Qatar: Build It, But Will They Come?

Qatar may have a world-class airport, but it may struggle to attract 7 million tourists by 2030. Published in Bloomberg Businessweek, 21 December 2014

Travelling into Doha by air these days is a far more enjoyable experience than it used to be. Gone are the unwelcome bus rides between plane and terminal and the cramped duty free area of the old airport. In their place at the recently opened Hamad International Airport are world-class, modern and spacious facilities.

The airport opened in May 2014, several years later than originally planned, and there were some unusually public legal wrangles with contractors along the way, such as with the German-UAE joint venture Lindner Depa Interiors about the fit-out of lounges. Now that it is finally open, those in charge say the new airport will play an important role in the growth of the country’s economy and could help it to diversify into areas such as meetings, incentives, conferences and exhibitions (MICE).

“Hamad International Airport will be one of the key drivers of the country’s economic diversification and will have a strong impact on the human and economic development pillars of Qatar National Vision 2030,” says Badr Al-Meer, chief operating officer of the airport.

“The airport also supports the evolution of a significant MICE market in Qatar which, with state-of-the-art facilities such as the Qatar National Convention Centre and initiatives from Qatar MICE Development Institute, is set for rapid growth.”

The airport will be able to handle up to 50 million passengers a year once complete, which should provide plenty of room for Qatar Airways to continue expanding. But the big question for the country is whether it can persuade enough passengers to leave the airport and spend time and money in the country rather than just change planes.

The number of international tourists visiting Qatar has varied significantly in recent years, from 1.5 million in 2010 to 2.5 million in 2011 and back down to 1.2 million in 2012, according to the World Tourism Organisation, an arm of the UN.

The Middle East region as a whole attracts around 52 million tourists a year, so Qatar is clearly only gaining a small fraction of the market. It is currently in the same league as Lebanon, which attracted 1.4 million visitors in 2012, and Oman, which received just under 2 million visitors. By contrast Dubai, which is Qatar’s most natural rival in many ways, welcomed close to 9 million visitors in 2012.

The Qatar Tourism Authority (QTA) is not attempting to match Dubai, but it has set out some ambitious targets in its national tourism strategy, which was launched in February 2014. Chief among them is the aim of attracting 7 million tourists to the country by 2030. It also wants the sector to contribute 3.1 per cent of GDP by 2030, up from 0.8 per cent in 2012.

At the moment, the majority of visitors come from around the Gulf. “Many of the tourists visiting Qatar’s hotels come from neighbouring GCC countries, mostly from Saudi Arabia and the UAE,” says Hamad Abdulla Al Mulla, CEO of local hotels group Katara Hospitality. “The GCC has been the primary market for in-bound tourists in previous years. In 2013, more than 1 million tourists from the Gulf visited Qatar.”

If the country is to hit its target of 7 million visitors, it will clearly need to attract far more from outside the region. The QTA says that 64 per cent of visitors should be coming from outside the GCC by 2030, compared to around 30 per cent at the moment. The country will also need a lot more hotel rooms. In 2012, there were some 13,407 rooms available. The national tourism strategy says that figure should rise to between 56,100 and 62,000 by 2030.

However, there is one issue, which makes the idea of a gradual build-up of accommodation and visitor numbers more complicated. The country is due to host the football World Cup in 2022 and the sport’s governing body FIFA is demanding at least 60,000 hotel rooms are available by then. Once the tournament is over, the country could find itself with significant overcapacity.

“It will be difficult for the country to achieve the level of visitor growth which will garner enough demand to support a 400 per cent expansion in the number of hotel rooms,” said Saudi bank Samba, in a report on the Qatari economy published in July 2014.

Other industry insiders appear confident that the country will be able to build enough rooms in time for the competition and to avoid a surplus in the long-term. “The market will build what the market deems necessary and sustainable for the post-World Cup period in Qatar,” says Nick Smith, a partner at construction consultancy firm EC Harris. “The shortfall will be provided by temporary accommodation that is easy to dismantle and remove.”

Sporting events are a key element in Qatar’s plans to attract more visitors, along with the MICE sector. However, it is less clear what all the tourists might do when there are no major sporting events to view or conferences to attend. Qatar is a conservative society and, as a result, life in Doha is noticeably more sedate than somewhere like Dubai. There has been some noticeable investment in art galleries and museums in recent years – including the Arab Museum of Modern Art (Mathaf), which opened in 2010 and the National Museum of Qatar, which is still under construction – but in reality there is little to mark the country out from other destinations in the region.

“Whilst some museums, hotels and a significant number of shopping centres are under construction – in addition to the downtown entertainment area – it is fair to say that hotel, hospitality and tourism facility developments are yet to gather pace,” says Smith.

Clearly, developing a vibrant tourism strategy requires more than simply building a modern airport and providing accommodation. But Qatar’s playing the long game and while it may be starting from a low base, it has at least got some of the right foundations in place, according to observers.

“Qatar, like many of its neighbours, has been keen to maximise the long-term opportunities afforded by trade and tourism, and it now has the necessary infrastructure to build on these industries in the medium- to long-term,” says Michael Regan, a partner at international law firm Mayer Brown.