Abstract
The Saudi Kingdom has invested heavily and emphasized the tourism sector in the country in the last few decades because this is one of the ways the country’s economy will be transformed, according to the Saudi Vision 2030. It is also expected that the country’s tourism sector will contribute as much as $69.9 billion to the country’s GDP, promoting economic growth. Negative views, on the other hand, continue to stymie these attempts.
The study’s goals are to examine the current state of the tourism industry in Saudi Arabia, to determine the challenges that have hampered advancement in the industry, to analyze the efficacy of initiatives taken to promote development and growth in the sector and to assess how the tourism sector in Saudi Arabia can benefit from investment strategies both domestically and internationally. Interviews with open-ended questions were used to collect primary data for this research to gain insight into the effects of investments on the industry. Since a stratum for sampling the respondents would allow the researcher to achieve greater accuracy, this would require a smaller population sample, reducing costs, protect against cases of the unrepresentative sample, and ensure sufficient sample points were obtained to improve the accuracy and effectiveness of the study, stratum sampling technique was favored over simple random sampling. The approach was used by the researcher to divide the participants into various clusters.
The research was successful, and the findings were documented with evidence on how investments have affected the tourism sector in the Kingdom of Saudi Arabia. The literature review also shows the strategies that the government has put in place over the years to cater to wise investments in the industry. All these points towards the positive side of achieving the vision 2030 with a few challenges in the way, the most recent being the global pandemic that is COVID-19.
Introduction
The tourism sector of the Kingdom of Saudi Arabia is among the most prospective and potentially lucrative sectors of the nation’s economy. Although the country is the largest oil exporter in the world, accounting for 12.9 % of the total oil in the world, it is important to point out that such a heavy reliance on one source of national income carries major risks and vulnerabilities, which evidently makes Saudi Arabia highly dependent on global oil price values (Nurunnabi 538). Therefore, it is critical for the nation to diversify and shift its economy to a wide range of economic segments, and hospitality and tourism are one of these aspects, which need to be regarded with a high degree of prioritization. The role involves not only hospitality or travel; it needs effective management and committed effort of all persons. The promotion of tourism and travel in the country is, therefore, an integral part of the culture (Nurunnabi 541). The development of tourism is directly tied to the private sector since the arrival of tourists will result in oil-independent sources of national income. In other words, the state, through Vision 2030, is focusing on “creating new business opportunities, promoting creativity and competitiveness, and eliminating barriers that hinder the private sector from playing a bigger role in providing national services” (Saudi Vision 2030). Therefore, the incentives are based on shifting away from fossil fuels towards a more sustainable economy.
Investing in tourism is the most crucial step, which needs to be done early, despite the current conditions of the worldwide pandemic. The research suggests that sustainable growth of a nation can only be done in a non-oil context, where the key components art renewable energy sources and tourism (Waheed et al. 49). The government has to undertake a number of actions, such as developing new tourist spots, improving infrastructure, and create a tourist-friendly environment (Ali 417). In addition, it is important to note that historically, tourism in Saudi Arabia was primarily based on religious pilgrimages due to the sacred cities of Mecca and Medina (Abuhjeeleh 2). However, the tourism development of the kingdom needs to encompass non-Muslim tourists in order to expand the global interest in the nations and ensure the arrival of foreign capital. Thus, tourism is among the most relevant and prospective sectors of Saudi Arabia’s economy.
The development of tourism as a sustainable economic sector requires a deep understanding of what kind of people are likely to visit the country and their preferred activities and destinations. This knowledge will allow the kingdom to choose the right directions for investment and boosting the industry. Bokhari explains that although non-evident for Western and Asian visitors of the country, religious tourism plays a vital role for Saudi Arabia as a keeper of “Mecca and Medina, Islam’s two holiest cities” (160). Muslims currently comprise around 25% of the global population and growing, which means that religious tourism will hardly ever stop in the kingdom in the foreseeable future.
At this point, the significance of domestic airline companies grows as they will have to be able to serve the increasing influx of tourists from all over the world. Alsumairi proves a positive correlation between the air transport development in the region and the number of international tourists (142). Apart from the big airline business, such small and medium enterprises as hotels, souvenir shops, travel agencies, translation bureaus, and others will benefit and expand.
Research Background
On the 25th of April 2016, his deputy crown prince Mohammad Bin Salman (MBS) had announced the Kingdom of Saudi Arabia 2030 Vision. The 2030 vision is set to transform the kingdom’s income from a nation that heavily invests in oil to a knowledge -economy; through diversifying its income into investing into other sectors, such as education, tourism, entertainment, culture, agriculture, and other non-oil sectors.
The vision for 2030 is based on three pillars: a vibrant community, a dynamic economy, and a forward-thinking nation (Kruglanski et al.). The first pillar is a vibrant society, which allows society members to live in harmony through balancing between the local Saudi traditions with moderation and being open–minded in accepting new concepts and ideas. They will be confident of their common culture and social heritage, enjoy a good life in a beautiful world, be supported by loving families, and be helped by an inclusive social and healthcare structure (Kruglanski et al.). The second pillar would be a thriving economy, which is developing a strong ecosystem that is vital and can significantly grow the kingdom economy through diversifying the kingdom sources, introducing more investments, hence, will lead to more job opportunities in the kingdom (Kruglanski et al.). The third pillar is an ambitious country, which is based on a government that is effective, open, accountable, enabling, and high-performing.
Moreover, Saudi Arabia is the largest oil exporter in the international arena, and it has massive amounts of oil reserves. It is stated that 40% of the kingdom’s GDP accounts for oil exports, and another 40% is made private sector (Thompson 207). In other words, there is a heavy reliance on oil as it comprises almost half of the national income. However, the government is recognizing the given fact, which is why Vision 2030 was established in order to advance the position of Saudi Arabia, where it will no longer depend on oil as its primary source of income. The strategy revolves around shifting focus from oil exports towards a more sustainable form of economy, which emphasizes the importance of the private sector (Thompson 207).
Problem Statement
Given the Saudi government’s commitment to massive resources and transformation of the tourism industry, the sector has seen developmental delays with little to no improvement in terms of its contribution to the country’s GDP in recent years (Nurunnabi 539). As a result of the industry’s reform, the Saudi government took a number of steps, including establishing the Saudi Commission for Tourism and Antiquities. The industry, on the other hand, has yet to fully realize its potential. This is considered to be a significant source of concern for shareholders in the tourism sector, as most people tend to fly abroad for vacations rather than take advantage of the country’s plethora of tourist destinations. This has piqued the interest of analytical researchers over the years, but there is very little research on how marketing and public relations can help the tourism industries in Saudi Arabia improve their results (Nurunnabi 539). Therefore the focus of this study is how investing in the tourism and hospitality industry in Saudi Arabia will affect the kingdom.
Aims and Objectives
This study is focused on the impact of promoting the tourism industry, which incorporates hospitality in Saudi Arabia. Studying the current progress of the tourism sector in Saudi Arabia; identifying the variables that have hampered change and development in the tourism industry in Saudi Arabia; evaluating the success of the plan taken to enhance development and growth in the tourism industry in Saudi Arabia; analyzing the current contemporary international trends in increasing productivity in the tourism industry in Saudi Arabia, and evaluating the current global trends in improving efficiency in the tourism sector in Saudi Arabia are some of the study’s objectives.
Literature Review
National income, also known as a national dividend, national output, or national expenditure, is an ambiguous concept. It has been described in a variety of ways based on this foundation: the total amount of goods and services generated annually in a country (Axenciuc and Gorgescu 1890). There are some factors that affect the national income of a country which include the quality and quantity of the natural and human resources of a country and how they are managed. Natural resources are like good cultivation soils mineral deposits, and in the case of Saudi Arabia, oil is the largest natural resource. Though natural resources and human resources go hand in hand, the presence of good capital equipment like machinery is important for productivity to increase (Axenciuc and Gorgescu 1890). A good example is how oil drilling needs good oil rigs to drill the oil from the oil deposits. Political stability is another key influence that affects national income indirectly. Political stability is important for the development of market activities. War and social unrest interfere with output because they contribute to typical financial risk. Thus, peace and a centralized government foster trust and encourage development (Axenciuc and Gorgescu 1890).
National income can be measured in three ways:
Product method
The movement of goods and services is used to calculate national income. We determine the monetary value of all final goods and services generated in a given economy over the course of a year. The term “final products” refers to goods that are consumed immediately rather than being used in a subsequent manufacturing phase. Intermediate products are items that are used later in the manufacturing process. Since the value of intermediate goods is included with the value of final goods, we do not include the valuation of intermediate goods in national income; else, we would be double calculating the value of the product (Manduca 630).
Income method
The flow of factor incomes is used to calculate national income using this approach. Labor, money, property, and entrepreneurship are the four basic factors of development. Labor is compensated with wages and salaries, capital is compensated with interest, the land is compensated with rent, and entrepreneurship is compensated with benefit (Manduca 630).
Expenditure method
The circulation of consumption is used to calculate national income in this approach. GDP stands for Gross Domestic Product, which is the amount of all private consumption expenditures. Government consumption, total capital accumulation (public and private), and net exports, which are the total imports and exports (Manduca 634).
Saudi Arabia’s tourism industry has grown in importance in recent years, contributing significantly to the country’s economic growth and GDP. This is due to the fact that, despite difficulties on the development plan, the sector has seen progress and development as a result of investing heavily and the emergence of ventures aimed at improving the industry (Kruglanski et al.). Investors who are convinced that Saudi Arabia has the capability to be the number one world’s tourist destination are making such contributions. According to a report compiled and published by the Tourism Information Research Centre, foreign investment in the country reached over 19.7 billion USD in 2008 (Kruglanski et al.). Saudi Arabia’s tourism industry has increasingly been in the news for the best of reasons. The central government is committed to growing and enhancing the tourism industry in order to minimize the country’s reliance on oil (Cecez-Kecmanovic et al. 1). Significant progress has been reported in this context, with estimates indicating that businesses in Saudi Arabia that are primarily connected to the tourism industry are projected to increase by over10 a billion USD by the end of 2025, bringing their contribution to the country’s GDP to about 2.8 percent (Nurunnabi 560).
The Saudi government’s Vision 2030 emphasizes the importance of diversifying the economy by fostering the information economy’s growth. The results of this study will aid policymakers in their efforts to build a long-term information economy system for Saudi Arabia. Comparing the foundations of the Middle Eastern information economy would take additional study. Tourism is also in the government’s vision 2030 (Nurunnabi 560). Various developments that can be seen in various parts of the Country are supporting growth in the hotel and tourism sectors (Nurunnabi 563). One of the economy’s current trends is the growing number of adjustments and development policies, as well as improvements in the tourism industry across the Country. The tourism industry has benefited greatly from these improvements, with legislation and development policies promoting development and shielding the industry from political interference. In this context, the overall industry pattern in the Country’s tourism industry is that there is a strong emphasis on the creation of needs for the Kingdom that offers a comprehensive strategy of national economy differentiation; tourism is a primary priority of this as the government continues to broaden its economy and reduce its dependence on the oil sector (Nurunnabi 564). Sports, entertainment activities, and simplifying the visa system in the country are just a few of the approaches that have been taken to boost the tourism industry growth. This is an effective technique because the country’s growing tourism industry is a key component of the Kingdoms Vision 2030. In Saudi Arabia, tourism is expected to play a significant role in driving economic growth and fostering travel-related markets. This also demonstrates the importance of investing in the sector’s growth and development, as well as raising global awareness of its presence. As a result, big investments are needed to complement the tourism industry’s current developmental initiatives.
Taking into account all of the current plans and actions in the field, it is reasonable to assume that these initiatives are significantly positive improvements that are very likely to increase the appeal of the country’s tourism industry, resulting in more tourists visiting Saudi Arabia. Furthermore, this demonstrates that the tourism market would benefit significantly from these changes over the course of development and growth in the hospitality sector as a result of increased tourist demand (Abuhjeeleh 10). The government’s policies are expected to boost demand in the sector even further, both domestically and internationally. It’s important to note that Saudi Arabia’s tourism sector is one of the fastest-growing in the region (Abuhjeeleh 12); this can be credited to Vision 2030 that has set optimistic aims and objectives for the Kingdom to attain maximum developmental transition.
Research Methodology
The aim of this chapter is to describe the methodical process that was used to answer research questions. The techniques and approaches that were used in data collection will be described in detail. The research approach, design, strategy, and methods, as well as the ethical issues that influenced the entire research process, are all addressed. There really is no single technique that can be deemed the most effective for gathering data. As a result, the researcher examines various methodologies for each subject and selects the most appropriate for performing the research.
Research Approach
It seems reasonable to state that the investigation on the topic of tourism in the Kingdom of Saudi Arabia does not imply the beginning of new theories from the available data. Instead, it is pre-assumed – as well as confirmed by numerous studies in the field given – that the development of and investments into the tourism sector result in significant benefits for economies, including diversification of the sources of income and welfare (Alola et al. 13) as the research aimed rather at developing hypotheses and testing the existing theory within the scope of tourism’s potential positive impact on the country’s economy. The above rationale serves as a foundation for choosing the deductive research approach in the framework of this study.
Research Design
This research aims to explore the tourism sector of Saudi Arabia – a phenomenon that cannot be considered new. As the research will be highlighting the tourism attributes in Saudi Arabia and what are the challenges that the tourism sector is facing in order for the kingdom to be a desirable destination for tourists. Thus the research design will be descriptive as it will be explaining or describing the theories and hypothesis (Cecez-Kecmanovic et al. 1). The exploratory research design was used to direct the collection and analysis of data strategies in this report. The exploratory research design entails looking into a problem statement where there has been previous research on the topic. The aim of this research design is to familiarize yourself with the research problem and build a foundation for it. The design’s application would be crucial in identifying problems, generating new hypotheses, and gaining a thorough understanding of the topic, all of which would serve as a foundation for future research.
The study used the comparison to obtain essential knowledge on the different independent factors being investigated in the study in comparison to the dependent factors. Furthermore, the study’s design allowed the researcher to examine the relationships between the independent variables and the study areas of interest, which was helpful in determining the impact of investing on tourism in the kingdom of Saudi Arabia (Thompson 210). It’s worth noting that tourism was a conditional dependent factor of the study. Evaluating the qualitative association between tourism and its related markets aided the researcher in obtaining a better understanding of the topic, which led to more accurate suggestions and theory development, allowing for a more in-depth analysis of the research. As a result, the overall impact was successful recognition of available alternatives to the problem described. Essentially, it aided the researcher in comprehending the impact of investments on tourism and how investments can be effectively utilized to improve domestic and foreign tourism in the kingdom.
Research Strategy
A strategy that will guide this research will be of the grounded theory character. As it’s rational, considering the approach and design of the research scope. The research strategy chosen for this study interviewed using a questionnaire survey. Interviews are a data collection method in which the research study sets up a chat in which the respondents respond to questions that the researcher asks (Ivey 200). The aim of interviewing is to gain a better understanding of different viewpoints on a given idea, definition, or circumstance. The tourism industry was chosen as the report’s subject because the information was easily accessible from the tourism offices as well as from its digital sites. This research took about one month, and there were four participants who were questioned. Those who had a better understanding of the tourism industry in Saudi Arabia and around the world were selected as respondents. The interviews were done online using a sampling method that influenced the process. Ascertaining the sample group that will be used in the analysis is an important step in the sampling process. The sample group has a major influence on the study’s credibility (Ivey 200).
Data Collection and Analysis
Methods that will be utilized in this study are qualitative as we will be conducting an in-depth interview with tourism experts, hotel managers, journalists, and many others to have more depth and insights into the tourism sector and its contribution to the Saudi economy. The study used interviews to collect data from respondents in the region. The researcher concentrated on getting similar information from the various participants involved in the analysis, so the use of questionnaires and interviews was deemed suitable for this research. These interview questions were distributed to the participants and collected after three days. This sample size was deemed sufficient to enable the researcher to make important conclusions and recommendations information gathered and analyzed. The Internet, archives, industry publications, articles, and session class papers were all used to gather secondary data for this research. Before being included in this report, the authenticity of the data was checked. Basically, data collected for this study involved the use of primary and secondary sources.
Interviews used to obtain data from the CEOs and shareholders in the tourism industry in Saudi Arabia were the main source of primary data. A set of questions were posed to the participants about the effect of investments on Saudi Arabia’s tourism industry. The queries were open-ended in order to allow for a more intrusive discussion of the subject matter. This aided in gaining a better understanding of how investment theories could be applied to the tourism industry to achieve vision 2030. The results were linked to the research objectives using a purposeful sampling technique when analyzing the data. The procedure entailed analyzing the answers of the participants and finding common themes.
Ethical Consideration
Ethical concerns are always due to arise when working with obtaining data from people. In interviews, the importance of providing explicit consent while maintaining the privacy of the informants is key (Voltelen et al. 515). Seeking permission to interview the respondents was the first step. Those who gave consent were sent the interview questions with the promise of full disclosure of their identity to gain their confidence and trust. The data collected, which was in audio form after the interview, was password-protected to prevent tamper and leakage of the identities of the respondents.
Research Findings
The age of the participants was one of the demographic characteristics that the researcher wanted to evaluate. The participants’ ages were clustered from 38 to 46 years old in this scenario, meaning that the youngest was 38 and the eldest was 46. One of the criteria for inclusion in the population sample was that participants be at least 18 years of age. Individuals are considered adults at that age, and they are free to travel even without the permission of their guardians.
Saudi Arabia is known to derive much of its income from the oil sector. It is the number one oil exporter in the world. However, in recent years, the leadership in Saudi Arabia has realized that depends solely on oil is not sustainable. The world is considering transformation towards clean and renewable energy sources such as wind, solar and clean electricity. Therefore, the need to invest in other sectors of the economy. Tourism is one area likely to drive growth in the country. Saudi Arabia is principally known to host two key events that attract millions of people worldwide. These are the Makkah and Madinah, where Hajjis and other visitors go to the country to perform hajj and Umrah annually. The Muslim community holds these two events with very high regard (Poncet). Other key attractions include the coastal seafront in the western (Jeddah) and eastern (Damman) regions that are good for aesthetics and entertainment.
Despite the government’s effort to improve tourism, the sector still contributes a small proportion to the GDP in recent years that is below 10 percent. In 2017, 2018, 2019, and 2020, the sector contributed 9.2 percent, 9.0 percent, 9.3 percent, and 5 percent, respectively (Poncet). The trend is depicted in figure 1 below;
The country has been reviewing its laws, especially on visa applications, in order to attract more visitors. In prior years only expatriate workers, religious pilgrims, and people with business visas were allowed into the country (Poncet). The rules were reviewed in 2019 with the provision of tourist visas. In addition, in 2020, the country allowed tourists having UK, US, and Schengen visas to enter the country. As a result, there was a slight increase in tourism GDP contribution from 9 percent in 2018 to 9.3 percent in 2020 (Poncet). The sharp decline in 2020 is attributed to the effects of COVID-19 that resulted in lockdowns and travel restrictions. Therefore, there was reduced travel for the most part of the year in a bid to contain the spread of the disease. The country is also working towards increasing the number of international tourist visits to over 30 million by doubling the issue of religious visas.
In conclusion, investing in tourism is vital in developing the relatively fresh sector of the Saudi economy. The government has committed to spending up to over 58.5 billion by 2023 and $133 billion by 2030 to build its tourism sector (Poncet). Overall, Saudi Arabia seeks to spend up to $810 billion in tourism-related activities as part of its vision 2030 project (Poncet). Besides, there is a massive construction of shopping malls to meet the demand of both local and international travelers. For instance, the Jeddah region is characterized by giga-projects intended for leisure. One key construction is the Amaala or the “Middle East Riviera,” which is expected to be completed in 2028 and will create over 2,500 leisure rooms (Poncet). Such projects are expected to draw the attention of tourists and enable the Kingdom to compete with the current leader in the region, UAE (Dubai). Other projects include Neom (a $500 billion futuristic city project), the Red Sea Project, and the Qiddiyah Project (a $10 billion entertainment project). These efforts are intended to further open up the sector and enhance its contribution to overall GDP.
Discussion
In Saudi Arabia, one of the most important aspects of tourism is brand positioning. The goal of the process is to create a compelling picture in the minds of consumers that distinguishes the industry’s brands from their competition. In this regard, the industry provides exclusive services and labels to meet the needs of its customers, and it promotes its services to the general public through local channels. Furthermore, it makes use of available information and global brands to spread the news that will convince potential customers to visit its facilities and encourage the rural economy in tourism (Alsumairi and Kan 140). Both of these are examples of the advantages consumers would get if they toured small local parks and national parks, thus promoting the tourism industry. The sector will catch the interest and favor of many people through intense persuasion and effective advertising, and they will become customers while using several of its programs and amenities. As a result, the industry should work to improve its positioning by promoting and reach out to a large number of consumers.
Conclusion and recommendations
The study’s findings and discussion will be used to reach the appropriate conclusion. A brief overview of the results and also how they contribute to the research goals will be presented in conclusion. It will be decided if the results are relevant to the research question and objective. This chapter would also discuss the problems that have been encountered and how future research might be strengthened. In addition, suggestions on how to strengthen the investment strategies to have a more positive effect on Saudi Arabia’s tourism industry will be discussed.
Following the success of the research, it is clear that investments in the tourism industry in Saudi Arabia have had a great impact on the growth and development of the sector. However, there have been challenges encountered during the research, like huge amounts of time were taken to compile the data, which was not so sufficient to draw more extra conclusions about the effect of investments in the industry; the data was sufficient enough to draw a positive hypothesis though. It is recommended that the tourism industry in Saudi Arabia continue to improve the effectiveness of its strategies of investment, based on the findings of a study conducted on investments that have influenced the sector’s development. It should spend marketing now that we are in the age of new media technology. Furthermore, the industry should step up its online activities in order to improve its presence (Alsumairi and Kan 135). The industry should also enhance its customer support and interaction, which involves operational efficiency and communicating with customers, among many other things, as this will help communicate with and understand its customers.
Such strategies would aid in enhancing the organization’s productivity and assisting Saudi Arabia in achieving its Vision 2030 goals. A significant investment in marketing research will allow the sector to recognize any potential growth opportunities. Furthermore, the technique will speed up the process of assessing a customer’s exact needs as well as predicting revenue. The sector will determine whether a new service would work well or not by conducting market research. In addition, the venture allows for the redevelopment of products, which aids in beating competitors. Furthermore, it serves as the foundation for any reasonable decision made on any topic. For the reasons mentioned above, it is worthwhile to encourage the industry to invest in market analysis.
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