Tourism Breaking News
Saudi Arabia has recently revised its annual tourism target to 150 million visitors a year by 2030, after achieving the original goal of 100 million seven years ahead of schedule, thanks to the country’s continued – and unprecedented – investment in infrastructure, tourism transformation, hospitality and real estate as part of Vision 2030. With a seemingly endless array of new hotels, resorts and tourist attractions being announced, breaking ground and opening for businesses in KSA, Future Hospitality Summit (FHS) Saudi Arabia will hone in on the future of successful hotel and destination development in the Kingdom as part of its three day, action packed agenda. Ahead of the event, taking place at the Mandarin Oriental Al Faisaliah in Riyadh from 29 April to 1 May, industry experts discuss the key factors affecting tourism development, and how the sector can overcome potential challenges to ensure government targets are met.
Read on for expert opinion from David Vely, Vice President Development & Asset Middle East and Africa, Club Med; Ramine Behnam, Vice President Development, Minor Hotels EMEA; Shahbaz Tufail, Executive Vice President, DAR Engineering; and Stefano Lopez, Tourism Project Director, Baheej Group.
Saudi Arabia is looking to attract more than 150 million tourists a year as part of its goals for Vision 2030. What are the most important factors when it comes to hotel and destination development in ensuring that tourism targets are met?
David Vely, Vice President Development & Asset Middle East and Africa, Club Med:
Firstly, world-class infrastructure, including international airports and an advanced highway network, is crucial to facilitate tourist travel. Secondly, a variety of tourist attractions – from historical sites and beautiful beaches to modern entertainment centers – are needed to attract visitors. Thirdly, quality service and memorable experiences, coupled with professional and warm hospitality, are essential to retain tourists and foster positive word-of-mouth. We have observed Saudi Arabia’s ongoing efforts and investments to successfully fulfill these three criteria, and are confident in its ability to achieve – and surpass – the ambitious goals of Vision 2030.
Ramine Behnam, Vice President Development, Minor Hotels EMEA: Vision 2030 is an exciting time for Saudi Arabia and represents a huge opportunity. It’s critical that infrastructure is well developed allowing easy access for the local market and overseas tourists flying in to the destinations. Already there are a significant number of hotels and resorts announced across many well-known international brands; this needs to include a variety of offerings from uber luxury through upscale and mid-market. Ensuring sustainable initiatives are in place will also be key, along with offering exceptional guest services, iconic design and taking cultural integration into account.
Shahbaz Tufail, Executive Vice President, DAR Engineering: The revised tourism target of 150 million visitors a year was announced during the Future Investment Forum last October. Out of these, 75 million are expected to be international visitors. The ongoing development of new entertainment options, as well as aligning value and service propositions to the international travel palette, clearly demonstrates the intent of Vision 2030. To appeal to a broader audience, providers must align with global hospitality and travel trends such as ecotourism, wellness, smart hotels, sustainability, and AI.
Stefano Lopez, Tourism Project Director, Baheej Group: So far, the focus has been on international tourism and the luxury and super luxury sector. I believe that to achieve this goal, we need to look at domestic and regional tourism as well which is the bedrock of the tourism and hospitality industry for developed countries. Baheej will make sure that these new lifestyle and leisure offerings are accessible to a broader audience. Let’s not forget that destinations are not only built, they are also discovered There are a lot of hidden gems in Saudi yet to be discovered, and we are here to enable them become the destinations of tomorrow.
More than a million new jobs are set to be created in the Kingdom by 2030, with 250,000 allocated to the 2030 World Expo in Riyadh, according to the Ministry of Tourism. How is the hospitality industry going to attract – and retain- the right talent?
David Vely: Attracting and retaining talent in the hospitality sector goes beyond offering competitive salaries. Providing opportunities for career advancement, personalised training programmes, and fostering a supportive work environment are essential for cultivating a skilled and motivated workforce. Becoming the employer of choice in the tourism industry to attract and retain top talent is one of Club Med’s strategic pillars. Our social model centres on providing a “life-changing experience” for all employees, along with promoting geographical mobility and internal promotion.
For instance, 100 per cent of our Resort Managers and 80 per cent of our Department Managers are being promoted internally, while 40% of our resorts workforce rotates to different countries every year. Additionally, we collaborate with international training institutions like Vatel to establish and develop regional hospitality schools to recruit and train local talent, contributing to the development of the local workforce.
Ramine Behnam: The industry needs to offer competitive compensation and benefits packages to attract skilled professionals into hospitality, and invest in training programmes to develop new talent and upskill existing team members. To retain top talent, a positive work culture valuing diversity, inclusivity, and employee well-being needs to be nurtured, in addition to establishing clear career progression and providing opportunities for advancement within the industry. Collaboration with educational institutions to offer internships and graduate training programmes, as well as vocational training programmes can also help in providing a pipeline of future talent. By implementing these measures, the hospitality industry will be able to ensure that they employ the best talent and furthermore retain these loyal individuals.
Shahbaz Tufail: A significant transformation is imperative to attract and retain a new age of Saudi and international talent across all industries. Employers must understand that the skills required to excel in a job five years from now will be vastly different from those required today. As the world of work continues to evolve, companies must become more technology-driven, and potential employees must become disruptors rather than the disrupted. This new generation is keen to future-proof themselves with 21st-century skills, combining existing and new capabilities to thrive in a region that is being profoundly transformed.
For employers in the hospitality industry hoping to attract and retain the next generation of workers, there is now greater impetus – and no excuse – to enhance their workplace offerings, while enabling flexible and supportive work environments. Just as hospitality and destination propositions are expanding and being redeveloped, employers must act quickly and decisively to meet the demands of the modern workforce.
Stefano Lopez: Creating opportunities for young generations to train and dive into the market is the first step to bringing more talent to the industry. I praise the initiative by Red Sea Global, which has created an academy within their project to train and foster local talent – it will pay off in the long run.
Another crucial step involves removing some of the stigmas and misconceptions surrounding employment in the tourism industry, especially for women. The idea that it offers limited career advancement and economic opportunities is misleading. Globally, the tourism industry is experiencing significant growth, at an annual rate of 5.2 per cent. Women are poised to play a pivotal role in propelling this growth forward, particularly in Saudi Arabia.
Saudi Arabia’s massive investment in infrastructure, tourism transformation and real estate is creating a wealth of opportunities for investors to be a part of the KSA of tomorrow. What role does the hospitality sector play in attracting FDI into the country?
David Vely: The hospitality sector plays a pivotal role in attracting Foreign Direct Investment into Saudi Arabia. As the country undergoes significant infrastructure development and tourism transformation, the serves as a key component in accommodating the growing number of visitors. Investors are drawn to opportunities in hotel development and resort projects due to the sector’s potential for substantial returns on investment. Moreover, a thriving hospitality industry enhances the country’s overall attractiveness as an investment destination, strengthening confidence among foreign investors and contributing to the country’s economic growth and diversification efforts.
Club Med has been a pioneer being the first to establish resorts in destinations like Cancun, Punta Cana and Bali. This early presence has had a significant impact on these countries, driving substantial tourism development, economic growth and attracting FDI.
Ramine Behnam: The role of the hospitality sector within Vision 2030 and Saudi Arabia’s extensive tourism transformation cannot be underestimated. The sector will bring a huge economic contribution, through the construction and development of hotels, real estate and tourism projects, and over time will represent extensive job creation, with requirement for skilled workers and skills development. The events and conference industries will also prosper. Overall, the country’s roadmap for economic diversification represents a huge long-term commitment for those companies and brands that invest but there will be considerable pay-back in terms of brand recognition and reputation.
Shahbaz Tufail: The hospitality sector is among the most significant contributors to the global economy. Investors find it an attractive sector due to its potential for high returns, diversification benefits, and the ability to capitalize on increasing consumer demand for travel and leisure experiences. To support the ongoing growth of FDI in the kingdom, the hospitality sector must continue to innovate and embrace topics such as sustainability and experiential travel, leverage technology for personalization, grow service propositions, and evolve sales and marketing tactics.
Stefano Lopez: Saudi Arabia is the newest fastest-growing tourism destination and, as I have personally experienced by living and working in different cities within the country, has an incredible tradition of hospitality, rich culture, history, and heritage.
With the direction of boosting the tourism industry’s contribution to more than 10 per cent of GDP by 2030, KSA is becoming the gateway for attracting Foreign Direct Investment (FDI). Saudi Arabia offers a welcoming environment that fosters connections and breaks down barriers, and hospitality has the power to connect individuals, remove barriers, and see what’s beyond stereotypes. As these obstacles are removed, Saudi will further amplify its appeal as a pivotal gateway for attracting FDI.
Construction costs in KSA increased 7 percent in 2023 and are predicted to rise by another 5-7 percent this year. What can developers do to mitigate these risks?
David Vely: To mitigate the risks posed by escalating construction costs in KSA, developers can pursue a multifaceted approach. This involves conducting thorough feasibility and planning studies to identify cost-effective solutions tailored to the local market. Also, negotiating fixed-price contracts with safeguards (upper and lower limit) against cost fluctuations, while continuously monitoring market trends to adapt strategies. In addition, engaging in collaborative partnerships with reputable local firms renowned for their quality craftsmanship and efficiency. At Club Med, we prioritize working with local partners, leveraging their expertise and embracing their tailored local construction methods to ensure the successful realization of projects.
Ramine Behnam: Developers need to execute measures including material substitution, design optimisation and local sourcing to help contain costs. Contract negotiation needs to include long-term agreements, volume discounts and fixed price contracts where possible. Supplier diversification, technology adoption including prefabrication and modular construction needs to be considered, and supportive governmental policies and incentives to alleviate cost pressure on construction.
Shahbaz Tufail: While there were some indications of inflation easing towards the end of 2023, fluctuating prices continue to pose difficulties for the hospitality sector in KSA – and around the world. Rising costs have made it necessary for the sector to adopt innovative ways of working, such as modular construction, an approach that can help cushion the impact of local skills and materials shortages, as well as price increases. Additionally, it’s crucial to incorporate sustainability and implement digitization to ensure that everyone can benefit from operational efficiencies and mitigate the impact of construction cost increases both now and in the future. Working closely with skilled consultants on value engineering, cost-benefit analysis, and project modeling from inception and throughout the design and construction phases of a project is also a key factor in managing costs effectively. An ounce of prevention is worth a pound of cure.
Stefano Lopez: KSA developers can adopt several strategies to navigate these risks such as embracing innovative build technologies and materials, including modular construction, which can significantly reduce construction costs while expediting project timelines. Also, with market conditions and construction material prices continuously on the rise, it’s important to implement additional mitigation strategies that focus on risk allocation and traditional cost management mechanisms for establishing early-stage budgets, reducing program delays, and so forth.
The construction sector will prioritize innovation and digitization to meet evolving needs and Vision 2030 objectives. Yet, redefining the concept of luxury and embracing its shift to focus on experiential elements rather than material ones presents developers with opportunities to deliver outstanding experiences and properties for a reasonable price tag.
From your perspective, what is/are the key(s) to successful hotel and destination development in Saudi Arabia?
David Vely: Providing distinctive and genuine experiences that showcase the rich cultural heritage and breathtaking natural landscapes of Saudi Arabia is essential to appeal to a broad spectrum of local and international travellers. It’s also important to emphasize sustainable practices in operations to ensure enduring success and demonstrate a commitment to minimizing the ecological footprint. Furthermore, investing in infrastructure development aligned with environmental preservation to enhance the overall attractiveness of the destination. Ultimately, a strong focus should be on exceeding guest expectations by adapting to evolving preferences and delivering unparalleled hospitality experiences.
Ramine Behnam: The Kingdom has a huge opportunity to develop successful hotels and destinations within the country, with the potential to be equally enjoyed by the local, regional and international markets and across different price points. Excellence in the hospitality experience is key, along with ensuring sustainable practices are adhered to from the start and local community engagement is essential.
Shahbaz Tufail: Engaging with the local context is crucial when designing and developing unique and welcoming places in Saudi Arabia. This is particularly important for the numerous projects in locations such as the Red Sea Coast, Al Ula, and Asir. In addition to embracing sustainable design and the growing demand for eco-tourism, the hospitality industry should also showcase cultural history, local arts and crafts, Saudi fashion, cuisine, and folk traditions. They should also collaborate with the flourishing arts, festivals, and sports programs in the Kingdom as catalysts for hospitality development, particularly in urban hotspots.
Stakeholders involved in the design, construction, and operation of any hospitality project should also prioritize technology adoption and innovation. Existing venues should review and invest in infrastructure upgrades to modernize their offerings, while new developments should seek the right expertise to plan cutting-edge and audience-appropriate propositions for prospective customers throughout the planning phases of any development.
Stefano Lopez: The key to successful hotel and destination development in Saudi Arabia lies in recognizing the unique opportunities the country presents, distinct from the asset-centric model of Dubai. Saudi Arabia boasts a rich cultural heritage, diverse landscapes, and a thriving economy, offering vast potential for strategic development. Rather than solely focusing on building destinations, we believe in uncovering and showcasing the hidden gems within the country, such as Yanbu, the Farasan Islands, Duba, or Wadi Al Disah.
At Baheej, our role is to identify and enable these future destinations, addressing gaps through our offerings. Additionally, support from the Ministry of Tourism and the Saudi Tourism Authority in establishing local and regional Destination Management Organizations is crucial. These initiatives lay the foundation for a robust, sustainable tourism ecosystem, instilling confidence in the private sector to invest in the industry.
