Saudi Begins Developing Towns as More Affordable Tourism Spots

Skift Take

Yanbu is being developed as a new leisure destination, offering prices well below those expected at the giga-projects.

Saudi Arabia is now developing towns with stays below the five-star price range.

“For a lot of people from the outside, it may look expensive in Saudi Arabia, but you can already afford it,” said Stefano Lopez, senior product director at Baheej Group.

Baheej is a Saudi developer specifically building up Saudi towns and communities for mid-market tourism and leisure. It is already working on a destination called Yanbu, a coastal port city around two and half hours from Medina.

Baheej is partly owned by the Public Investment Fund, Saudi’s sovereign wealth fund also building the giga-projects.

Recently, Baheej announced the development of the waterfront area of Yanbu. The project will cover an area of 32,000 square meters and features three leisure assets including a “Beach Escape”, a “Tourist Activation Center,” and a hotel. Additionally, the project will feature a fourth component to be announced at a later stage.

“Let’s use Italy as an example,” Lopez said. “You have Almafi Coast and it’s a top-selling destination. If you go there in summer, 90% of tourists are foreigners. [Italians] go to places you barely hear about, that’s where you find all the locals and some of the spill-over tourists who don’t want to spend so much in the centers.”

Lopez believes the idea Saudi is too expensive comes down to marketing. “The misconception is Saudi is working only towards luxury. Naturally, because of how long it takes to build those crown jewels, so far, the notion is that’s the only focus.”

“Of course, Neom is launching a clear message, same with Red Sea. But the World Cup [might be] coming, the Expo, the Formula 1. These things will bring so many tourists, so secondary destinations must be inclusive for them, for people who want different offerings.”

“In our case, we have other destinations in the pipeline. Our hotels come up faster than the giga-projects, so we’re working behind the scenes on a lot of launches.”

Right now, Baheej has just one hotel confirmed, a Cloud7 property from Kerten Hospitality. For reference, the Cloud7 in Saudi’s AlUla site costs around $270 a night.

At the Arabian Travel Market in Dubai, the CEO of Saudi Tourism Authority told Skift that the country expects 80% of travelers to choose affordable accommodations.

Dubai Did it First

Lopez says Saudi’s strategy to hit the market with luxury developments won’t last forever, and affordability should follow suit, just as seen in Dubai.

“Outsiders hear Saudi and they hear Neom with that. It worked. It is the intent to send a message. It’s a little bit like what Dubai did. 20 years ago, people wondered what tourism would be in Dubai. Now it has the highest rates and is a haven for hotel operators.”

“People who bet against Dubai are now surprised. Saudi is announcing a lot of very visionary projects and they will be surrounded by other offerings to complement the flashier developments.”

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