Last Updated on March 10, 2020
Saudi Arabia, one of the world’s fastest growing restaurant markets, is in the midst of an unemployment crisis. Arabic Hospitality may provide part of the solution. While the nation’s GDP reached $653 billion in 2015 (almost than double the KSA’s 2006 GDP of $328 billion), unemployment rates for Saudi nationals stands at a shocking 11.4 percent. When unemployment was one of the top issues in the U.S. presidential election back in 2008, only 7.3 percent of Americans were unemployed.
With the Nitaqat system, the KSA government is putting solving unemployment at the forefront of its agenda. But will implementation of the new Nitaqat system be enough? Our analysis, coming from years of experience working with Saudi restaurant companies to offset the effects of Saudization, suggests that, while Nitaqat is a start, it has yet to be allowed to live up to its full potential. Encouragingly, however, we believe the KSA’s restaurant industry and its leaders may be able to help provide the solution.
The problem of Saudi unemployment – particularly as it relates to Saudi Arabia’s record-breaking foodservice market – is that most prospective Saudi employees don’t understand the true wealth, vibrancy and potential of their nation’s restaurant industry. It’s a perception problem that paints service positions like greeters, waiters and line cooks as dead-end jobs unworthy of highly skilled and driven individuals. And nothing could be further from the truth – particularly in a region like Saudi Arabia, a land whose rich traditions are highlighted with Arabic hospitality.
The good news: this perception problem is one the restaurant industry has already faced in the U.S.; and its solution is simple: training, education and an investment in hospitality. This situation should be encouraging hospitality companies to make investments in their employees and creating a positive company culture, which will lead to maximizing profit and industry potential.
Saudization and the KSA’s Travel and Tourism Industry
Travel and tourism in the KSA was estimated to make a total contribution of 8.0 percent ($50.7 billion) to Saudi Arabia’s 2015 GDP. Collectively, travel and tourism industry jobs indirectly account for 11 percent of the nation’s entire workforce. Of travel and tourism jobs, coffee shop and restaurant positions make up 48 percent.
By 2020, tourism sector jobs will grow to total 1.7 million at an astonishing 10 percent annual growth rate (the rest of the world, in the meantime, will only see a global average growth of 2.5 percent in tourism jobs during the same period).
Strictly speaking, the KSA and its population of 29 million (47 percent of whom are under the age of 25) have plenty of manpower to fill these roles. However, expat workers typically account for 56 percent of all Saudi jobs. It’s even higher for the restaurant industry, where nearly 73 percent of all jobs are filled by foreign workers. This is only slightly better than the International Monetary Fund’s (IMF’s) estimates that expat workers account for 85 percent of all KSA “low-skilled jobs”.
For companies to achieve a Green Nitaqat standing in 2020, the tourism industry as a whole will need to have roughly 459,000 Saudis on its payroll. That’s 364,800 more than the national workers currently needed to earn the KSA’s entire 942,000-strong travel and tourism workforce.
But what if?
Foodservice companies, with the adoption of Arabic hospitality, can change the current story of unemployment plaguing the region with a headline about how the world’s fastest growing restaurant market is setting the example, turning unemployment on its head.
Imagine the creation of joint hospitality training academies (institutions that prepare Saudi Arabia’s youth for work in an immensely important industry with practical, specialized and standardized skills training) and the creation of a nationalized KSA restaurant association dedicated to helping the industry grow by establishing best practices, acting as an advocate for business and campaigning to improve misguided perceptions. Think of where the world’s fastest growing restaurant market could be in 10 years with this kind of commitment.
A Younger Saudi Workforce
Over the next 10 years, nearly two million Saudi youths will enter the national workforce. But are they ready to make meaningful contributions to the private sector? According to the CIA World Factbook, younger Saudis “generally lack the education and technical skills the private sector needs.” As a result, it is estimated that the unemployment rate of Saudis ages 16 to 29 stands at 29 percent – more than double the nation’s overall unemployment rate.
In 2007, the government invested $3 billion to improve the country’s educational systems to help address this issue. In 2009, the government granted the King Abdullah University for Science and Technology $10 billion. In 2015, the country invested an estimated $58 billion toward improving education (25 percent of the total spending budget). Put into perspective, for the 2015 fiscal year, President Obama allocated $69 billion on U.S. education.
Changing Perceptions and Investing in Arabic Hospitality
As it stands, the KSA’s potential national workforce views entry-level restaurant jobs as unskilled, unbecoming positions that add little value to society and show minimal room for personal and professional growth. The U.S. underwent some of these same perception issues with restaurant industry not long ago.
Misconception 1: An entry-level job in the restaurant industry takes you nowhere.
The Truth: This year (2016), the KSA’s Quick Service Restaurant (QSR) industry segment (with fast food chains built on the backs of line-level employees capable of taking, preparing and serving an order in under 180 seconds) is projected to be worth $18 billion – clearly, a profitable industry requiring trained, experienced managers and executive teams; leaders who will shape the future of the KSA foodservice market. And (as companies in the U.S. have shown) roughly 80 percent of all restaurant executive staff started “at the bottom” in an entry-level position.
Misconception 2: Entry-level restaurant jobs are unbecoming.
The Truth: Saudi Arabia is leading the growth in the GCC hospitality industry; and the global media is taking notice, looking to Saudi Arabia as a nation that is redefining and reintroducing the world to Arabic hospitality. While our consultancy’s long, dynamic experience working with KSA brands allows us to see the potential in this story, unfortunately, this is not always the tale depicted – particularly when it comes to Saudization. Because the government and private sector companies (like restaurants) have yet to truly come together to face unemployment with a united front, articles like the March 2015 Wall Street Journal story “Saudi Arabia Puts the Squeeze on Foreign Workers” take a distinctly negative tone.
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Arabic hospitality is an ancient and incredibly beautiful tradition of welcoming travelers into one’s home as honored guests. It is a hospitality that is not boastful, but worthy of immense pride; where individuals travel great distances and are welcomed with a meal, a remnant of the days when individuals did not traverse Saudi Arabia in air conditioned cars – a time when to refuse a guest (even an unexpected one) refreshment was to place the visiting individual’s life in danger.
It has been my distinct honor to have witnessed the modern face of these traditions first hand during each of my many trips to Saudi Arabia, and an even greater privilege to have had the opportunity to help KSA foodservice companies build themselves up to incredible heights by incorporating Arabic hospitality into their branding and company culture. What if, by working together with restaurateurs, government initiatives and an eager young workforce, we could say the same for the entire KSA restaurant industry?
Not many foodservice consultancies from outside the region fully understand the added challenges of operating in the Middle East. We do, and we bring both a global and local perspective to foodservice strategy and planning no other firm can.
If you’re a restaurant chain or an investor in the foodservice sector, we can help with growth an expansion, turnarounds, performance optimization, and value-creation strategy. We provide tailored insights about what’s now and what’s next — and why it matters — to help companies become faster, leaner, and more agile.