Arabian Travel Market: Diversification drives tourism investment
The centre of the Gulf’s tourism industry is shifting. Geographically, attention is moving from Dubai to Saudi Arabia, where hoteliers are lining up to sign deals and entertainment producers are finally being welcomed with open arms. Meanwhile, developers are loosening their fixation on luxury and seeing greater value in mid-market accommodation.
The drying up of oil revenues has encouraged all of the six GCC countries to develop more enthusiastic tourism strategies.
Saudi Arabia’s plans are the most vigorous. Its Vision 2030 document lists tourism as one of the seven pillars of the kingdom’s economy under its diversification strategy. While the kingdom receives 8 million Muslim pilgrims annually, it wants non-religious visitor numbers to rise from 200,000 to 1.5 million by 2030.
Religious tourism will continue to play a key role but the spotlight is also turning on domestic tourism. With 30 million residents, Saudi Arabia has the second largest population in the Arab world, but the vast majority of people travel outside the kingdom, not within.
Saudi Arabia ranks among the top 20 countries for overseas tourism spend — exceeding $21bn in 2014 — according to the World Bank.
Simply announcing the intention to boost domestic tourism has already seen a spike in Saudis moving around the kingdom, indicating the current pent up demand. The Euromonitor International Tourism Forecast report, prepared ahead of the Hotel Show Saudi Arabia in March, said domestic vacations were expected to rise by a whopping 40 percent by 2020 compared to 2015.
The Commission for Tourism and National Heritage said in March it had allocated $105m to lend to hospitality and tourism projects this year as part of its efforts to support growth in the sector. The commission has received 40 requests for funding from investors working on hotel and tourism projects.
Saudi Arabia has the most hotel rooms under construction in the Middle East and North Africa, with 36,742 keys in 85 projects, according to analysts STR Global. Comparatively, the UAE, which already has 134,434 rooms, has 28,898 keys in 99 projects on the go.
With so much potential, international developers are scrambling to be a part of the kingdom’s tourism boom.
Much of the focus is in the two holy cities of Makkah and Madinah, where millions of pilgrims descend for Haj and Umrah. Among the dozens of new hotels being built there, Abraj Kudai is expected to be the largest, with 10,000 rooms, when it opens later this year.
Marriott International, the world’s largest hotel operator, has more than 10,000 rooms in 30 hotels in its Saudi pipeline. The company’s Middle East and Africa head, Alex Kyriakidis, says the massive redevelopment of the holy cities was particularly attractive to hoteliers and investors.
A fair chunk of Dubai’s tourism has relied on shoppers, and Colliers International this month claimed hotels in and around shopping malls could expect average daily rates 25 percent higher than other properties.
Retail accounts for more than 40 percent of total tourism spending in Dubai, according to Colliers International. The number of shopping malls and entertainment centres exhibiting at this week’s Arabian Travel Market has also grown to more than 400.
Other Gulf states also are using entertainment and shopping to lure tourists. This month, Omani developer Al Raid Group started building a $158.55m shopping mall that would resemble the Westfield centre in London. Muscat Palm Mall is due to be completed this year with an aquarium, indoor snow park and cinemas, and the under-construction Al Araimi Boulevard Mall will include dedicated kids’ zone, hypermarket, fashion brands and food and beverages (F&B) outlets.
Saudi Arabia has several mega-malls on the way. The first is Mall of Arabia, with a gross leasable area (GLA) of 167,000 sq m, due to open next year. Just the first phase of Mall of Saudi, due to open in 2022, will have a GLA of 300,000 sq m, including indoor ski facilities.
Major events are also likely to drive tourism in the region. In Qatar, which is set to invest up to $45bn in new developments under the National Tourism Sector Strategy 2030, about $2.3bn will be spent on facilities specifically for the 2022 World Cup, including about eight stadiums (it is still confirming the final number).
The country revealed last month it wants to increase visitor numbers from about 3 million a year now to 10 million by 2030, generating $17.8bn in tourism receipts — or 5.2 percent of its gross domestic product, and creating 98,000 jobs.
Its goal to reach a total of 63,000 hotel rooms would represent a 69 percent increase on today’s 23,000 rooms, with another 15,956 rooms under contract, according to the Qatar Tourism Authority (QTA).
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