Why Saudi Arabia banks on tourism to turn a service economy

Until some years ago, Saudi Arabia was a place warped under the perception of heavy reliance on fuel and economic shocks. It was not the top-of-the-mind destination one thought of for historical exploration or luxurious leisure. Jump to 2016, with the 2030 vision in mind, Saudi Crown Prince Mohammed bin Salman decides to position the country as a central player in global tourism, with several giga projects at the centre of his ambition.

Although the Gulf nation is flush with oil revenues, it is now shifting its focus and investing heavily in tourism and travel. Its target is 10% of GDP (gross domestic product) by 2030 to be contributed by the tourism sector, which will help diversify the economy.

As part of its Vision 2030 initiative, Saudi Arabia aims to diversify the economy away from oil dependence, create jobs, and attract high-skilled talent into the nation. There are several giga projects in the pipeline and many projects that have opened up in the last year, including the Red Sea global tourism, the Qiddiya entertainment city and the Diriyah Gate heritage development initiatives, along with the sustainability-based $500 billion giga-project, Neom. For the Red Sea project, the aim is to achieve a 30% net conservation benefit by 2040.

Although Saudi Arabia was the fastest-growing G20 (Group of Twenty) economy in 2022 at 8.7% GDP growth, and its non-oil-related growth also stood at a hefty 4.8%, it recorded the largest fall (-3.6%) in Q3 2023. Among G20 economies, India recorded the highest growth over the last four quarters (7.0%), as per OECD (Organisation for Economic Co-operation and Development) data.

“Tourism helps improve quality of life in Saudi Arabia, especially for the locals and attracts international travellers as well,” Alhasan Aldabbagh, president – Asia Pacific, Saudi Tourism Authority, tells Fortune India.

He believes that tourism will help countries connect while building bridges between cultures and allow people to connect, have a dialogue, and remove any perceptions or barriers.

“This opens the door for people to explore opportunities, whether it’s in business, art, technology or science. Tourism is the catalyst for a lot of other industries to flourish as well,” he adds.

With an ambitious target set for the year 2030, Saudi Arabia aims to bring in 150 million visitors in the next 6 years with an eye on India wherein for 7.5 million visitors at least. In 2023, the country received 1.5 million visitors but huge growth is expected from now to 2030.

“India has been prioritised as a strategic market for Saudi Arabia for a lot of reasons. The country has a growing population of 1.4 billion people with a burgeoning middle class as well. The travel market in India is very diverse. Moreover, it is a destination which is only 4-5 hours away,” shares Aldabbagh.

As the third-largest source of tourists in the Asia-Pacific region, the growing interest from Indian travellers stems from family visits, and spiritual and leisure purposes.

Betting big on India

Bullish on India, Saudi is capitalising on the India opportunity through multiple holistic campaigns and strategic partnerships. Additionally, with 275 direct flights every week between the two countries presently, the air connectivity between India and Saudi Arabia has also been improved lately, encouraging more accessibility. Last year itself, the Saudi nation increased its seat capacity to 2.8 million which is nearly 30% higher as compared to 2019.

“We are working currently with a lot of the Indian carriers such as Air India, SpiceJet, Vistara, Indigo, and Air India Express to create new direct routes to open new cities from India to Saudi and also increase the frequency of existing routes,” adds Aldabbagh.

Saudi Arabia has launched multiple initiatives to enhance travel opportunities between the two countries including offering a 96-hour free stop-over visa to Indian citizens. However, only travellers flying via Saudi Airlines or Flynas, a private low-cost Saudi airline, can avail of this offer. Currently, there are 10 VFS (Visa Facilitation Services) offices in 9 Indian cities with plans to expand further in the future.

Moreover, travellers with US, UK, or Schengen visas qualify for an e-visa or visa on arrival, simplifying travel processes. With intentions to expand further in the future year, there are currently 10 VFS locations in India that offer simplified visa access.

Saudi is also seeing a pickup in bookings from other markets such as Malaysia, China, Russia, and a few others as well. “China was closed for two years so the outbound recovery is very slow but I believe we are getting disproportionate recovery in Saudi more than any other region in the world,” says Aldabbagh.

Luxury with a twist of sustainability

“We are redefining luxury in Saudi Arabia. Luxury is not just about expensive hotels, rather it’s about having authentic experiences, and exclusivity and now it has become about sustainable tourism as well,” says Aldabbagh.

More than ever before, even affluent consumers and travellers are connecting sustainability with the values of luxury. All new giga projects of the kingdom are taking this into account as part of their core design, development and operational value.

Not only is the Neom economic zone being built as a zero-carbon smart city that will run on renewable energy, but the Red Sea project goes a step beyond sustainability. It focuses on regenerative tourism.

“This means they are giving back to the environment. For example, they are helping grow coral reefs and they are rewilding animals like turtles,” explains the president.

Ultimately, under the Saudi Green Initiative, the kingdom has set targets of 0% net carbon by 2060 across all sectors. “We are aware that to achieve the 2030 vision, we need to keep up with the development,” says Aldabbagh.