BMI View: Saudi Arabia is set to see an increase rise in tourist arrivals between 2015 and 2019, with increasing numbers of business travellers and religious visitors boosting the tourist market within the country. Backed by governmental support, transport infrastructure investment and foreign hotel group development, the industry is in good shape. However, regional insecurity and low oil prices present a genuine downside risk that may affect government fiscal spending if continued in the long term.
Job opportunities in Saudi Arabia's tourism and tourism-related sectors will reach 1.7mn by 2020, according to a report by the Saudi Commission for Tourism & National Heritage. The report stated that employment growth in the tourism sector is forecast at 10% in 2010-2020, compared with a global growth rate of 2.5% during that same period. Job opportunities in the Saudi tourism sector stood at more than 751,000 in 2014. This highlights the rapid expansion of the tourism sector to date, and the emphasis which the government is placing on future economic diversification away from oil revenues. However, we would emphasise that there are a number of regional rivals with regards to the tourism industry in the Middle East, many of which have already established themselves more firmly, and this could undermine Saudi Arabia's aspirations to become the main Middle Eastern tourist destination.
However, the country is determined to entrench itself as a domestic and international tourist destination, and is undertaking a number of projects outside of the standard tourism-boosting remit, in order to attract and retain larger customer-bases. One such is the development of a number of theme parks targeted at the under-14s. Saudi Arabian firm Abdul Rahman Saad Al-Rashid and Sons signed a deal with Kidz Holding to create seven KidzMondo Edutainment Cities across Saudi Arabia. KidzMondo is helping to set up the first KidzMondo theme park in Riyadh. The property is scheduled to open in Q117. The seven edutainment cities, under the KidzMondo franchise agreement, will involve an investment of SAR500mn (USD133.2mn) over 10 years. KidzMondo Saudi Arabia will cooperate with more than 60 brands that will sponsor various activities in the Riyadh project. The edutainment cities are aimed at children aged between two and 14.
A recent public transport trade delegation from Saudi Arabia to the International Association of Public Transport (UITP) World Congress in Milan outlined plans for more than USD90bn worth of public transport infrastructure projects. According to BMI's Infrastructure Key Projects Database, around USD74bn worth of transport infrastructure projects are now under construction in Saudi Arabia. The improvement of the country's transport infrastructure will offer another boon to its burgeoning tourism sector, as not only international travel facilities such as the Prince Mohammed Bin Abdul Aziz International Airport in Madinah Al-Munawarah are being improved and expanded, but also domestic road and rail infrastructure. For example, there are a number of highways being built to facilitate religious tourism, and travelling around major tourist destinations such as Mecca, Riyadh, Medina, and Jeddah is also being improved via a number of metro projects. In addition, we anticipate arrivals to rise, and the tourism sector growth to be supported by the GACA's plan to attract additional airlines to its regional airports to boost tourism is less frequented regions, and improve domestic flight volumes.
Further evidence of the importance that the government is placing on the tourism sector can be found in the news that they have become directly involved in the accommodation sector, commissioning a vast new super-hotel development in Mecca. While we view this as a positive development overall for the wider tourism sector, it does pose some risks to the hoteliers themselves, as few, if any, have the necessary funds to compete with the Saudi government at the upper levels of the luxury market. However, overall we retain our positive outlook for the hotel sector in the country, as rising domestic and international numbers will continue to boost demand, and the comparatively unsaturated market offers opportunities at all levels.