Analyse of the sector 30/11/2010
Weathering the storm

The economic downturn has had a significant impact on the global travel and tourism sector in 2009, and yet in the Middle East, many seem to have survived the storm rather well. In Saudi Arabia, domestic tourism continued to grow well in 2009 in terms of number of trips taken while religious tourism also continued to perform healthily. Saudi Arabia’s travel sector draws its strengths from domestic demand and pilgrimages, and these two subsectors have proven resilient to economic downturns. Tourism authorities had in fact feared the impact of the H1N1 flu pandemic on the Hajj season more than they had the economic crisis. Worshippers will continue to pray, and Saudi Arabia’s population will also continue to travel within the country, for religious and other purposes, which will continue to be an advantage for the Kingdom.

 

Slow, but certain growth

 

Growth in international tourism arrivals and in the sector as a whole had always been slow in Saudi Arabia, as the inbound leisure tourism segment is almost nonexistent and because Saudis were very much more inclined to spend their money abroad and not in Saudi Arabia. However, the situation is changing as Saudi Arabia is upgrading its tourism infrastructure and developing six major economic cities, among which is the King Abdullah Economic City (KAEC). All cities will include massive developments, which will include hotels and a more advanced tourism infrastructure, and will draw an increasing number of Saudis and expatriates who will live and work there, generating further tourism traffic. This will also go hand in hand with the government’s increased commitment to develop business and MICE tourism. Saudi Arabia still has many challenges to overcome and a long way to go in order to become a truly attractive leisure tourism destination. However, MICE and religious tourism are definitely set for more growth in the mid to longer term.

 

Focusing on the Gulf

 

Gulf Cooperation Council (GCC) residents have always been and will remain Saudi Arabia’s main target audience because of the cultural and geographical closeness of these markets. From the classification of Maidan Saleh as a UNESCO World Heritage centre to the religious relevance of the Ka’ba in Mecca, Saudi Arabia’s cultural wealth and religious landmarks are all mainly attractive to Muslims and Arabs, rather than Westerners, and it is therefore natural that the Kingdom focuses on this market for the growth of inbound tourism. Saudi Arabia’s relatively “inaccessible” culture and stringency when it comes to the application of Sharia Law will continue to make it difficult to open up to the West, and to lure Westerners to the country.

 

Growing trend towards more luxurious travel accommodation

 

Saudi Arabia’s tourism infrastructure, and more specifically its hotels and travel accommodation sectors are currently still rather underdeveloped, with low to average quality standards of hotels. The vast majority of outlets are three star and even two star hotels as opposed to four and five star establishments. However, recent years have shown that there is at least some demand for luxury accommodation, even from domestic tourists. Global luxury chains such as the Rezidor Hotel Group’s Park Inn, Mövenpick Hotels and Resorts, Ramada Worldwide and others have entered the Saudi market, recording healthy occupancy rates throughout the year, and existing chains such as the InterContinental have expanded, with plans for further expansions in years to come.

 

Airlines fighting on local and international fronts

 

Increasing activity in the travel sector has naturally benefited airlines. Newly launched Nas Air and Sama Airways have been generating healthy sales, increasing their fleet size and expanding their route network to potentially serve international destinations, in addition to their domestic destinations. Both airlines have taken a significant share from Saudi Arabian Airlines, the leading national airline. Although these were only competing at a local level with SAA, they are now also likely to start competing on a regional scale. Meanwhile, the government is pledging more liberalisation in this sector, with a new Jeddah-based “pilgrimage carrier”, Alwafeer Air to be launched in the near future.