a catalyst for reducing dependence on oil and creating new avenues of revenue creation.
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