Saudi Arabia ups emphasis on tourism sector

The tourism sector generates billions of dollars in revenue and provides jobs for more than 342,000 people in areas related to hotels, resorts, furnished apartments, cafes, travel agencies, transportation and entertainment.

Religious tourism is by far the key driver of tourism in Saudi as the kingdom is home to the holiest sites in Islam.

Overall, religious tourism accounts for some two-thirds of all earnings in the international tourism sector and one-third of domestic tourism revenue. It also helps to make Saudi Arabia the top destination in the Middle East in terms of international tourist arrivals.

Not surprisingly, hotel occupancy in the kingdom varies greatly depending on the proximity of the properties to holy sites, and the time of year. Overall, hotels in the kingdom achieved an occupancy rate of 50.6% in 2008, according to a new report by the Tourism Information and Research Centre of the Saudi Commission for Tourism and Antiquities (SCTA).

Hotel occupancy during January, which coincided with the pilgrimage season in 2008, reached 57% with 2,246,513 rooms fully booked, the report said.

Infrastructure plans

One of the largest impediments to tourism growth in the kingdom is its infrastructure capacity. The country's shortcomings are most evident during Haj, the annual pilgrimage of three million Muslims to Makkah, which creates so many problems due to overcrowding that the government is forced to restrict the number of visas for pilgrims.

Recognizing this, the Saudi government has approved a $38bn tourism programme aimed at improving infrastructure as part of an effort to boost tourism revenue and employment opportunities for its citizens.

Under the new strategy, the kingdom is investing SR19.2bn ($5.1bn) to upgrade its transport system. Five new airport construction projects are currently in development, including a $1.5bn terminal at Jeddah, which will help the city cope with the influx of religious visitors.

The kingdom has also announced plans to build a 450 km high-speed railway valued at $1.8bn (SR6.7bn), which will link Jeddah, Makkah and Medina. Once completed, the travel time between Jeddah and Makkah will be less than 30 minutes and two hours between Makkah and Madina.

The railway line, which is scheduled to be completed in 2012, is expected to carry 72,000 passengers per hour at peak period and cut the five-hour car journey to just half an hour. The government said the railway will help increase the number of worshippers to the holy sites to 14 million per year by 2030.

Mega projects in Makkah

Another major effort in the works includes the SR10bn Jabal Omar development overlooking the central area of the Grand Mosque in Makkah.

The development is one of five mega projects in Makkah that are being built at a cost of SR40bn.

The project involves the construction of two five-star hotels with 935 rooms, and six three-star hotels consisting of 1,255 rooms, over an area of 244,800 square metres. It also includes the construction of 30 to 40 residential buildings to accommodate 100,000 people, 4,360 commercial and retail units, and 520 restaurants.

Red Sea coast development

The Council of Ministers has also approved plans to carry out a number of new tourism projects on the Red Sea coast. According to the SCTA, the new projects will attract SR150bn in investment, and annual tourist spending at the new resorts will be SR9.9bn.

The Red Sea projects will be established in Ras Humaid, Sharma, Qayyal and Dhaffat Al-Wajh in Tabuk province, Arrayes in Yanbu, Ras Muhaisen in Makkah province, Haridha in Asir and Farasan in Jizan.

The resorts are projected to have a total of 557,000 rooms and create 413,000 jobs, including 165,000 direct jobs in the first five years.

Other new hotel projects planned for the kingdom include a 292-room Radisson-SAS hotel that is expected to open in Jeddah this year, as well as a 167-room property in Yanbu and a 234-bed hotel in Riyadh. Marriott Hotels and Crowne Plaza are also planning to open five-star properties.

Hilton sees no drop off

Hilton Hotels Group, which recently entered into a partnership with Saudi-based Abdulmohsen Al-Hokair Group for Tourism and Development, plans to build 13 new hotels throughout the country over the next five years, adding 2,500 rooms. The first of these is scheduled to open this year in Riyadh.

So far Hilton has not witnessed any decline in its hotel business in Saudi since the onset of the global economic crisis, says Essam Abouda, Hilton's VP of operations for the Arabian Peninsula and Indian Ocean. He credits the stability of the Saudi economy as a key factor that is keeping domestic tourism strong.

'Another factor is that, unlike business travel, which is subject to ups and downs, travel to the holy sites in the kingdom is something that many people feel they need to do regardless of the economy,' he noted. 'They save up their money for the trip, which for some people is something they do once in a lifetime and others once every year.'

Due to these stabilizing factors, Hilton expects 'business as usual' for its properties for the rest of the year.

Abouda says one of the limitations that Saudi faces as a tourist destination are the restrictions to entering the country. 'In terms of attracting more foreigners, this will not be easy unless the country makes major efforts to ease the visa requirements,' he said.

'If they relaxed these requirements they would boost tourism because the country does offer its share of attractions, including nice weather, beaches, and fishing and diving which have not been exploited to the maximum.'

Saudi tourism will be one of the main topics that will be discussed at the upcoming Arabian Hotel Investment Conference which will be held on May 2-4 in Dubai.