Saudi Arabia’s big tourism gamble

Summary: Mohammed bin Salman is staking a huge amount of money on building a tourism industry that will be not just a regional but a global behemoth.

With last week’s announcement  that the Saudi Tourism Authority had signed a memorandum of understanding with Alibaba Cloud, Mohammed bin Salman’s dream, espoused in Vision 2030, of turning the kingdom into a global tourism power moved a step closer to reality.

 

Ali Baba Saudi
Last week the Saudi Tourism Authority signed a memorandum of understanding with Alibaba Cloud, the digital technology and intelligence backbone of China’s Alibaba Group, aiming to attract more Chinese tourists [photo credit: SPA]
The giant Chinese digital tech firm’s pay app Alipay has 700 million Chinese customers on its books. The Saudi crown prince would dearly love to steer some of those many millions to the mega-attractions he has ordered to be built. Among them is Amaala on the kingdom’s northern Red Sea coast. As described in Arabian Business:

Amaala is set in the Prince Mohammad bin Salman Natural Reserve across three communities. The 4,155 sq km year-round destination will include 2,800 hotel keys and more than 900 private residential villas, apartments, and estate homes, alongside 200 high-end retail establishments, fine dining, wellness, and recreational facilities. 

The crown prince’s other big projects include the entertainment city of Qiddiya on the outskirts of the capital Riyadh, Diriyah Gate also adjacent to Riyadh and the AI city of Neom. With massive injections of cash from the country’s Public Investment Fund (PIF) which he controls, the prince is gambling that his mega-projects will usher in a bold new era for Saudi tourism, one that, ultimately, will overtake the already lucrative religious tourism sector.

And the amounts of money MbS is prepared to spend are quite stupendous. US$ 500 billion has been set aside for NEOM alone, part of an investment package that, according to the Middle East and North Africa Leisure Attractions Council (MENALAC), totals US$810 billion.

Mishal Alhokair, a Saudi MENELAC board member whose family has significant hotel holdings in the kingdom and elsewhere in the Middle East argues that Vision 2030 is a gamechanger for “the entire economic and tourism landscape of not only Saudi Arabia, but the entire Middle East region, that will have a massive positive knock-on effect on the leisure tourism industry.” And looking beyond COVID he sees massive opportunities, given the level of investment and development. “It is,” he says “time for everyone to prepare for the next big growth.”

The hope is that the  Alibaba deal will uncork a steady stream of well-heeled Chinese tourists who will benefit (as the Saudi Press Agency  put it) from Alibaba Cloud’s deployment of “advanced, secure and reliable cloud services and technologies to improve digital experience for Chinese tourists in Saudi Arabia, and allow for the automation of services in content delivery, digital storage and digital processing,” all in the interest of delivering  a “seamless travel experience.”

Less seamless may be the effort to realise the promise of creating hundreds of thousands of jobs for young Saudis. Last year Ahmed Bin Aqeel al-Khateeb the kingdom’s Tourism Minister, the first ever, set a target of 260,000 openings in the sector over the next three years with the ministry aiming “to provide one million job opportunities by 2030, to bring the total by then to about 1.6 million job opportunities.” Even by Saudi standards of numerical hyperbole that seems wildly optimistic, in part because  jobs in tourism in Saudi Arabia have traditionally been filled by low-paid migrant workers from Africa and Asia. Making those service jobs attractive to young Saudis will require a cultural shift and a change in attitude; a major challenge that can be only partially compensated for with better wages.

And at the senior executive  level there remains a dearth of Saudi expertise.  At Amaala, MBS chairs an all-Saudi board but of the 15 executive posts 7, including that of CEO, chief financial officer and chief operating officer are held by expats. The picture holds true for all but one of his mega-projects: MBS chairs everyone of them, heading all-Saudi boards but with executive teams at least 50% consisting of expats. The lone exception is Diriyah Gate, headed by the American Jerry Inzerillo (see our posting of 30 June) with 10 of the 14 positions held by Saudis. On the other hand NEOM, which is MBS’s flagship project, sees 14 out of 15 senior executive roles filled by expats.

Clearly, in his rush to get the projects completed, MBS is buying in foreign executive talent rather than taking the time to develop it domestically, an old story in the new kingdom he claims to be building.

And the speed with which the mega-projects are bring brought onstream has far outstripped the training that young Saudis need if they are to move into middle management positions. That’s a point acknowledged by Aradhana Khowala who chairs the advisory board for The Red Sea Development Company. In seeking to encourage British investment in the sector, she noted that the UK could help to plug the talent gap: “There are huge opportunities for sharing education and culture experiences with the UK…education and skills development is critical… because the untapped potential for tourism in the region is massive.”

Meanwhile, Dubai which has long been the Gulf destination of choice for foreign tourists can be excused if it is feeling a trifle uneasy about MBS’s ambitious plans.  Not only does he want to lure global tourism away from the UAE, he wants to discourage Saudis who have for decades headed to Bahrain’s capital Manama and to Dubai in search of entertainment to stay and spend in the kingdom. And with the kind of financial clout he has at his fingertips, courtesy of the PIF, and a large population hungry for pleasures previously denied them, the massive investment he has ploughed into the tourism sector may come good despite the still significant challenges it faces.

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