Competition In The Middle East Intensifies As Saudi Arabia Works Toward Vision 2030

In May 2023, the World Tourism Organization (WTO) revealed that Saudi Arabia was the world’s second fastest growing tourism destination.  The Kingdom of Saudi Arabia ranked 13th globally, advancing by 12 places  since 2019 on the WTO index, as one of the top countries receiving international tourists in 2022. 

According to the World Tourism Barometer report issued by the WTO, the Kingdom also advanced 16 places in the international tourism revenue index, achieving 11th place in 2022, compared to 27th place in 2019 globally.  Saudi Arabia has continued to make progress in developing its tourism sector, as it received about 7.8 million international tourists for all purposes during the first quarter of 2023, representing its highest quarterly performance, up 64% compared to the same period in 2019.

These are encouraging figures as the Kingdom looks to enhance its position on the global tourism map and increase tourism's contribution to the country’s GDP under the its Vision 2030 roadmap.  Nevertheless,  the goal to generate a tourism industry supporting 100 million visitors each year by 2030 remains ambitious. Here we will review the progress that has been made towards meeting these targets.

International Capacity Overtakes Domestic Capacity in 2023

Saudia Arabia’s domestic air travel market weathered the pandemic better than many other countries, placing it in a strong position to ramp up subsequently. In 2023 there is 20% more international capacity than there was in 2018 and it now exceeds domestic capacity. Saudi Arabia has made significant efforts to attract international visitors, including easing visa requirements for tourists from established markets and working hard to make connections with a range of countries previously unserved directly. The launch of a free 96-hour stopover visa for passengers booked on Flynas or Saudi Arabian Airlines (Saudia) flights by the Saudi Tourism Authority is among a raft of initiatives aimed at making the country’s tourism offerings more accessible.

The Middle East Continues to Dominate Inbound Capacity

Inbound capacity from within the Middle East remains highest, where it has grown by 23% since 2019. This represents 81% of all international capacity. The second biggest market is Asia Pacific, which has grown by almost a quarter and represents 10% of KSA’s international capacity. Inbound capacity has increased most from Europe, although whilst it has more than doubled over the same period, the volumes are still small, only representing a 5% share. Capacity from North America has not recovered since the pandemic, down by 16% vs 2019 and only represents a 0.3% share of international capacity.

The Top 10 country markets flying in to Saudi Arabia by capacity in 2023 reflect the importance of the outbound Muslim Travel market; United Arab Emirates and Egypt being the largest. Capacity from Türkiye has increased by over 150% within the last year and is likely to include traffic transferring over Istanbul's new airport. Several European countries have increased capacity considerably over the last couple of years, particularly the UK, Italy and France where capacity has grown by 58%, 193% and 22% respectively. Capacity from China is almost back to pre-pandemic levels which is not the case for all China outbound markets.

The KSA Ministry of Tourism considers China to be an important global source of tourists and is heavily targeting Chinese travellers, including agreeing a memorandum of understanding and joint marketing campaigns with the China-based Group. At the beginning of August 2023, Saudia launched its first direct flight to Beijing, which will operate four times weekly from Jeddah.

Saudi Arabian Carriers Intend to Place the Fifth Largest Commercial Order in Boeing's History

In 2023, Saudi Arabian Airlines represents 41% of capacity, with private Saudi airlines LCC Flyadeal and hybrid short haul operator Flynas representing a further 25% of the market. In March 2023, Saudia and Boeing announced the order of 39 fuel-efficient 787s with options for 10 more airplanes. The airline also signed a memorandum of understanding to purchase 100 Lilium eVTOL Jets and launch a state-of-the-art service. This will include new electric point-to-point air connections as well as seamless feeder connections to its hubs for business-class guests. With zero operating emissions, the Lilium Jet will enable sustainable and time-saving travel, allowing the national flag-carrier to play its part in the country’s sustainable air mobility development strategy.

Saudi Arabia’s new national airline, Riyadh Air, has also begun to take shape, aiming to operate its first flights in early 2025. It placed a large order with Boeing for 787-9 Dreamliner jets, with 39 confirmed orders and options on a further 33. The new carrier’s initial focus will be on international services to boost connectivity at its King Khalid International Airport hub at Riyadh. Major Far East capitals are likely to also feature in early timetables.

Transforming Kingdom of Saudi Arabia Airports

The overhaul of the country’s transport infrastructure continues at pace, with existing airports getting a makeover and several new commercial airports under construction. King Abudlaziz International Airport at Jeddah and King Khalid International Airport at Riyadh are the busiest airports in terms of capacity, the former growing by 15% over the last year. Capacity has grown most at NEOM Bay airport (NUM) in the north of the kingdom, where it has almost doubled in the last year. Some of this capacity may subsequently transition to the new NEOM International Airport at the new NEOM smart-city and sustainable-development, which is one of the ambitious giga- projects.

The Giga Projects Begin to Take Shape

Building of a host of ‘giga-projects’ and attractions is well underway. The first of these to open will be The Red Sea, an eco-tourism-focused project developed by Red Sea Global. Originally scheduled for May 2023, the first three resorts plan to open through November and December.

Meanwhile, Saudi’s grand project NEOM, which is estimated to cost $500bn, will feature cognitive cities, research centres, ports, tourist destinations and entertainment venues. Saudi officials are aiming to attract approximately one million visitors by 2025 and five million by 2030 to NEOM. The NEOM smart-city and sustainable-development project will feature its own airline and airport system. Sindalah, NEOM’s first luxury island, is scheduled to open in early 2024.

Global Tourism Ambition, Though Challenges Remain

It is evident that considerable investments are being made throughout the country to enhance both religious and non-religious tourism. The Saudi ministry of tourism’s cooperation with partners from the public and private sectors is pushing toward transforming the Kingdom into a global tourism hub.

There are, however, challenges ahead. The Kingdom has yet to win the confidence of potential international tourists and change their perceptions around equality and a rigid legal system. Whilst there is rapid change underway within the country, the communication of this to key source markets will be essential. It will also be important not to lose sight of the domestic market and to convince Saudis who usually vacation abroad to frequent attractions such as the Red Sea resorts and NEOM. With an established market position already in the Middle East, the UAE, with its twin centres of Dubai and Abu Dhabi, is likely to pose a strong response to increased competition for tourists in the region. Dubai attracted 16.7 million tourists in 2019 and has an ambitious target for growth to between 23-25 million visitors by 2025. Qatar is also pursuing international tourists, with 6 million visitors targeted by 2030.

The next few years will be key in KSA’s tourism journey and we will continue to watch with interest.

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