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© 2018 Gulf Research Center

KINGDOM OF SAUDI ARABIAEnriching the Hajj and Umrah Experience

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ENRICHING THE HAJJ AND UMRAH EXPERIENCEKINGDOM OF SAUDI ARABIA




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TA B L E O FCONTENTS

2© 2018 Gulf Research Center

EXECUTIVE SUMMARY 03

04MARKET OVERVIEW

12KSA POSITIONING

15OPPORTUNITY ASSESSMENT



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A journey to Hajj and Umrah represents the core of Islamic religious pilgrimage. It is done with an intension to attain closeness to Allah and divine satisfaction. In this regard, Saudi Arabia has two of the holiest places in Islam – the Al-Masjid al-Haram in Mecca and the Al-Masjid an-Nabawi in Medina. The country thus plays a key role in providing access for pilgrimage and extending warm hospitality to all religious pilgrims.

Given the central role of Islam and the aspects of Hajj and Umrah, Saudi Arabia has embarked on an ambitious plan to enrich the experience of Hajj and Umrah pilgrims as part of its Vision 2030 plan. Such a move can be considered the country’s biggest step in diversifying its revenue base and reducing its dependence on oil revenues.

Data from Saudi Arabia’s General Authority of Statistics reveals that during the five-day Hajj period, over two million pilgrims from all across the world come to the country annually. Umrah, being held for a longer season, accounts for a high number of pilgrims, with the larger share being from within the country. It has been noted that 8.3 million pilgrims spent SAR 83.6 billion (USD 22.3 billion) in 2016 alone and that expenditure from pilgrims is expected to expand in double digits between 2016 and 2021.

Following a period of sustained high oil prices from 2000 to 2013, the rapid decline in oil income since that time has highlighted the need of the kingdom to generate alternate stable sources of indigenous development. Tourism, specifically religious tourism, is expected to provide numerous benefits. In addition to generating substantial revenues, religious tourism will also provide a sustained boost for Saudization strategies – i.e. generating new employment opportunities for the young Saudi population in the service sector.

Currently, the economy is at a transition point. Significant labour reforms, modification of business regulations, restrain on indiscriminate fiscal expenditure, and controlling inflation through strong monetary policy intervention is required to put the economy on a path of balanced growth. Boosting religious pilgrimage and inbound tourist flow is seen as one of the key solutions to fuel gross domestic product. This could be done with sufficient private and public investment in the accommodation segment, transportation segment and construction segment.

The report details how this could be achieved in line with the government’s Vision 2030, thus ushering in prosperity for the economy and satisfaction for the pilgrims.

EXECUTIVE SUMMARY



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2MARKET OVERVIEW



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The Kingdom of Saudi Arabia, the largest country in the GCC (Gulf Cooperation Council) region, is also one of the most affluent economies in terms of per capita income; as per data from the World Bank, the per capita Gross National Income (GNI) in purchasing power parity has increased from SAR 121,800 (USD 32,480) in 2002 to SAR 209,062 (USD 55,750), reflecting a steady rise of 3.9% over 2002-2016.

Riding the surging wave of oil profits, the Gross Domestic Product (GDP) of KSA was growing steadily and peaked in 2011, at 10%. However, since then it has declined intermittently. Hence, to reduce dependence on oil revenues, KSA is spearheading a broad-based diversification plan of non-oil GDP. Heightened competition in the energy market coupled with the increase in Saudi population entering working age has increased the urgency for diversification of the revenue base. The Kingdom needs to transform its economy and enter a more sustainable growth path in the near future to maintain its position in terms of being one of the more vibrant of the Gulf economies.

As part of the solution, Saudi Arabia’s Vision 2030 outlines the importance of religious pilgrimage and enriching the experience of Hajj and Umrah pilgrims. In terms of the pilgrimage, Saudi Arabia has witnessed an ever increasing rise in the number of both domestic and international tourists. KSA is focusing on promoting tourism and religious pilgrimage in order to increase revenue through diversified sources, because the kingdom is home to the two holiest places in Islam- the Al-Masjid al-Haram in Mecca and the Al-Masjid an-Nabawi in Medina. The country’s tourism industry thus plays a key role in providing a quality experience to tourists and pilgrims from across the globe.

2.1 Industry SnapshotAs KSA is home to numerous significant sites of pilgrimage, including the holiest place in Islam the Al-Masjid al-Haram - the Grand Mosque of Mecca, the religious tourism industry becomes the second largest revenue earning sector for the country after oil and gas. Data from KSA’s General Authority of Statistics reveals that approximately two million pilgrims come to the holy city of Mecca to perform Hajj annually.

Pilgrimage during the Hajj and Umrah are the cornerstones of the steadily emerging concept of Islamic tourism, often called Halal tourism. The concept of “halal tourism” is defined as “that which is permitted, with respect to which no restriction exists and the doing of which the law giver, Allah, has allowed.” Halal refers to a process, which is in accordance with, and fulfilled as per the Shariah law. Being Islamic thus refers directly to the faith and its doctrines. To make an activity Islamic, the main element which is required is “niyyah or intention.” An activity becomes Islamic once the activity is accepted by Allah and when the person who performs the activity renders the center-stage to Allah. The increasing popularity of Halal tourism among international Islamic tourists is one of the factors fuelling the concept of religious pilgrimage or tourism.

At present, revenue contribution of Hajj and Umrah to KSA’s GDP is estimated around 3%1 per year. Religious tourism is a sub-part of the overall tourism industry and revenues from it are captured within leisure travel. Data from the World Travel and Tourism Council reveals that leisure travel spending accounted for 86.8%2 of the direct travel and tourism GDP contribution in 2016. This spending is expected to expand at a compound annual growth rate (CAGR) of 3.8% between 2017 and 2027 to reach SAR 132 billion (USD 35.1 billion)3 in 2027. On the other hand, tourism for business purposes accounted for a 13.2% travel and tourism GDP contribution in 2016.1“Religious Tourism in Saudi Arabia Expected to Increase 30%.” Travelandtourworld.com, 9 January 2017,www.travelandtourworld.com/news/article/religious-tourism-in-saudi-arabia-expected-to-increase-30/2“Travel and Tourism Economic Impact Saudi Arabia, 2017”,World Travel and Tourism Council, accessed on March 8, 2018, https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2017/saudiarabia2017.pdf3Ibid.



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Figure 1. Key figure, 2017

4“Religious Tourism in Saudi Arabia Expected to Increase 30%.” Travelandtourworld.com, 9 January 2017,www.travelandtourworld.com/news/article/religious-tourism-in-saudi-arabia-expected-to-increase-30/.5“Hajj Statistics 1438 H, 2017”,General Authority of Statistics, Saudi Arabia, accessed on March 8, 2018, https://hajmap.stats.gov.sa/hajmap/haj_1438.pdf6,7Ibid.8“Travel and Tourism Economic Impact Saudi Arabia, 2017”,World Travel and Tourism Council, accessed on March 8, 2018, https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2017/saudiarabia2017.pdf

Approximately 3%4

35% (600,108)6

2,352,1225

65% (1,752,014)7

Contribution of Hajj and Umrah to GDP

Hajj - Domestic pilgrims

Hajj - Total number of pilgrims in 2017

Hajj - Foreign pilgrims

Source: General Authority of Statistics

Source: World Travel and Tourism Council, Economic Impact Saudi Arabia 2017

SAR 101.5 billion (USD 27.0 billion)8

Figure 2. Travel and Tourism Spending, 2017

87%

13%

Leisure spending Business spending



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9“Saudi Arabia seeks Islamic tourism boost in test for heritage, tradition”,reuters.com, 4September, 2017, https://in.reuters.com/article/saudi-haj-tourism/saudi-arabia-seeks-islamic-tourism-boost-in-test-for-heritage-tradition-idINKCN1BF1X610“Ministry of Haj and Umrah: Record pilgrim numbers achieved”,Arabnews.com, 25 June, 2017,http://www.arabnews.com/node/1120051/saudi-arabia`11“Specialist hotel concepts in demand as Saudi religious tourism sector booms”, saudigazette.com.sa,20 August 2017, http://saudigazette.com.sa/article/516275/BUSINESS/Saudi12Ibid.13“Haj and Umrah: Developments and Opportunities”, January 2017, Thomson Reuters and Dinar Standard, accessed on 8 March, 2018, http://www.lafinanzaislamica.it/wp-content/uploads/2017/01/SALAAM12012017075243.pdf14,15Ibid.16“Travel and Tourism Economic Impact Saudi Arabia, 2017”,World Travel and Tourism Council, accessed on March 8, 2018, https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2017/saudiarabia2017.pdf17Ibid.

2.2 Analysis of the sectorExploring religious pilgrimage as an engine of growth in KSAData from the Ministry of Hajj and Umrah reveals that Hajj and Umrah annually contribute ~50% of 20 million foreign tourists9, i.e. ~10 million. International pilgrims account for over 60% of total pilgrims who come to perform Hajj every year. The Ministry of Hajj and Umrah further reported that for Umrah, 6.7million visas were issued in 2017 compared to 6.3million in 2016, reflecting a year-on year increase of 6%10. Umrah accounts for around 80-85%11 of the total pilgrim base every year.

It has been estimated that Umrah, being held for a longer season, will contribute 88%12 of all pilgrims by the year 2021, which will lead to a significant rise in hotel occupancy rates and room rents during the full season, rendering marginal costing benefits to hoteliers, especially the middle-price range hotels.

There is steady increase in the spending during the pilgrimage; in 2016, around 8.3 million pilgrims spent SAR 85.1 billion (USD 22.7 billion)13. This is expected to grow at a CAGR of 11% between 2016 and 2021. Spending on Hajj and Umrah is projected to expand at a CAGR of 14.1% over 2016-2021 and reach SAR 166.1 billion (USD 44.3 billion) by 202114. In line with the objectives noted under Vision 2030, the country however, plans to spend SAR 310.1 billion (USD 82.7 billion)15 on infrastructure projects over 2016-2021 to support the growth in pilgrimage spending.

Total global spending on outbound tourism was SAR 5,051.2 billion (USD 1,347 billion) in 2015, of which Muslim spending on outbound tourism was SAR 566.2 billion (USD 151 billion)16. Besides the direct contribution to the GDP, travel and tourism in Saudi Arabia is instrumental in providing job opportunities in the country. In 2016, travel and tourism directly generated approximately 600,000 jobs accounting for 5.1%17 of the total employment generated in the country during that year. The nature of these jobs

Source: General Authority of Statistics, KSA

Figure 3. Hajj Pilgrims in 2017 (%)

87%

13%


35%

65%

Pilgrims within KSA Pilgrims outside KSA for Hajj



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18“Haj and Umrah: Developments and Opportunities”, January 2017, Thomson Reuters and Dinar Standard, accessed on 8 March, 2018, http://www.lafinanzaislamica.it/wp-content/uploads/2017/01/SALAAM12012017075243.pdf19Ibid.20“Haj and Umrah: Developements and Opportunities”, January 2017, Thomson Reuters and Dinar Standard, accessed on 8 March, 2018, http://www.lafinanzaislamica.it/wp-content/uploads/2017/01/SALAAM12012017075243.pdf

2.3 Growth driversExpenditure on Hajj and Umrah from international locations has increased significantly in recent years and is projected to increase by double digit rates per year over the next five years. This is expected to create significant opportunities in real estate, telecom, logistics and finance provision. To cite an example, the graph below exhibits pilgrim expenditure with and without air travel. In this regard, the major revenue drivers of religious tourism include the global growth in the Muslim population, ongoing capacity expansion at holy sites and airports in KSA and higher availability of accommodation facilities.

Data from the International Monetary Fund (IMF) reveals that the global Muslim population will grow by 24% between 2014 and 2030 to reach 2.218 billion by 2030. The growth is supported by an average GDP growth of 4.2%19 p.a. in Organization of Islamic Cooperation (OIC) economies. Performing pilgrimage at religious sites to fulfil promises made to Allah helps in fuelling pilgrim spending year after year. This cyclical impact boosts revenues generated every year.

Global growth in Muslim population per year

87%

13%


35%

65%


52119.8

80667.9

166243.5

22457.1

36006.1

74308.0

2010 2015 2021

Total Hajj/Umrah pilgrim expenditure without air fare Total Hajj/Umrah pilgrim expenditure with air fare

Figure 4. Expenditure on Hajj and Umrah from international locations, SAR

Source: Haj and Umrah: Development and Opportunities, Thomson Reuters and Dinar Standard, January 201720

is both seasonal and permanent and includes jobs in hotels, travel agents, various types of passenger transportation services, activities in restaurants and others.



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Growing direct and indirect tourism industryA report by the World Tourism and Travel Council (WTTC) has outlined that the direct contribution of travel and tourism to Saudi Arabia’s GDP in 2016 was SAR 78.8 billion (USD 21 billion), which was also 3.3% of the country’s total GDP. This is expected to increase to SAR 117.5 billion (USD 31.3 billion), growing at a CAGR of 3.8%, between 2017 and 202721. Also, the overall contribution, including the indirect impact travel and tourism on KSA’s GDP was 10.2% i.e. SAR 244.6 billion (USD 65.2 billion) in 201622, which is projected to rise at 4.7% per year to reach SAR 412.0 billion (USD 109.9 billion) and 11.1% of GDP in 2027. It has been forecasted that travel and tourism will account for the generation of 781,000 direct jobs by 2021, reflecting an expansion of 2.5% each year23.

Foreign visitor spending or international tourist receipts accounted for 42.2% of the direct travel and tourism GDP in comparison with domestic receipts, which accounted for 57.6% of the travel and tourism GDP in 201624. While domestic travel spending is expected to grow at ~3% over the next ten years, the international tourist receipts are expected to expand at 4.7% for the same period.

Figure 5. Components of Hajj and Umrah Sector

Source: World Travel and Tourism Council, Economic Impact Saudi Arabia, 201725

INDIRECT

INDUCED

DIRECT

• T&T investment spending• Government T&T spending

• Food & Beverages• Recreation• Clothing• Housing• Household Goods

• Accomodation• Transportation• Attractions• Retail Trade• Cultural &

recreational services

21,22,23,24,25Ibid.



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Expanding accommodation facilities The city of Mecca emerges as the largest market within KSA, with a supply of 27,000 quality hotel rooms in 201626. Hotels in Mecca achieve 100% occupancy during the Hajj season and also during the Umrah high season, i.e. during Ramadan. All major hotels tend to push for minimum lengths of stay during Hajj to accommodate larger number of guests. Consequently, a large number of projects are currently underway to accommodate future supply growth in volume of foreign tourists. The hoteliers act in the best interests of the people to accommodate as many tourists as possible.

Pilgrim staying options are also increasing. The number of rooms available to pilgrims stood at ~360,000 in 2015. Most pilgrim staying options are temporary in nature and operate for a maximum period of 60 days only during the Hajj period. Rates for pilgrim accommodation vary by distance from the holy mosque, age of property, and facilities provided. With the increase in demand, the number of rooms available for pilgrim accommodation is also increasing at a moderately high rate.

Accordingly, there is ongoing accommodation expansion particularly in the luxury segment. Room capacity is expected to increase with 108 upcoming major hotel projects – offering 23,000 rooms in Saudi Arabia, largely in Mecca and Medina28.

Source: World Travel and Tourism Council, Economic Impact Saudi Arabia, 201727

Figure 6. Travel and Tourism receipts, 2017

87%

13%


35%

65%


52119.8

80667.9

166243.5

22457.1

36006.1

74308.0

2010 2015 2021

Total Hajj/Umrah pilgrim expenditure with air fare Total Hajj/Umrah pilgrim expenditure without air fare

58%

42%

Domestic Receipts International tourist receipts

26“Makkah hotel sector witnesses high growth demand”, hoteliermiddleeast.com, 9 December, 2016, http://www.hoteliermiddleeast.com/28946-makkah-hotel-sector-witnesses-high-growth-demand/27Ibid.28“Oil price fall to drive growth in Saudi trade”, arabnews.com, 20 January, 2016, http://www.arabnews.com/economy/news/867696



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Ongoing capacity expansion of the Grand Mosque of MeccaThe Saudi government has allocated a fund of SAR 310.1 billion (USD 82.7 billion) to expand capacity of the Grand Mosque of Mecca. In line with Vision 2030, capacity of the Grand Mosque is being expanded to accommodate 2.2 million pilgrims29 at one time. Approximately 400,000 people will be able to perform the tawaf or circumambulation of the Kaaba per hour. Capacity of the Jamarat bridge is being increased to accommodate 500,000 pilgrims at any one time30. Equally, the ongoing capacity expansion of the King Abdul Aziz Airport in Jeddah will allow it to handle 30 million passengers, and is expected to be completed by the end of 2018.

The development of the high-speed rail link (Haramain High Speed Rail link) with an expenditure outlay of SAR 61.8 billion (USD 16.5 billion)31 between Mecca and Medina will further ease passenger transportation.

29“Haj and Umrah: Developments and Opportunities”, January 2017, Thomson Reuters and Dinar Standard, accessed on 8 March, 30,312018, http://www.lafinanzaislamica.it/wp-content/uploads/2017/01/SALAAM12012017075243.pdfIbid.



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3KSA POSITIONING



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KSA is the leading destination country for international pilgrimage. The primary source markets for these tourists are India, Pakistan, Malaysia, and Indonesia. In 2016, 65% of foreign tourists entered the country on Hajj and Umrah visas, while 25% entered on family visas32, and the rest on work visas.

The Inbound tourism is projected to expand at a steady CAGR of 4.8% between 2016 and 2026 to account for 32 million trips per annum by 202633, driven primarily by the growth in religious tourism. To boost religious pilgrimage, and promote KSA tourism, the Saudi Arabian government has planned to take certain measures, which include:

• Increased government investment in parks, attractions, festivals and other recreational activities• Investment in excess of SAR 48.7million/year (USD 13 million/year)34 on the preservation of heritage sites by

the government• Introduction of the ‘Post-Umrah Tourist Visa’, which allows pilgrims to travel around the KSA for up to 30 days

after their pilgrimage. This was introduced in the first quarter of 201835

• Potential introduction of a single Schengen-style visa for all GCC countries• Tourism skills training for over 30,000 Saudi citizens within the ‘Takamul’ program

The Malaysian government has promoted the concept of Halal tourism in order to aid provision of tourism services while strictly following the guidelines of the Shariah principle. This makes for a credible benchmark in religious tourism. Some of the steps taken by Malaysia include the promotion of the Halal concept in hotels, restaurants, hospitals, airports, and businesses. It also includes the promotion of “Visit Malaysia Year” (VMY) by Tourism Malaysia in the Middle East. Tourism Malaysia also launched the “Tourism-Malaysia Dubai App”, which facilitates online booking of packages and flights and getting the best travel deals from Dubai to Malaysia. Malaysia also launched the Islamic Tourism Centre in 2009 to attract more Muslim visitors from other Islamic countries.

3.1 Country comparison

32“Saudi Filmmakers Shine in Annual Festival”, 13martyrs.wordpress.com, accessed on 8 April, 2016, https://13martyrs.wordpress.com/page/4/33“Destination Saudi-The Impact of Vision 2030 - Leisure, Culture and Tourism Potential”, 2017, Colliers International, accessed on 8 March 8, 2018, http://www.colliers.com/-/media/files/emea/uae/case-studies/2017-overview/destination-saudi-2030.pdf34Ibid.35“New post-Umrah tourist visas to be issued this quarter”,arabnews.com, 7 January 2018, http://www.arabnews.com/node/1220456/saudi-arabia



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3.2 Sector growth

3.3 Upcoming market trends

Many OIC countries provide financial and operational support to pilgrims travelling to Saudi Arabia to perform Hajj or Umrah. This support comes in the form of travel subsidies that cover a portion or all of the Hajj costs. In this area, the Malaysian example is accepted as best practice.

In Malaysia, subsidies for Hajj are provided through the government linked Lembaga Tabung Haji. The Tabung Haji is an exclusive Hajj fund in Malaysia, which was valued at USD 14.2 billion in 201536. The fund was established as a peoples’ fund in order to support resource-poor pilgrims in Malaysia with pilgrimage services. In 2016, subsidies provided to Hajj pilgrims from Malaysia totalled SAR 146.2 million (USD 39 million), with an average individual subsidy of approximately SAR 7,875 (USD 2,100), against a total cost of SAR 16,875 (USD 4,500)37 per person. The total cost included flight, ground transportation in Saudi Arabia, accommodation in Mecca, Medina, and Jeddah, meals, and payment to the Government of Saudi Arabia.

Another Asian country, Indonesia, has a dedicated fund for direct investments in Hajj packages and programs. However, the country discontinued its Hajj subsidy after 1969. These examples portray financial support provided to pilgrims to facilitate their travel to Saudi Arabia.

Big steps are being taken to develop Islamic tourism and attract more visitors to Medina, also deemed the centre of Islamic Tourism as of 2017. With the support and guidance of Prince Faisal bin Salman, Governor of the Medina Region and Chairman of the Tourism Development Council in the region, the city is witnessing continuous activity in the tourism sector. The city is identified as a pillar of the National Transformation Programme (NTP) 2020 and Vision 2030. As such, it has been witnessing development of facilities and service sites. Preparations in the tourist accommodation sector have reached 565 facilities38 in the Medina area.

Better packages of accommodation and entertainment programmes/activities are being developed and enriched for improved tourism experiences. A number of projects have attracted investment in the city, which is expected to help garner more revenues and lead to creation of more jobs. Information from the Medina branch of the Saudi Commission for Tourism and National Heritage (SCTH) reveals that there are 173 licensed travel and tourism agencies, and the SCTH further plans to license 55 tour operators and eight offices for booking tourist accommodation. The number of accredited tourist guides in the SCTH in Medina has reached 63 as of February 201839. To facilitate tourist travel, there are tourist buses in Medina, which cover visits to historical, heritage, and tourist sites in the region. This step was taken after Medina was declared the capital of Islamic tourism for the year 2017.

36“Haj and Umrah – Developments and Opportunities, January 2017, Thomson Reuters and Dinar Standard, accessed on 8 March 2018, https://repository.salaamgateway.com/images/iep/galleries/documents/201701120749099835.pdf37Ibid.38“Saudi Arabia: Tourism boost for Madinah, hub of Islamic and historical sites”,halalfocus.net, 8 February, 2018, https://halalfocus.net/saudi-arabia-tourism-boost-for-madinah-hub-of-islamic-and-historical-sites/39Ibid.



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4OPPORTUNITY ASSESSMENT



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4.1 KSA Vision 2030 for Hajj and UmrahThe government of KSA has outlined specific objectives for enriching the Hajj and Umrah experience under Vision 2030. The program aims to provide maximum opportunity for the largest possible number of Muslims to perform Hajj and Umrah. It also aims to enrich and deepen the pilgrimage experience through the development of the two Holy Mosques. To this end, the state will work on developing tourist and cultural destinations, and refine services provided to pilgrims before, during, and after their visits to Mecca, Medina, and other holy sites. Under Vision 2030, KSA reaffirms its role as a religious and cultured nation in the service of the two Holy Mosques. This program will boost the relationship between government agencies and the private sector for faster growth and sustainable development. Program objectives are described in Figure 7 below.

40“KSA Vision 2030 – Strategic Objectives and Vision Realization Programs”, accessed on 8 March 2018, http://www.vision2030.gov.sa/download/file/fid/1319

Figure 7. Objectives of Vision 2030

Direct Objectives Indirect ObjectivesFacilitate hosting more Umrah visitors and provide easier access to the holy mosques

Conserve & promote Islamic, Arabic & national heritage of the Kingdom

Improve quality of services provided Enable development of the tourism sectorEnrich the spiritual and cultural experience of Hajj &Umrah visitors Create and improve performance of logistics hubs

Improve quality of services provided in Saudi cities

Improve the urban landscape in Saudi cities

Grow assets of the Public Investment FundDiversify government revenues - Maximize revenues collected from service fees

Source: KSA Vision 2030 Strategic Objectives and Vision Realization Programs40



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The various metrics involved in enriching the Hajj and Umrah experience under Vision 2030 are detailed below:

Figure 8. Key metrics for Vision 2030

Gross Domestic Product

Share of local content

Balance of Payments

Employment in private sector

Non-oil revenues

Non-government investment

Consumption Rate

Inflation rate

INDICATORS TO

MAXIMISE

INDICATORS TO MONITOR

MACROECONOMIC METRICS

Total Umrah visitors per year

The capacity of the Two Holy Mosques, the transport network and accommodation

Average utilization rate of hospitality facilities

Overall satisfaction with the experience of Hajj and Umrah

Injury rate per 1000 vitiors sustained due to accidents

Average spent by Umrah & Hajj Visitors

SAMPLE PROGRAM SEPECIFIC METRICS

NO. OF VISITORS

MAXIMUM CAPACITY

UTILIZATION

SATIETY

SAFETY

EXPENDITURE

Source: KSA Vision 2030 Strategic Objectives and Vision Realization Programs

The final objectives are to be prioritized at the time of delivery of each of the action items. Streamlined execution of this vision is expected to boost pilgrim satisfaction. Some of the strategic initiatives being taken by KSA’s Ministry of Hajj and Umrah in 2018 are:

• An electronic control center and system will be established at the Ministry of Hajj and Umrah in order to link various pilgrim service centers and enhance information management. The control panel will be available with government agencies.

• KSA’s government plans to enter into Hajj agreements with 78 countries, both Islamic countries and countries with Muslim minorities. This could help administer pilgrims’ affairs, and manage awareness, grouping and promotion programs.



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41“Saudi’s PIF unveils Rou’a Al Madinah, Rou’a Al Haram companies”, constructionweekonline.com, 3October, 2017, http://www.constructionweekonline.com/article-46575-saudis-pif-unveils-roua-al-madinah-roua-al-haram-companies/1/print/

• The e-bracelet program is set to be used for the first time during the Hajj season of 2018 for better data management and information sharing among pilgrims.

• The Ministry of Hajj and Umrah plans to increase co-operation with the private sector, the Co-ordination Council and Tawafa establishments for facilitating the implementation of Vision 2030.

• The Ministry plans to launch the Hajj pilgrims’ e-portal for protection of pilgrim rights, ensuring equality and transparency, and, most importantly, quicker processing of visas.

• Developing the sector economies and cooperation with Tawafa Establishments to widen the scope of opportunities and formation of major national entities.

• Launch of a transformation initiative for the Hajj and Umrah sector to do away with its seasonal nature and facilitate functioning throughout the year in conjunction with the private sector.

• Increasing the capacity of accommodation during Hajj and Umrah season for seamless pilgrim management.

4.2 Investment analysis, government initiatives and industry collaborations

4.3. Opportunity assessment

In line with Vision 2030, Rou’a Al Haram, -a construction development company has been formed by Saudi Arabia’s Public Investment Fund (PIF) in order to increase the capacity of accommodations for tourists visiting the Grand Holy Mosque in Mecca, to perform Hajj and Umrah. In the first phase of the company’s projects, expected to be launched in 2024, space of 854,000 sq. m., in over 115 buildings will be developed. Upon completion of the first phase, a total of 70,000 new hotel rooms will enable the site to receive 310,000 pilgrims per day. Additionally, development of around 9,000 residential units, 360,000 square meters of commercial space and prayer areas designated for more than 400,000 worshipers is planned in the first phase. Approximately 30 million pilgrims are expected per year in Mecca by 2030. Rou’a Al Haram will not only provide infrastructure support to the pilgrims but is projected to generate 160,000 employment opportunities and contribute SAR 8 billion (USD 2.1 billion) to GDP41.

Other flagship accommodation projects under construction include Jabil Omar, Jabal Al Kabbah, Anjum Hotel Mecca, Fairmont Clock Royal Hotel, AbrajKudai, etc. The largest addition to rooms has been undertaken at the Sheraton/Four Points (1,890 rooms) followed by the Hilton Garden Inn (1,433 rooms) and the Radisson Park Inn (1,155 rooms).

Opportunity assessment for Hajj and Umrah pilgrimage is manifold. It covers the entire gamut of assessing the source markets of pilgrims, the services sought by them and the facilities available to them. Identifying the gaps could help in better service provision and enriching the overall experience of the pilgrims.

Statistics provided by Saudi Arabia’s Passport General Department reveal that 1,752,014 foreign pilgrims came to Mecca between 2016 and 2017.



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87%

13%


35%

65%


52119.8

80667.9

166243.5

22457.1

36006.1

74308.0

2010 2015 2021


58%

42%


1,042,335

383,044

186,873

84,894 32,600 22,268

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Asian CountriesExcluding Arab

Countries

Arab CountriesExcluding GCC

Countries

African CountriesExcluding Arab

Countries

EuropeanCountries

GCC Countries North & SouthAmerica & Australia

Pilgrims from other countries in 2017

Figure 9. Foreign Pilgrims by country groups performing Hajj, 2017

Source: Hajj Data, 2017 (1438 H), General Authority of Statistics, KSA42

42“Hajj Statistics 1438 H, 2017”,General Authority of Statistics, Saudi Arabia, accessed on March 8, 2018, https://hajmap.stats.gov.sa/hajmap/haj_1438.pdf43“Hajj Statistics 1438 H, 2017”,General Authority of Statistics, Saudi Arabia, accessed on March 8, 2018, https://hajmap.stats.gov.sa/hajmap/haj_1438.pdf44Ibid.

The above data reveals that Asian countries other than Arab countries account for the largest number of foreign pilgrims visiting Mecca. The most important source markets among these countries include Indonesia, Pakistan, India and Bangladesh. Other prominent countries include Nigeria, Egypt, Jordan, Turkey and Algeria. Allocation of higher quotas of visas for these key countries will further increase the number of pilgrims and tourists.

In addition, a separate analysis for Hajj and Umrah pilgrim source markets is necessary in order to understand the revenue opportunities.

Statistics provided in the Annual report on Hajj by the Ministry of Hajj and Umrah for the year 2017 (1438 H) reveal that a total of 1,752,014 foreign pilgrims (74.5% of total) visited KSA for performing Hajj. The number of domestic pilgrims stood at 600,108 (25.5% of total). There were 31,56943 vehicles carrying domestic pilgrims to Mecca for Hajj. Overall, 2,532,122 pilgrims visited Mecca in 201744 for performing Hajj. This reveals that the number of foreign pilgrims is much higher than domestic Hajj pilgrims. Therefore, entering into strategic partnerships/tie-ups with key countries could prove beneficial.



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45Ibid.46“Umrah Survey, 2016”, General Authority of Statistics, Kingdom of Saudi Arabia, accessed on 8 March, 2018, https://www.stats.gov.sa/sites/default/files/umrah_surveyen_0.pdf47Ibid.

Similarly, an analysis of Umrah pilgrims is essential as it is held for a longer duration and contributes to a larger number of tourists. Data from the Ministry of Hajj and Umrah reveals that the number of pilgrims from within KSA was higher than the number of pilgrims who came to perform Umrah from outside the country. In the first nine months of 2016 (1437 AH), 67%45 of pilgrims who performed Umrah came from within the country. The maximum number of Umrah pilgrims visited during the holy month of Ramadan. By administrative area, Mecca Al-Mokarramah contributed the largest number of domestic pilgrims (both Saudi and Non-Saudi) followed by Al-Riyadh and Al-Medina Al-Monawarah respectively. The number of Umrah performers from outside Saudi Arabia reached 6,145,93946, for the first nine months in 2016 (1437 AH). Vision 2030 aims to increase this number of Umrah performers to 15 million by 2030. In order to facilitate this increase, the government plans to increase the capacity and quality of services provided to Umrah performers.

Figure 10. Number of pilgrims

Number of Pilgrims outside Saudi Arabia performing Umrah in 2016 (1437 AH)*

Month No. of pilgrims

Safar 303,972Rabi-al-awwal 934,209Rabi' al-thani 887,632Jumada al-aula 818,699Jumada al-thani 949,347Rajab 860,364Sha'ban 686,038Ramadhan 705,629

*for the first eight months of 1437 AH ((2016); only pilgrims from outside Saudi Arabia

Source: Umrah: Umrah Survey 1437 AH, General Authority of Statistics, KSA47



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Figure 11. Umrah Pilgrims, 2016

Source: Umrah: Umrah Survey 1437 AH, General Authority of Statistics, KSA48

87%

13%


35%

65%


52119.8

80667.9

166243.5

22457.1

36006.1

74308.0

2010 2015 2021


58%

42%


1,042,335

383,044

186,873

84,894 32,600 22,268

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Asian CountriesExcluding Arab

Countries

Arab CountriesExcluding GCC

Countries

African CountriesExcluding Arab

Countries

EuropeanCountries

GCC Countries North & SouthAmerica & Australia

Pilgrims from other countries in 2017

33%

67%

Pilgrims outside KSA Pilgrims within KSA

This calls for the establishment of mid-market hotels catering primarily to Umrah tourists travelling from within the country. Furthermore, partnering with Muslim-focused travel booking platforms, these hotels could provide deals and one-stop solutions for pilgrims looking for a longer duration of stay.

Similarly, international or outbound pilgrims consist of both affluent and resource-constrained tourists, who are dependent on government support for te travel and stay. In this regard, government support also comes in the form of the establishment of a quasi-governmental entity responsible for functions such as organizing registration process, training, vaccination, travel planning (both domestic and international as well as insurance), and arranging accommodation and ground transportation in Mecca and Medina. The Hajj Committee of India is an example. Accommodation and transportation providers could consider collaborating with these entities for better revenue opportunities and attracting larger numbers of pilgrims.

Source country governments are also responsible for distribution of pilgrim quotas allocated by the Saudi Arabian government between private travel operators and government travel agencies. The allocation of quotas helps in the ultimate decision making of the pilgrims and the marketing approach of the service providers in Saudi Arabia. This especially affects the accommodation choices of the pilgrims.

48Ibid.



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Product and Service Value Chain for Hajj and UmrahIn order to understand the underlying gaps and opportunities for development, it is important to analyse the ecosystem of core products and services required to perform the pilgrimage with satisfaction. Ensuring proper training, R&D, regulations, effective marketing and application of other positioning strategies could help cover the existing gaps and enrich pilgrim experience.

Figure 12. Hajj and Umrah ecosystem

Source: Haj and Umrah: Development and Opportunities, Thomson Reuters and Dinar Standard, January 2017

FOOD

SPIRITUAL INFORMATION

CLOTHING & COSMETICS

FINANCING

TRAVEL

HEALTHCARE

Food Service Grocery

RetailBooks

ApplicationsClasses

ConferencesHotels & Accomodation

Travel Agents

VaccinationsHealthcare

Hajj FundsInsurance

IhramLeather

ECOSYSTEM SUPPORT: TRAINING, INGREDIENTS, RAW MATERIALS, REGULATIONS, MARKETING, RESEARCH AND DEVELOPMENT

CORE

PRO

DUCT

S &

SERV

ICES



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Transportation and Travel Agents

Clothing

Telecommunication and Information Services

There exists substantial scope in improving the transport facilities to the holy sites. Introduction of more low cost airlines such as Flynas could help in transportation of pilgrims to Mecca and Medina. Flynas is a low cost airline service that primarily focuses on transportation of Hajj and Umrah pilgrims. In 2015, the airline operated over 335 flights49 and flew more than 100,000 pilgrims. Further, there is substantial scope in the improvement of road transport. In 2016, around 18 Saudi transportation companies had secured 18,000 fully equipped buses to transport 1.4 million pilgrims50 from outside the Kingdom successfully during the Hajj season. These fleets of buses need to be updated on an annual basis to ensure proper and safe transportation of pilgrims.

Incorporation of Hajj and Umrah travel packages with other Halal51 offerings could generate more interest from the affluent class of international travellers. Such services are currently being offered by the UK-based travel company, Hajj and Umrah Express, the USA-based travel companies, Dar El Salam and Sara International Travel and the Indonesia-based Iskandaria travel company.

Specific clothing known as Ihram is required by pilgrims to perform Hajj. Approximately, 30 million pieces52 of Ihram were sold in 2016 by various retail clothing outlets, reflecting peak demand. Partnering with low-cost modest clothing providers on a large scale could improve the availability of comfortable yet religious clothing required during the pilgrimage season.

Several information service providers such as UAE-based Hajjnet and USA-based Divine Connect have emerged to provide mobile applications and hardware tools for pilgrims. Hajjnet launched the Salam app in 2014 to provide spiritual information; it also provides guidance, tracks and connects all users. Being available in several languages, the app has been listed as one of the top 10 apps in Apple’s Travel category in 59 countries. Divine Connect has developed a hardware tool that makes sermons available in seven languages in real time. Mecca 3D, sourcedout of Germany, is an interactive app launched by Brainseed Factory to enhance the virtual journey of Hajj and Umrah and to also provide spiritual information. Some other innovative technical applications include Mina Locator and Hajj Guider. The former is a mobile navigation application that allows pilgrims to geotag their tents and accommodations and helps in locating and identifying routes to different sites, including mosques, hospitals, and train stations. Hajj Guider is based on a technology that helps in monitoring the movements of friends during Hajj so that they do not get lost. It also facilitates access to voice communication and emergency services. Apart from all these, in 2016, the government of KSA launched an electronic bracelet system for pilgrims, in order to speed up identification processes. The bracelet will electronically read all relevant information, especially for those who do not speak Arabic. Additionally, this will increase transparency of information flow, guide the lost, and shorten procedure times. The bracelet is set to be implemented for the first time in 2018 during the Hajj Season.

The Ministry of Hajj and Umrah also updated its electronic Hajj portal to speed up electronic issuance of visas and reduce procedural waiting and entrance times to a mere few minutes.

49“Haj and Umrah – Developments and Opportunities, January 2017, Thomson Reuters and Dinar Standard, accessed on 8 March 2018, https://repository.salaamgateway.com/images/iep/galleries/documents/201701120749099835.pdf50“Vision 2030: Haj services among KSA’s top priorities”,arabnews.com, 28 August 2016, http://www.arabnews.com/node/976506/saudiarabia51Halal offerings refer to goods and services that are Shariah compliant52“Haj and Umrah – Developments and Opportunities, January 2017, Thomson Reuters and Dinar Standard, accessed on 8 March 2018, https://repository.salaamgateway.com/images/iep/galleries/documents/201701120749099835.pdf



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Healthcare

Takaful or Insurance

Personalized Savings Plans

Healthcare service providers help in provision of various vaccinations for inbound foreign tourists to protect against diseases such as meningitis, yellow fever, poliomyelitis, and hepatitis. Healthcare providers could also broaden their service offerings for pilgrims, who fall sick while performing Hajj and Umrah, by being available 24/7. Private-sector players could benefit from offering innovative health check-up plans specifically for Hajj and Umrah pilgrims. KSA’s Ministry of Health also offers healthcare facilities and services free of charge during Hajj, which could be broadened to include the most important months for Umrah too.

Takaful providers have designed specialized takaful plans for Hajj and Umrah. Comprehensive takaful plans include coverage of medical care and travel inconveniences such as lost luggage, flight cancellations or unforeseen adverse events.

All takaful plans are Shariah compliant in nature. An example of a specific Hajj and Umrah takaful is Labbaik provided by Abu Dhabi National Takaful Company, valid in UAE and KSA. The company also offers comprehensive medical coverage of up to SAR 51,048 (AED 50,000; USD 13,613) especially during Hajj and Umrah trips. Another takaful provider, which provides takaful especially designed for Hajj and Umrah is Salama, Dubai. The provider, also known as Islamic Arab Insurance Company, offers a Hajj &Umrah Protection Plan that includes limited coverage for medical expenses up to SAR 93,750 (USD25,000) and for medical evacuations up to SAR 56,250(USD15,000)53. Other key takaful providers are Al Rajhi Takaful, Etiqa Takaful (a subsidiary of Maybank Malaysia), HSBC Amanah Malaysia, Noor Takaful, SABB Takaful and QIB. Etiqa Takaful’s core product for Hajj and Umrah is World Traveller Care Takaful. The product provides comprehensive coverage, medical coverage and coverage against terrorism. The provider was ranked number one in 2014.Broadening availability of comprehensive coverage takaful could prove beneficial for pilgrims.

There is also provision for Hajj and Umrah savings plans. These are Shariah compliant instruments using mostly mudharabah contracts (partnership-based finance). Sometimes other Shariah-compliant contracts such as wakalah (agency-based finance) are also used. Under the savings plan, the bank pays the amount upfront and the customer starts repaying the amount after the trip is complete. Currently, the availability of Hajj personal savings offerings is limited in geographical scope. There are substantial opportunities to widen availability of financial services, especially savings plans. One of the leading examples of such a savings plan is Maybank Singapore’s Ar-Rihla Regular Savings Account, which allows for savings for Hajj and Umrah to be made over a period of 1 to 10 years. However, like many similar offerings from other banks, it is limited in its geographic scope, as it requires a Singapore identity card. Evolution of Shariah compliant robo-adviser savings platforms could also help in accumulation of personal savings to be used for Hajj and Umrah later. Currently, there are no such platforms available. Further, creation of a Hajj specific fund, linked through an employer-sponsored program, and managed by an external Shariah-compliant fund management platform could be a more secure platform for generating savings by the service class. Governments in OIC countries could also extend support in creation of such funds by providing tax incentives to employees for creation of Hajj-related savings.

In line with the vision of offering a fulfilled and healthy life as stated under Vision 2030, covering the above service gaps is expected to enrich the Hajj and Umrah experience for all pilgrims.

53“Haj and Umrah – Developments and Opportunities, January 2017, Thomson Reuters and Dinar Standard, accessed on 8 March 2018, https://repository.salaamgateway.com/images/iep/galleries/documents/201701120749099835.pdf



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Notes:Exchange Rate 1 USD – 3.75 SAR, as of 6 March 2018Exchange Rate 1 AED – 1.02 SAR as of 8 March 2018

• GCC – Gulf Cooperation Council• GDP – Gross Domestic Product• UAE – United Arab Emirates• USA – United States of America• GNI – Gross National Income• CAGR – Compound Annual Growth Rate• NTP – National Transformation Program• SCTH – Saudi Commission for Tourism and National Heritage• PIF – Public Investment Fund• OIC – Organization of Islamic Cooperation• VMY – Visit Malaysia Year



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