Increasing wealth disparity and the erosion of the middle class
Around the world there is a growing disparity between a small wealthy elite and a growing cohort of citizens who are angry at or disappointed in their inability to enjoy the life they expected. The Middle East, as a region, has the highest share of inequality.
While the inequality is largely accounted for by differences across the region, even within countries – and even among citizens – there is growing wealth disparity that is nurturing social tensions. The greatest challenge is among the large number of young nationals that are unable to find a job. Over 30% of Saudis aged below 25, and over 50% of young Omanis are unemployed. In response, governments are trying to diversify the economy, nurture a job-creating private sector, realise targets to replace expat workers with nationals, improve local skills and provide access to affordable public services and housing.
The hospitality and tourism industry is at the heart of that diversification effort.
Globally, travel and tourism is the largest employment generating sector in the world. In the region, Dubai has shown the economic potential of tourism when policies are prioritised and stakeholders are well aligned. Although occupancy rates have come down from unsustainable high levels (upper 80%) to ones that match other global locations, the fast growth build-up to the Dubai Expo in 2020 will not create a bubble like the one in 2008/09. This is because Dubai has put a comprehensive framework in place around its iconic hotels and other hospitality assets, fortifying demand through largescale investment into business, leisure and MICE products.
Saudi Arabia now actively pursues the potential of hospitality and tourism to build private-sector momentum in and around the industry and create jobs. Religious tourism is already very strong. In addition to 1.8 million foreign and domestic Haj visitors, Saudi Arabia attracts around 6 million international Umrah visitors in 2016.
The aim is to increase this number to 15 million by 2020 and 30 million by 2030. The country also has a rich wealth of cultural and natural heritage assets, but few visitors stay to enjoy them or spend money in the country. In order to boost businesses and jobs by developing leisure tourism, as the National Transformation Plan envisions, there needs to be a clearer consensus around the country’s positioning as a tourist destination, there also needs to be alignment around policies and investment in order to build up a future-proof industry.
For investors and policy-makers in Saudi Arabia putting tourism at the heart of successful diversification, a clear focus on what tourism will look like in the future is required - not just piecemeal changes and opportunistic developments. Is the country going to focus on heritage tourism, on beach resorts or on leisure & entertainment assets? Will immigration and visa processes be transformed to encourage tourism or will the country remain difficult for visitors to enter? Will the focus be on international or domestic tourism? And will nationals be encouraged to develop a service mindset so they can be employed in large numbers across the tourism sector?