Bordered by the Kingdom of Saudi Arabia in the South, Iraq to the North and West and the Arabian Gulf to the East, Kuwait is considered the gateway to the Arab peninsula. This oil-rich nation is home to just over two million people, with over half of them non-nationals. 

Kuwait has a climate typical of a desert geographical region, with temperatures averaging 23 degrees celsius for the year, but climbing as high as 50 degrees celcius in the summer months. In this climate, prohibitive to agricultural development, there is virtually no arable land, and it is necessary to import most of the food and water consumed by the populace. 
 

Contrary to its lack of agricultural resources, Kuwait is a country supremely rich in oil resources, which account for 50 percent of its GDP, 90 percent of its exports and 75 percent of government revenues. The first significant oil strike was recorded in 1938 but it was not until 1946, after World War II, that the first barrels were exported. Today, Kuwait is ranked third in the Middle East for proven oil reserves after Iraq and Saudia Arabia, with an estimated 94 billion barrels, 10 percent of the world's crude oil reserves 

Economy 

Kuwait's economy is dependent almost completely on the production of oil, and thus subject to external market conditions. The government is well aware of the finite nature of this resource, albeit not in the immediate future, and have maintained a 'Reserve Fund for Future Generations' into which they funnel 10 percent of oil sector revenues. They are also aware of the need to diversify the economy and tourism is one of the tools at hand. 

Following the September attacks in the US, oil prices slumped by 40 percent. Real GDP growth is estimated at 0.8 percent for 2001, but is expected to contract by 1.1 percent in 2002 as a result of OPEC production quota cuts, which will bring overall oil production down by nine percent compared to 2001. However, this is expected to rebound in 2003 with real GDP growth of 3.5 percent. 

Continued tensions in the region and the increasing concern that there will be a US led military assault on Iraq pose a potential threat to the economy. Foreign and domestic investment activity will most likely be negatively impacted, although this may be balanced by increased oil output and revenues if the Iraqi oil supply is severely disrupted. 
 

Tourism  Tourism is a relatively untapped industry in Kuwait, a country that has primarily concentrated on the development of its oil industry. Corporate and government business dominated the sector with over 90 percent of the travel to the country being for the purpose of business rather than leisure. A complicated visa regime and lack of attractions are

The Safir Palace Hotel Al Riggae

Increased promotion activity coupled with the development of a number of major tourism projects are another step in the development of the industry. The Pearly City Project is a mixed-used development incorporating residential and tourism facilities in a complex in the south of the country, with construction due to be underway shortly. There are also plans underway to develop Failaka and Bubujan islands in the Arabian Sea, aimed at providing a haven for leisure visitors. 

If the oil industry is open to foreign participation, as is the plan with the implementation of US$7 billion Project Kuwait, Kuwait's profile in the non-GCC arena will potentially be raised, and will be a push towards increasing leisure business. However, with oil production the dominant economic activity in the country and a lack of attractions, the push for tourism is perhaps not the primary focus of the government at this time. 

The most recent data available from the World Tourism Organization show visitor arrivals to Kuwait at 77,000 in 1998. With 89,000 arrivals in 1989, visitation declined dramatically to 4,000 in 1991 in light of the invasion by Iraq, but has increased each year since then.  International tourism receipts have also increased year on year with the 1999 figures set at US$243 million. 

Kuwait - The City

In 1999, there were an estimated 2,224 hotel rooms in the country according to the World Tourism Organization. In the capital city, the majority of these rooms are in the four and five-star sector, made up of a selection of international hotel chains, including Starwood, Radisson SAS, Le Meridien and Six Continents, although the dominant company is the local Safir Hotel Management Company. 

The rate cartel operated by the five-star hotels has served to guarantee the highest average room rates of a destination city in the Middle East. Of the 28 markets that are tracked by the Andersen Hotel Industry Benchmark Survey - Middle East and Africa, Kuwait has consistently been ranked first in terms of average room rate. However, occupancy is practically the lowest in the region averaging less than 50 percent in each of the last six years. 

Future supply

It can be argued that the four and five-star market is saturated and it is unlikely that the industry can sustain the new additions that are currently in the pipeline. The Safir Palace Hotel Riggae has reopened after undergoing an extensive refurbishment program, and Hilton has opened a new resort property located on one of the longest private beaches in the country. Other projects online include a new Four Points by Sheraton property to be constructed adjacent to the existing Sheraton Kuwait, as well as the first Courtyard by Marriott hotel for the Middle East, due to open next year. 

Outlook 

Government and corporate business dominate in Kuwait, although there is an increasing push to grow the level of leisure travel to the country. The development of resort properties suited to the leisure traveller, as well as mixed-used developments focusing away from the business traveller are evidence of the desire to attract more leisure business. However, the success of this strategy in the short-term is dependent on the continued conflict in the region, and the potential escalation of violence which will prove a powerful deterrent to new leisure business.