Analysis: Saudi Arabia is now open for business
Saudi Arabia has opened its doors to the world with its recent tourism announcements. Hotelier Middle East investigates what this will mean for the Kingdom's hospitality sector
Saudi Arabia’s recent revelation took the world by storm: Saudi tourism visas will likely be issued in April 2018, and regulations have already been sent to the government for approval.
The opening of the borders that started with the Red Sea Tourism announcement in 2017 is now seen by the world as an attempt by the Kingdom to diversify its economy by attracting millions of tourists. The newly relaxed rules are a significant change for a country that has, in the past, avoided opening up to non-religious tourism.
The newly introduced electronic tourist visa is in line with the latest economic developments taking place in Saudi Arabia. This development highlights the important role of tourism as outlined in the Saudi national agenda. The Saudi Vision 2030 details a number of projects which are currently in the pipeline for Saudi Arabia, with the aim of positioning the kingdom as a global leader in the tourism sector.
According to Alex Kyriakidis, president and managing director, Middle East and Africa for Marriott International, “the opening of the borders is a positive step in the right direction and will give further impetus to inbound travel to the country which is much needed”.
Certainly, the tourism and hospitality industry is a key focus in this changing market, with nearly 1,300 additional keys added to Saudi Arabia’s hotel market in Q3 2017, and hotel investment in the Kingdom on the rise. In addition to a number of plans to facilitate arrivals in the country, including airport and infrastructure upgrades, the country is planning to convert 50 islands off its Red Sea coast into a world-class tourism destination. The first phase of the Red Sea Project will be complete in 2022.
Currently, there are 187 hotel projects in the ‘planning’, ‘final planning’ and ‘in construction’ stages in Saudi Arabia, according to STR’s January pipeline report. The construction phase takes up the largest portion of the pipeline with approximately 40,000 rooms in 94 projects.
STR area director for the Middle East and Africa Philip Wooller said the country is going through a phase of massive supply.
“In the short term, we’ve already seen this growth affect performance levels, and this trend should continue as more and more properties start to come online. But it is important to note that this is part of a major long-term investment for the market to further develop its infrastructure to accommodate millions of annual visitors, who come for religious pilgrimages and as new tourism attractions spring up as part of Vision 2030,” Wooller noted.
Vision 2030, which was announced in 2017, is an initiative aimed at reducing the country’s dependence on oil and included investments into the tourism sectors.
The new visa announcements are a huge advantage for Marriott International. “The new visa regulations represent a strong indication for great things to come and a promising future for tourism in the Kingdom. This further strengthens our commitment to Saudi Arabia as one of strategic growth markets. We view this as a great opportunity and we are proud to be in a position to leverage our capabilities as the largest hotel chain operator globally to support the Kingdom in its upcoming projects,” said Kyriakidis in an interview with Hotelier Middle East.
“The Kingdom of Saudi Arabia is our second largest market in the Middle East and we continue to see a strong momentum of growth across the country,” Kyriakidis added. Marriott currently operates 23 hotels with over 6,700 rooms across nine brands in Saudi Arabia. These include Courtyard by Marriott, Marriott Executive Apartments, The Ritz- Carlton, Marriott Hotels, Four Points by Sheraton, Residence Inn, Aloft, Le Méridien and Sheraton. And that’s not all. Expansion plans in Saudi Arabia are set to more than double the number of hotels, with the opening of 29 new hotels and more than 5,700 rooms. Three new brands will also be making their debut, including Autograph Collection, Westin and Element.
Hilton, meanwhile, currently operates 10 hotels in the country, with more than 30 further hotels under development. Similar to Marriott, Saudi Arabia also represents Hilton’s largest development pipeline in the Middle East.
The launch of these hotels is expected to add more than 8,400 rooms across the Kingdom. One such hotel is Hilton Riyadh Hotel & Residences, an 866-room property that is expected to open later this year, Kamel Ajami, vice president, operations, Kingdom of Saudi Arabia & Levant, Hilton told Hotelier Middle East.
The Radisson Hotel Group is also making significant gains in the Kingdom. Its area senior vice president, Middle East, Turkey and Africa, Tim Cordon said in a statement: “We are delighted to continue our strong growth across the Kingdom of Saudi Arabia, which is a key growth market for development for our group. We are pleased to see our portfolio rise to 18 hotels and we will continue to focus on growth in the key commercial cities of Riyadh and Jeddah, support the growth of religious tourism, and important industrial cities like Dammam and Jubail.”
In terms of what the opening of Saudi borders mean to the region in general, Kyriakidis noted that as Saudi Arabia is the largest economy within the region, it leads the way when it comes to the development of the region as a whole. The Saudi Vision 2030 presents ample opportunities across different sectors and the ease of entry will allow more people to cross the borders on a regular basis and explore possibilities that can include leisure, religious tourism, trade and business.
According to Ajami, new legislation and government reforms such as the expected issuance of tourist visas are making the Kingdom more accessible than ever before. The Saudi hospitality sector has demonstrated an ability to diversify its offering and attract the wide range of business it needs in order to sustain growth.
“The market for religious tourism has always been key and this is not going to change. We are now adding to that by working with the Saudi government and the General Entertainment Authority (GEA) to promote tourism to Saudi cities,” Ajami said.
Hotels are partnering with the GEA to host major entertainers performing in the country. In addition, the conferences and exhibition sector is growing, not only bringing business to the Kingdom but also serving as a marketing engine to promote the venues available. Corporate business is also on the rise and the expectation is for this market to grow further with travellers coming to Saudi Arabia to service many of the mega-projects being planned by the government and the private sector.
One of the hospitality hotspots in Saudi Arabia, Jeddah, will play an essential role in the Kingdom’s development plans in the Red Sea, as well as 50 Red Sea islands that are set to be transformed into a touristic destination offering a range of luxury resorts that are expected to host over a million tourists annually.
In parallel to Saudi Arabia’s initiatives to improve tourism, connectivity within the country is improving rapidly, with the railway project that links Saudi cities with Makkah expected to be completed sometime this year. The expansion of Jeddah’s King Abdulaziz International Airport, also expected to be completed this year, will improve transport links within the country.
Hilton’s Ajami said that the market in Jeddah is thriving and Hilton currently operates two hotels in the city— Waldorf Astoria Jeddah Qasr Al Sharq and Jeddah Hilton. “We expect our presence in Jeddah to expand in the coming years as large scale projects such as the Jeddah Downtown development fuel continued demand for accommodation,” Ajami added.
Kyriakidis added that Jeddah will continue to maintain its appeal in the long run for those visiting for both leisure and business.
According to Kyriakidis, Marriott International’s future growth strategy is testament to the Kingdom’s vision to achieve a thriving economy, vibrant society and build an economic powerhouse, which will be largely achieved by raising non-oil revenue to US$160 billion by 2020, up from $43.5 billion in 2017. Tourism will play a crucial role in boosting this revenue and strengthening the economy.
In terms of the future for the hospitality industry in Saudi Arabia, Kyriakidis said that the Saudi Vision 2030 makes it a very exciting time for those working in, or hoping to work in, the travel and tourism industry in the Kingdom.
The renewed focus and investment in the sector opens up a wealth of opportunity for both Saudi nationals and tourists alike.
“Following a successful 40 years in the Kingdom of Saudi Arabia, we remain committed to our continued support towards growth of the tourism sector. Our Saudi Arabia growth plan along with the implementation of our programs aim to foster local talent, share best practises and ultimately support the development of the sector as a whole,” he added.