How the GCC can succeed in tourism

01 Feb 03:10 AM

Sector : Tourism Country : Qatar

By George Atalla, partner, and Antoine Nasr, principal, at Booz & Company

Tourism generates no more than 7% of the GDP in GCC countries, compared to 18.5% in competitors such as Hong Kong

With its warm weather, cultural and historic endowment, the GCC’s tourism sector is an opportunity ripe for development

The tourism sector in the Gulf Cooperation Council (GCC) countries shows considerable promise. In recent years tourist arrival numbers have been growing in many GCC states. The region will host high-profile events such as the World Expo 2020 in Dubai and the 2022 FIFA World Cup in Qatar. Governments are also putting tourism development into their ambitious national development agendas.

While these are important advances, there is more that GCC countries can do if they are to realize the full economic potential of tourism. In particular, GCC policymakers will have to adopt more sophisticated methods when developing tourism. They will have to take into account the important changes in the global tourism industry, understand the GCC’s advantages and disadvantages vis-à-vis its competitors, and then create national tourism strategies.

A changing industry

The global tourism industry is undergoing significant changes and growth. Digital technologies mean that the days of mass advertising campaigns and industry fairs for destination management are waning. Instead, destinations are turning to direct and indirect online channels, which require the development or upgrading of marketing capabilities. These technologies allow tourists to make reservations and bookings for hotels, travel, and tours more easily and flexibly than in the past.

The profile of tourists is also changing. Previously destinations could look to developed economies in Europe and North America as their main sources for visitors. These markets have grown slowly in recent years and their populations are aging. The major new sources of tourists are the emerging markets such as Brazil, China, India, and Russia, which have large numbers of increasingly affluent citizens. In terms of economic impact, tourism had a compound annual growth rate of 7 percent from 2003-2012, one of the fastest growing industries globally.

The tourism ecosystem

To grasp the measures required to succeed in this changing environment, and to appreciate how the sector interacts with the broader economy and policy setup, policymakers should look at tourism as an ecosystem. There are three elements to the ecosystem: products and services, sector enablers, and system enablers.

Products and services

Products and services bring visitors to a destination. These visitors fall into two categories with different product requirements: leisure or business. Leisure tourists need cultural and natural attractions, whether museums, scenery, resorts, beaches or events. Business travelers are different, requiring conference facilities and related services.

To increase visitor numbers, countries focus on a set of core products. After these are firmly established, they then increase their offerings. Turkey, for example, moved away from dependence on cheap package holidays and cyclical visitor numbers. The country began by concentrating on two main products: culture and “sun and beach.” Turkey then came up with other products, including golf, skiing, spas, and conferences. As a result, Turkey now has a range of tourism products which mitigate the volatility in the sector. In 2012, Turkey was the world’s sixth largest tourism destination with 35.7 million arrivals and $25.6 billion in receipts according to the United Nations World Tourism Organization, respectively close to treble and double their levels a decade earlier.

Tourism services include reliable internal transport, such as road, rail, and air, as well as affordable inbound and outbound airfares. Services also encompass the read availability of guided tours and the breadth of accommodation, from cut-price hotels to five star and above.

Sector Enablers

Enablers are a country’s activities to strengthen tourism. The most important enablers are the drafting and implementing a national strategic plan, encouraging investment in tourism, marketing, and the training and education of those employed in the sector so that they have the appropriate skills.

For example, Australia’s “Tourism 2020” strategy calls for the government, at the federal, state, and territorial levels to cooperate with the tourism sector. Among the plan’s six strategic areas are improving digital capabilities for marketing and transactions (such as bookings), increasing investment and cutting the red tape that may hinder it, and ensuring the sector has sufficient skilled labor.

System Enablers

Enablers are elements of how a country functions. These include its environmental practices, infrastructure, health and safety, security, and environmental-sustain­ability practices. Few tourists are interested in these features of a country until something goes wrong—for example, when there are transport delays, inadequate medical care, or crime. Ensuring that the system enablers function properly makes the tourism sector appealing to visitors and improves the quality of life for citizens.

GCC tourism’s advantages and disadvantages

To rigorously develop their tourism sectors, GCC policymakers will have to consider areas in which their tourism sectors are either ahead, or in a handful of areas behind, their competitors.

The GCC has six notable advantages. First, GCC economies are strong, allowing them to invest in high-cost capital projects for tourism. Saudi Arabia decided in 2012 to invest $16.5 bn in public transport in Mecca. Qatar will spend $140 bn on transport infrastructure before the 2022 World Cup.

Second, the region’s airport capacity is substantial and has strong connections to major sources of tourism. Moreover, there are millions of transit passengers who could become visitors. Doha International Airport and Dubai International were among the top 30 airports for international passengers in 2013. Dubai International has gone from just 1 million passengers in 1974 to nearly 64 mn in the twelve months to September 2013, making it the second busiest airport for international passengers in the world. Dubai International plans capacity of 90 mn passengers a year by 2020.

Third, the GCC is well-positioned to develop business tourism. Along with frequent flight connections, the region has the hotels, convention facilities, and other enablers needed by business travelers.

Fourth, the GCC has a growing set of cultural offerings. GCC countries have sites of historic and cultural importance. In addition, there is a push to develop modern arts and museums Qatar and the UAE.

Fifth, the GCC’s sunny weather allows it to compete for “sun and beach” tourists for nine months of the year, unlike its competitors which are off-season for around half the year.

Sixth, GCC countries have a well-deserved reputation for safety, with travelers able to enjoy their stay without fear of harassment and crime.

At the same time, the GCC has three disadvantages. These shortcomings help explain why tourism generates no more than 7 percent of the GDP in GCC countries, compared to as much as 18.5 percent in competitors such as Hong Kong.

The first disadvantage is a limited variety of tourism products, whose quality is not developed, and that are not systematically marketed. GCC countries offer mainly one product each—business travel in Bahrain and Qatar, “sun and beach” in Oman, and religious tourism in Saudi Arabia. Countries have also not developed the quality of these products. For example, most GCC countries have not sought international certifications for their beaches, nor have they applied for their culturally and historic places to become UNESCO World Heritage sites. Yet the GCC’s competitors recognize such designations as indicators of quality. Marketing and promotion also need more attention. The GCC does not exploit the opportunities of digital technology to attract visitors.

The second disadvantage is an underdeveloped set of sector enablers. Some GCC countries still do not have a long-range tourism strategy. Investment in tourism is also lacking, particularly by the private sector. There is sometimes no national strategy to develop a skilled tourism workforce, nor is there a comprehensive registry of tourism resources and assets.

The third disadvantage is systems that hold back tourism, such as restrictive visa regimes.

Formulating a national tourism strategy

To generate the most economic benefit from tourism, GCC countries need a long-term strategy that is incorporated into their economic development plans. Generating the strategy involves three steps: define the ecosystem, develop strategic positioning and the value proposition, and develop the institutional framework.

Defining the ecosystem begins with a comprehensive inventory of the country’s tourism products and services, along with an examination of sector and system enablers. This way the country knows where the gaps are. For example, a country should have five sub-sets of sector enablers:  planning, promotion, marketing, human capital develop­ment, and research and statistics. There should also be a central tourism planning entity supervising and promoting these activities.

Developing the strategic positioning and value proposition is a detailed, sequential process. It involves selecting target sources for tourists through such factors as their size, proximity, anticipated growth, and spending per tourist. The country then segments its target markets to determine what type of tourists it will provide, such as culture seekers, budget travelers, or families. This allows the central planning entity to determine which products it should promote— a consideration tempered by how much demand exists for the product, whether the country is in a position to offer it, and the extent of competition in nearby destinations.

Understanding the source markets and products allow the country to state a clear value proposition that is distinct from its competitors. For example, by offering meetings and conference for senior European corporate managers, the tourism planning entity has defined an activity, a source market and a segment within it, and identified the necessary elements of the ecosystem.

Developing the institutional framework allows the central planning entity, which animates the framework, to focus on the most important aspects of sector development. The central planning entity sets policies, promulgates and enforces regulations. In some countries it initiates and carries out major projects. It can be an independent body or part of a ministry, according to choice. What matters is that it possesses the influence to develop the sector.

By developing tourism the GCC can bolster employment, skills, and economic diversification. With its warm weather, cultural and historic endowment, the GCC’s tourism sector is an opportunity ripe for development.


George Atalla
George Atalla is a Partner with Booz & Company
He has advised Middle East government clients on economic policy setting, fiscal management, investment prioritization, and subsidies realignment.
Antoine Nasr
Antoine Nasr is a Principal with Booz & Company and a member of the firm’s public sector practice
He has over eight years of consulting experience acquired through various projects in the Middle East.





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