Saudi Arabia is known to derive much of its income from the oil sector. It is the number one oil exporter in the world. However, in recent years, the leadership in Saudi Arabia has realized that dependence solely on oil is not sustainable. The world is considering transformation towards clean and renewable energy sources such as wind, solar and clean electricity. Therefore, the need to invest in other sectors of the economy.
Tourism is one area likely to drive growth in the country. Saudi Arabia is principally known to host two key events that attract millions of people worldwide. These are the Makkah and Madinah, where Hajjis and other visitors go to the country to perform hajj and Umrah annually. The Muslim community holds these two events with very high regard (Poncet). Other key attractions include the coastal seafront in the western (Jeddah) and eastern (Damman) regions that are good for aesthetics and entertainment.
Despite the government’s effort to improve tourism, the sector still contributes a small proportion to the GDP in recent years that is below 10 percent. In 2017, 2018, 2019, and 2020, the sector contributed 9.2 percent, 9.0 percent, 9.3 percent, and 5 percent, respectively (Poncet). The trend is depicted in figure 1 below;
The country has been reviewing its laws, especially on visa applications, in order to attract more visitors. In prior years only expatriate workers, religious pilgrims, and people with business visas were allowed into the country (Poncet). The rules were reviewed in 2019 with the provision of tourist visas. In addition, in 2020, the country allowed tourists having UK, US, and Schengen visas to enter the country.
As a result, there was a slight increase in tourism GDP contribution from 9 percent in 2018 to 9.3 percent in 2020 (Poncet). The sharp decline in 2020 is attributed to the effects of COVID-19 that resulted in lockdowns and travel restrictions. Therefore, there was reduced travel for the most part of the year in a bid to contain the spread of the disease. The country is also working towards increasing the number of international tourist visits to over 30 million by doubling the issue of religious visas.
Investment in tourism is vital in developing the relatively fresh sector of the Saudi economy. The government has committed to spending up to over 58.5 billion by 2023 and $133 billion by 2030 to build its tourism sector (Poncet). Overall, Saudi Arabia seeks to spend up to $810 billion in tourism-related activities as part of its vision 2030 project (Poncet). Besides, there is a massive construction of shopping malls to meet the demand of both local and international travelers. For instance, the Jeddah region is characterized by giga-projects intended for leisure. One key construction is the Amaala or the “Middle East Riviera,” which is expected to be completed in 2028 and will create over 2,500 leisure rooms (Poncet).
Such projects are expected to draw the attention of tourists and enable the Kingdom to compete with the current leader in the region, UAE (Dubai). Other projects include Neom (a $500 billion futuristic city project), the Red Sea Project, and the Qiddiyah Project (a $10 billion entertainment project). These efforts are intended to further open up the sector and enhance its contribution to overall GDP.
Poncet, Sacha. “Could Saudi Arabia Become the Next Tourism Leader in the Middle East?” EHL Insights. Web.