Why Saudi Arabia’s Travel and Tourism Sector Is Ripe for Growth
SUSTG Analysis | Lucien Zeigler | 7.6.12
Saudi Arabia’s travel and tourism sector is poised for rapid growth in the next decade and beyond, and both Saudi and international corporations are looking to cash in on the opportunities ahead. A product of the changing economic and social landscape in Saudi Arabia, the coming tourism boom is likely to contribute to the Kingdom’s growing diverse economy and open Saudi culture to the world.
Although Saudi Arabia currently hosts the World’s largest annual religious pilgrimage, the Hajj, it is not yet a leading tourism destination. Saudi Arabia ranks 62nd in the world in the 2011 World Economic Forum’s Travel & Tourism Competitiveness Index. It is 7th in the MENA region, behind the UAE, Qatar and other nations.
However, a variety of indicators point to strong growth in the tourism sector in the coming years, and many of these positive changes are already underway. Saudi Arabia’s tourism industry is estimated to grow to $14.88bn in 2012 compared to $10.37bn in 2009, according to ArabianBusiness.com.
Hotels, from budget accommodations to arguably the world’s nicest hotel are springing up all over the Kingdom. 2011 brought 14,000 new hotel rooms to Saudi Arabia. Between now and 2014, around 1,690 budget hotel rooms are expected to come online in Saudi Arabia, according to the consultancy Christie + Co. But most of the hotel market is upscale, which has already begun its boom with new major five star hotels coming online in recent years.
Driving the growth now is religious tourism in Saudi Arabia, and particularly in the holy cities of Mecca and Medina, which are sacred to followers of Islam. Developers are reportedly planning 8,500 more rooms in the holy city of Mecca within five years. Not only is the number of tourists increasing in the holy cities, tourism has actually changed the look of Mecca and Medina. The recently completed Mecca Royal Hotel Clock Tower now dominates the skyline of the holy city. It is the second tallest building in the world, behind only the Burj Khalifa in Dubai, and is the world’s tallest hotel.
Business tourism is also growing. Business travel typically increases in tandem with bilateral trade figures, and non-oil trade is growing between Saudi Arabia and its largest trading partner, the United States, as the trade relationship becomes more diversified. New hotels are popping up in nearly every major Saudi city. That’s good news for domestic travelers as well, and Saudis themselves are traveling more. Domestic tourism expenditures in 2011 increased 13.5 percent compared to 2010.
Where Saudi Arabia’s tourism industry lags most is attracting international leisure tourists. Although Saudi Arabia is modernizing its economy and society, many view the Kingdom as too conservative for Western-style relaxation. The Kingdom’s scorching hot desert summers in many locations send even heat-tolerant Saudis abroad and inside to air conditioning. While these factors and others are unlikely to change, new leisure tourism destinations from archeological sites to the forthcoming world’s tallest building will entice a new generation of leisure tourists to explore the Kingdom’s offerings.
Companies are ready to cash in on the tourism sector’s potential and will develop their services in expectation of robust tourism sector growth. Saudi officials are ready, too, and are hoping to maximize opportunities for the people as the Kingdom aims to attract 88 million visitors by 2020, according to Gulf News. The government has even released a new website for the Saudi Commission for Tourism and Antiquities (SCTA) to promote Saudi Arabia’s tourism potential. Massive infrastructure projects being built in part to accommodate tourists are nearing completion and more are planned. Saudi Arabia’s official carrier, Saudia, recently joined the Delta SkyTeam Alliance in preparation to allow more flights inside the Kingdom and to eventually open up Saudi skies.
All signs point to Saudi tourism sector growth in the coming decade, which will have a substantial impact on the Saudi economy and society.