KSA

MORE THAN MEETS THE EYE

Hospitality News Middle East - - FRONT PAGE - hodema.net

With sev­eral Unesco-listed sites to its name and a huge project pipe­line, there’s more to the King­dom than Mecca, as Tarek Ham­moud, off­shore team man­ager and con­sul­tant at Hodema con­sult­ing ser­vices ex­plains

Think hol­i­day spots and Saudi Ara­bia is un­likely to spring to mind as a mustvisit des­ti­na­tion, tick­ing few of the usual boxes manda­tory for in­ter­na­tional tourists. For many, the coun­try’s beaches and lo­cal dishes re­main a mys­tery, with me­dia cov­er­age of­ten fo­cused in­stead on KSA’S strict dress code and al­co­hol ban. How­ever, as home to Mecca, one of Is­lam’s most revered holy sites, Saudi Ara­bia of­fers another kind of break which makes it hugely pop­u­lar across niche mar­kets. Mecca at­tracts up to 2 mil­lion wor­ship­pers dur­ing the Hajj alone, with more than 15 mil­lion pil­grims flock­ing to the ever-ex­pand­ing western city through­out the year.

In 2016, the coun­try wel­comed 18 mil­lion vis­i­tors, with 120 mil­lion pas­sen­gers pass­ing through KSA’S air­ports. The travel and tourism in­dus­try con­trib­uted USD 65.2 bil­lion to the coun­try’s GDP in the same year, while pro­vid­ing 1.14 mil­lion jobs, rep­re­sent­ing 9.7 per­cent of to­tal em­ploy­ment. This share is fore­cast to rise by 3.7 per­cent in 2017.

A pro­jected GDP per capita of USD 5378 in 2017, up from USD 5184 last year, and a rapidly grow­ing pop­u­la­tion, which is fore­cast to reach 37.6 mil­lion in 2025, are ex­pected to ben­e­fit the King­dom’s travel and tourism in­dus­try. In a fur­ther pos­i­tive sign, in­vest­ment in the sec­tor is ex­pected to rise by 9.8 per­cent in 2017, up from USD 28.6 bil­lion in 2016, when it ac­counted for 14.7 per­cent of to­tal in­vest­ment.

Vi­sion 2030: An am­bi­tious strat­egy for the fu­ture

While KSA is rec­og­nized as one of the top des­ti­na­tion for pil­grims, with its tourism in­dus­try mostly fo­cused on the reli­gious seg­ment, the cul­tural niche, which re­mains largely un­tapped, has a great deal of po­ten­tial.

The an­cient city of Mada’in Saleh, for ex­am­ple, was awarded UNESCO her­itage sta­tus in 2008 and has been likened to Pe­tra in Jor­dan for its breath­tak­ing his­tor­i­cal beauty. In­deed, the coun­try is home to many arche­o­log­i­cal and her­itage sites, although few for­eign­ers have vis­ited these his­tor­i­cal and nat­u­ral won­ders, since visas are rarely granted to in­ter­na­tional vis­i­tors other than pil­grims and tourists from the Gulf.

To date, most other for­eign­ers have en­tered Saudi Ara­bia on a work visa or to visit rel­a­tives. How­ever, the tide could be about to turn. While the gov­ern­ment has yet to an­nounce any change in visa pol­icy, it has given a green light in re­cent months to sev­eral ma­jor projects in­volv­ing huge in­vest­ments, in­clud­ing the enor­mous new Red Sea re­sorts, span­ning dozens of un­oc­cu­pied is­lands.

The Saudi Com­mis­sion for Tourism & Na­tional Her­itage has also an­nounced an in­vest­ment of USD 7 bil­lion in tourism­fo­cused ini­tia­tives around the coun­try, un­der its strate­gic Vi­sion 2030 plan for the King­dom. The main ob­jec­tive of the Na­tional Trans­for­ma­tion Plan is to boost the in­dus­try by de­vel­op­ing in­bound and do­mes­tic tourism. Ac­cord­ing to of­fi­cial data, do­mes­tic tourism will grow by 7.5 per­cent per an­num un­til 2020, with in­bound tourism ex­pected to ex­pand by 6.1 per­cent. This am­bi­tious pro­gram is aimed at di­ver­si­fy­ing the econ­omy and boost­ing the con­tri­bu­tion made by non-oil re­lated sec­tors against a back­drop of oil-price volatil­ity.

The gov­ern­ment has set three main ob­jec­tives, the first of which is to in­crease the num­ber of Um­rah pil­grims to 30 mil­lion per year. Ef­forts to fa­cil­i­tate vis­i­tors’ jour­neys to the holy sites range from mosque ex­pan­sion plans to ma­jor in­fra­struc­ture projects in Mecca and Me­d­i­nah. With this in mind, Deputy Crown Prince Mo­hammed bin Sal­man has an­nounced ma­jor air­port ex­pan­sion works in Jed­dah and Riyadh. King Khaled In­ter­na­tional Air­port will house an ex­tra ter­mi­nal, a large mosque, one of the world’s tallest con­trol tow­ers and a new sep­a­rate ter­mi­nal for roy­alty, heads of state and VIPS. King Ab­du­laziz In­ter­na­tional Air­port in Jed­dah is also be­ing over­hauled. In­creased ca­pac­ity means it will now be

able to ac­com­mo­date up to 80 mil­lion pas­sen­gers a year. The fa­cil­ity will also have a spe­cial Hajj Ter­mi­nal, of­fer­ing di­rect ac­cess to Mecca and Me­d­i­nah via rail. Low-cost air­lines, such as Nesma and Fly­adeal, have put them­selves for­ward, in an­tic­i­pa­tion of a grow­ing in­flux of vis­i­tors.

The sec­ond tar­get is to dou­ble the num­ber of UNESCO her­itage sites as part of broader plans to boost do­mes­tic leisure tourism. Four sites have al­ready made the list, with another 10 un­der con­sid­er­a­tion. Thirdly, the gov­ern­ment plans to in­crease pub­lic spend­ing on cul­tural and en­ter­tain­ment ac­tiv­i­ties from 2.9 per­cent to 6 per­cent. The re­cently ap­pointed Board of the Gen­eral En­ter­tain­ment Au­thor­ity is al­ready mov­ing for­ward with these ob­jec­tives and has set the bar high, with plans that in­clude the con­struc­tion of Al-qidiya, a new en­ter­tain­ment mega-city just out­side of Riyadh. With a tar­get com­ple­tion date of 2022, the project will com­prise nine cities or sec­tions fo­cused on en­ter­tain­ment and ed­u­ca­tional ex­pe­ri­ences. The theme park com­pany Six Flags has also an­nounced its ex­pan­sion into Saudi Ara­bia, with the first cen­ter slated to open around 2020-2021. In a sep­a­rate devel­op­ment, an Is­lamic mu­seum is planned.

The Saudi Com­mis­sion for Tourism & Na­tional Her­itage has also an­nounced an in­vest­ment of USD 7 bil­lion in tourism-fo­cused ini­tia­tives around the coun­try

Ho­tel mar­ket re­view

The projects for the hos­pi­tal­ity in­dus­try also look promis­ing, es­pe­cially within the mid­scale seg­ment, which is in par­tic­u­lar de­mand, buoyed by a grow­ing lo­cal and in­ter­na­tional mid­dle class. In Riyadh, where big names such as Nobu and Hil­ton Riyadh Ho­tel & Res­i­dences have cho­sen to es­tab­lish them­selves, 10,053 rooms are un­der con­struc­tion. The cap­i­tal city is look­ing to at­tract 88 mil­lion tourists by 2020 and po­si­tion it­self as a re­gional busi­ness hub. The open­ing of Court­yard by Mar­riott Olaya and the Faisil­iah Re­sort and Spa in 2017 has al­ready in­creased the branded ho­tel sup­ply from 8,363 to 10,992 keys and re­duced the av­er­age rate from USD 200 to USD 185 in Riyadh. In Jed­dah, the coun­try’s sec­ond city and its cul­tural hub, the open­ing of Cen­tro Sha­heen by Rotana and As­sila Ho­tel by Rocco Forte group in 2016 has given a boost to the branded ho­tel sup­ply, in­creas­ing keys from 5,646 to 7,274. In con­trast, rates have gone up from USD 259 to USD 267 due to stronger mar­ket de­mand. How­ever, Mecca re­mains well ahead in the game, with 24,133 rooms un­der con­struc­tion. The Swis­so­tel Al Maqam is the lat­est ad­di­tion to an ev­er­ex­pand­ing sec­tor, which has jumped from 13,911 keys to 21,093 in branded ho­tel sup­ply in just one year. The highly an­tic­i­pated Abraj Ku­dai Tower, which, with 10,000 rooms, is set to be­come the world’s largest ho­tel when it opens its doors, is also in the pipe­line. In­creased ca­pac­ity has had only a min­i­mal im­pact on rates, which re­main sta­ble, hav­ing risen from USD 214 in 2016 to USD 216 this year. Kho­bar, Dam­mam and Dhahran in the East­ern Prov­ince also en­joyed their fair share of growth, helped by the open­ing of Aloft Ho­tel. Key num­bers reached 6039 in 2016, mark­ing a rise of 1062 on the pre­vi­ous year.

F&B pipe­line looks promis­ing

Pre­dictably, the F&B sec­tor fol­lowed suit, with sev­eral high-pro­file restau­rant open­ings in key cities. For larger purses, the new, high-end No­zomi Jed­dah and Kho­bar, Cipri­ani Riyadh, Novikov Riyadh, Nobu Riyadh, Okku Riyadh and Em Sherif Café Riyadh are open­ing in the com­ing months, with STK and Nus­ret slated for launch in the city next year. In the ca­sual seg­ment Al Balad, Ihop and Leila min Leb­nen have all opened their doors in the cap­i­tal. New clus­ters are ap­pear­ing on the univer­sity boule­vard and at the Fiorenza com­plex (Takhas­sousi), while two shop­ping malls have been an­nounced: the Mall of Saudi, with 3.2 mil­lion square feet of re­tail and a large snow park, and The Av­enues Riyadh, a USD 1.9 bil­lion shop­ping com­plex.

With high hopes come strate­gic chal­lenges

For now, early in­di­ca­tions are that the Vi­sion 2030 pro­gram looks promis­ing. How­ever, the au­thor­i­ties face key chal­lenges in steer­ing the plan for­ward. First comes the im­pact of oil prices on fi­nances. While oil is cur­rently priced at roughly USD 50 per bar­rel, stag­nat­ing or de­creas­ing prices would make the im­ple­men­ta­tion of ma­jor projects more dif­fi­cult. Se­cu­rity is also an is­sue; the on­go­ing war in Ye­men is weigh­ing heav­ily on the gov­ern­ment and could gen­er­ate an in­ter­nal po­lit­i­cal and se­cu­rity risk.

KSA’S draw is, in it­self, a risk fac­tor. Too much en­thu­si­asm could lead to an over­sup­ply of ho­tels, restau­rants, re­tail, of­fices and malls that ad­versely af­fects over­all per­for­mance. Closely re­lated is the sup­ply of hu­man re­sources. The au­thor­i­ties will need to pro­vide ad­e­quate train­ing to the size­able num­ber of prospec­tive em­ploy­ees be­fore they can take up their roles at these places of work. New uni­ver­si­ties have been es­tab­lished of­fer­ing de­grees, which could ad­di­tion­ally help to tackle the coun­try’s un­em­ploy­ment prob­lem across lo­cal com­mu­ni­ties if im­ple­mented strate­gi­cally.

The de­ci­sion to in­crease taxes for for­eign­ers has also raised con­cerns. Ex­pats spon­sor­ing their fam­i­lies liv­ing in KSA face higher fees and there are fears that for­eign­ers equipped with key skills may, as a con­se­quence, turn their back on the Saudi mar­ket. Bold and am­bi­tious, Vi­sion 2030 en­com­passes the gov­ern­ment’s com­mit­ment to re­duc­ing KSA’S de­pen­dence on oil rev­enues. The fact that KSA is en­ter­ing un­char­tered ter­ri­tory means ques­tion marks hang over some ar­eas of this long-term vi­sion for the coun­try, though there is un­doubt­edly no short­age of en­thu­si­asm or fi­nan­cial back­ing for the im­ple­men­ta­tion phase.

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