Riyadh looks beyond religious tourism

Although Hajj and Umrah pilgrims will remain the mainstay of the travel market in Saudi Arabia, the government is keen to develop other areas of the sector to draw in more 20 million visitors by 2020. Published in MEED, 26 March 2013

Tourism in Saudi Arabia has traditionally been synonymous with religious travel. Last year, for example, a total of 1.7 million visas were issued for those undertaking the Hajj pilgrimage in October, according to the Saudi embassy in Washington. A further 5.5 million visas were issued for people carrying out the Umrah pilgrimage, which can be done at any time of the year.

Between them, the two pilgrimages accounted for two thirds of the 10.8 million visas issued by the kingdom in 2012. Work visas accounted for a further 18 per cent and there were just over 1 million, or 10 per cent, of visitor visas given to other tourists.

Religious tourism will remain the mainstay of the travel market in Saudi Arabia for the foreseeable future, but other areas are now also getting a boost. There appears to be a renewed effort by the government to develop other areas of the market, which could help to diversify the economy and provide more jobs for locals - two priorities in Riyadh’s long-term vision for the country.

Budget increase

The most obvious sign of this is the steady increase in funding that the government has been providing for the Saudi Commission for Tourism & Antiquities (SCTA), which promotes tourism both inside the country and abroad. Its budget has risen by a third in the past four years, from SR384.9m ($102.6m) in 2009 to SR511.3m in 2012.

In terms of specific projects, in December 2012, the government approved a plan to set up the Saudi Heritage Hospitality Company, with a paid-up capital of SR250m, to convert historic buildings around the kingdom into hotels. The SCTA has been drawing on the experience of Spain’s state-owned Paradores de Turismo, which, since 1928, has been successfully converting palaces, castles and other old buildings into hotels.

Among the places earmarked for development and promotion is Al-Diriyah, on the northwestern edge of modern-day Riyadh, which was the first capital of the Al-Saud dynasty. The SCTA is planning to restore the historic buildings in the area, converting some into hotels and in the process providing jobs and training for Saudi nationals.

Al-Diriyah is one of only two sites in the country granted world heritage status by Unesco, the cultural arm of the UN. The other site is the Nabataean ruins at Madain Saleh in the west. This year, the SCTA says that it will push for the old city of Jeddah to be added to the Unesco list too, something it has been trying to achieve since at least 2006. A case to include the ancient rock paintings at Jabal Umm Sanman in the northern Hail region was also submitted in 2012, but the current focus is with Jeddah.

That ambition was confirmed in a speech to the Saudi Heritage Preservation Society in Riyadh on 28 February by Prince Sultan bin Salman bin Abdulaziz, who has been president of the SCTA since it was founded in 2000 and is the key figure in the development of the country’s tourism sector.

“We have signed an agreement of cooperation with the Ministry of Islamic Affairs, Endowments, Dawah & Guidance to work jointly on all urban heritage sites, including the Jeddah historical area,” he said. “We are determined to submit the Jeddah historical area file this year for registration in Unesco’s World Heritage sites.”

Visa overhaul

Such developments could help to draw in more tourists and in the process help the government to reach its ambitious targets for visitors. The kingdom would like to increase the number of visitors it receives to almost 15 million a year by 2015 and more than 20 million by 2020.

However, achieving those targets may well require changes to the visa system. At the moment, tourists are only allowed to enter the country if they are part of a tour group. Such issues help to explain why Saudi Arabia was ranked 62 out of 140 countries in a Travel & Tourism Competitiveness Report published by the World Economic Forum (WEF) in early March. Of the other five GCC states, only Kuwait was ranked lower.

In the report, Saudi Arabia scored badly when it came to its overall regulatory framework for travel and tourism, ranking in 87th position, but when it came to visa requirements it was ranked just 137th. One positive area was the comprehensiveness of the tourism data it releases, where it was ranked first, but in most other areas there is plenty of room for improvement.

Making improvements

“It is hard to identify one single reason why Saudi Arabia ranks lower than the other GCC countries,” says Roberto Crotti, quantitative economist at the WEF. “The shortfall applies to most of the 14 criteria we assess in our report. For example, Saudi Arabia attains the lowest rank across the GCC states in health and hygiene, and it adopts the most restrictive visa and air service agreement policies. Additionally, it ranks lower than most of the other GCC countries except Oman in infrastructure. This indicates that Saudi Arabia should take a holistic approach when planning the development of its travel and tourism industry.”

The country also needs to build many more hotel rooms. According to US-headquartered real estate agency Colliers International, almost 1,200 mid-market hotel rooms are expected to be added by 2015, including those of well established international brands such as Ibis, Premier Inn and Holiday Inn Express.

The majority of these rooms will be in the major cities of Riyadh, Jeddah, Dammam and Al-Khobar. However, Colliers says that the market could absorb as many as 35,000 more rooms over the next five years.

According to regional projects tracker MEED Projects, more than $6bn-worth of hotel projects are currently planned or under way in the kingdom. Many of the hotels are in Mecca, including five hotels planned by the local Muthmerah, but there are also seven in Riyadh, including a Hilton, a Radisson Blu and a Centro Rotana.

Several major convention centre projects are also ongoing, including the $2bn Jeddah Conference Centre and the Qassim University Convention Centre in Buraydah. Beyond the business market, the Prince Sultan Cultural Centre is being built at King Saud University in Riyadh. The capital is also to host the King Abdullah International Botanical Gardens.

All these hotels and other facilities should also help the government reach its target of increasing the number of jobs in the tourism sector to almost 1.3 million by 2015, double that in 2011.

Workers in the tourism industry represented 7.6 per cent of the country’s entire workforce of 8.8 million people in 2011, and 6.9 per cent of the private sector workforce.

However, most of these jobs go to foreign workers; only around a quarter are held by Saudi nationals. The problems that hospitality companies have in finding locals willing to do the many low-paid or low-prestige jobs required in the industry is a familiar issue for all sectors of the economy. The country’s vast oil wealth means that most people looking for a job gravitate to the public sector where the pay and conditions are often better.

Oil wealth

Saudi Arabia’s hydrocarbon endowment is also responsible for the lower contribution that the tourism sector has been making to the overall economy in recent years.

Although revenues from tourism have been increasing, from SR55.1bn in 2009 to SR58.9bn in 2010, and SR59.5bn in 2011, the sector’s share of total gross domestic product (GDP) has been falling.

In 2011, tourism accounted for 2.7 per cent of the kingdom’s total GDP, down from 3.4 per cent in 2010 and 3.9 per cent in 2009. In a report issued in late 2012, the central bank, the Saudi Arabian Monetary Agency (Sama), attributed the decline to the faster growth in other parts of the economy, notably the oil sector.

With oil prices remaining high, reversing that trend will require a concerted effort by the authorities to attract more tourists, including non-pilgrims. Although there appears to be some willingness to do that, unless the visa regime is also relaxed the country may well struggle to meet the targets it has set itself.

“Given the visa constraints in Saudi Arabia, focusing on regional and domestic travel as well as religious tourism may well be a promising option,” says Crotti.

“Over the longer term, the country could look into diversifying beyond the immediate region into cultural and business tourism, but this would require a more flexible visa regime.”