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Oil-rich kingdom trying to get tourist-rich

Written by editor

Of all nations in the world, Saudi Arabia has so far suffered the least from the global crisis.

Of all nations in the world, Saudi Arabia has so far suffered the least from the global crisis. It, too, has been the least impacted compared with other Gulf states such as the UAE and Kuwait, according to Moody’s.

In a climate of economic uncertainty elsewhere but the KSA (Kingdom of Saudi Arabia), this country is also looking to grow its tourism business. Amid the global meltdown, smart investors have already set their sights on Saudi Arabia and have earmarked the Kingdom as the next potential bright spot for tourism, according to Jonathan Worsley, co-organizer of the Arabian Hotel Investment Conference to debut in Saudi this May.

“What we are seeing in Saudi Arabia is a continued investment in the requisite infrastructure to develop and maintain a healthy hospitality sector from new airlines, to a rail network, and to a plethora of accommodation options,” said Worsley, who earlier said that many projects in the region have already been sidelined in a swift response to the current market cycle. Except in Saudi…

HRH Prince Sultan bin Salman bin Abdulaziz Al-Saud, president and chairman of the board for the Saudi Commission for Tourism & Antiquities (SCTA), looks further than oil revenues in the tourism industry. He said the remit for SCTA is to train and create jobs, oversee the hotel and travel trade sector, as well as build on the Kingdom’s heritage. He said that a five-year strategic plan is guiding this development. “Our aim is to reawaken our culture, not to open the floodgates for unrestricted tourism. Our mandate is to ensure that tourism adds value to our culture, our society, to our economy, and to the visitor,” said the prince.

With the easing of restrictions on tourism visas, plus government incentives and investment opportunities, Prince Sultan said SCTA’s efforts and programs are aimed at developing local tourism. He said that a service sector is being created from the ground-up to cater to not only Umrah, Hajj pilgrims and overseas tourists, but also domestic travel, meetings and events.

Saudi Arabia’s Vision 2020 outlines KSA’s national development strategies that expect over 43 million visitors to travel through the Kingdom by that year. Currently, STR (Smith Travel Research) Global statistics for 2008 demonstrate that Saudi cities, though not hitting the dizzy heights of other regional gateways, are maintaining a healthy increase in revenues. Last year, Jeddah with 71.5 percent average occupancy saw an increase in RevPAR of 27.7 percent to US$114 with an average room rate of $159, while Riyadh had a similar occupancy figure with average rate of $244 and RevPAR of $175, up 25.3 percent.

Backing up the leisure sector, the Saudi Council of Ministers has approved plans for a number of major tourism projects on the Red Sea coast and elsewhere, while many global hotel groups have announced plans for expansion in Saudi. Additional deluxe rooms and budget accommodation will be opened to cater to the expected burgeoning of the mid-range travel market. Hilton Hotels has recently announced an agreement to develop 13 Hilton Garden Inn properties with 2,500 rooms, starting this year in Riyadh. It is also looking to bring in its upscale Conrad brand.

According to Jean-Paul Herzog, Hilton President, Middle East and Africa, the Group is paying special attention to the needs of Saudi Arabia to ensure development projects were in sync with the Kingdom’s tourism ambitions. “Our immediate expansion plans in the Kingdom will drive the presence of our core Hilton brand and luxury brands The Waldorf Astoria and Conrad, but we are also identifying opportunities for Doubletree by Hilton, as well as Hilton Garden Inn,” he said adding, “We strongly believe a market as expansive and diverse as Saudi Arabia has room for all service points.”

Further to Worsley, as many projects have been sidelined in a swift response to the current market cycle, industry players must be careful to keep an eye on the future. He said that this is a good opportunity to use a mixture of experience, innovation and instinct in identifying and backing projects with a real difference.

For many, Saudi Arabia is largely unknown. It has been a closed society for many decades. The summit can set the stage for potential investors and developers to learn more about this vast market. Saudi’s government will confirm their commitment to boosting the tourism and leisure sector; profile the opportunities, for the private sector; also address any challenges as well as the challenges for the private sector.

Optimism is raised due to the high level of support the real estate sector has received in the form of financial bailouts and stimulus packages from governments, Moody’s added. Recently, Moody’s has cited Saudi Arabia as one exception to its negative rating for Gulf real estate due to a growing local population fuelling demand for housing. After all, the KSA has the largest population in the region which, on the flipside, makes it face a bigger challenge in meeting job demands from nationals. Fortunes of the private sector mainly depend on state spending, which is linked to the price of crude oil, down about two-thirds from record levels above $147 a barrel in July.

“The launch of the Saudi summit is timely given the global scenario. The current situation has caused many to rethink their tourism and hospitality investment strategies as former hot spots going into meltdown,” Worsley said.

Criticisms surmise at the other end of the investment spectrum where oil-rich Gulf states financials are discussed. Egyptian professor of Economy at the faculty of Economics and Political Science Jawdah Abdal al Khaliq, however, described the Islamization of the economy as a disease that came from oil-rich Gulf states. These states raise the slogan of Islamic banks but do not follow the teachings of Islam. There are men who are paid to promote such banks and to issue fatwas in their favor. He said that he worked in Sudan for two years where the banking system is 100 percent Islamic and discovered that Islamic and commercial banks use the same system and that there is no difference between them.

We will follow this debate closely.