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Saudi Arabia’s New Tourism Frontier Explained

Raini Hamdi, Skift
Saudi Arabia’s New Tourism Frontier Explained

An opaque kingdom wants to become transparent. Saudi Arabia is both reviled and revered — hated by many for checking all the boxes on human rights abuses and worshipped by Muslims as custodian of their holiest places.

The opening of a new destination is almost always greeted as a triumph. Not this one, where there’s been an outpouring of skepticism and scorn over the duality of its aims.

Scoffers see that, beneath the goals of reducing oil dependence and mirroring neighboring Dubai as a tourism hub, lurk motives such as ridding the ghost of murdered journalist Jamal Khashoggi that still haunts after a year and presenting a more benign image of itself to the world. Most recent measures include allowing unmarried foreign couples to rent hotel rooms and loosening strict dress code for female travelers.

In business, however, the practicalities of learning about opportunities in a new frontier duck uncomfortable concerns.

Some 400 government and business leaders, including 50 members of the World Travel & Tourism Council, attended a glitzy event marking “Saudi Open Hearts Open Doors” on September 27 in Diriyah, a town on the outskirts of the Saudi capital, Riyadh. Hosted by the Saudi Commission for Tourism and National Heritage, the invitation included a three-day bespoke tour of the kingdom designed to showcase hidden attractions and investment potential to about 45 VIPs, half of them World Travel & Tourism Council members including Carnival Corp., VFS Global, and Panorama Group Indonesia.

Collaborations have been sealed and, over time, more are expected to be inked. Oyo Hotels & Homes, funded by Saudi’s sovereign fund, Public Investment Fund, and SoftBank Vision Fund, unsurprisingly stepped up plans in the kingdom. On September 27, it signed an agreement to invest $1.1 billion (SAR4 billion) to build luxury and midscale hotels across the kingdom, its region’s head for Saudi Arabia, Manu Midha, told Skift.

Since its entry in February, Oyo has flagged 130 hotels with 6,500 rooms in 14 cities in Saudi Arabia, but these are largely budget accommodations, not luxury. It will also set up two Oyo Skills Institutes, in Riyadh and Jeddah, to train Saudi nationals in hotel management.

The World Travel & Tourism Council signed a partnership with the Saudi Commission for Tourism and National Heritage on September 27 to “harness the experience and richness of our membership in supporting Saudi Arabia’s goal to be a top-five destination in the world with 100 million international and domestic visitors by 2030,” said the council’s executive director for business development Asia-Pacific, Middle East/Africa, Nigel David.

New E-Visas Explained

At the heart of the opening of Saudi Arabia to the world is a new tourist visa. Until September 28, there was no such thing as a tourist visa, only visas for pilgrimage (i.e., Hajj and Umrah), business, and commercial purposes.

This historic change enables non-Muslims to visit Saudi Arabia, save for the two holy cities Mecca and Medina, as tourists.

Moreover, Muslims can now use the tourist visa for their Umrah, which means they too are able to go beyond Mecca and Medina to anywhere in the kingdom after their Umrah. Tour operators handling the Muslim market interviewed by Skift see a huge upside from this development (see Prospects Explained).

At present, citizens of 49 countries can apply for the tourist visa online.

That does not mean citizens who are not from those countries on the list can’t apply for a tourist visa. Applications can be done, for instance, through VFS Tasheel, the Dubai-based visa outsourcing company that is fully owned by VFS Global, which is present in 30 countries. In countries where VFS Tasheel is not present, travelers could go to the Saudi embassy or consulate.

VFS Global’s Chief Communications Officer Peter Brun told Skift that the first tourist visas have already been processed in the last few days. But he said it’s too soon to gauge visitor interest and from which markets.

“From the 30 countries VFS Tasheel is present, the largest source countries where travelers apply for visas [primarily pilgrim visas] to Saudi Arabia are Indonesia, Algeria, Pakistan, Egypt, UAE, Jordan, Bahrain, the Philippines, and Nigeria. But it is expected that from these countries a lot of tourists will also visit the kingdom in future,” said Brun.

According to the official Saudi visa website, tourists are able to visit the kingdom during the Hajj season, except to Mecca and Medina.

Mohammed M.S. Binmahfouz, founder & CEO, UmrahMe.

“Eliminating visa restrictions changes the market forever, opening the gate for new, endless opportunities. It will generate huge employment opportunities for many young people and for tours and travel experts,” said Mohammed M.S. Binmahfouz, founder and CEO of UmrahMe based in Jeddah. The online travel agency attracts global consumers from 15 to 20 countries, particularly in Asia, to book Umrah tailored packages completely online, including visa processing.

Prospects Explained

A huge prospect is an expansion of the Umrah market into the leisure sector. Players targeting the Asian market, where a huge Muslim population exists in countries such as China, Indonesia, Malaysia, and the Philippines, all said they are studying this closely.

Dubai-based HolidayMe’s co-founder and CEO Geet Bhalla said the length of stay of Umrah visitors from Asia could easily be extended by another four to six days.

“We’ve just started figuring out how do we add value for these clients — they have already spent on flights to Saudi Arabia, why not explore the country, which is unique in many ways,” he said.

“Saudi expects 10 million Umrah visitors this year. If 5 percent decide to stay longer and do tourism, that’s half a million people — not small.”

The kingdom is aiming for 15 million Umrah visitors next year, and 30 million by 2030. It’s also investing in improving the booking efficiency for Umrah pilgrims. Recently, the Ministry of Hajj and Umrah launched a global distribution system, Maqam, linking more than 32 Umrah business entities, including service providers such as Mokhaa, which handles Umrah applications, relevant government ministries, online travel agencies, and end customers.

“Maqam has changed the business model of Umrah forever, providing more control over the process and more automation than ever, introducing e-visas and e-wallets and enhancing user experience,” said UmrahMe’s Binmahfouz.

Besides the Umrah market, an entirely new non-Muslim market has opened up.

Panorama Group Indonesia CEO Budi Tirtawisata, who was at the September 27 launch event, believes non-Muslims will want to visit Saudi Arabia. Panorama, which started offering Umrah packages early this year, will now look at the non-Muslim market in Indonesia for Saudi as well.

“Saudi Arabia was ‘hidden,’ now it is opened, so in a way that attracts attention. Frankly I, as a non-Muslim, initially did not intend to visit the kingdom,” he said.

But curiosity and the novelty factor got the better him.

“I believe it could be an exotic destination for incentive travel. And now we can combine Saudi Arabia with, say, Jordan and Egypt. Indonesian leisure trips are seven to 10 days, and they don’t want to spend 10 days just in Saudi Arabia.”

Likewise, WebBeds Asia-Pacific CEO Daryl Lee sees the potential of multi-destination trips that include Saudi Arabia for Chinese tourists. The bedbank recently formed UmrahHolidays International in a joint venture with undisclosed partners in the Middle East and has two exclusive partnerships in China, with Mafengwo for direct online consumer sales and major wholesaler Haoqiao for retail agency distribution.

“When we launched UmrahHolidays, we were always hoping people would stay longer and explore other tourist attractions in Saudi Arabia such as the beaches, dive sites, natural and cultural heritage, not just the mosques and religious aspects. Now that the kingdom is promoting itself as a tourist destination, it will change people’s mindset about it as a pilgrim’s place.

“Chinese tourists are already visiting Dubai and Abu Dhabi, and in the longer term it’s not unreasonable to expect these travelers to want to combine them with Saudi Arabia, although it will take a lot more than a couple of videos for that to happen [see Challenges Explained],” said Lee.

Global hotel chains such as InterContinental Hotels Group (IHG) want “to leverage the huge growth opportunities that the new inbound travel presents,” said its managing director India, Middle East, and Africa, Pascal Gauvin. IHG has 39 properties in operation, 14 hotels in development, and expects “to bring new brands to cater to new guest segments that are now expected to visit the country,” he said.

Melia Hotels International is finalizing its first deal in Saudi Arabia in “a prime location” in Jeddah, according to Its head of development Middle East and Africa Benjamin Oppl.

But Oppl admitted this “took a while” as there were concerns over political tensions in the region by some developers.

“It takes more time to persuade the right people to enter the market than the UAE or Qatar,” he said. “But when you look at the business equation, Saudi Arabia is the biggest economy in the Arab world, with young demographics, and now there’s a strong leisure opportunity. We are talking to the big developers about opportunities in the mega project, and it’s a matter of time before we’ll have a number of hotels there.”

Among the giga projects launched by the Saudi sovereign fund, which offers incentives and other support to attract developers, are Amaala, NEOM, and the Red Sea Project.

Challenges Explained

A challenge commonly voiced by industry players is that the kingdom isn’t made for leisure travel. Catering to pilgrims and catering to leisure travelers, whether Muslims or non-Muslims, require a different skills set, the argument goes.

“It’s largely been religious-compliant tours and more business-oriented tours,” said World Travel & Tourism Council’s David. “It isn’t so much about the infrastructure in handling leisure travel, but how they adapt and make changes for leisure travelers, such as the people aspect or the ability to organize leisure tours,” he said.

Panorama’s Tirtawisata agreed, saying the basic infrastructure such as roads, hotels, and attractions are all there, but not destination management companies, which are a critical component of leisure travel. These inbound specialists create exciting tours, offer the best guides, and handle the incoming tourists. He said it might take two to three years before Saudi Arabia is ready for leisure travel.

After all, Dubai didn’t get to where it is today overnight. But Melia’s Oppl believes it will take longer for Saudi Arabia than Dubai, saying, “You’re dealing with the most conservative kingdom on the planet probably,” which Dubai is not.

“I’ve been living in the Middle East for over 10 years now. Dubai did it smartly. It put resources in the right places, became the air hub connecting Europe and Asia, created a strong government-private sector partnership and opened up quickly — some said too quickly — to the Western lifestyle, which made it unique in the region.

“Saudi Arabia does have a vision, but it’s going to implement it in a more moderate way. We’ve seen positive developments, such as the latest news that foreign non-married couples could now rent hotel rooms, but I don’t see other rules such as alcohol restrictions being changed anytime soon. So if it wants to grow on an international level, there are still some limitations,” said Oppl.

But that isn’t necessarily bad, he said, as Dubai’s rise to stardom shows the downside of supercharged growth. “Too much supply in hotels, residential development, offices, retail spaces, everything. Dubai is for the first time feeling an imbalance, and we’re all sitting it out,” Oppl said.

As it is, too, Saudi Arabia’s hotel market is expanding rapidly, developers pinning their hopes on Vision 2030 which was announced in 2017. According to STR’s figures, as at January 2018, Saudi Arabia’s pipeline comprises 64,000 rooms — 76 percent of the existing 84,500 rooms in the country.

The launch of a tourist visa should lessen the risk for developers, but the question remains if tourists will visit, just because they can, given the lingering negative sentiments.

An uneasy dance with the beast remains the elephant in the room. When asked about this, World Travel & Tourism Council’s David reiterated its mantra about tourism being “a force for good, not just economically but socially.”

A Saudi shaming would be a shame. Said David: “You can’t sort of say we’re not going there because of human rights issues, otherwise nothing will ever change. I think our members see this as a positive opportunity, because that’s what travel and tourism is all about.”

Try saying that to Khashoggi’s fiancée, Hatice Cengiz.

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