World Economy

Tourism to replace oil economy in Saudi Arabia?

Saudi Arabia's tourism back up plan
Saudi Arabia's tourism back up plan

The revenue that Saudi Arabia generates from oil could be overtaken by tourism one day, according to tourism industry experts and economists.

Speaking on the rapid growth of tourism to the country at an event organized by the Saudi state, economists and experts said that tourism and national heritage are the sectors most likely to become pillars for Saudi Arabia's future economy -- one that is currently predicated on oil exports.

"Tourism represents the second most important economic sector in the Kingdom," said economic analyst Fadl Saad Al Bu Ainaian, according to a release from the organizers of Wednesday's event, the Saudi Commission for Tourism and National Heritage (SCTNH).

"Despite its low contribution to the gross domestic product (GDP) of only 2.7 percent, development plans in tourism show its ability to raise its contribution to higher levels, and makes it more capable to develop targeted areas especially the rural and remote areas that need comprehensive economic development to create jobs and investment opportunities," he economist added.

A couple in Jeddah, Saudi Arabia.
Kaveh Kazemi | Getty Images

Another economist present at Saudi's tourism event, Nasir bin Ogail Al Tayyar, estimated the volume of tourism market in the Kingdom as about 80 billion Saudi riyals -- $21.3 billion -- aside from the income derived from pilgrims travelling to the Islamic holy site Mecca.

Read MoreDeadly stampede at Mecca highlights dangers of hajj

The comments come as Saudi Arabia is investing increasingly in its tourism industry, with the SCTNH overseeing numerous programs to develop museums and heritage sites, tourist accommodation, tourism routes and domestic employment in the tourism and hospitality trade.

Pushing the tourism agenda away from home too, Saudi Prince Sultan bin Salman, the president of the SCTNH, attended a Group of Twenty (G-20) meeting of tourism ministers in Turkey on Wednesday to discuss how to strengthen the tourism sector – which is estimated to account for one in 11 jobs in the world.

Leaving oil behind

Wealthy as it is from oil revenues -- it has an estimated $757.2 billion sovereign wealth fund and oil and gas makes up around 50 percent of the country's GDP, Saudi Arabia is looking to diversify away from a product that has lost half its value since June 2014. Then, a barrel of benchmark Brent crude fetched $114 but today, a barrel is trading at $48.87.

Low oil prices came amid a glut in supply and lack of demand, and have been exacerbated by Saudi Arabia's decision, as de facto leader of the 12-producer oil group Organization of Petroleum-Exporting Countries (OPEC), not to cut oil production despite the steep drop in price.

Nonetheless, Saudi Arabia is aware that fossil fuels, and the world's reliance upon them, are finite and has started to look at boosting other areas of its economy before it's too late. The country also has a high proportion of young people who are unemployed and tourism is seen as a way to direct young people into jobs.

Read MoreHere's why Saudi Arabia is caught in 'perfect storm'

Reporting on Saudi Arabia's economy in September, the international Monetary Fund (IMF) praised the country's efforts to diversify but urged the government to continue with reforms of the labor market.

"The decline in oil prices has increased the importance of structural reforms to switch the focus of growth away from the public sector and toward the private sector," it said.

"With unemployment of nationals still high and the working-age population growing strongly, the government is continuing to focus on reforms that aim to increase the employment of nationals in the private sector and diversify the economy away from its reliance on oil."

Arriving late to the party

Saudi Arabia is already a tourism destination for Muslims around the world who "make hajj" or a pilgrimage, to the holy city of Mecca. But despite attempts to modernize infrastructure around the site, visited by millions every year, the authorities have been accused of complacency over visitor safety.

Read MoreTough times strike Saudi Arabia's millionaires

That criticism was borne out in the recent stampede that resulted in 717 deaths of pilgrims, the latest in a string of similar tragedies, has highlighted Saudi shortcomings in being able to deal with influxes of tourists and pilgrims, however.

In 2014, Saudi Arabia's council of ministers (a cabinet of ministers who assist King Salman bin Abdulaziz Al Saud who is also prime minister) approved the formation of the Saudi Association for Tourist Accommodation facilities, Saudi Association for Tourist Guides, and the Saudi Association for Travel and Tourism."

It remains behind its Arab neighbors in terms of tourism, however, with the United Arab Emirates (UAE) cities Abu Dhabi and Dubai already popular tourism destinations in the Middle East.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld