While Saudi Arabia is pursuing a tourism strategy aimed primarily at domestic and Gulf Cooperation Council (GCC) visitors, the government is also looking to develop a sustainable base from which the industry can grow.

With an estimated 5m Saudis traveling abroad annually and SR6.8bn being spent on outbound tourism, it is understandable why the government is keen on expanding the number of domestic tourism trips from the current 29.6m. The Supreme Commission for Tourism and Antiquities' (SCTA) target is to have 128m internal tourists by 2020, generating some SR101bn in revenue.

Tourism is already a valuable component of the Saudi economy. While religious tourism plays a significant part, the government has been trying to buoy the broader sector to optimise revenue and employment opportunities. To this end, the council of ministers has approved a $38bn tourism programme aimed at boosting infrastructure, local media reported.

Massive investments are in line with the national budget for 2009, which will allocate SR19.2bn to upgrade the transport system. Airports alone will get SR5.14bn. Five new airport construction projects are under way, including a $1.5bn terminal at Jeddah, which will help the city cope with what has become a near year-round stream of pilgrims.

The hotel industry is also set for growth. International hospitality brands are preparing to take advantage of the Kingdom's growing focus on tourism. A 292-room Radisson-SAS hotel is expected to open in Jeddah this year, as well as a 167-room property in Yanbu and a 234-bed hotel in Riyadh. Marriott Hotels and Crowne Plaza are also planning to open five-star properties. Hilton Hotels Group, which recently entered into a partnership with Saudi-based Abdulmohsen Al-Hokair Group for Tourism and Development, has plans to build 13 new hotels in different parts of the country over the next five years, adding 2500 rooms. The first of these is scheduled to open this year in Riyadh.

Overall, The SCTA plans to create 50.000 new hotel rooms and housing units in the next three years and has decided to turn several historic buildings across the country into state-owned heritage hotels.

As part of continued efforts to spread awareness of the benefits of tourism to all corners of the country, and in particular to the west coast of the country, the government has selected 19 areas to be developped into resorts around Jeddah and Madinah. Furthermore, local media reported the establishment of tourism investment and services centres throughout the country's nine regions. A total of SR1.5m will be spent on these centres to encourage the flow of funds into the sector. Consulting services as well as simplified licencing procedures will be offered to investors.

Despite the current focus on domestic and religious tourism, other segments of the market are set to grow. Conferences and workshops, for example, are beginning to take a higher profile and already account for 17% of tourism spending in the Kingdom.

While the current strategy focuses on domestic tourism, not foreign visitors, traveling to Saudi Arabia has become easier, and more and more people are coming. Gradually, selected groups of leisure tourists are being allowed into the country. At the end of last year, for example, a group of 38 Americans visited the historical area of Tabuk, from Sharm El- Sheik in Egypt.

The government's willingness to increase the number of inbound visitors is a sign that Saudi Arabia is aware of the revenue and employment opportunities underlying a robust tourism sector. But the biggest challenge for the country will be to balance its tourism offer with local customs and allow the sector to grow in a sustainable way.

This article was provided courtesy of Oxford Business Group, a leading publisher of economic and political intelligence on the emerging markets of South East Europe, South East Asia, North Africa, the Levant and the Gulf.