Saudi Arabia
Tourism is one of Saudi Arabia’s fastest-growing sectors. It is a significant contributor to the national economy and is a key source of jobs. In 2019, tourism directly contributed to 3.8% of GDP, supported 571 152 jobs (5.1% of total employment) and generated nearly SAR 165 billion in tourism spending. Following the pandemic in 2020, tourism’s direct GDP fell 61%, with tourism’s direct contribution to GDP falling to 1.7%.
International tourism arrivals in Saudi Arabia plunged by 76.4% to 4.1 million in 2020 and declined an additional 16.0% in 2021 to 3.5 million. International tourism receipts fell by 80.6% to SAR 21.1 billion in 2020 and decreased a further 26.8% in 2021 (85.8% down from 2019).
Domestic tourism showed a gradual and faster recovery, with 42.1 million domestic overnight visitors recorded in 2020 (down 11.9% from 2019). Domestic tourists in 2021 hit a record high of 63.8 million, up 34% compared to 2019. Similarly, domestic tourism receipts recorded a new high of SAR 80.9 billion, exceeding 2019 by 32%. Overall, domestic tourism spending contributed to 84.6% of total tourism receipts.
Saudi Arabia’s outlook remains positive in terms of long-term prospects. By 2030, Saudi Arabia targets annually 100 million tourist visits, 10% direct contribution to GDP, and 1 million additional tourism jobs.
Saudi Arabia’s tourism policy is centred around the Ministry of Tourism, which focuses on strategy, regulations, destination development, human capital development, and investment attraction. It is supported by the Saudi Tourism Authority (STA), which is in charge of branding, marketing and promotional efforts with the different travel agencies and tour operators. The Tourism Development Fund is in charge of funding iconic projects and supporting the private sector to develop offerings and accommodations.
The tourism policy ecosystem works closely with all the relevant government entities (Ministry of Foreign Affairs, Ministry of Interior, Ministry of Transport, Ministry of Electricity, Water and Agriculture) through a government body called the Tourism Development Committee, where major cross-governmental initiatives are discussed and monitored. Governance has also been put in place to manage the development of the tourism sector through the Regional Tourism Development Committee, which gathers provincial administration, regional development entities, the different entities in charge of developing sites and destinations, and professional associations.
During COVID-19, efforts and policies have been focused on promoting domestic tourism while continuing to develop the offering, regulations, and policies to welcome inbound tourism after the pandemic. In terms of funding, Saudi Arabia plans to invest more than SAR 3 trillion in the tourism sector over the next ten years. This will take shape through investments in every aspect of tourism.
Source: OECD, adapted from Ministry of Tourism, 2022.
The National Tourism Strategy aims to leverage the opportunities of Saudi Arabia’s Vision 2030, which focuses on creating a vibrant society, thriving economy, and an ambitious nation. Reforms under Vision 2030 have played a key role in helping the national economy navigate the pandemic.
The Ministry of Tourism’s main policy priorities include maximising tourism’s contribution to GDP, creating jobs, improving tourism infrastructure and competitiveness, transforming tourism to be a more resilient and sustainable sector, and attracting investment to the sector.
In 2021, Saudi Arabia announced the Sustainable Tourism Global Centre, a multi-country, multi-stakeholder coalition established to lead, accelerate, and track the tourism industry’s transition to net- zero emissions, as well as driving actions to protect nature, climate, and communities.
Sustainability policies are issued to support sustainability and tackle climate change in the sector. Initiatives on this topic will be led by the Saudi Green Initiative, the new Sustainable Tourism Global Centre, tourism destination management organisations and the Ministry of Environment, Water and Agriculture.
As for the recovery from COVID-19, Saudi Arabia’s COVID-19 policy responses were aimed at ensuring the survival of businesses in stage one and a faster recovery to sustainable growth in stage two. The government closely observed and calibrated its response against a set of key indicators and aspects that stimulated and catered to the needs of MSMEs, and the tourism sector (see box below).
In 2020, Saudi Arabia announced the creation of a Tourism Development Fund with an initial capital of approximately SAR 15 billion. Additionally, Saudi Arabia exempted companies operating in the tourism sector from issuance/renewal license fees.
Since the pandemic, Saudi Arabia has launched several initiatives surrounding skills and employment:
A new human capital development (AHLHA) strategy, launched in 2020, which aims to develop the tourism sector by attracting more Saudi nationals to the sector. Several local efforts have followed to support those ambitions.
The Tourism Shapers programme, launched in 2021 by STA, is an employment initiative that aims to equip the local private sector with the support needed to navigate and manage the evolving tourism landscape.
The Ministry of Tourism launched the “Tourism Pioneers” programme, which aims to develop the capabilities of 100 000 young people and provide them with key skills in the field of hospitality, tourism and travel to prepare them to work in the tourism sector. The programme includes investments worth over USD 100 million.
Saudi Arabia has also launched several initiatives around innovation and entrepreneurship:
The Tourism Entrepreneurs Bootcamp was launched in 2021, with the aim to transform innovative ideas into sustainable businesses via an intensive programme for entrepreneurs. The Bootcamp received over 3 000 applicants across 15 cities, of which 30 were ultimately nominated to take part in the final round to obtain funding.
The Ministry also launched the Tourism Entrepreneurship Accelerator in 2021 to support select start-ups in the tourism space in scaling up their business and expanding service offerings. The Accelerator programme received over 1 200 tourism start-up applications, of which 15 were selected to enter the six-month programme. Throughout this programme, the Ministry of Tourism provided benefits and services totalling over SAR 1 million, alongside 180 hours of workshops and 1 300 hours of one-to-one mentoring.
In 2022, the Mustasharik programme (also known as Mix & Mentor programme) was launched following feedback from the Saudi tourism entrepreneurship community, aimed at providing mentorship and workshop sessions for entrepreneurs across the start-up lifecycle from ideation to scale-ups.
Tourism SMEs, which represent 99.8% of all tourism businesses in Saudi Arabia, were hit the hardest by the COVID-19 pandemic and faced several challenges to their continued development, such as lack of access to finance, market uncertainty, competition from major international players, and low research and development. To address these challenges, Saudi Arabia’s policy responses were initially aimed at ensuring the survival of businesses, followed by a focus on fostering a faster recovery to sustainable growth. Policy measures broadly involved:
Fiscal policies: including a stimulus package, exemption from issuance and renewal license fees for companies operating in the tourism sector, a delay in loan payments, a loan guarantee programme, and supporting employee wages.
Employment related measures: including providing unemployment insurance, introducing supportive labour market regulations, providing training and supporting job matching.
Social measures: including launching an indirect lending initiative for SMEs, providing investment for sustainability focused SMEs, starting a venture capital fund initiative for SMEs, refunding fees paid by SMEs, and providing packages for institutional quarantine in hotels for visitors.
Preliminary impact assessments have showed positive results. Employment in tourism SMEs was largely preserved, with only a low number of establishments going out of business.