Regaining ground: Following a tough 2011, prospects are looking brighter

After a difficult year in 2011, the return of the Formula 1 (F1) Gulf Air Bahrain Grand Prix in late April 2012 signalled a possible turning point for the country’s tourism sector – a sign that, perhaps, things are now on a path towards renewed growth.

Bahrain’s long-term development plan, Economic Vision 2030, calls for a growth in tourism to help diversify the economy. A combination of government investment, regional demand and an overall return of investor confidence should help drive this growth. The World Travel and Tourism Council (WTTC) estimates that the total direct contribution of travel and tourism will rise 4.2% from approximately BD513m ($1.35bn) in 2011 to BD534.5m ($1.41bn) in 2012, and will continue to rise on average 3.7% per annum through 2022 in real 2011 prices.

A CHALLENGING YEAR: Of all the sectors of the Bahraini economy, tourism and hospitality were among the hardest hit by the political unrest that affected the island Kingdom in 2011. From the cancellation of the F1 race, one of Bahrain’s top attractions, to a substantial reduction of cruise ship arrivals, 2011 was a challenging year for the tourism industry.

“Bahrain went through an unprecedented situation in 2011, and that impacted negatively on the tourism sector, but we continued working on our plans last year and we have started overcoming the challenges,” said Nada Yaseen, the assistant undersecretary for the Ministry of Culture.

Yet, as with the rest of the economy, the headlines have far overstated the extent of the difficulties facing the sector. Some segments have not just weathered the storm but prospered throughout it – the 2012 Bahrain Air Show, for example, which took place in January, was the most successful event of its kind to date. Bahrain’s Exhibition and Conference Authority (BECA) has reported a full roster of exhibitions at the country’s main conference centre for 2011 and 2012, and Bahrain was voted the best meetings, incentives, conferences and exhibitions (MICE) tourism destination in the Gulf region in 2011 by Business Destinations, a UK-based publication.

OPPORTUNITY FOR GROWTH: With many business travellers and visitors from neighbouring countries staying away to wait out the resolution of the political situation in 2011, the direct contribution of tourism to Bahrain’s economy fell by some 23% on the previous year, from BD666m ($1.76bn) to BD513m ($1.35bn). Nonetheless, the tourism sector still plays a very large role in the nation’s economy – it accounted for 6% of GDP and 6% of employment in 2011.

According to the Tourism Directorate, the majority of Bahrain’s tourists come from other GCC countries, with Europeans and Asians making up the bulk of other arrivals. There is also a moderate presence from the US, thanks in large part to family and friends visiting soldiers at the US Navy base in Manama.

Fortunately, Bahrain’s effort to regain lost ground in the tourism sector coincides with its assumption of two prestigious posts in the coming years. For the first time, Manama will be designated as the “Capital of Arab Culture” in 2012, as part of UNESCO’s cultural capitals campaign. The Kingdom will continue to build on this through 2013 as the “Capital of Arab Tourism”, a title currently held by Muscat, Oman. These celebrations represent a major push by the government to drive interest in Bahrain’s cultural offerings, especially as other countries in the region invest heavily in their own museums and festivals.

PROMOTION: The Tourism Directorate is also stepping up promotional efforts by showcasing Bahrain at international trade fairs and exhibitions. The Ministry of Culture recently invested in a substantial presence at the 2011 Exhibition for Incentive Business Travel and Meetings (EIBTM) exposition in Barcelona to promote MICE tourism, and also sponsored a delegation at the ITB Berlin in March of 2012.

The government also provides support closer to home through Tamkeen, a government body that is responsible for promoting the development of the Kingdom’s private sector across a number of industries. In the tourism sector, this comes in the form of direct investment in developments and subsidised hospitality training for the staff of restaurants, hotels and other services that cater to tourists. Tamkeen also partners with organisations looking to exhibit at local and international fairs – the government organisation contributed BD130,000 ($343,226) to 30 different companies taking part in the Bahrain Boat Show in November 2011, for example. Tamkeen also offers consultancy services and access to financing on more generous terms than prevailing market rates.

THE GRAND SCHEME OF THINGS: Like its neighbours, Bahrain has invested in the development of luxury hotels, resorts and shopping malls. Yet Bahrain does not see itself in direct competition with its neighbours for tourist dollars. The Kingdom has focused on developing its own tourist niche built around its liberal atmosphere and position as a major financial centre. According to Mohammed Dadabhai, the chairman of the Dadabhai Group, “Each country in the GCC caters to a different segment of the tourism industry so that they do not directly compete with each other. Bahrain has its own target market, with our tourism industry catering to family tourism from Saudi Arabia, business travellers from the financial sector and weekend leisure tourists arriving from neighbouring countries.”

In the short term, Bahrain’s recovery will in large part depend on countless smaller events marking the return of political normalcy: its hosting of the Grand Prix, cruise traffic and the success of landmark cultural festivals planned for the coming year. Each of these will be essential to recovery.

Over the longer term, the big question when considering future economic growth is whether the assets that constitute Bahrain’s brand identity as a tourist destination – its status as a regional financial centre, its openness, its international-standard motorsports facilities and its excellent transport links with its regional neighbours – are fundamentally sound. And it certainly seems that they are.

Bahrain’s tourism sector stands to benefit from robust regional growth. Saudi Arabian visits to the nation are approaching pre-financial-crisis levels, and improvements to Bahrain’s transport connections with both Saudi Arabia and with the wider GCC (through the development of a planned rail link to Qatar) will only improve its attractiveness as a leisure and business tourism destination.

ARRIVAL CHANGES: For some time, Bahrain has stood out from its Gulf counterparts due to the relative ease of transit, as travellers from most European countries, Asia and the EU could obtain tourist visas upon arrival to the Kingdom. This policy was particularly attractive to global business travellers, who tend to prize flexibility and ease of transit when choosing sites for meetings and conferences.

While the government promotes the improved security situation and tourist-friendly infrastructure, some of its changes in visa policy have the potential to affect the Kingdom’s tourist traffic. Reportedly prompted by foreign journalists and activists entering the country illegally while posing as tourists, the new rules imposed in March of 2012 require advance visa applications for travellers from countries whose governments require the same of Bahraini citizens. These requirements will affect citizens of EU member states, as well as Australia, Canada, the US, Japan, New Zealand, Hong Kong, Malaysia, Brunei, Singapore and South Korea, who previously were able to obtain visas upon arrival in the Kingdom.

At the time of research, it was unclear whether this change in policy was merely temporary or a more permanent measure. However, the government’s e-visa programme is simple, usually requiring little more than an advance application made online, which may help to ease the logistical hurdles posed by the new rule. While there is clearly an element of reciprocity in the rule, it may deter some visitors in the coming year. Importantly, however, it makes little difference to the country’s largest tourist group: citizens of GCC nations can still enter the country without a visa.

BY SEA: Cruise tourism has been an increasingly important and growing sector of Bahrain’s tourist trade, and ships travelling around the Gulf coast in the cooler winter months have been stopping just outside Manama at the dedicated cruise terminal at Khalifa Bin Salman Port (KBSP), allowing passengers and crew to travel a short distance to Manama to take in the fort, visit local museums, patronise the old souq and check out the F1 track.

During the cruise season in 2010, 67 ships berthed at KBSP, and Seatrade Middle East estimates that each of these visits contributed around $300,000 to the local economy. In contrast, visits to the Kingdom from major cruise lines dropped in the 2011 season. Throughout the year, 23 cruise vessels landed in Bahrain, a decline of 66% over the previous year. While the 2011 cruise season did not experience any security problems, it is clear that headlines in the media had taken their toll. The Tourism Directorate at the Ministry of Culture is collaborating with the private sector to strengthen the cruise industry in a number of ways to ensure ships come at the higher levels seen in previous years, acting to standardise taxi fares between the port and downtown and distributing multilingual guides to overseas visitors.

While cruise numbers were down at the beginning of 2012, there is potential for a strong recovery through the autumn and winter seasons. A successful F1 race and the various offerings associated with Bahrain’s Capital of Arab Culture year-long celebration should go a long way to restoring the Kingdom’s desirability as a cruise destination. According to the Tourism Directorate, the country is scheduled to receive two new cruise ships in 2012: the 400-passenger Europa and the 800-passenger Princess. The Monaco-based Silversea cruise line is also scheduled to bring its Silver Wind cruise ship back to Bahrain in the autumn of 2012, adding another 500 passengers.

GRAND PRIX: In its bid to show that a climate of normalcy has definitively returned to the Kingdom, the Kingdom has trumpeted the return of F1 racing to the Bahrain International Circuit (BIC).

The Gulf Air Bahrain Grand Prix – the facility’s biggest annual event – was held on April 20-22 amid tight security. Official attendance at the race was reported by organisers to be 27,800, somewhat less than BIC’s total capacity of 45,000. "We have sold 27,000-28,000 tickets, which is almost our second-best sale,” Sheikh Salman bin Isa Al Khalifa, the chief executive of BIC, told the media.

It is difficult to overstate the significance of the race, both in terms of economic impact and international prestige. Organisers actively cast the success of the race as a symbol of the Kingdom’s growth and national unity, branding the event with the slogan: “UniF1ed – One Nation in Celebration”. The race, along with other events held at BIC throughout the year, will create more than 3000 jobs, Sheikh Salman said recently. “We are, this time around, hoping to generate around $500m of direct and indirect benefits for the Bahrain economy,” he told the local media.

MOTOR SPORTS CENTRE: Establishing the country as the capital of motorsports in the Middle East has been a long-term goal for the country’s leadership – it is even something of a personal project for Sheikh Salman, a passionate motorsports enthusiast. Ensuring a smooth visitor experience during the 2012 race has been a clear priority for the government. First held in 2004, the race is the biggest annual event in Bahrain’s hospitality sector. It drew some 100,000 attendees to the Kingdom in 2010. “The cancellation of the F1 affected the entire industry – from hotels all the way down to valets. We estimate that the direct loss was $190m-200m and the indirect loss, encompassing tourism revenues from the entire industry, is $300m-400m,” Sheikh Salman told OBG.

The race’s return in 2012 should give the tourist sector a tremendous boost. Aside from the revenue that is generated from ticket sales and television rights, which generally averages around $20m, the event counts as the biggest weekend for the country’s food and beverage outlets, hotels and retailers. Hotel operators, for example, report that they are able to charge double their usual rates for rooms over the race weekend due to the high demand for accommodations. While foreigners only account for around 22% of visitors, their expenditures comprise the majority of the revenue generated by the event.

SPECIAL EVENTS: In keeping with its significance for the country’s economy, the Kingdom planned a suite of special events to coincide with the Grand Prix’s return. The Chamber of Commerce, in collaboration with various ministries and associations, organised a 15-day series of festivals and events around Bab Al Bahrain, aimed at revitalising the old shopping quarter. The new visa requirements were also relaxed for the event, with ticket holders from affected countries allowed to obtain visas on arrival.

RIPPLE EFFECT: The importance of F1 racing is reflected in the development projects that surround the raceway itself. The circuit, which has 45,000 seats and 47 suites, also hosts a variety of stock, bike, drag and kart racing events throughout the year. BIC also boasts a variety of facilities intended to make the site a centre of corporate entertainment and conferencing, including a large shopping plaza, an eight-storey tower and hotels. The choice of BIC as the site for expo@bahrain, a huge planned expansion to the country’s expo facilities, testifies to BIC’s status as a prime destination for business travellers.

Outside of the F1 event, the track continues to draw tourists with a variety of smaller events. The Bahrain Drag Racing Championship, the BIC 2000cc Challenge, the Porsche GT3 Cup Challenge and the WGA Supercars Middle East Championship are some of the local series, while the V8 Supercars Australia Championship, the GP2 Series, the Porsche Mobil 1 Supercup and Formula BMW Asia have also been held at BIC in the past. Upcoming events include the FIA World Endurance Championship in September 2012 and the CIK World Under-18 Karting Championship in November. BIC also provides “open track” days for racing enthusiasts to try their vehicles on the track.

HISTORY & HERITAGE: Bahrain has been continuously inhabited for as long as any other country in the Gulf – and perhaps longer. The Kingdom places great value on its history and retains a unique archaeological heritage. A UNESCO World Heritage site, one of the region’s largest museums, and a rich and varied set of archaeological points of interest provide tourists with an added incentive to visit. As Yaseen told OBG, “These represent a value offering for tourists looking for more than just sun and sea.”

Excavations have uncovered Bronze Age burial mounds, thought to be from the ancient Dilmun civilisation, dating to around 4100-3700 BCE. Some of the findings of these excavations can be seen at the Bahrain National Museum, alongside exhibitions that showcase other eras of the island’s history.

One of the largest and oldest museums in the Middle East, the Bahrain National Museum opened its doors in December 1988. The complex consists of two buildings, with a total area of 27,800 sq metres, including nine main galleries, an educational hall, offices, and laboratories for restoration and conservation work. It is currently home to some of the region’s oldest documents and artefacts, which detail flora, fauna, astronomy and culture. As well, a new BD19m ($50.16m) National Theatre is set to open in November 2012 adjacent to the museum.

Bahrain Fort, also known as Qalat Al Bahrain, was listed by UNESCO as an official World Heritage site in 2005. The site, with excavations ongoing, has been carefully prepared to accommodate visitors of all ages and levels of mobility. An accompanying museum, with captions in Arabic and English, explores the many layers of the fort’s past, including remarkable finds from the Hellenistic era and remains of its past as a Portuguese and later Islamic fort.

Bahrain’s museum offerings also showcase its more recent past: the Oil Museum, located near Jebel Dukhan, memorialises Bahrain’s status as the first Arab country to discover oil. Its collection of drilling equipment, rock samples, maps and information on the companies which dominated early oil exploration in the region are popular with tourists who appreciate oil’s centrality to development in the Middle East.

Another popular spot is the Al Khamis Mosque, said to be one of the oldest Islamic sites in the world, with a supposed foundation as early as 692 CE.

According to the Economic Development Board (EDB), Bahrain is set to invest BD10m ($26.4m) in an effort to renovate one of Muharraq’s oldest neighbourhoods. The 2-km stretch of coastline was integral to the country’s past as a centre for pearl diving, and the EDB hopes that the “Pearl Route” will become Bahrain’s second UNESCO World Heritage site.

OUTLOOK: As one of the Kingdom’s top employers, the tourism sector is a clear priority for a government that seeks to provide jobs for its growing population. But even without public investment, Bahrain’s central location, its unique and liberal culture, and its well-developed travel infrastructure provide it with the assets it needs to compete as a tourist destination.