Tourism in Saudi Arabia: Business Tourism Outlook 2014-2015

Interview with Abdullah Alomran, CEO of Riyadh International Convention and Exhibition Centre (RICEC)

Saudi Arabia attracts a lot of religious tourism and MICE (Meetings, Incentives, Conferences and Events) tourism. According to statistics from the Tourism Bureau, out of 2.5 million tourists, 15% are business tourists. Therefore, MICE tourism is a growing niche market. Can you give us your overview of the tourism sector in Saudi Arabia?

Yes, you are right; Saudi Arabia is not a very touristic country apart from some religious tourism and MICE tourism, which is beginning to represent a significant share of our tourism industry.
Riyadh is the capital city and is one of the most important and populated cities in Saudi Arabia. We have more than 5 million people living in Riyadh. With the launch of the Riyadh International Convention and Exhibition Centre (RICEC) in 2009, the MICE sector started to grow more and more as this centre encouraged more people to come to Saudi Arabia for such purposes.
According to statistics from SCTA, which is the tourism authority here, the Riyadh International Convention and Exhibition Centre´s share of the total MICE visitors is 10%. Therefore 10% of the visitors coming to Saudi Arabia for MICE purposes have visited the Exhibition Centre here in Riyadh.
Although the number of visitors coming for MICE purposes is very low compared to other regional countries, we do expect this number to grow with the new government´s strategy and legislations. These should attract more visitors to this sector and ease procedures such as getting visas, logistical support for embassies outside of Saudi Arabia, and so on.

One of the major challenges that the tourism industry in Saudi Arabia faces is visas; people need to have a sponsor in order to come to this country, they cannot just come to a conference for example. This is something that the government is working on. The government does want to promote tourism and is building infrastructure. This conference centre for example was built by the Riyadh Chamber of Commerce and Industry.

I think the government strategy was announced in 2010 when they started to think about forming a new Bureau for Conventions and Exhibitions. This Bureau was formed in 2011 and is headed by Prince Sultan bin Salman who is also the head of the Tourism Authority. This Bureau works as an internal regulator for the sector and one of its main goals is to encourage visitors to come to Saudi Arabia. The Bureau is made up of a board of directors from different governmental departments and relative Ministries, such as the Ministry of Foreign Affairs. This Bureau is dedicated to looking at the challenges and obstacles facing this industry, for example the logistics and the visas etc.

The plan of the Bureau is to target of 88 million “tourists” a year in Saudi Arabia by 2020, although 84 percent of them would be “local,” that is, Saudis taking their holidays inside the kingdom. The projected employment figure by 2020 would be 1.5 million.

You may have noticed if you ever visited Riyadh 10 years ago, that it is totally different now. We have more highways and many ongoing public transport projects. There are 3,000 rooms under construction here in Riyadh now, which should cover the demand for the hospitality sector. Therefore, the infrastructure developments related to the MICE sector are making a big difference. There is also a big expansion plan for Riyadh airport to increase its capacity.

How important is the MICE segment of the tourism industry here? How much economic activity does it generate and what is the potential for growth?

Saudi Arabia is an oil-based economy. The MICE segment was considered a side income until 2011 when the Bureau was formed and they started to look at statistics to do with the direct and indirect impact of this industry. In 2010, the International Bank carried out a study in Riyadh, which declared that the indirect income resulting from the construction of the RICEC was 370 million Riyals. That was in 2010 when we had a very limited number of events. We used the same methodology in 2012 and found that the figure had risen to 500 million Riyals. This figure represents the indirect income from the industries related to this sector such as hospitality, transport and logistics.

In terms of the direct income, to tell you the truth we do not have any statistics just yet that we can announce. However, I do know that many sub-activities like boat construction, services and the private sector are growing very fast. When we started, we had very few service providers in Riyadh but now we have 100 for the sector alone. This shows that sector is encouraging more investors to invest in activities related to this industry.

What is your utilisation rate?

Usually we do not announce this figure. We have a benchmark that we have to reach every year and we have been growing on average by about 12% since 2009. We hold more events every year and we have increased our space utilisation year upon year. Compared to the GCC region I think that Riyadh is now in a very good position regarding space utilisation and the number of events we hold.

I believe that we are attracting major events here in the RICEC. We had more than 1 million visitors last year, both local and international. We had more than 3,200 exhibitors, 60% of whom were international exhibitors.

What are some of the key events that you would like to attract for 2014 and beyond?

Our plan is to mix international events with local events. Now, we are hosting most of the major events in this area and in this country. They are organised by the private sector but we hold the events in this centre. We also have some plans to co-organise with international organisers in the energy and construction sectors.

We cannot announce the names of those events because we have non-disclosure agreements. For the future, we have plans to attract more recognised events and brand names to Riyadh.

When you talk to potential clients about holding an event here, do you meet a lot of resistance from them? Perhaps they suggest Dubai or Qatar instead.

Yes, you are right; we do hear a lot of that. However, we have to consider that according to a report I read a few months ago more than 70% of the visitors attending events in Dubai come from Saudi Arabia. Therefore, we have the buyers here in Saudi Arabia. That is why many of the main suppliers of many industries are very interested in being here, to be close to the buyers. Exhibitors invest in participating in an event because they want to do business, and what better way than to be close to the buyers.

We do have some challenges; it may be easier for some exhibitors to go to neighbouring countries but as I mentioned before, these issues are currently on the table to be discussed by the highest authorities.

The government clearly sees the potential of this sector.

Yes, definitely. That is why they started with the statistics to show the economic impact of this sector.

To validate their strategy?

Definitely, and also to support the economy. If you have some figures and statistics, you can compare and get a good perspective. The problem here is that we do’ have any statistics for the private sector. However, there is a data centre now so I think the impact is going to be very clear soon and the government is working towards resolving most of the obstacles.

What about growth figures?

We expect from now until 2017 to have growth of around 10 to 17%, mainly in Riyadh. There will be more projects happening and venues opening around the Kingdom. Overall, there will definitely be growth of over 10% here.

Saudi is turning itself into a transhipment hub as it has natural advantages compared to Dubai. Here you can unload a ship in Jeddah and transport by train in 12 hours.

Yes. Infrastructure is very important. I think that we are ranked very well in terms of ease of doing business. According to our expectations, our growth in this sector is likely to be between 10 and 15%.

Can you tell us a bit about the Exhibition Centre, what facilities do you have and how do you differ from other centres?

The RICEC was built by the Riyadh Chamber of Commerce and Industry. Our land area is about 190,000m2. It was designed for holding conventions and exhibitions and is the only centre in Saudi Arabia built for that purpose. It has a very modern design. We have a total hall area of 15,000m2 with a complete set of supporting facilities like workshops, warehouses and service areas. We have a very good system of crowd circulation and movement. We have many buildings that support the visitors like restaurants, cafes, business centres and VIP reception lounges etc. We have many facilities related to seminars and conventions. We have an auditorium capacity of 1,000 seats. We have parking for more than 1,500 cars. Part of the centre is the National Product Centre, which has permanent retail shops for local manufacturers so that they can be close to the international exhibitors. Lots of business is now done during the exhibitions between local manufacturers and international visitors. 
We have many plans to expand in the future. In the first phase, we plan to expand the hall space by 5,000m2. We have plans for a four star hotel within our perimeter with 200 keys. The construction of this hotel will start in early 2015. We have plans to expand more and more in the second phase of the hall expansion.

What is the estimated value of the investment that you plan to make?

Over the next three years, I think that we are going to invest around 170 million Riyals.