Reinventing the GCC's Tourism Ecosystems – The Key to Reaping the Sector's Full Benefits

With the region's tourism sector still not reaching its true potential – due to insufficient offer¬ings, spotty marketing and sporadic investments – GCC nations today need to work urgently to improve tourism services, build up related institutions and tackle existing challenges

Dubai, UAE, 22 September 2013: In recent years, the countries of the GCC have collectively played host to millions of tourists, with arrival numbers increasing in most destina¬tions. However, there is still a widening gap between the opportunity that these nations have in their tourism sectors, and what they have actually achieved. Only two GCC states – the United Arab Emirates (UAE) and Qatar – rank in the top third on the World Economic Forum's Travel and Tourism Competitiveness Index. In effect, GCC countries today 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. In line with this premise, management consulting firm Booz & Company has formulated a framework to develop and execute a successful tourism sector strategy. And, the recommendations have special relevance in the GCC – where tourism represents a particularly rich opportunity.

TOURISM – A POWERFUL TOOL
Over the next 20 years, the number of global tourist arrivals is set to rise by as much as 70 percent, to 1.8 billion every year, according to the World Travel and Tourism Council. If there was any question about the industry's economic vitality, this statistic answers it: tourism already accounts for 9 percent of the world's economic output. Simply put, tourism dollars bring many benefits to destination countries.

“A heavily visited country – one that takes in hundreds of mil¬lions, or billions, in tourism dollars – has a natural way of preserving its historic sites, generating support for small businesses, and burnishing its image,” said  George Atalla, a Partner with Booz & Company. “Tourism income can also be a mechanism for fulfilling parts of a country's economic agenda – includ¬ing human capital development and economic diversification.”

Economic Impact of Tourism
Tourism was a US$2.68 trillion economic activity in 2012 in terms of its direct contribution to global output. However, Booz & Company's bench¬marking study of almost two-dozen countries reveals 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,” explained Antoine Nasr, a Principal with Booz & Company. “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.”

The Tourism Ecosystem
The best way to understand how countries compete for tourists is to think of tourism as an ecosystem comprising three parts: products and services, sector enablers, and system enablers.
•    Tourism products and services attract travelers to a country.
•    Tourism sector enablers support a country's indigenous physical attrac¬tions.
•    System enablers are the quality of a country's infrastructure, security, health and safety, and environmental-sustain¬ability practices.

GCC TOURISM: THE PROS AND CONS
The GCC tourism market, which consists of domestic, regional, and international travelers, has wit¬nessed 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
These include GCC countries' ability to invest in capital-intensive tourism products; their large airport capacities with easy connections to major tourism markets; their strong appeal as business tourism destinations; the region's emerging cultural amenities; the long “weather window” for sun-seeking tourists; and, the GCC nations' stability and reputation for safety.

Sector Disadvantages
For the most part, GCC govern¬ments have not devoted much atten¬tion to their tourism sectors. This has resulted in three major disadvantages:

1. Subpar 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. The second deficiency involves product quality; for example, despite the amount of shoreline that all of the countries have, the UAE's beaches are the only ones in the GCC with Blue Flag certifications. Finally, GCC nations have not suf-ficiently marketed or promoted their existing products.

2. Insufficiently 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 states do not have a long-term strategic plan for their tourism divisions. Moreover, they do not invest heavily in the sector.

3. Systems that inhibit tourism instead of encouraging it. GCC countries have relatively restric¬tive visa requirements and significant challenges in the area of environmental sustainability, reflected in low scores for air quality and waste-management practices.

BUILDING A THRIVING TOURISM INDUSTRY
In countries where tourism has the most economic impact, the sector is integrated into the national development strategy and the long-term national vision.
Indeed, the development of a national tour¬ism strategy typically follows three critical steps:

1. 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 ecosys¬tem. A nation should start building this picture by taking inventory of all the tourism products and services it has to offer – such asculture, sun and beach, nature, sports, and lodging/food.

“The ecosystem can be further defined by looking at the country's tourism-sector enablers,” added Atalla. “In most states, the sector enablers fall into five categories: planning, promotion, marketing, human capital develop¬ment, 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.”

The picture is then 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 on its appeal as a tourist destination.

2. Value Proposition
In this next step, a country deter¬mines its primary geographic target markets – a process which entails eliminating all the outbound tourist markets that are under a certain size and beyond a certain distance. After that, it 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.

“The key question that nations need to answer centers on product prioritization,” said Nasr. “And, 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 prod¬uct; 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. After it has done the market seg¬mentation and laid out its tourism products in this way, the GCC state 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? Or, market itself as a destination for outdoor adven¬tures? Should it emphasize its advantages for business meetings and its appeal to business travelers?

3. Develop Tourism Sector Institutional Framework
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; regula¬tion setting and enforcement; and in certain cases, development and execu¬tion.

However, in some states, a national tour¬ism development entity works side by side with the CTPE, focusing on key tourism projects and the development of partnerships with the private sector.

In reality, there is no single “right” insti¬tutional framework. And, while it is useful to understand how countries with thriving tourism sectors use their CTPEs, this perspec¬tive 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.

To conclude, tourism represents a colossal economic opportunity for the countries of the GCC, as they have many existing assets that they can use to attract global travelers – from modern airports to pleasant beaches, and cultural and archeologi¬cal sites. To date, however, most of these nations have not made tour¬ism a priority, nor have they realigned their institutions to adequately tap into related opportunities. Now is the right time to take advantage of substantial national investments in infrastructure and human capital to begin the transfor¬mation of the GCC's tourism sector.