Saudi Arabia: the transformation of an $800 billion tourism giant

30-01-24

Saudi Arabia, the vast Middle Eastern kingdom, is emerging as a giant in the global tourism industry with an ambitious $800 billion project. This project includes the construction of private islands, luxury hotels, theme parks, cruise ports and, surprisingly, a desert ski resort. The question on many people's minds is: if they build all this, who will be the visitors?

Preconceptions about Saudi Arabia as a tourist destination are about to change dramatically. Imagine, for example, Sindalah, a 7-star private island with three luxury resorts, 38 high-end restaurants and several marinas for superyachts. Or consider Qiddiya, a futuristic city of 600,000 people emerging in the middle of the desert, focused on e-sports and gaming.

Trojena offers a unique experience: a space-age ski resort in the desert. On the other hand, the Red Sea project will transform a vast waterscape into a complex of 50 luxury hotels and 8,000 hotel rooms spread over 22 islands, with a focus on wind and solar power. In addition, The Rig is a $5 billion adventure theme park built on an offshore oil platform.

Saudi Arabia is also positioning itself as a key cruise destination, with the recent acquisition of a $300 million ship. Across the country, new roads, airports, golf courses and cruise terminals are emerging, redrawing the landscape in real time.

The hotel industry is experiencing an unprecedented boom with the construction of thousands of new rooms. World-renowned hotel brands such as Ritz-Carlton, Four Seasons, St. Regis, Fairmont, Marriott, Hilton, Hyatt and InterContinental are expanding their presence at a rapid pace. Each of these projects could capture the attention of the tourism world on its own, but taken together, they represent a transformation that cannot be ignored.

Prominent among these efforts is NEOM, a $500 billion region being built from the ground up in northwestern Saudi Arabia. This mega-project includes new cities, resorts and housing developments. Spanning 10,200 square miles and located between the Red Sea and the Gulf of Aqaba, NEOM is roughly the size of Albania.

Funding for these projects comes primarily from the Kingdom's $700 billion Public Investment Fund (PIF). These initiatives are part of Saudi Arabia's Vision 2030, a plan to diversify the economy beyond dependence on oil. Tourism goals include attracting 100 million visitors a year and increasing tourism's share of the economy from 3% to 10% by 2030.

In 2019, Saudi Arabia opened its doors to international leisure travelers, providing e-visas and on-arrival to visitors from 49 countries. Significant changes were made to dress and travel regulations for female visitors, although Mecca remains inaccessible to non-Muslims.

Saudi Arabia's tourism transformation has surprised many analysts. According to Caroline Bremner of Euromonitor International, billions of dollars are being invested in infrastructure and economic diversification. The World Travel and Tourism Council (WTTC) estimates that the Kingdom has already invested $800 billion in the tourism sector.

Despite delays caused by the pandemic, targets have been increased to 150,000 annual visitors by 2030. Euromonitor projects that Saudi Arabia will welcome 37 million tourists by 2030, which could translate into 100 million visits, including domestic tourists. International tourists are expected to spend $38 billion by 2030, and the total economic impact could be much larger, including the ripple effect of one million new jobs in the tourism sector. WTTC forecasts that tourism could contribute nearly $169 billion to Saudi Arabia's GDP by 2032.

This focus on tourism also reflects a shift toward what new generations of travelers are looking for: new and sustainable destinations, with a strong penchant for local culture and traditions.

However, there are significant challenges. Rapid hotel construction could lead to overcapacity and possible price erosion. In addition, Saudi Arabia faces perception issues regarding its strict laws on alcohol consumption, restrictions on women and allegations of human rights abuses.

Despite these challenges, multinational companies continue to invest in Saudi Arabia, attracted by its vision of becoming a world-class tourist destination. In this context, the Middle East is emerging as a fast-growing tourism region, with a 23% increase in international arrivals by 2023.

As Saudi Arabia moves towards its ambitious tourism goal, the world is watching closely as this traditionally conservative kingdom transforms itself into a cutting-edge global tourism destination, facing challenges and opportunities along the way.