As the impact of the global economic crisis spread across the region in December 2008, the Saudi Finance Ministry announced its 2009 budget, with an allocation for tourism up 10 per cent on the previous year to SR385m ($102m).
Vast numbers of religious pilgrims arrive in the kingdom each year to perform the Hajj. The Hajj Ministry estimates that about 2 million pilgrims made the journey in 2008, together with the constant influx of pilgrims for Umrah (lesser pilgrimage) throughout the year. They account for 51 per cent of all visitors to the country, spending about SR10bn each year. But the kingdom’s current tourism drive is geared towards domestic rather than religious or international tourism. An estimated 5 million Saudis travel out of the country on holiday each year, a market valued at approximately $15bn, and the government would like to encourage them to holiday within the kingdom.
According to Rohit Talwar, chief executive officer of Fast Future Research, which is working on a study of the sector with the Supreme Commission for Tourism (SCT), tourism receipts rose by 5.4 per cent in 2007 to SR19.6bn. “Even assuming a modest average increase of only 2 per cent going forward, income could rise to more than SR25bn by 2020,” he says.
The reasons for Riyadh’s new focus on domestic tourism are largely demographic. About 70 per cent of its population of 27 million are under 30 years old and half are under 15, and unemployment is 13 per cent among males. The tourism sector accounted for an estimated 738,000 jobs in 2007, according to the World Travel & Tourism Council, almost 9 per cent of all employment in Saudi Arabia.
The kingdom approved an ambitious $38bn tourism masterplan in March 2008 for the Red Sea coastline, under which 19 locations will be considered for development, in addition to a $10bn Gulf coast development at Al-Auqair, south of Dammam.
The sites were chosen on the basis of their suitability for development and their ability to provide employment opportunities. For each destination, the commission is expecting an investment by the chosen developer of at least $2bn. This will cover infrastructure and project construction costs.
Prince Sultan bin Salman bin Abdulaziz al-Saud, president of the Saudi Commission for Tourism & Antiquities (SCTA), signed 38 contracts for the Red Sea masterplan worth SR37m in the fourth quarter of 2008.
However, it is not just through an increase in public funding in the 2009-10 budget that the kingdom hopes to transform its tourism sector. The SCT is responsible for developing a tourism strategy, part of which involves attracting private sector money. It hopes to relay the solid growth of the religious tourism market into the non-religious market through both new and existing initiatives.
Interest in major projects such as the multi-billion-dollar Al-Rayis project, which will be Saudi Arabia’s first resort town, on the Red Sea coast, has been strong. The development, the first of the 19 planned coastal towns that form the government’s Red Sea masterplan, will cover 30 square kilometres and is seeking investment of SR22bn ($6bn).
Also vital to the SCT’s growth strategy is the upgrading of infrastructure through the expansion of Jeddah airport and the proposed 444-kilometre-long Mecca-Medina rail link.
In Riyadh, there is little concern over the impact of the current financial crisis on the tourism sector. The government reaffirmed its commitment to its economic diversification plan, of which tourism will play a major role, in the 2009 budget announcement.
SCT is also moving ahead with plans to develop tourism facilities on the Gulf coast. Three bids were submitted in July 2008 for a 100-square-kilometre site at Al-Auqair. The SCT is now awaiting a decision from King Abdullah before launching talks with the bidders.
Foreign investors are wary of committing to new developments in such a young tourism industry, but Saudi Arabia does not necessarily need to look beyond its own borders.
“There is a huge investment pool available in Saudi [Arabia] itself,” says Talwar.