The shifting trajectory of Saudi Arabia’s tourism sector

With the launch of numerous leisure and entertainment related megaprojects, 2017 could turn out to be a landmark year for contractors and consultants operating in Saudi Arabia’s hospitality market

As of July 2017, 18 hotels, comprising a total of 23,816 guestrooms, were under construction in Makkah.
As of July 2017, 18 hotels, comprising a total of 23,816 guestrooms, were under construction in Makkah.

Home to the Holy Cities of Makkah and Madinah, the Kingdom of Saudi Arabia’s tourism sector is most commonly associated with religious visitors – at least at a global level.

Hajj will no doubt continue to account for a significant portion of the country’s international visitors; approximately two million worshippers from around the world made the pilgrimage in 2016. However, during recent years, the kingdom has also been working to expand its broader hospitality market.

To date, the majority of these efforts have centred on Saudi Arabia’s business visitors and domestic tourists, but 2017 could mark the beginning of a shift in the sector’s trajectory.

In April 2017, for example, Saudi officials announced the launch of what looks set to become the largest cultural, sports, and entertainment city in the world. Located in Al Qidiya, southwest of Riyadh, the megaproject will be built across an area of 334km2, and will include the previously announced Six Flags theme park. The development’s foundation stone is scheduled to be laid next year, with Phase 1 expected to open in 2022.

The entertainment city will contribute towards Saudi Vision 2030, a national development plan designed to diversify the kingdom’s economy away from oil and gas revenues. The country’s Public Investment Fund (PIF) will be the project’s main investor, alongside numerous local and international stakeholders.

In August 2017, less than four months after the entertainment city launch, PIF unveiled details of The Red Sea, a 34,000km2 tourst hub that will be built between the cities of Umluj and Al Wajh. As part of the project, which is also in keeping with the aims of Saudi Vision 2030, hotel companies will be invited to develop resorts on more than 50 natural islands. Ground breaking will take place in Q3 2019, and Phase 1 is due to complete in Q4 2022.

The Red Sea will be governed by independent laws and a regulatory framework developed and managed by a private committee, according to Saudi state news agency, SPA. Interestingly, this move could result in the relaxation of visa restrictions for foreign tourists looking to visit the hub, opening up the kingdom’s hospitality market to a wider audience.

While the entertainment city and The Red Sea are certainly among the largest hospitality-related projects underway in Saudi Arabia, they are by no means the exception. STR’s July 2017 Pipeline Report revealed that 18 hotels, comprising 23,816 guestrooms, are currently under construction in Makkah; and 30 projects, totalling 6,712 rooms, are underway in Riyadh. And according to research published by Tophotelprojects in February, Saudi is likely to witness a record 68 hotel openings across its major cities in 2017.

In turn, the authors of Euromonitor’s International Tourism Forecast expect such trends to drive a 40% rise in domestic tourism by 2020, and projects like The Red Sea and the entertainment city – coupled with anticipated regulatory changes – could see the kingdom boost its international appeal during the same period.

Whether domestic or international, Saudi Arabia’s contemporary hospitality landscape spells good news for contractors and consultants operating in the kingdom.

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