Ibrahim Al Rashid
Managing Director at Resorts Group
With all the transnational companies coming into KSA to benefit of the massive government investment in gigantic projects, it is easy to overlook the smaller fish – genuine self-made entrepreneurs who build up a small business with their own blood, sweat and tears. There is effectively space for small and medium enterprises too in the kingdom, and the story of the Resorts Group shows they can be successful. Ibrahim al Rashid, general manager and business developer of the company, who graduated in marketing started a consultancy service in 1994 with his partner, an industrial engineer. “We met working for Proctor & Gamble and wanted to start on our own. When we researched the Saudi economy, we found that tourism was the most underdeveloped sector, and the one that offered the best chance to start up a business with little capital.”
The pair got involved in various enterprises, including management of furnished apartments and chalets in resorts, organisation of 'umra visits and domestic tourism. The first five years of their business saw a yearly growth of 15 to 30% and by 2000, their company had become so big and cumbersome, they decided to re-engineer it and break it down into its various components. In the process, they created three separate companies: Utlat (National Vacation) which took care of their domestic tourism branch, Afwaj, which handled the 'umra business and Lafontaine Hospitality which dealt with holiday property management. “We assigned an executive manager for each company, while me and my partner formed the board of the mother holding,” says Al Rashid, adding that they now have overall sales of SR 100 million per year and employ 375 people on 25 locations throughout the country. “In domestic toursim we are now the number one provider, producing 250,000 nights per year in KSA. We don't deal with hotels but manage furnished apartments and individual chalets for their owners, who are usually small developers who have a few properties to let but are not interested in dealing with the booking, maintenance and renting themselves. On the other hand, the international hotel management companies are not interested in them as they are too small, and the developers usually cannot afford their fees either. This is where we come in.”
In a way, the Resorts Group's success is a product of opportunities left untouched by investors who are out for a fast buck – there is no great short-term profit to be made from these operations. “Most of our customers fall in the C+ and B spending classes – not Four Seasons stuff but still middle class people with some money to spend and looking for something decent to spend their holidays in. We provide them with all-in furnished holiday homes including washing machines, hygienic bed sheets and other details appreciated by mothers of large families. Our slogan is 'fun for the kids' and we focus on families. We are actually the only company operating in this niche. Our customers are very loyal, some have been coming back to us for 15 years now.”
As for the market for 'umra visits, this has positively exploded since 2005, when the market was regulated and many of the original 220 companies lost their licence. “Only 55 of the original companies are left now, because many operators just sold visas and then left visitors to their own dvices to find transportation, accommodation and the lot. This is why the Ministry of Hajj revoked their licences. Consequently, in 2005 we suddenly went from 1,000 to 150,000 customers per year. Most of them come from Africa and Europe, a smaller proportion from Pakistan and India.”
In an effort to promote tourism, a law stipulated that 'umra visas can be transformed electronically into tourist visas, but in practice this has been discontinued, just like the issuing of non-religious tourist visas itself. Al Rashid explains: “Misuse by local and foreign agents has resulted in economic refugees using these procedures to gain access to country, then disappear and enter the black labour market. Tourist visas were sold by the same operators as cheap hajj visas. Those practices also caused problems for us with the Ministry of Hajj. We used to take religious tourists in groups to Ta'if and other places of historic significance for muslims – especially with second and third generation muslims from Europe, this was a popular tour. But now it has become very difficult to organise these tours, as the 'umra visa is only valid for Mecca anymore.”
As for their domestic tourism operation, the most popular destinations in KSA for Saudi (and GCC) tourists are, in descending order, Jeddah “which offers everything from shopping to good restaurants to beaches in a more liberal environment than Riyadh”; Abha, the capital of Asir, situated high up in the cool, green mountainside; and Khobar “kind of a smaller version of Jeddah with beaches and shopping, and most of all very close to Bahrain, so that Saudi tourists can cross the border to go to a cinema”. Says Al Rashid: “40% of domestic travel comes from Riyadh and the central Najd plateau in general, which is too cold in the winter and too hot in the summer, so people go to the east and the west on weekends and school holidays. The busiest period is made up of long weekends and school holidays, which limits the peak to around 130 nights per year.”
A rather unsuspected form of entertainment, not normally associated with the kingdom, is attracting GCC tourists: sports. “Not only do we have the strongest football league in the region, there are actually many car rallies and other auto and motor sports, which are very popular in the region.”
But international tourism, despite cumbersome visa procedures and other restrictions, has proven successful too, Al Rashid says: “The kind of tourism that fits in with our standards and values – desert safaris, archaeological tours and red sea diving sessions, really works well and could be operated on a far larger scale too. Last year, we had 12,000 foreign tourists coming in - half of them were Italian divers. We have created an oil tour too: the oldest oil well can be visted in Dammam, there is an oil exhibition in the Aramco museum in Dahran, the working petrochemical industries in Jubeil. But has not proven very successful, which surprised me. I mean, when I visited Belgium I just had to see the diamond industry and the lace industry!”
Yet much still needs to be done to enable the country to benefit to the full from its attractions for international tourists. “First of all, to develop the sector more efficiently,” argues Al Rashid, “we need more and clear regulation, a legal structure for the sector which urgently needs to be recognised as an important part of the economy nad which deserves the same support and above all dedicated financial funds which other sectors receive. In tourism, the profit margins are small and this makes it unattractive for private banks to finance and lend to. In this country, if you start a kindergarten or a small school you get benefits, subsidies, tax breaks, free or cheap land and electricity. If you start a farm or manufacturing company it is the same, and you get export facilities on top. For tourist projects, there are very little such benefits available. As for training – which is offered for free to agricultural and industrial companies – we now have the first 250 or so graduates from 16 hospitality schools, which is totally insufficient even for already existing businesses.” Especially for women, this situation needs to improve: 99% of women employees in the sector are non-Saudi. The larger companies and hotels all offer on-the-job training, but for small and medium enterprises, this is not a feasible option.
Yet the largest obstacle, Al Rashid emphasises, is not so much financial as cultural – and at the same time seemingly easily solved: “Personally, in Arabic, I never speak of tourism (siyaha) but instead of hospitality (dhiyafa).It is only a label, but hospitality is an ancient and honourable Arabian tradition – receiving travelers and passing caravans in your tent and offering them tea, dates and protection. The word tourism on the other hand has the negative connotation of Saudis travelling abroad in search of forbidden pleasures, or of bringing foreigners in and endangering our own traditions. Talking of tourism scares many of our leaders and the general population. When I talk to the Ministry of Hajj about tourism, they refuse to listen. They tell me tourism is not their business and they will have nothing to do with it. But when I talk about hospitality, their whole attitude changes: they understand well that even the hajj requires hospitality, meaning improved transportation, better restaurants, and more hotels.”
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