GCC’s Billion Dollar Tourism and Hospitality Industry Surges with Innovative Startups

This rise highlights the region’s dedication to boosting its hospitality sector. Dubai’s bold $8.7 trillion economic development plan, along with the UAE’s ambitious $27 billion tourism initiative and Saudi Arabia’s goal of attracting 100 million foreign tourists by 2030, serves as a clear indication of the swift expansion of the Arabian Gulf’s tourism sector.

Hi, I’m Nabeel Shaikh, a chartered accountant, management consultant, and entrepreneur with 17 years of experience. In this article, we look at the emerging trends and challenges in the industry. We explore how startups are coming up with clever new ideas and ways of doing business to do well in this ever-changing world.

Join me on this journey to learn more about the exciting world of hospitality in the GCC.

Governments in the region are investing a lot in tourism. They’re building luxurious hotels, resorts, and cultural attractions to make the GCC a top destination. They’re also organizing big events like the Formula 1 Grand Prix, the Dubai Shopping Festival, and the Riyadh Season. At the same time, they’re showcasing a mix of cultural and natural wonders—things like historic sites, museums, deserts, islands, diving spots, and mountain resorts.

In the first quarter of 2023, Dubai’s super-prime residential market had transactions totaling AED14 billion, and key areas experienced a significant 27.49% increase in prices.

Dubai is also becoming a hub for medical tourism, attracting 674,000 medical tourists who spent AED992 million in 2022.

Saudi Arabia has set an ambitious goal for its tourism sector, aiming for a 4% contribution by 2022 and targeting 10% by 2030. The country is placing a spotlight on its archaeological wonders to achieve this.

Under Crown Prince Mohammed bin Salman’s vision, economic zones in Saudi Arabia are working to attract global investment. Special Economic Zones (SEZs), offering incentives, are a key part of this strategy. Currently overseeing 36 industrial cities, the Saudi government has announced four new SEZs in different regions.

The Red Sea and AMAALA destinations in Saudi Arabia are particularly focused on eco-luxury and regenerative tourism. These efforts are not only contributing to GDP but also creating job opportunities.

The GCC hospitality sector faces several challenges, mainly centered on supply chain complexities and a shortage of labor. Unstable political situations and conflicts in the region further disrupt travel and tourism, causing unpredictable changes in demand and revenue for businesses in the industry.

If not tackled effectively, these obstacles can greatly hinder operational efficiency, cost-effectiveness, and service quality within the industry. Let’s explore the challenges faced by the GCC tourism industry:

The GCC faces a significant challenge in global tourism competition. Regions such as Europe, Asia, and Africa provide comparable or even lower prices, along with diverse experiences and superior connectivity. This increased competition demands that the GCC strategically position itself to attract and retain tourists in the presence of compelling alternatives.

In 2022, Europe emerged as the top destination globally, hosting over 595 million foreign visitors, a substantial increase from pre-pandemic levels. Travel and tourism contributed approximately 1.9 trillion US dollars to Europe’s GDP.

The evolving preferences of consumers pose a dynamic challenge for the industry. Modern travelers are seeking more personalized, authentic, sustainable, and digital services. Meeting these expectations requires a comprehensive reassessment of existing tourism offerings and the implementation of innovative approaches to cater to the shifting demands of contemporary travelers.

In the UAE, Saudi Arabia, and Egypt, shoppers are increasingly concerned about sustainability and social issues. In 2020, 87%, 88%, and 86%, respectively, expressed worry about at least one sustainability factor during online purchases.

Fintech startups in the UAE are introducing a novel “buy now, pay later” option, capitalizing on the country’s booming e-commerce sector and complementing traditional mobile payment services like Apple Pay and Google Wallet.

In the GCC region, e-commerce transaction values are set to reach an impressive US$61.74 billion in 2023, with an anticipated annual growth rate (CAGR 2023-2027) of 11.70%, paving the way for a staggering total of US$96.11 billion by 2027. The user base is expected to swell to 52.2 million by 2027, with the average transaction value per user standing at a noteworthy US$1.28k in 2023.

It’s intriguing to note that China takes the lead in transaction value, reaching an impressive US$1,981 billion in 2023.

Effectively addressing the challenge of continuous innovation and differentiation is crucial. To ensure ongoing success, staying updated on emerging trends, embracing new technologies, and understanding diverse customer segments are essential in the tourism industry. Recognizing the need for adaptation, the industry must foster a culture of innovation to distinguish itself and remain relevant in a rapidly changing landscape.

Simultaneously, GCC nations are striving to shift from their traditional reliance on petrochemicals to more diversified and sustainable economic models. This transformative vision places significant emphasis on research and development (R&D), technology, knowledge, and innovation.

Central to this strategy is the attraction and support of small and medium-sized enterprises (SMEs), which prioritize R&D and innovation across various industrial sectors.

COVID-19 has shown how fragile supply chains can be. Factories closed, items were hard to find, and shipping became challenging. Output dropped significantly, as seen in China, hitting a record low in February 2020.

The projected size of the GCC Freight and Logistics Market is around $47.59 billion USD in 2023, with expectations to reach approximately $66.61 billion USD by 2029 (Source: Mordor Intelligence).

While the region excels in ensuring a steady food supply, challenges persist in the supply chain for the hospitality sector. The UAE’s advanced infrastructure supports business and tourism, and Qatar’s Logistics Areas Project attracts $8.17 billion in direct investments.

Saudi Arabia’s logistics industry reached $18 billion in 2022, with a projected 6.7% annual revenue growth. It leads with a $147 billion investment in transport and logistics over eight years, envisioning global aviation hub status.

The GCC Railway’s revival promises transformative trade and connectivity, with Saudi Arabia’s ongoing Land Bridge project set to connect the Red Sea and Arabian Gulf ports by 2026.

The plan to revamp supply chains aligns with the GCC nations’ broader national plans. Drawing lessons from the world, the GCC countries aim to design agile, efficient, and robust supply chains.

The hospitality industry in the GCC region grapples with a significant challenge: a shortage of skilled labor. There is a higher demand for trained professionals in roles ranging from hospitality management to service personnel compared to the available workforce.

This scarcity not only affects daily operations but also hampers the industry’s capacity to provide consistent and high-quality services.

Globally, post-pandemic labor shortages are a widespread challenge for economies. A recent study indicates that GCC nations, including Kuwait, Qatar, Saudi Arabia, and the UAE, are contending with this issue. A significant number of employees express concerns about a scarcity of specialized skills in their countries.

In Kuwait, an impressive 75% of employees feel there’s a shortage of people with specialized skills, while in Qatar, the number stands at 60%. In Saudi Arabia and the UAE, 58% and 46% of workers, respectively, acknowledge the strain on available talent.

Despite these challenges, there’s optimism among respondents in the GCC region. According to PwC’s survey, they believe their employers are actively prioritizing upskilling initiatives to address the talent gap.

With over 60% of respondents emphasizing the necessity of specialist knowledge in their jobs, the importance of training in the GCC workforce is evident.

The impact of talent shortages is substantial, with projections indicating that it could cost the UAE a staggering $50 billion across various industries by 2030.

The tourism and hospitality industry’s cyclical nature brings the challenge of seasonality. Fluctuations in visitor numbers, influenced by factors like weather patterns and regional events, necessitate strategic planning for consistent business throughout the year. Seasonal variations can impact revenue streams, requiring flexible business models.

These challenges highlight the resilience and adaptability required by the GCC tourism sector to navigate a complex environment and thrive in the post-pandemic era.

A new wave of startups is emerging to address these challenges and capitalize on opportunities in the GCC tourism sector. These startups represent a fresh approach in a landscape where traditional methods meet the expectations of the modern traveler, serving as catalysts for change.

They embody the spirit of a new era in hospitality, where innovation, sustainability, and cultural richness converge to shape the future of travel in the GCC.

Seera Group stands as the largest travel and tourism company in the Middle East, boasting a diverse portfolio of brands catering to various segments of travelers.

At the heart of its operations are online travel platforms, including Almosafer.com and Tajawal.com. These platforms offer a range of services encompassing flight and hotel bookings, packages, activities, car rentals, insurance, and tourism visa services.

Beyond online platforms, Seera Group operates destination management companies such as Mawasim and Elaa. These entities specialize in providing tailored travel solutions for both corporate and leisure clients. As part of its holistic approach, Seera Group also runs the Almosafer Academy, dedicated to training Saudi nationals to become proficient travel advisors.

Wego is a top online travel marketplace in the Middle East and North Africa (MENA). It connects travelers with over 1,000 travel providers, offering flights and hotels, comparing deals, and making trip bookings easy.

In a strategic move, Wego, a major player in the MENA online travel marketplace, has acquired Travelstop. This isn’t just a business move; it’s a step into the future of travel.

The timing is perfect. With the Asia-Pacific (APAC) and the Middle East set to contribute 46% to global business travel spending in 2023, Wego and Travelstop are ready to capitalize on the opportunities this acquisition brings.

This is more than a business decision; it’s a commitment to shaping the future of travel experiences. Exciting times are ahead as Wego and Travelstop embark on this journey together.

Darent is like a door to real home experiences for tourists exploring Saudi Arabia. Started in 2021, this app connects local and international travelers with residents, providing many options for daily rentals in Saudi cities.

In 2022, Darent got $1 million in a pre-seed round led by Watheeq Proptech Venture, showing its early success in hospitality. With Saudi Arabia planning to welcome 100 million tourists by 2030, Darent sees itself as a pioneer, making places to stay that fit the special needs of visitors.

It’s not just changing how we stay; it’s making a place where travel mixes with tradition. It gives tourists a mix of cultural experiences, and for hosts, it’s a good way to earn.

Zayr Travel is a startup that provides travel packages focusing on experiences that highlight Oman’s culture, history, and nature. They collaborate with local communities and guides who share their stories and traditions with travelers. Zayr Travel is committed to responsible tourism by reducing waste, respecting wildlife, supporting conservation projects, and contributing to social causes.

The goal of Zayr Travel is to craft memorable and meaningful experiences for travelers while safeguarding the beauty and diversity of Oman. 

New startups like Seera Group, Wego, Darent, Beehive, and Zayr Travel are changing how tourism works in the GCC. These startups are important because they help with challenges and find new opportunities. They make the hospitality business in the region grow and last longer.

These new startups aren’t just bringing new ideas; they’re creating jobs and helping the economy grow. As tourism gets bigger, it also makes a bigger impact on the region’s economy.

These startups aren’t just doing what’s needed now; they’re planning for a future of tourism in the GCC that’s lively, lasting, and full of culture. They are creating a story that mixes old ways, new ideas, and caring for the environment—a story that will make the GCC a top destination for tourists worldwide.

As we witness Dubai’s ambitious Ciel Dubai and Saudi Arabia’s goal to host 100 million visitors, the tourism scene in the Arabian Gulf is undergoing a significant transformation. Projects like Amaala and other eco-friendly efforts go beyond building hotels; they’re creating opportunities that extend far beyond our sight.

Darent and Beehive in Saudi Arabia focuses on authentic home experiences and sustainable hospitality. Zayr Travel adds a cultural touch with experiential travel in Oman.

As the Arabian Gulf envisions a future blending skyscrapers and eco-tourism, startups lead the way, crafting a new story where travel meets tradition and sustainability.

The road ahead is exciting, with these startups ensuring the GCC’s tourism is vibrant, diverse, and ready for an exhilarating future.