Tourism to contribute 5.7% of the non-oil Saudi GDP by 2020

Saudi Arabia’s non-oil sector is forecasted to maintain robust growth in 2015. Thanks to the Kingdom’s diversification strategy, the non-oil sector benefits from government spending, corporate lending, and solid domestic consumption. These benefits are likely to continue due to an important contributor to the non-oil sector, which is the hospitality sector.

Tourism is a primary driver for the hospitality sector, with its activities centered in the holy cities of Makkah and Madinah. Industry experts at the Saudi Commission for Tourism & Antiquities (SCTA) projected tourism to contribute as high as 5.4% to the non-oil GDP in 2015, reaching a strategic level of 5.7% by 2020. 

Following the announcement of Human Resources Development Fund (HRDF), Saudi Arabia’s tourism sector is expected to create more than 400,000 jobs in the next five years. Mr. Anees Moumina, CEO of SEDCO Holding Group, articulates that “In its continuous surge, religious tourism stands as a haven to investors and a world of opportunities to young Saudis. The success, efficiency and overall infrastructure of this sector is a tribute to the country’s economy.” 

He went on to say, “We have a successful platform to build on.  Our multiple infrastructure projects and the growing business and leisure tourism, as well as the increasing inflow of religious tourists, the expansion of Al-Haram and the government supporting growth by way of building transportation and properties infrastructures are all healthy indicators. Furthermore, the development of this sector contributes to new ancillary services such as training, and this constitutes a great investment potential.” Mr. Moumina explains: “Governmental entities collectively acknowledge the growth potential of this sector. Both Ministry of Labor & SCTA recognize the size of this labor market and are highly aware of the employment potential this sector holds for young Saudis. Vocational training programs have been developed with the support of the Ministry of Labor, which is a promising sign to sustain the sector’s growth. We seek to capitalize on these trends, and with the expansion of our operating company, Elaf Group, the employment growth will increase by 75% across our properties.”

Millions of pilgrims visit the Kingdom every year with growth showing no sign of abating as the government continues its massive expansion projects: visitors to Makkah and Madinah are expected to reach an average of 30 million by 2025, an increase of 42% compared to 17.5 million in 2014. Elaf Group CEO, Ziyad Bin Mahfouz points out that “Hajj season plays a key role to the religious tourism sector. Visits have witnessed an overall surge in recent years and the number of pilgrims, which stood at 2 million in 2013, is expected to increase to 5 million by 2025. Regarding Elaf hotels, our occupancy rate last Hajj in Makkah reached 95% and our revenue per available room recorded higher numbers than international hotels.”

While furnished apartments are gaining prominence as an alternative, hotels remain the predominant form of accommodation in both cities. Makkah is the city with the most visitors in the country contributing to 96% of the total visitors to the Kingdom. The government approach to development confirms that the Kingdom’s tourism industry has become a labor market on its own, focused to deliver a high-quality religious tourism experience, as is the case with Hajj services. 

Mr. Ziyad added “Our Group is expanding in line with the rapidly-developing religious tourism sector as we plan to supply 5,000 rooms over the next five years, more than doubling our total capacity. We know that premium hotels dominate the Holy cities - one can even speak of an oversupply of premium hotels - hence there is considerable scope for expansion in the branded economy hotels and apartments segment. With this understanding of the market, we have worked toward the opening of four more properties next year– two properties of three stars’ hotels, one four stars and one five stars, which is on Tahlia Street in Jeddah.”

Mr. Ziyad Bin Mahfouz further adds “We are a trusted brand which was established locally but is now widely recognized globally amongst religious tourism travelers and travel providers. As a local name abiding by international standards, our aim is to reach Muslim populations around the world. The recall of our brand by the customer is strong. Through the satisfaction of our customers, we are confident that we will be able to double our market share in the next few years”.