Reinventing tourism in the GCC: Building the tourism ecosystem
Countries in the GCC can grow their tourism sector significantly by developing a national tourism sector strategy. The best way to achieve this is through a three-step process: define the tourism sector ecosystem; develop strategic positioning and value proposition; and develop tourism sector institutional framework.
Reinventing tourism in the GCC Building the tourism ecosystem
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About the authors
Abu Dhabi Richard Shediac Senior Partner +971-2-699-2400 richard.shediac @strategyand.pwc.com Beirut Antoine Nasr Principal +961-1-985-655 antoine.nasr @strategyand.pwc.com
George Atalla was formerly a partner with Strategy&. Antoine Nasr is a principal with Strategy& in Beirut and a member of the firm’s public-sector practice. He has advised top-level officials in leading Middle East countries on a broad range of public policy and national agenda issues. He has extensive experience in largescale restructuring and transformation of major corporations and public-sector institutions. He has also worked on strategy setting and business planning, covering Middle East-based corporations, individual official entities, and whole-ofgovernment programs.
This report was originally published by Booz & Company in 2013.
Ghida Elhassan, Alice Klat, Ramzi El Khoury, Valerie Jambart, Beatrice El Hage, and Ahmed Mokhtar also contributed to this report.
Tourism has been growing rapidly in the Gulf Cooperation Council1 (GCC) countries, but this vital sector is still not meeting its potential. An insufficient assortment of tourism offerings, spotty marketing, and sporadic investment in the sector have limited tourism’s contribution to these economies. To increase their appeal to international tourists, GCC countries must make changes to every part of their tourism “ecosystems.” They must improve their most visible tourism products and services, build up the institutions that support tourism, and address the system-level challenges that lead to tourists being disappointed with their visit and not returning. These problems can include inadequate physical and social infrastructure and insufficient attention to environmental issues. This report presents a framework to develop and execute a successful tourism sector strategy. It describes a three-step process, and the impact that a central tourism planning entity can have when it is refocused on the correct priorities. The recommendations have special relevance in the GCC, where tourism is starting to be integrated into national agendas. These countries’ considerable wealth, appealing climates, and increasingly rich cultural attractions put them in a position where they can make substantive improvements and reap the benefits that come from thriving tourism sectors.
Over the next 20 years, the number of global tourist arrivals is forecast to rise by as much as 70 percent, to 1.8 billion every year, according to the World Travel and Tourism Council. If there were any question about tourism’s vitality, this statistic answers it. Tourism already accounts for 9 percent of world economic output, a level equal to automotives and not far below banking, and tourism dollars bring many benefits to destination countries. A heavily visited country, one that takes in hundreds of millions, or billions, in tourism dollars, has a natural way of preserving its historic sites, generating support for small businesses, and burnishing its image. Tourism income can also be a mechanism for fulfilling parts of a country’s economic agenda — including human capital development and economic diversification. In recent years, the countries of the GCC have collectively played host to millions of tourists, with arrival numbers increasing in most destinations. However, there is still a gap between the opportunity that GCC countries have in their tourism sectors, and what they have achieved. Only two GCC countries — the United Arab Emirates (UAE) and Qatar — rank in the top third on the World Economic Forum’s Travel and Tourism Competitiveness Index.2 All GCC countries have a considerable amount of work to do if they want to increase their share of tourism receipts — and realize the considerable socioeconomic benefits that come with that.
The tourism ecosystem
The best way to understand how countries compete for tourists is to think of tourism as an ecosystem composed of three parts: products and services, sector enablers, and system enablers (see Exhibit 1).
Exhibit 1 The tourism ecosystem
Key Tourism Assessment Areas
Tourism area 1 Component Culture Sun and beach Nature Tourism products & services Sports MICE Themed Travel services Lodging and food 2 Tourism sector enablers Sample subcomponent Antiquities Cruises Desert Local competitions Meetings Education Air transport Hotels Incentives Architectural heritage Beach Marine Regional competitions Health & wellness Ground transport Restaurants Conventions Museums Waterfront activities Mountains International competitions Exhibitions Urban Travel tours Resorts
Tourism industry planning Tourism investment promotion Tourism marketing Tourism human capital development Tourism research and statistics Security Health and safety Environmental sustainability Infrastructure
3 Tourism system enablers
Note: MICE = Meetings, Incentives, Conventions, and Exhibitions. Source: Strategy&
Tourism products and services attract travelers to a country. Of the two kinds of travelers — business and leisure — leisure travelers are more important, because they account for the largest share of total spending. Cultural and natural attractions, beaches and resorts, and sports events are all products that appeal to leisure travelers. Typically, countries trying to drive tourist arrivals will concentrate on one or two core product areas, and expand from there. For instance, Turkey initially focused on its cultural attractions, including the Topkapi Palace and the Hagia Sophia museum (both UNESCO World Heritage sites), and on its sun and beach attractions. The country has added other tourism products, including ski resorts, golf courses, and spas, to generate new revenues and reduce the cyclical nature of its tourism sector. Singapore uses a different product strategy, developing comprehensive tourism offerings that package lodging, luxury shopping, fine dining, entertainment, and gaming in a single complex. Singapore also understands the appeal of urban attractions — it has turned itself into a destination for culinary tourists — and it knows how valuable megaevents can be as a form of publicity. This explains Singapore’s decision to host the first-ever Summer Youth Olympics, held in 2010. The event attracted more than 3,500 teenage athletes and considerable positive attention from around the world. The services part of tourism refers to the availability of guided tours, reliable ground and rail transport systems within the country, discount air fares to and from the destination, and a wide range of hotel accommodations (from budget to luxury). Tourism sector enablers support a country’s indigenous physical attractions. They are activities that a country undertakes to build up its tourist industry — analogous to corporate functions like research and development or marketing. In tourism, the key sector enablers are a country’s ability to formulate and execute a strategic plan, promote investment in its tourism sector, market to prospective tourists, and develop the relevant human capital. Turkey’s long-range tourism plan sets four strategic priorities — improving the quality of its tourism services; enhancing the brands of its cities; diversifying its tourism offerings; and developing thematic tourism cities and zones. In its 2023 Tourism Strategy document, the country lays out a plan for achieving these priorities, including a set of actions to be taken. System enablers are the last part of the tourism ecosystem. System enablers are the quality of a country’s infrastructure, security, health and safety, and environmental-sustainability practices. These are not what tourists typically travel to a country to see, but what they may become aware of during their visit. When travellers perceive a country to be
poorly run, they are not usually talking about the queues at major attractions — they expect those. More often, they are referring to some unexpected corner of daily life they encountered: uncollected rubbish, traffic jams, a lack of potable drinking water, the quality of medical care (if they needed it). These are all elements of a country’s larger systems. This reinforces a key point, that a country’s attempts to make itself more attractive to tourists may dovetail with other aspects of its national development agenda. Thus, by making a country more appealing to visitors, the country makes itself better for its own citizens as well. Economic impact of tourism Tourism was a US$2.68 trillion economic activity in 2012 in terms of its direct contribution to global output (see Exhibit 2). The benchmarking study we conducted, of almost two-dozen countries, shows that tourism brings many additional benefits to national economies. For instance, tourism has a multiplier effect: When tourism spending goes up, other sectors of the economy, such as retail and construction, may rise along with it. Tourism also has an impact on employment. The opening of a new theme park, for instance, can mean hundreds or even thousands of new jobs for the local population. There are also indirect effects, with jobs created in supporting businesses, such as food, lodging, and transportation companies.
Exhibit 2 Tourism is one of the fastest-growing contributors to the world economy
Tourism’s Direct Contribution to World Output, 2002–2013 (in US$ Trillions; Compound Annual Growth Rate)
+7% 2.14 2.30 2.24 2.39
Source: Global Insight
GCC tourism’s advantages and disadvantages
The GCC tourism market, which consists of domestic, regional, and international travelers, has witnessed significant recent growth. To develop the sector systematically, policymakers will need to bear in mind the tourism sector’s six key competitive advantages as well as its three major disadvantages. Sector advantages 1. A bility to invest in capital-intensive tourism products. The generally strong economic position of most GCC countries means that they can invest in products that lure travelers, whether for business or pleasure. Qatar’s building of sports stadia in advance of its hosting the 2022 FIFA Football World Cup is an example, as is Yas Waterworld, a new amusement park in Abu Dhabi. 2. L arge airport capacities with easy connections to major tourism markets. Most GCC countries are investing in their airports. The UAE is in the process of increasing the annual capacity of Dubai International Airport to 90 million passengers by 2020, almost double the current capacity. Dubai International is already the second-largest airport by international traffic, with almost 58 million passengers in the 12-month period ended in January 2013, according to Airports Council International — nearly six times its level in 1998. These expansion projects are transforming GCC airports into regional hubs and attracting international tourists. The millions of transit passengers who have layovers in Dubai, Jeddah, or Doha, for example, can be converted into tourists.
3. S trong appeal as business tourism destinations. GCC countries had average GDP growth of 5.8 percent in 2012, a rate considerably higher than the U.S. or the European Union. Along with its highly developed infrastructure for meetings and conventions, this growth has put the region on the map of business travel. 4. E merging appeal of the region’s cultural amenities. There is particularly strong potential for this in places like the UAE, Saudi Arabia, Qatar, and Oman. These countries have been rehabilitating some of their ancient sites. Qatar and the UAE have also been investing to bring new works and exhibits to their museums and to become more competitive on the contemporary arts scene. 5. L ong “weather window” for sun-seeking tourists. The GCC has good weather for as many as nine months out of the year, including at times when nearby tourist destinations are “off season.” This should allow the GCC to take market share from sun and beach destinations. 6. S tability and reputation for safety. The order and stability of the GCC work to its advantage when tourists want to visit the Middle East. These are countries where security-conscious tourists can feel safe. Sector disadvantages For the most part, GCC governments have not devoted much attention to their tourism sectors. The result is that their tourism sectors have three major disadvantages. 1. S ubpar assortment of tourism products. GCC tourism products have three deficiencies. The first is their limited variety — that is, the tendency to focus on a single product. Saudi Arabia concentrates on religious tourism, Oman on its beaches, Bahrain and Qatar on their status as destinations for business travelers. Tourists either come to these countries for these reasons, or they simply do not come at all. The second deficiency involves product quality. Despite the amount of shoreline that all of the countries have, the UAE’s beaches are the only ones with Blue Flag certifications (a voluntary program to
designate water safety and environmentally sound practices). No other GCC country has even a single beach with a Blue Flag certification. Other indications of undifferentiated product quality are the scarcity of World Heritage sites in the region — the median number of World Heritage sites in GCC countries is 1.5 (see Exhibit 3, page 11). Some 25 countries have 10 or more World Heritage Sites, whereas no GCC country has more than four. Even the region’s supposed attractiveness to business tourists is not as widely recognized as officials may think. For instance, the UAE and Qatar — two countries with reputations for being business-friendly — rank 49th and 74th, respectively, among 97 countries for the number of events in the Meetings, Incentives, Conventions & Exhibitions (MICE) category, according to the International Congress and Convention Association. Finally, GCC countries have not sufficiently marketed or promoted even their existing products. Their participation in international trade shows devoted to tourism is sporadic. GCC countries also make relatively limited use of digital channels to promote their tourism products. The gaps extend to tourism-related services. When a traveler arrives in major GCC destinations it may be hard to get a taxi and even more difficult to find a bus tour. These services should be ubiquitous, as they are in more established destinations like London and New York. 2. I nsufficiently developed sector enablers. By and large, GCC countries are not focusing on the activities that other countries use to bolster their tourism sectors. Most GCC countries do not have a long-term strategic plan for their tourism sectors. Most of these countries do not invest heavily in the sector, nor do they do enough to encourage private investment. They often lack a strategy for human capital development as it relates to tourism, and do not possess a comprehensive data repository on tourism. 3. S ystems that inhibit tourism instead of encouraging it. GCC countries have relatively restrictive visa requirements and significant challenges in the area of environmental sustainability, reflected in low scores for air quality and waste-management practices. Their public transportation systems are also underdeveloped, although the region is beginning to address this through some large-scale investments.3
Exhibit 3 GCC countries have considerably fewer UNESCO world heritage sites
Number of UNESCO World Heritage Sites
Italy China U.S. Poland South Korea Oman Saudi Arabia Bahrain UAE Qatar Kuwait 0 2 2 1 1 4 10 14 21 45 49
The path to a stronger tourism industry
In countries where tourism has the most economic impact, tourism is integrated into the national development strategy and the long-term national vision (see Exhibit 4, page 13). The “Tourism Strategy of Turkey–2023” is an example of this, as is “Tourism 2020,” Australia’s long-term plan. As an interim step, countries often establish shorter-term strategic plans that lay out goals and set milestones. Examples include the three-year tourism plan in Estonia, the five-year plans in Abu Dhabi and the Philippines, and the seven-year plan in Scotland. As these countries improve the competitiveness of their tourism sectors, they will start to increase their tourism sectors’ revenues and economic impact. The development of a national tourism sector strategy typically follows three critical steps (see Exhibit 5, page 14). Define the tourism sector ecosystem To get an accurate picture of its tourism ecosystem, a country needs to know what it is doing — or not doing — with respect to each of the three parts that make up the ecosystem — products and services, sector enablers, and system enablers. A country should start building this picture by taking inventory of all the tourism products and services it has to offer. Tourism products and services cover eight basic components — including culture, sun and beach, nature, sports, and lodging/food (all eight components are listed in Exhibit 1, page 3). These components are composed of subcomponents — for instance, private museums and historic sites in the area of culture; cruises and waterfront activities in the area of sun and beaches; mountains and wildlife in the area of nature. The ecosystem can be further defined by looking at the country’s tourismsector enablers. In most countries, the sector enablers fall into five categories: planning, promotion, marketing, human capital development, and research and statistics. A central tourism planning entity (CTPE) typically oversees these activities, and acts as a catalyst for the diversification of the country’s tourism offerings and the increase in tourism-related investments.
Exhibit 4 Reinventing tourism requires incorporating it into the overall national agenda
Policy Setting and Planning Pyramid
Driving agenda National vision National development strategy Geopolitical/ governance agenda Infrastructure & utilities agenda, e.g., urban plan, transport, environment Fiscal, monetary, & trade agenda
Long-term National 10-year tourism strategy
Economic Social agenda agenda
Services agenda, e.g., tourism, government services, healthcare
Human capital agenda, e.g., education, labor
Medium-term 5-year strategy Short-term
Ministries'/Authorities' operating plans
1- to 3-year working plan
Pillar in which tourism is a key component
Exhibit 5 National tourism sector strategy development
Three Sequential Steps
Deﬁne the tourism sector ecosystem
Develop strategic positioning and value proposition
Develop tourism sector institutional framework
The picture is completed by the system enablers, namely health and safety; security; environmental sustainability; and infrastructure. These are essential aspects of any country’s identity, and they can have a big impact (positive or negative) on the country’s appeal as a tourist destination. Develop strategic positioning and value proposition In this next step, a country determines its primary geographic target markets. This usually starts by eliminating all the outbound tourist markets that are under a certain size and beyond a certain distance. After that, the country ranks the remaining markets, using characteristics such as the number of outbound tourists, expected future growth in outbound tourist numbers, and the average expenditure of tourists from the country. Finally, each target market is segmented by type of tourist. For instance, the target market may contain travelers who are nature lovers, budget-conscious comfort seekers, or sports and fun enthusiasts. The key question that countries need to answer is product prioritization. What should a country emphasize, its cultural amenities or its natural wonders? In turn, this depends on three dimensions: product attractiveness, which is the intrinsic demand for the product, now and in the future; product readiness, which measures the quality and variety of the product; and competition, which shows the extent to which other GCC and Middle East and North Africa region countries offer similar products. The intelligence that results from this analysis can allow CTPEs to make decisions about which products to prioritize — and which to de-emphasize (see Exhibit 6, page 15).
Exhibit 6 A country must determine which tourism products to prioritize
Illustration of Tourism Offerings Prioritization Results
Sun & beach
Health & wellness Education Sports Low Low High
Low competition Moderate competition High competition Relative size of the bubble reflects relative market size
Note: Roman numerals indicate priority of the products. Source: Strategy&
After it has done the market segmentation and laid out its tourism products in this way, a GCC country must make a decision about what its tourism value propositions are going to be. Should it pitch itself as a place for other Arabs to come for comfort and recreation? Market itself as a destination for outdoor adventures? Emphasize its advantages for business meetings and its appeal to business travelers? Countries cannot be all things to all travelers, so it makes sense for them to figure out what their main and secondary value propositions are going to be, and let go of everything else.
Develop tourism sector institutional framework Once the tourism value proposition and product strategy have been developed, the next step is to set up an institutional framework — and make sure the CTPE is focused on the right things. In general, CTPEs are responsible for policy setting; regulation setting and enforcement; and in certain cases, development and execution (including the operation of sites with high touristic potential). In some countries — Morocco and Mexico are examples, as are Abu Dhabi and Oman in the GCC — a national tourism development entity works side by side with the CTPE, focusing on key tourism projects and the development of partnerships with the private sector (see Exhibit 7, page 17). However, there are many variations on this theme. That there is no single “right” institutional framework is evident from the different approaches taken by countries that have highly successful tourism industries. For instance, in Germany and France, which currently rank second and seventh in tourism competitiveness, the CTPEs are departments within ministries. This framework is fairly common in developed countries where tourism is already well-established. By contrast, CTPEs are much more likely to be set up as independent ministries in developing countries in which tourism is a primary economic sector. This is the case in Brazil, South Africa, the Philippines, and Malaysia. In Malaysia, a variety of industry groups, including the Malaysian Association of Hotels and the Malaysian Association of Tour & Travel Agents, advocate for tourism-related policies. However, the final decisions are generally made by Malaysia’s Ministry of Tourism and Culture. The ministry is also responsible for executing Malaysia’s tourism plan, and provides input to other ministries that oversee critical systems, such as the country’s natural resources and transportation infrastructure. In addition, Tourism Malaysia, the national tourism board, supports the ministry in promoting Malaysia as a world-class tourism destination. The approach seems to be working. The World Economic Forum ranks Malaysia’s tourism policy environment ninth out of 140 countries.4 In 2010, Malaysia was among the top 10 tourist destinations in the world, and was the only non-OECD country to make that list besides China and Russia.5 Although it is useful to understand how countries with thriving tourism sectors use their CTPEs, this perspective alone does not yield definitive answers. GCC tourism officials need to apply this intelligence to their own institutional frameworks if they are to refocus their CTPEs on the correct priorities for maximum impact.
Once the tourism value proposition and product strategy have been developed, the next step is to set up an institutional framework.
Exhibit 7 Tourism sector institutional framework
Policy/Regulatory sector custodians - Set policies and plans, develop and operate speciﬁc products and services, and coordinate with CTPE on tourismspeciﬁc areas Culture CPE Natural parks CPE Recreational MICE CPE activities CPE
Central government High-level policy
Tourism enabling entities - Coordinate with CTPE on tourism sector enablers and sector system enablers Economy CPE
Central tourism planning entity (Set tourism policies, plans, regulations, standards, and manage site development) Coordinate
Defence / Security Coordinate CPE
Policy advocacy bodies - Composed of private and semi-private special interest bodies
Subordinate entities Development companies Tourism promotion board
Private enterprises - Assume role of product and service operators
Trade unions Advocate policy
Education service providers
Tourism service providers License & Cooperate contract Private research & statistics entities
Development companies Human capital development entities
Local authorities - Operate and develop products (e.g., parks) - Coordinate infrastructure planning with CTPE - Regulate select tourism products and services
Note: CPE = Center for Professional Excellence. Source: Strategy&
The number of global tourist arrivals has more than trebled in the last 30 years — and there is more growth ahead. With per capita incomes rising rapidly in many developing nations, tourists will increasingly come from new places. They will want to visit different destinations, bringing a host of economic and social benefits to the countries able to attract them. Tourism represents a particularly rich opportunity for the countries of the GCC, which have many assets they can use to attract global travelers — from modern airports to pleasant beaches, and cultural and archeological sites. To date, however, most of these countries have not made tourism a priority, and have not realigned their institutions to address the opportunity. Now is the right time to take advantage of substantial national investments in infrastructure and human capital to begin the transformation of the GCC’s tourism sector.
The GCC countries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
World Economic Forum, “The Travel and Tourism Competitiveness Report 2013,” Table 1, page xvi, 2013 (http://tinyurl.com/mllujla).
Fares Saade, Dr. Ulrich Kögler, “The emergence of public transportation in the GCC: Promoting the modal shift,” Strategy&, 2013.
World Economic Forum, “The Travel and Tourism Competitiveness Report 2013,” Malaysia profile, page 241, 2013 (http://tinyurl.com/ll6mn8b).
United Nations World Tourism Organization, “World Tourism Highlights 2012,” page 6 (http://tinyurl.com/lw3hhbn). Malaysia may still have some work to do in broadening its appeal outside Southeast Asia. Most of its tourists come from Singapore, directly to Malaysia’s south.
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This report was originally published by Booz & Company in 2013.
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