'Tailoring L&E investments in GCC could generate $3.4bn annually'

GCC governments can generate an incremental of $3.4 billion annually by aligning investments in the leisure and entertainment sector (L&E) with consumers’ needs, according to a new data.
Bahjat El-Darwiche, partner with Strategy& Middle East

GCC governments can generate an incremental of $3.4 billion annually by aligning investments in the leisure and entertainment sector (L&E) with consumers’ needs, according to a new insight by the Ideation Centre, the leading think tank for Strategy&, part of the PwC network.

GCC countries are investing significantly to develop leisure and entertainment sectors to improve quality of life, celebrate national identities and diversify national economies. Bahjat El-Darwiche, partner with Strategy& Middle East, said: “L&E activities impact society’s well-being positively in a number of ways, through engaging nationally relevant culture and art activities, increasing citizen’s participation in recreational events and affirming belonging among diverse groups of people – which all leads to a higher quality of life. However, to get the most from their L&E initiatives, GCC governments have to prioritise investments to match the specific needs of the sector’s consumers.”

The GCC has ambitious aspirations for its sector
According to the report, Saudi Arabia is investing heavily and introducing major changes with the aim of building a thriving L&E sector and a comprehensive offering across segments, in line with Saudi Vision 2030, the national development program and quality of life program. As part of this effort, the government has created new entities such as the Ministry of Culture, the General Entertainment Authority, and the General Sport Authority - and there will soon be 11 more culture subsector bodies that will focus on developing areas such as visual arts, performing arts, film, and music.
The UAE, Qatar and Bahrain, all include L&E in their national visions and plans, with a primary focus on celebrating culture, heritage, and national values by investing and promoting their arts and culture ecosystem. Kuwait and Oman, however, consider the economic impact of these activities, indirectly.

To understand what the public’s current consumption levels and preferences are, the Ideation Center surveyed 1,200 consumers in the six GCC countries, and included nationals, as well as Arab, South Asian, and Western expatriates. For this purpose, the L&E sector was defined as comprising of six categories of activities, namely: home recreation, visual arts, live entertainment, neighbourhood recreation, mega parks, and sports. The survey highlighted key findings in relation to L&E consumption preferences and levels:

• GCC citizens and residents place a premium on access to L&E options. Two-thirds of respondents see L&E as a “must” for quality of life and prosperity.
• Moreover, respondents see value in improving the quality and selection of L&E offerings. Among the primary benefits they perceive are a better lifestyle and increased happiness (69 per cent of respondents), stronger family ties (50 per cent of respondents), and stronger social connections (39 per cent of respondents).
• Interestingly, GCC consumers reported generous spending on L&E activities, and that they are willing to spend more.
• Overall, GCC consumers claim to spend an average of 6.2 per cent of income on L&E. By comparison, the average household in the UK spent around 4.2 per cent of its income on the same L&E categories in 2018, according to government reporting.

Karim Sarkis, senior executive advisor with Strategy& Middle East, added: “Based on consumers’ self-reporting, an improvement in L&E offerings could potentially lead to an increase in spending by over $3.4 billion a year across the GCC. More than 78 per cent of respondents showed willingness to increase their spending on L&E if the offerings were more aligned with their needs. This would correspond to an average increase in spending on L&E activities of 8.5 per cent per household.”

Supply of L&E in the GCC
An assessment of the current and planned supply of offerings (in absolute and in proportional values) across visual arts, live entertainment, neighbourhood recreation, sports, and theme parks was conducted, providing an understanding of the value proposition of each country.

UAE - The UAE already has a strong existing supply of recreational activities and mega parks, coupled with renowned visual arts and live entertainment offerings.
Bahrain - Bahrain leads the region in terms of supply of cultural and neighbourhood entertainment, especially its live entertainment sector (theatres and festivals).
Saudi Arabia - Saudi Arabia has a limited supply of L&E offerings relative to its population size. Yet if it achieves its 2030 plans, its overall L&E offerings, excluding sports, will be the richest and most diverse in the region in absolute terms.
Qatar    - The supply of sports and visual arts offerings is well advanced and a priority in the country.
Kuwait - Providing cultural offerings is a main focus in Kuwait, with an emphasis on building libraries, and promoting visual arts, as well as accessible recreational options, especially outdoor parks.
Oman - Oman is notable for offering prestigious national and international opera performances, as it is home to the region’s oldest opera house.

All countries also have plans to further develop the visual arts and live entertainment scenes.

Alice Klat, director of the Ideation Centre, said: “We compared available and planned offerings with GCC consumers’ consumption levels and preferences. Our survey findings show that there is a lower level of engagement with the cultural activities, as GCC consumers favour lighter L&E activities such as neighbourhood recreation and sports. Based on survey results, this is due to the limited awareness, variety and cultural relevance of current activities.”
The survey also shows that these trends are likely to further intensify, as respondents aim to increase their consumption of sports activities, neighbourhood recreation and theme parks. In contrast, engagement levels for visual arts and live entertainment are likely to remain flat or even decrease.

Opportunities for GCC governments
GCC governments have several opportunities to increase L&E demand and returns on investment, and grow sector economic contribution in the region. The Ideation Centre has identified three priorities for GCC governments. These include:

1) Increase sensibility to arts and culture
GCC consumers are not sufficiently engaged in arts and culture. GCC governments should start by making arts and culture offerings more available and accessible, publicising them in dedicated public spaces. They should then encourage peoples’ participation through the creation of immersive and engaging experiences.

2) Focus on neighbourhood-based entertainment offerings
GCC governments should also incentivize investments to build a comprehensive neighbourhood entertainment offering. Family entertainment centres should be prioritised for their high profitability (ROI of 20 per cent or more). Outdoor urban parks should be made more available and accessible, especially closer to prime city locations.

3) Invest more carefully in theme parks
While there is a growing demand for theme parks, GCC governments need to assess any opportunity carefully. Theme parks require large and complex investments, and there is typically a lengthy period before they break even, in part because of high operating costs. However if successful, they can create jobs, attract tourism, and increase tax revenues.

“The current L&E investments underway in GCC countries are ambitious. By working in partnership with the private sector, GCC governments can develop the L&E sector so that it also opens the region to an influx of domestic and international tourists. In turn, this could unlock significant economic potential for the region, helping countries to fulfill their national development objectives,” said Melissa Rizk, senior fellow with the Ideation Centre. - TradeArabia News Service