Can Saudi Arabia Build a Successful Tourism Industry?

10 MINS READOct 31, 2018 | 09:00 GMT
A journalist takes a picture of a tomb at Madain Saleh, a UNESCO World Heritage site, in Saudi Arabia's northwest on March 31, 2018.

A journalist takes a picture of a tomb at Madain Saleh, a UNESCO World Heritage site, in Saudi Arabia's northwest on March 31, 2018. The area is rich in archaeological remnants and seen as a jewel in the crown of future Saudi attractions as the austere kingdom works to improve tourism and open up one of the last frontiers of global tourism.

  • Saudi Arabia is aiming to meet some of its foreign direct investment goals by developing its tourism sector — provided that the kingdom's reputation doesn't scare away potential partners.
  • The country will struggle to convince global middle-class tourists to visit. It will need to differentiate itself from regional rivals and face down its image as being unwelcoming.
  • A flood of new tourists — if Saudi Arabia can get them — will have cultural consequences for its insulated citizens, possibly helping to disrupt the kingdom's social contract if economic conditions don't improve.

Saudi Arabia wants to lure tourists — and their currency — to the kingdom. The effort is another element of the country's ambitious Vision 2030 reform plan and part of its strategy to bring in more foreign direct investment. The kingdom already hosts millions of pilgrims each year for the Muslim pilgrimage, or hajj, to the cities of Mecca and Medina. But entering the secular tourist trade will be a new experience for the Saudi government, which has previously reserved most of its visas for foreigners coming either to do business or make their hajj. Already the kingdom is liberalizing its visas for tourists and setting up infrastructure with cinemas, amusement parks, museums and other entertainment venues. But that's the easy part. Reforming a poor international reputation, luring middle-class tourists away from regional competitors, convincing pilgrims to visit new tourist attractions and grappling with the cultural impact of an influx of foreigners will all be much harder.

The Big Picture

As host to the annual Muslim hajj pilgrimage, which brings in millions of foreigners each year, Saudi Arabia is no stranger to international visitors. Expanding its tourist appeal will build on this tradition and bring the kingdom new opportunities for economic growth and reform. But it will bring challenges too, including the blunt reality that turning pilgrims into tourists is no straightforward task.

A Reputation for Closed Doors

Since the formation of the modern Saudi state in 1932, the Saudi monarchy has had a reputation for hostility toward tourists, welcoming few but oilmen and diplomats. British explorer Wilfred Thesiger, who helped map Saudi Arabia's Empty Quarter in the 1940s and early 1950s, wrote in dire terms about the potential consequences for himself and his Bedouin guides should the Saudi king get wind of his unauthorized, and unwanted, expeditions. This was in part because of the monarchy's close relationship with the religious establishment, which feared that foreign, non-Muslim influence would secularize Saudi Arabia like it was perceived to have done in other Arab countries such as Egypt.

The Saudi government has thus avoided fostering an official tourism sector for many decades, though economically and religiously focused foreigners have been regular visitors. Expatriates working in the kingdom have built up a quiet, largely informal tourist economy to busy themselves, participating in tourist activities such as Red Sea scuba diving and jaunts to Madain Saleh, the Roman-era Nabatean ruins in the northwest. And hajj pilgrims visit the country by the millions each year, though they rarely stay beyond their religious duties or venture far from the holy cities.

Over the years, insulation has indeed preserved the values that empower the Saudi monarchy and that provide social and political stability to the kingdom. But Saudi Arabia's young population is more open to the world than previous generations, thanks to social media, technology and greater global connectedness. The domestic gains for the monarchy of cloistered hard-line Sunni Islam are increasingly limited. Moreover, there is money to be made from tourism — money and jobs badly needed in a kingdom striving to employ more Saudis and reach the goals of its Vision 2030 plan. In light of this, Riyadh has started shifting its strategy toward encouraging both domestic and international tourism.

What the Saudi Government Can Change Most Easily

The easiest part of Riyadh's project to grow the tourism sector — and one that is already underway — is liberalizing the visa process to include tourists as an official category of visitors, which they currently are not. The kingdom intends to roll out an electronic visa approval system by the time it hosts the Formula E race in Diriyah, the Saudi family's ancestral city, in December. The new visa process fits into Vision 2030's goal of improved government services; the electronic service will undercut the power of the sluggish, often paper- and stamp-based bureaucracy, in addition to opening the door for non-Muslim tourists.

The country faces a similarly straightforward endeavor in convincing its own citizens — who take large sums of money out of the kingdom when they go on vacation elsewhere — to become domestic tourists. Opening movie theaters and hosting domestic events in existing infrastructure are relatively easy means of keeping Saudis from spending money in Dubai, Bahrain, Lebanon and other favorite tourist hot spots. Saudi Arabia will still have to contend with the cultural reality that foreign countries can offer services and experiences — such as bars and specific forms of entertainment — that Saudis want but remain publicly unacceptable in the kingdom. Bahrain, in particular, has a reputation for being a place where Saudis go to experience what they cannot at home — and there are few signs yet that Saudi Arabia is about to introduce Bahrain-style bars and clubs. 

The Kingdom's More Difficult Challenges

More challenging for Riyadh is the effort to build large-scale tourist infrastructure, which is funded by a combination of foreign investors and the sovereign wealth Public Investment Fund. The Saudi General Entertainment Authority intends to spend $64 billion on the entertainment sector alone, while it is also developing the $500 billion Neom city in the northwest, a series of Red Sea resorts and a recently announced "Riviera of the Middle East," dubbed Amaala, on the country's west coast.

Many of these projects are either in the beginning of their development or have not begun at all. Not all will be finished, at least not in the forms currently envisioned, and not all will provide the returns the Saudi government is hoping for. Some projects may see the same fate as the nearby Ferrari World in Abu Dhabi, a $1 billion car-themed amusement park that has yet to capitalize on its famed brand and its record-breaking roller coaster. Other projects could fall victim to recessions and economic downturns; Dubai's Palm Jumeirah, another regional mega-tourist project, is mired in litigation and recriminations after the 2009 financial collapse brought its development to a halt.

A chart shows the income per capita of the countries sending hajj visitors to Saudi Arabia.

The greatest struggle of all will be attracting the middle- and upper-class tourists that drive the majority of the global tourism economy. First, Saudi Arabia can't readily transform its large hajj pilgrimages into a steady stream of tourists: Over 54 percent of pilgrims came from low-income countries in 2016, and many Muslims can afford the trip only once in their lives. Many pilgrims already complain that the hajj has become a cash grab by hotels and unscrupulous merchants, undermining Riyadh's claims to be the best steward of the two holy mosques. Asking them to extend their stay to have a secular experience is a hard sell for a devout group of visitors uninterested in the worldly pleasures of a luxury hotel or Red Sea coral reef.

The middle- and upper-classes that do visit the Middle East and North Africa overwhelmingly avoid Saudi Arabian locations in favor of Dubai, Abu Dhabi, Qatar, Oman and regional tourist heavyweight Egypt. Those places have a decadeslong head start in the tourism industry, and they don't have Saudi Arabia's fraught reputation. The country is still recovering from several bad public relations events, such as the affair involving Lebanese Prime Minister Saad Hariri, the German-Saudi diplomatic dispute of 2017-18, August's Canadian-Saudi diplomatic dispute and the recent killing of journalist Jamal Khashoggi.

In addition to proving that it is welcoming to tourists, Saudi Arabia will also have to provide experiences that its competitors are lacking. Here, its Red Sea diving, coastal experiences and ancient ruins provide advantages over Persian Gulf competitors, restricted by the often desolate gulf and containing few historical remains. Yet it may still find itself outclassed by both Egypt and Jordan, which have access to the Red Sea and an abundance of ancient cities as well.

Can It Work?

It's possible for Saudi Arabia to differentiate its brand and rehabilitate its image, but these efforts will take time. If Saudi Arabia can improve its reputation, it could see tourism increase its foreign direct investment from 15.6 percent today to 19.9 percent by 2028, according to World Travel and Tourism Council. But the growth may not make much of a dent in Saudi unemployment rates, a key test of whether Vision 2030 will result in lasting improvements to Saudi social norms. Even the most optimistic estimates suggest only 9.8 percent of Saudi jobs will be tourist-related in 2028, up from the current 9.1 percent. And that figure presumes that Saudi Arabia will be able to alter its economic structure enough to entice — or in some cases, force — Saudis to work the service jobs that make up much of the tourist trade. There are few signs so far that Saudi education is preparing its citizens for this, and the window of opportunity to do so before 2030 is closing.

Bringing new tourists to Saudi Arabia will also increase the country's vulnerability in another arena: security. Jihadists, both foreign and domestic, often target tourists in order to undermine confidence in the government and achieve their ideological goals. These types of attacks have been seen in Egypt and Jordan. The more tourists Saudi Arabia brings in, the more terrorism opportunities it creates for organizations like al Qaeda and the Islamic State.

Fear of Foreign Influence

Then there is the unknown quantity of how the intersection of cultures will affect Saudi society. Much of the country's identity, especially in core conservative regions like the Najd, where Riyadh lies, comes from its closed-off nature. An influx of visitors, whether Arab or non-Arab, Muslim or non-Muslim, will bring new ideas, languages and lifestyles. In Dubai, this has challenged traditional culture to the point where some Emirati youths are better versed in English than Arabic. Yet that has not undermined loyalty to the governing system, nor has it produced instability, crime or terrorism.

An influx of visitors, whether Arab or non-Arab, Muslim or non-Muslim, will bring new ideas, languages and lifestyles.

Conversely, the influx of U.S. workers into Iran in the 1960s and 1970s helped produce a strong enough backlash to American values that it provided some of the ideological underpinnings of the 1979 revolution — a revolution that produced an acute geopolitical realignment that reverberates to this day. Between the two extreme examples of Dubai and Iran is a constant: the influx of foreigners to previously closed-off societies fundamentally changed the nature of those societies. Saudi Arabia will have to manage that change, often reactively, to maintain its own stability.

What Will a More Open Tourism Industry Ultimately Mean For Saudi Arabia?

Because the economic effects of inviting tourists to Saudi Arabia will be limited, the overall impact of increased tourism will be social, cultural and eventually political. An influx of non-hajj visitors would alter the makeup of Saudi society, especially in previously cloistered regions, in a manner outside the monarchy's control. This could possibly lead to backlash and criticism, especially if those changes are not accompanied by successful economic reform in other aspects of Vision 2030, including its goal of reducing Saudi unemployment. The introduction of large-scale tourism is an opportunity for Saudi Arabia to expose its citizens to the world and nudge up its foreign direct investment for Vision 2030, but the risks of blowback will hang over its implementation.

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