GCC nations have embarked on a journey towards diversification and tourism is their chosen vehicle. The industry—responsible for 3% of the global GDP—is a driver of growth through job creation, foreign capital influx, infrastructural development and cultural exchanges. Fahd Hamiddadin, CEO of the Saudi Tourism Authority, has gone as far as to state that “tourism is the new oil”.
In 2021, the tourism sector contributed $109 billion to the region’s collective GDP, with international tourists accounting for 55% of total expenditure. The sector’s contribution to job creation was 9.8%, according to the UAE Ministry of Tourism. The industry was already important to the region’s economy, but it is poised to become fundamental.
“In the Middle East, where the governments are prioritising the diversification of the economy, tourism has a strong place to lead this transformation,” Natalia Bayona, Executive Director of the World Tourism Organization (UNWTO) told Finance Middle East. “Eight of the top 20 sovereign funds in the world are in the Middle East and they are investing a lot in tourism.”
“Eight of the top 20 sovereign funds in the world are in the Middle East and they are investing a lot in tourism”
Natalia Bayona
The sky is the limit
When it comes to setting targets, the Middle East is not afraid of ambition. GCC countries have set themselves the goal of increasing the spending of inbound tourists by 8% annually, reaching $188 billion by 2030.
The most astonishing part is not the size of the goals but the fact that most nations are on track to meet them. In 2023, Saudi Arabia welcomed over 106 million tourists, surpassing its 2030 target seven years ahead of schedule. The Kingdom—which has invested $800 billion in the sector—has increased its target to 150 million visitors. Meanwhile, Dubai attracted a record 17.2 million international tourists last year, recording a 20% annual increase. Hospitality was also the fastest-growing sector in Qatar over the first nine months of 2023, and the second-fastest in Bahrain after transportation.
“With the hosting of the World Cup in Qatar, the development of projects such as NEOM or the Red Sea Project in the Kingdom of Saudi Arabia and extensive tourism strategies in place, it should be no surprise that the GCC is regarded as the fastest-growing region for tourism,” Naim Maadad, CEO and founder of Gates Hospitality, noted.
The trickling effect
Just how useful is tourism in driving economic growth? The World Travel and Tourism Council’s (WTTC) found that the UAE tourism sector contributed Dh220 billion ($59.89 billion) to the nation’s GDP in 2023. The sector also amounted to 10.3% of Qatar’s economic output, amounting to QAR 8.1 billion ($2.22 billion). By 2027, the industry’s economic contribution to GCC nation’s GDP is set to reach $318.6 billion.
“Tourism acts like an anchor that attracts related investment which, in turn, grows the economy,” said Michael Palkowski, Senior Lecturer in the Department of Tourism, Hospitality and Events Management at the University of East London. “There is often significant job creation, infrastructure development and foreign exchange earnings.”
“Tourism acts like an anchor that attracts related investment”
Michael Palkowski
From local shops and restaurants to real estate, healthcare and IT, almost all industries are impacted by a rise in foreign visitors. In the UAE, the number of jobs supported by travel and tourism grew by 41,000 in 2023, representing one in nine jobs in the country, the WTTC found. In Saudi Arabia, total visitor spending exceeded SAR 250 billion ($66.64 billion) last year. The Kingdom has already added 250,000 jobs in this sector since 2019 and it is expected to create another 1.3 million jobs by 2030.
Celebrating difference
Attracting foreign visitors is not as simple as building hotels. In order to position themselves as global tourism hubs, the region’s nations have developed unique value propositions, looking to leverage their strengths and capture specific segments of the market.
In this context, Qatar and Saudi Arabia have emphasised the importance of sports through initiatives like the Qatar World Cup and Saudi Arabia’s partnership with TKO (WWE/UFC). The UAE has invested in hosting events like EXPO 2020 and COP28, as well as heritage projects such as the Louvre Abu Dhabi. In 2023, Dubai’s World Trade Centre (DWTC) generated a total economic output of Dh18.3 billion ($4.98 billion) through 76 large-scale events, with 58% of the earnings being retained within the local economy.
“The DWTC drives economic diversification in Dubai and has done so for over 45 years,” said Mahir Abdulkarim Julfar, Executive Vice President at DWTC. “This translates to every dirham invested by an organiser or attendee at a DWTC event generating eight times that in sales value for the broader Dubai economy.”
In contrast, Bahrain, Oman and the UAE’s Ras Al Khaimah are focused on eco-tourism. The latter is looking to position itself as the “nature emirate” and the region’s “most-sustainable” travel destination, to reach its goal of growing tourism’s contribution to its GDP from 6% to almost one third by 2030. Sustainable communities such as RAK Central, Al Marjan Island and Beach District, exemplify this vision.
“Our overarching masterplan is to build a cohesive destination that balances economic growth with environmental stewardship”
Raki Phillips
“As one of the fastest-growing destinations in the Middle East, key to our success is the careful planning and execution of projects that align with our vision to position the emirate as a destination of the future,” Raki Phillips, CEO of Ras Al Khaimah Tourism Development Authority (RAKTDA), explained.“Our overarching masterplan is to build a cohesive destination that balances economic growth with environmental stewardship.”
A home for innovation
The GCC has embraced innovation in all sectors and tourism is no exception. The rapid pace at which the region expects to grow its visitor influx calls for new solutions that will enhance the tourist experience. This includes digital marketing and advanced booking systems, as well as “smart tourism” solutions that leverage data analytics to understand tourist flow patterns and design personalised experiences, building the tourist hotspots of the future.
“GCC countries are incorporating technology and sustainability into their tourism sectors,” Bayona said. “Tourism, for example, is today at the forefront of artificial intelligence.”
The appetitive for innovation is there and entrepreneurs are taking notice. In Q1 2024, MENA startups secured $429 million in funding. Bayona cites the UNWTO’s Women in Tech Startup Competition as one of the initiatives encouraging female entrepreneurship. Ankur Agrawal, CEO and founder of Inhabitr and former partner at McKinsey & Company also highlighted how this innovation-driven attitude towards diversification is attracting businesses and startups to the region. This includes Inhabitr, his AI-powered commercial real estate furnishing company, which has recently decided to expand into the Middle East.
“The region is more technology-forward than many other parts of the world”
Ankur Agrawal
“As we launched our business, I have come across numerous VCs, technology entrepreneurs and investors in the region and it’s amazing to see how open-minded and tech-forward they are,” Agrawal added. “I think the region is more technology-forward than many other parts of the world. It’s very open to adapt. Anytime you have a technology that can leapfrog the learning curve, the Middle East is always the first place that says, ‘Let me adopt it first’.”
Better together
All GCC nations want to be leaders in the tourism sector, but they are not in competition. Experts point out that businesses often benefit from setting up in close proximity as their competitors in what is known as the agglomeration effect. The same effect can take place between countries. Thus, GCC nations are set to benefit from having similar tourism policies, frameworks and vision.
The best example of cross-country collaboration is the unified GCC visa. The document could allow travellers to move seamlessly across countries and align governance to drive regional business expansion. The visa has been predicted to add a cumulative 22 million visitor arrivals and $26 billion in spending to the region by 2030 by Oxford Economics. It could be available before the end of 2024, although nations such as Saudi Arabia, Oman, Bahrain and the UAE have already announced their plans to develop combined leisure and business travel packages and align major events to expand the length of visits to the region.
“The single GGC visa is the perfect example of the appetite that the region has to work together in unity,” Maadad said. “I believe it will be a game-changer.”
Towards 2030
As we approach the end of the decade, the pace of growth of the GCC tourism sector is only expected to accelerate. The Middle East travel sector is forecasted to grow by 40% between 2022 and 2026, with the hospitality industry’s market value set to reach $37.62 billion by 2028. Over the next few years, the region is set to showcase a series of large-scale, sustainable and luxury-focused destinations that aim to attract—and retain—the world’s attention.
“The tourism sector in the GCC, particularly in Dubai, the UAE, and Saudi Arabia, is poised for substantial growth and transformation over the next three to five years,” said Mark Phoenix, CEO of real estate company Sankari. “This growth will be driven by several key factors, but perhaps most importantly, by the spirit of regional collaboration, which underscores the collective effort and shared benefits within the GCC.”
Tourism can significantly boost GDP growth by generating income, employment and, of course, investment opportunities. From Saudi Arabia’s NEOM and its hosting of the 2030 EXPO and 2034 FIFA World Cup to the development of smart cities such as Abu Dhabi’s Masdar City and Qatar’s New Doha, the region will have no shortage of opportunities to showcase its appeal on a global scale. The goal? To turn the GCC into the world’s top tourist destination.