Over the last few years, Saudi Arabia has put a lot of efforts to diversify its economy from oil. The kingdom's recent decision to release e-visas is surely set to have a positive long-term impact on its tourism market.
A Kingdom with high potential
With this announcement, Saudi Arabia seems to consider itself ready to become the new tourism force of the region. Indeed, thanks to its Vision 2030 project, the Kingdom has been focusing on opening itself to the world and has planned $64 billion of investments in culture, leisure and entertainment projects over the next decade. This strategy has already significantly enhanced the country's attractiveness as a tourist destination.
According to the World Travel and Tourism Council (WTTC), the Kingdom is expected to reach 22.1 million in international arrivals by 2025, which would be nearly 40% higher than Dubai's current visitors.
This projected growth is mainly due to a particular focus on creating a brand-new hospitality landscape. Saudi Arabia's tourism has been able to highlight its strengths by launching giga-projects across the Kingdom.
Case in point, several massive leisure projects are emerging on the western coast, which seems to have been chosen by the Kingdom to become the new leisure area of the country thanks to its exceptional biodiversity.
One of these projects, the Amaala, also called the "Middle East Riviera", will generate alone 2'500 luxury hotels rooms and more than 22'000 jobs by its completion in 2028. All those projects aim to retain Saudi tourists in the Kingdom, rather than see them travel to the UAE, as well as to attract international tourism.
Increasing demand from religious tourism
In parallel to those leisure developments, the Vision 2030 project aims to increase international religious tourists for the Umrah to 30 million by 2030. This would mean doubling the number of religious visas and therefore the demand.
With those changes, Jeddah, transit city for pilgrimages to the Islamic holy cities of Mecca and Medina, is expecting an additional 1'800 and 2'000 keys in 2020 and 2021 respectively with the creation of new luxury properties such as the new Jeddah Marriott or the new Shangri-la Jeddah Hotel.
Moreover, the religious visas will now be convertible into non-religious foreign tourists' visas to encourage people to visit the Kingdom's new touristic infrastructures.
Impact for neighbouring tourism leader UAE
Thanks to its development projects and its decision to release non-touristic visas, Saudi Arabia tourism will probably become a significant player in the Middle East market and will therefore be posing a real threat to the tourism economy of its neighbouring countries such as the United Arab Emirates.
As many investors are starting to consider UAE and more specifically Dubai as a saturated market in terms of hotel supply, the Emirates are already seeing foreign investors and expatriates leaving to Saudi Arabia for better opportunities and salaries.
Moreover, the new Saudi Arabia's strategy to retain Saudi tourists in the Kingdom and attract international tourists also means a fiercer competition and an eventual redistribution of market shares in the long term in the region.
Challenges to be faced
Even if Saudi Arabia seems ready to become a new tourism force in the Middle East, the Kingdom still faces many challenges, particularly in terms of political stability. The Kingdom has yet to win the confidence of potential international tourists and change its perception from potential tourists around security matters, human rights and equal treatment or even a rigid legal system.
Besides, the Kingdom's various strengths, such as its historical heritage and the biodiversity of the Red Sea, are often not well known abroad. Even with major investment from the government to promote the Kingdom, it will take time for people to change their negative perception of the latter.
Neighbouring countries have decided to not remain without a response to this Saudi development. Indeed, last July, UAE was announcing one of its most drastic steps yet to stop Saudi from encroaching on its lead to attracting foreign investors. The country offered 100% foreign ownership in 122 economic sectors.