Paula Koch
Last updated: 4 November, 2012

Persian Gulf travel hub: a sustainable plan?

Persian Gulf states are pouring millions of dollars into their tourism industries in the hopes of transforming the Gulf into a regional travel hub. The investment is a risk intended to diversify the hydrocarbon-reliant economies of the Gulf region, gambling on increased travel to and through the region.

However, there are a number of sustainability implications of this strategy. Is the level of fiscal expenditure sustainable over the years it will take to elevate the region to travel hub status? When will the travel and tourism industries be self-sustaining? At what cost does the infrastructure development come to the environment?

The lion’s share of current investment in the Persian Gulf’s travel and tourism sectors is backed by government funding emanating from tourism ministries and state-held investment funds. Without the government coffers and their accompanying steady stream of oil money, airport renovation projects and artificial island development would come to a halt. In the immediate sense, these industries are not self-sustaining. 

Many of the major tourism-related development projects in the Gulf are expected to finish within the coming 10 to 15 years.

Thankfully, substantial hydrocarbon reserves in the Gulf are anticipated to last for the next half-century or more. Barring the discovery of a cheap and easily produced alternative energy source, oil will provide the cash necessary to assure that these projects see their completion. 

Government sponsorship of the travel and tourism sectors will be necessary at least until major development and building projects are completed and the region is attracting additional air traffic and higher numbers of tourists. According to the World Travel and Tourism Council’s “Travel and Tourism: Economic Impact 2012 Middle East” report, this may not be too far in the future.

The report acknowledges that 2011 was a difficult year for tourism worldwide due to the global economic downturn, higher gas prices, and environmental disasters among other circumstances. However, these factors will not hinder long-term growth. 

The WTTC report goes on to predict that travel and tourism will grow over the next decade to directly contribute USD 110.6 billion to the world’s GDP by 2022, a projected increase of 4.1%. Growth of this kind will be necessary for the travel and tourism sectors of the Arabian Gulf to become self-reliant and sustainable over the long-term. 

The competitiveness of the Gulf’s travel and tourism sectors will influence the long-term sustainability of a Gulf travel hub economic strategy. If the region is unable to compete with the rest of the world, the significant investments made will have been for naught.

The Travel and Tourism Competitive Index released by the World Economic Forum outlines 13 “pillars” of competitiveness including environmental regulation, tourism infrastructure and human resources. While the Gulf excels in some categories, such as “prioritization of travel and tourism” and “air transport infrastructure,” there are several areas for improvement.

A Booz & Company report on Middle Eastern aviation systems highlights government regulation as an obstacle to the travel and tourism sectors’ competitiveness and growth. According to the report, “over-regulation is leading to low efficiency and low quality of both the aviation system and its infrastructure which is in turn creating serious restrictions on sustainable and self-funding growth.” The T&T Competitive Index noted similar concerns for government controls over hiring, firing, compensation and other human resource regulations.

Privatization and deregulation of some key state-owned assets in the travel industry will encourage competitiveness, efficiency, and practices reflective of the international travel and tourism market while ensuring that the Gulf will become and remain a travel hub in the long-term. Deregulation can allow for the adoption of new business models and international best practices that can better position the Gulf on the global travel and tourism market. By partially privatizing the industries, the market will be opened for increased international investment. This in turn will encourage competition, lower prices and, hopefully, an influx in tourism to the region.

While in an economic sense the travel and tourism development taking place in the Arabian Gulf may be sustainable, environmental sustainability is an entirely different issue. Relative to the tolls taken on the environment by the development of industries such as mining and mineral refinement, travel and tourism is comparatively benign. Indeed, drawing tourists to the region may actually protect the environment more than harm it. 

Governments will have to ensure the longevity of their natural environments for tourists to enjoy both now and in the future. In this way, environmental consciousness is bound together with the development of a Gulf travel hub.

Perhaps most concerning is the increased demand for water that will arise from higher numbers of tourists. The Persian Gulf is already considered to be water impoverished. Additional traffic to the area will add stress to the already strained resource. 

Steps, however, are being taking to address the environmental sustainability concerns of travel and tourism development. New buildings are being constructed to meet the standards necessary to obtain a Leadership in Energy and Environment Design (LEED) certification. State tourism departments are offering incentives to hotels and other businesses for integrating environmental contentiousness into their practices. Gulf airlines, such as Etihad Airways, are increasing their usage of biofuels. These initiatives, though they are not comprehensive solutions, will help to mitigate some of the negative effects on the environment that come with development.