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Yield Management and Tourism Industry in Saudi Arabia Essay

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Updated: May 13th, 2022

The hospitality industry is an important part of the economy in Saudi Arabia; more importantly, researchers expect that in the future this market may increase by 6,8 percent during the period between 2011 and 2016 (Alpen Capital, 2012, p. 19). However, one should not forget about possible fluctuations of demand. For example, according to the estimates, the room revenues are most likely to decline during 2012 and 2013 (Alpen Capital 2012, p. 19). One should take into account certain factors that can adversely affect the tourism industry in Saudi Arabia as well as other countries in the Middle East. In particular, one can speak about the political unrest in such countries as Egypt, Syria, Libya, and other states. Certainly, this trend does not directly influence Saudi Arabia, but they shape the public opinion and the decisions taken by potential customers, especially tourists who can be reluctant to travel in the Middle East (Andersson & Djeflat, 2013, p. 25). These are the main forecasts offered by market researchers and analysts.

Yet, some trends can favorably influence the hospitality industry in Saudi Arabia. For instance, the government of this country intends to invest approximately $ 80 billion to improve the existing infrastructure (Alpen Capital, 2012). In this case, close attention will be paid to railways, airports, roads, and so forth (Alpen Capital, 2012). To a great extent, these efforts can be explained by the need to diversify the economy of the country and make it more agile (Cordesman, 2010, p. 340). Furthermore, in this way, they attempt to enhance the experience of people who go to Saudi Arabia for purposes such as religious pilgrimage, leisure, or business (Cordesman, 2010, p. 340). Additionally, these initiatives can be partly explained by the fact that the hospitality industry is vital for the creation of jobs in the country. Moreover, this industry greatly contributes to the GDP of the country; at present, its share is 5,4 percent (Alpen Capital, 2012, p. 44). Thus, the hospitality industry of the country can rely on the support of the state, and this factor can contribute to the development of the hospitality industry.

It should be taken into account that there are 69 construction projects and in this way, the government and private businesses attempt to meet the increasing demand for hotels in Saudi Arabia (Alpen Capital, 2012, p. 20). Market analysts expect in 2016 there will be at least 260,000 rooms available to clients (Alpen Capital, 2012, p. 20). Therefore, one can say that the hospitality industry in Saudi Arabia will remain sustainable even if it may face some challenges shortly. This is one of the main points that can be made.

At present, the hotels located in Saudi Arabia number about 243,000 rooms. These rooms earned hotels approximately 35 million dollars (Alpen Capital 2012, p. 20). It should be taken into consideration that the room revenues diminished in 2012. Again, current projections indicate that the revenues per available room can decline. As it has been said before, the decline can be attributed to the political unrest in the Middle East (Andersson & Djeflat, 2013, p. 25). Nevertheless, the profitability of the hospitality industry is expected to increase in the long term. Surely, it is often difficult to make long-term predictions. In this case, one can speak about only about three or four- year predictions.

Several drivers affect the hospitality industry in Saudi Arabia. In particular, one should speak about religious tourism because pilgrims constitute approximately 40 percent of domestic and international tourists in the country. This trend becomes particularly important given that the population of Muslim people increases. At present, this population numbers at least 1,8 billion people in the world (Alpen Capital 2012, p. 26). Many of these people strive to visit Mecca and Medina at least once. Nevertheless, one should not forget about business travelers who also bring significant revenues to the hotels. Additionally, more than fifty percent of Saudi Hotels have four or five stars. This means that these organizations can appeal to the need of people with high-income levels. These are the main distinguishing features that should be considered by people who work in the Saudi tourism industry.

When speaking about tourism in Saudi Arabia, one can identify several important characteristics. Different regions and cities attract different types of clients. For instance, Mecca is primarily visited by pilgrims from various countries. In contrast, the hotels located in Riyadh serve the needs of business travelers working in the country.

Finally, Damman, Jeddah is more oriented toward people who seek leisure (Majid, 2012, p. 273). This is one of the trends that one can identify. It is important for understanding how geography shapes the hospitality industry in the country. Moreover, this knowledge can help managers better identify the needs of clients who have different values, opinions, or attitudes.

Additionally, one should note that the hospitality market of the country is dominated by local organizations, while the presence of foreign companies is rather limited. However, one cannot say how this situation will change in the future, so local hotels can face more significant challenges. Furthermore, the growth of the hospitality industry is slowed down because it is difficult for some tourists to get entry visas to Saudi Arabia (Alpen Capital 2012, p. 45). This is the problem that should be resolved. On the whole, each of these factors discussed in this section can have significant implications on the industry in this country. Moreover, they affect the approaches to the management of revenues.

This research is aimed at examining the use of yield management in modern Saudi hotels. In particular, it is vital to study the practices and techniques adopted by the administrators working in these hotels. Furthermore, this research should evaluate the degree of administrators’ awareness of the benefits of yield management. This study will involve the analysis of academic literature. Apart from that, it will be based on direct conversation with practitioners working in Saudi hotels. To a great extent, this work will be descriptive; it will not be aimed at testing a certain conjecture of the hypothesis. Several important questions should be addressed in the course of this research:

  1. What kind of approaches do business administrators adopt to manage room revenue?
  2. How do these professionals apply the principles of yield management in their daily practices?
  3. To what extent are they familiar with the benefits of this approach?

This research will investigate the practices adopted in different hotels operating in Saudi Arabia. These organizations will differ in terms of their size or profitability. Close attention will be paid to how they try to increase their revenues. In particular, it is vital to focus on such areas as pricing strategies, location, HR management, occupancy, pricing policies, customer relations, and the use of third-party websites. These issues are vital for understanding the applications of yield management. This study will involve several important stages. At first, it is vital to examine the views of Saudi managers of this approach. Secondly, this study should determine whether the strategies of these people are related to the management of revenues. Finally, this research should demonstrate how the principles of yield management can be best applied to the needs of the hospitality industry. This is one of the main goals that should be attained. Overall, this work can be important for understanding the principles of yield management as well as the advantages or disadvantages of this technique.

The results that will be presented in this paper will be based on several sources of information. For example, it will involve an extensive review of literature on the models and approaches to the management of revenues in hotels. Various books and scholarly articles can give evidence-based examples about the applications of yield management. This is one of the first steps that should be taken. Yet, this study will strongly rely on primary data collected from managers working in Saudi hotels. These professionals have in-depth expertise in such areas as the management of revenues, HR practices, or pricing policies. This research entails the use of such a method as an in-depth or semi-structured interview. This technique enables the respondents to openly express their views about the use of yield management. Moreover, it is necessary to examine the documentation that hotels were ready to provide. This examination can throw new light on the policies of many hotels. Furthermore, direct observation can illustrate the use of various distribution channels such as third-party websites. Additionally, it would be important to assess the effectiveness of different distribution channels and their room parity rates. These are the main research techniques were employed in the course of this study. Overall, their use of these techniques is quite justified.

This study will contain several parts. The first section will present a literature review regarding the application of yield management for various needs of the hospitality industry. It is vital to look at such issues as pricing strategies adopted by hotels, occupancy rates, HR policies, and the use of different distribution channels. This chapter will examine the main principles of yield management. The second section will describe the main methods that were used in the study and explain the reasons why they were chosen. Close attention should be paid to the methods of data collection. The third chapter will describe the finding of the research. This section will be aimed at discussing the practices adopted by Saudi Hotels. Additionally, the following chapter will discuss the implication of the findings and the opportunities for further research. Furthermore, it is vital to identify the limitations of this study and explain why its results cannot be generalized. These are the main issues that should be examined in this study.

Reference List

Alpen Capital. (2012). GCC Hospitality Industry. Dubai: Alpen Capital.

Andersson, T., & Djeflat, A. (2013). Research, Innovation and Entrepreneurship. New York: Springer.

Cordesman, A. (2010). Saudi Arabia enters the 21st century. New York: Greenwood Publishing Group.

Majid, M. (2012). Hospitality and Tourism. London: CRC Press.

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