Hajj Spells Contracts for Companies as Pilgrims Flock to Mecca

The biggest religious gathering in the world is getting bigger for business.

The annual Hajj pilgrimage is spurring opportunities for companies like the Saudi Binladin Group and Hilton Worldwide Inc. as the government in Saudi Arabia invests in new rail lines and airport expansions needed to meet the rising number of Muslim pilgrims to Islam’s two holiest cities.

“The arrivals we are seeing in 2010 are unprecedented in the history of Mecca,” said Shuja Zaidi, Hilton Worldwide’s vice-president of projects in Saudi Arabia. “You can imagine the numbers when the transportation projects are completed.”

The Hajj, which started Nov. 14, attracted 2.8 million Muslims to Mecca this year, including 1.8 million visitors from 181 countries, according to Saudi Arabia’s statistical office. The Arab world’s biggest economy wants to develop its religious tourism industry as part of plans to diversify away from oil exports and to help reduce an unemployment rate as high as 43 percent for Saudis between the ages of 20 and 24.

Saudi Arabia plans to have 2 million tourism jobs within 10 years, up from 457,000, according to the Saudi Commission for Tourism and Antiquities. Tourism revenue will grow 4.8 percent in 2010 to 66 billion riyals ($17.6 billion) and rise to 118 billion riyals in 2015, according to data from the commission.

Photographer: Mustafa Ozer/AFP/Getty Images

The Hajj, which started Nov. 14, attracts more than 2.5 million Muslims from 160 countries to Saudi Arabia. Close

The Hajj, which started Nov. 14, attracts more than 2.5 million Muslims from 160... Read More

Close
Open
Photographer: Mustafa Ozer/AFP/Getty Images

The Hajj, which started Nov. 14, attracts more than 2.5 million Muslims from 160 countries to Saudi Arabia.

“There are a huge number of Muslims in the world, all of whom are required to perform Hajj once in their lives,” said Paul Gamble, head of research at Jadwa Investment Co. in Riyadh. “Tourism related to Hajj has the potential to be an important source of employment in the kingdom, so building the infrastructure to support this makes sense.”

Rail Link

A $5.3 billion rail line linking the holy cities of Mecca and Medina with Jeddah is under construction and capacity at Jeddah airport will rise to 30 million passengers by 2012 from the estimated 15 million this year, according to data on the website of the General Authority of Civil Aviation.

Saudi Binladin won a 27.1 billion-riyal contract to expand the King Abdulaziz International Airport in Jeddah, the official Saudi Press Agency reported on Nov. 14.

Hoteliers and property developers will spend as much as $40 billion in Mecca within the next decade to meet rising demand for accommodation, Zaidi confirmed on Nov. 12.

Accor SA, Europe’s largest hotelier, and Kingdom Holding Co., the investment company controlled by billionaire Prince Alwaleed, also have expansion plans.

“If you look at the infrastructure pipeline over the last several years, expanding facilities for religious tourism has been a big component of it,” Jarmo Kotilaine, chief economist at Riyadh-based NCB Capital, said by telephone.

King’s Overhaul

King Abdulaziz Al Saud, the founder of Saudi Arabia, captured Mecca in 1924 and Medina in 1925 before officially establishing the kingdom in 1932. The two cities provided Al Saud with revenue from customs and religious taxes from visiting pilgrims and religious legitimacy as the ruler consolidated his power over the Arabian Peninsula.

The current monarch, King Abdullah, 86, wants to make the economy less dependent on oil. Saudi Arabia announced in August a $384 billion, five-year spending plan, with the funds being spent on education, housing and transportation.

Tourism represented 3.6 percent of the kingdom’s gross domestic product in 2009, with religious tourism probably accounting for as much as 1.5 percent of GDP, Gamble said.

Mecca needs 82,000 rooms with the number of pilgrims expected to double to 13.75 million by 2019, U.S.-based Jones Lang Lasalle said in a report in June. There are now 50,000 rooms in Mecca, or 40 percent of the kingdom’s room stock, and 20,000 in Medina, according to the Jones Lang Lasalle report.

First Hajj

Religious pilgrims are fueling the construction boom. Every devout Muslim who can afford it is supposed to perform a Hajj once in his or her lifetime. Many are struggling with the rising cost because of a dearth of rooms.

Engi Nassar, a 45-year-old Egyptian, is spending 40,000 Egyptian pounds ($7,000) during her 11 day pilgrimage to Mecca and Medina, about half of what she would have paid had she not booked her own accommodation at the last minute.

“I handled the hotel on my own and got a special discount in Medina,” Nassar, the general manager of Cairo-based Xpose Communications, said in a phone interview on Nov. 7.

This year’s Hajj, which finishes this week, is set to beat 2009 in terms of pilgrim numbers, according to hoteliers and transport companies. Last year was affected by concerns over swine flu among travelers, they said.

After obtaining a license in 2009, Saudi Alwafeer Air transported as many as 25,000 passengers during Hajj. This year, the number of passengers the company is expecting to lift is more than 60,000, Mohammad Bajaba, Alwafeer’s vice president of services, said in a telephone interview.

The number of foreign pilgrims visiting Saudi Arabia to perform the Hajj in Mecca rose 11 percent to 1.8 million people this year, the Saudi Press Agency reported yesterday, citing Interior Minister Prince Nayef bin Abdualziz.

“Spending by pilgrims supports the consumption side of the economy,” Saleh Al Suhaibani, head of research at Al Rajhi Capital, said in an e-mail. “The main beneficiaries are obviously hotel, transport and retail sectors.”

To contact the reporter on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net Mourad Haroutunian in Riyadh at mharoutunian@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.