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Saudi Arabia is experiencing a unique socioeconomic transformation in which sports take center stage in the Kingdom’s massive diversification efforts.
In brief
- Developing sports events can offer substantial economic development potential for a country.
- Sports events help to promote the tourism industry in the country.
- Saudi Arabia is now growing as a hot spot for attracting high-profile sports events.
- Events organizations need to look into revenue generation possibilities for long-term financial sustainability.
The Saudi Vision 2030 upholds Saudi Arabia’s plan to diversify its economy and address the challenges brought by low global energy prices. Vision 2030 also aims to create a vibrant society by promoting a healthy lifestyle and well-being — physical and social. The Quality of Life Program was launched in May 2018 to deliver on this objective. Sport is central to this program, with several initiatives aiming at encouraging mass participation, improving Saudi Arabia’s athletes’ performance in international competitions and growing the sports economy.
In a short time, Saudi Arabia has leaped to the forefront of becoming a new breeding ground for a flourishing sports events ecosystem by playing host to some of the biggest and renowned sporting events globally. A thriving sports sector prompts positive spillover and ripple effects in other sectors of the economy such as tourism, national identity and culture, public health and, most notably, youth and social empowerment. Specifically, hosting major sporting events displays Saudi Arabia’s value-driven diversity and inclusiveness, high economic potential and cultural attractiveness to the wider international arena, thereby increasing the inflow of foreign direct investments (FDI). It also enhances the attractiveness and visibility of the nation’s tourism sector.
Economic benefits of sports development
The Government of Saudi Arabia aims to encourage widespread participation in sports activities, diversify the economy and boost the sector’s contribution to GDP. Sports’ contribution to GDP has already grown from US$2.4b in 2016 to US$6.9b in 2019. This growth offers significant development opportunities to Saudi Arabian companies involved in the sports ecosystem, ranging from event organizers, sports facilities providers, to sports services such as gyms. While an impressive start, there is still massive growth potential in terms of GDP growth, FDI and employment, as well as indirect benefits such as stimulating tourism and improving the overall image of the country.
Large-scale, internationally recognized events in the Kingdom present massive partnership, investment and sponsorship opportunities in every part of the sports value chain — venues or facilities, sports leagues or clubs, sports professionals, equipment, merchandising, etc. The development of the sports industry in Saudi Arabia will help promote the country as a prime tourist destination. It will also offer attractive employment opportunities, in competitive sport as well as in the business of sport. Over two-thirds of the Saudi Arabia’s population are under the age of 35 with a growing appetite for sport, driving both event participation and attendance. While appreciating and encouraging sports culture in the country, the history, customs, traditions and culture of the country will be portrayed in a positive lens globally, creating a desire to know more. It helps to improve the image of the nation and build trust. Sports events have the capability to uplift the economic, social, lifestyle and health aspects of Saudi Arabia.
Sports tourism: a blooming opportunity
Sports events are an important component of tourism in general. Inbound attendants to sports events typically combine this with local tourism. Tourism projects are placing sports at the heart of boosting entertainment, hospitality and tourism industries. There is also a broader opportunity in attracting tourists to practice key sports in unique locations of Saudi Arabia’s mega projects. In recognition of sport’s significant economic contribution potential, the Saudi Arabian Government has announced very substantial investment commitments.
Sports events: a massive opportunity for Saudi Arabia
Historically, Saudi Arabia has not captured its fair share of global sporting events. Today, the Kingdom is ambitiously expanding the line-up of sporting events it is hosting — including major international events, elite events, regular national competitions, as well as numerous smaller and mass participation events. The number of internationally recognized events doubled from 9 in 2018 to 19 in 2019. The events held so far include the WWE Super Showdown, the Saudi Pro-Golf Championship, Battle of the Champions, Formula E, E-Prix, International Handball Federation Super Globe and Saudi International Meeting for Disabilities Sport. In 2020, all major sporting events planned during the year were disrupted by the COVID-19 pandemic. However, it has once again picked momentum and is in line with the country’s vision and objectives, with multiple large-scale events being planned throughout the year 2021.
The sports events industry is nascent in Saudi Arabia, with revenues of US$2.8b in 2019, representing only 0.9% of the global sports events industry. The market is expected to acknowledge substantial growth in the next five years, with a growth rate of 8% per annum.
Expected benefits of hosting sports events in Saudi Arabia
Hosting events will generate substantial benefits for the country. There are of course the direct economic benefits generated by the event, but more broadly speaking, sports events will act as a springboard for the overall development of the practice and the business of sport in Saudi Arabia.
The key benefits of hosting events include:
- Delivering direct economic impact, from spectator revenues (ticketing, food and beverage (F&B), accommodation), athlete spend (accommodation, sports services such as training facilities) and sponsorships
- Stimulating interest in sport in Saudi Arabia by encouraging both mass participation in sports events and creating interest in pursuing a career in high-performance sports
- Developing tourism, as flagship events will encourage spectators to combine sports viewership with tourism opportunities
- Improving the image of Saudi Arabia, as a modern nation with a thriving social and entertainment scene
- Promoting a sense of pride and unity among Saudi nationals
Turning sports events opportunity into success
Attracting high-profile events to Saudi Arabia will yield significant benefits to the country — provided it is able to turn these events into commercial successes. This entails creating highly entertaining events which will attract and delight viewers as well as drive monetization. A visual and emotional delight for the viewers is essential to leave an exceptional experience. For that, sports organizations need to focus and make investments in improving the overall fan experience, both inside and outside the stadium. There is a significant need to engage and develop year-round, 360-degree relationships with fans.
By digitalizing the customer journey, it is easier to deliver a personalized experience:
- Improving the live experience for fans at venues
- Improving the experience for fans on the go, at home or outside the venues
Maximizing monetization opportunities
The Saudi Arabian Government will certainly provide an initial boost to the development of the sector through investments, but long-term financial sustainability will be essential. This will require addressing challenges specific to Saudi Arabia. Despite the challenges, event organizers will need to leverage a wide range of revenue generation opportunities. Certainly, in the beginning, significant investments in educating viewers and advertisers alike, along with highlighting the value for money or return on investment (ROI), will be required to stimulate willingness to pay. Some of the revenue generation opportunities at hand include:
- Entice advertisers
- Grow sports broadcasting revenues
- Boost ticketing revenues
- Increase revenues generated by sponsorships
- Generate revenues from private companies involved in sport
- Generate revenues from consumer services or collectibles
Also, data monetization is likely to gain importance and emerge as a huge revenue stream for sports organizations. Data analytics, artificial intelligence (AI) and machine learning (ML) are gaining importance in sport for multiple purposes such as to improve public attendance, event monitoring at live events, performance analysis, player fitness and safety, predict outcomes and team valuations.
Being relatively new, monetization of virtual events will innovate through more immersive and interactive formats giving rise to novel partnerships between venues and live streaming platforms. It also allows cross-platform integration and monetization between events, sports organizations and any other form of virtual entertainment, such as music concerts or shows.
Building a sports economy
Events represent a unique opportunity to support the development of a local sports industry. With an estimated market of over US$3b by 2024, there is ample opportunity for both the global and local private sector to play an important role. The Saudi private sector can play prominent roles as sports event organizers, sports infrastructure providers and sports marketing agencies or event managers.
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Summary
Sport emerges as an important component of the socioeconomic development of a country. Saudi Arabia has evolved to become a new cradle of flourishing sports events ecosystem by playing host to some of the biggest and renowned sporting events globally. This helps in developing the tourism industry and thereby uplifting the economic prospects of the country.