RIYADH (Reuters) - Saudi Arabia's Al Tayyar Travel Group 1810.SE, a major tourism company in the region, expects earnings to grow about 25 percent next year, aided by Saudi government spending and a planned acquisition in Britain, its top executive said.
The wealthy oil-exporting country is investing heavily in infrastructure projects and revamping many of its 27 airports to cater for growing airline passenger traffic that, according to the latest official figures available, exceeded 54 million people in 2011, up 13.6 percent from 2010.
“The government is spending some 300 billion riyals ($80 billion) on airport development, train projects are expected to start in 2014 and two new airlines will operate in the Saudi market - all these factors make us expect higher growth compared to past years,” said Nasser bin Aqeel al-Tayyar, Managing Director and founder of Al Tayyar Group.
“In our strategy we always target around 10 percent growth, but in the past years we exceeded this target and we expect to reach 25 percent in 2014,” he said in an interview during the Reuters Middle East Investment Summit.
Last week, Al Tayyar posted a 6.8 percent increase in third-quarter net profit, citing higher sales and revenues from airline incentives. Its nine-month earnings jumped 23 percent from a year earlier to 735 million riyals.
It shares are up 59 percent since their listing in June 2012 and have rocketed 115 percent year-to-date.
In addition to the state spending, Al Tayyar is a likely beneficiary of deregulation designed to diversify Saudi Arabia’s economy beyond oil, as the government tries to create private sector jobs that would cut unemployment and help the country ride out any future plunge of global oil prices.
Last December, the Authority for Civil Aviation announced that Qatar Airways and Bahrain's national carrier Gulf Air GULF.UL had become the first foreign airlines to obtain carrier licenses allowing them to run both local and international flights in the kingdom. It also designated eight local airports as regional ones.
This will increase the availability of airline seats in the domestic market, where almost 2 million passengers cannot find seats annually, and thus boost company sales, Tayyar said.
His company was founded in 1980 as a single reservation office in Riyadh, and now has 28 subsidiaries in Saudi Arabia and 18 overseas in countries including Egypt, the United Arab Emirates, Sudan, Kuwait, Lebanon, Malaysia, Canada and the United States.
To strengthen its presence overseas, the company is in the final stages of acquiring a firm in Britain’s travel and tourism sector, Tayyar said.
“This will be our first acquisition in Britain with the aim of improving some sectors that complement our operations. We are studying three more acquisitions in Europe and Egypt but no decision has been taken yet...We need strength points at these locations,” he added, declining to give further details.
Tayyar said the last summer season had seen an increase in Saudi travel to the United States and Europe, locations where customers tended to demand extensive services.
The company has allocated 300 million riyals for investment during 2014. In addition, it will spend 200 million riyals over the next two years on building a four-star business hotel in Jeddah, he said.
It has also launched a private aviation service by purchasing a small jet to lease to VIP clients, and expects 25-30 million riyals of revenues annually from this activity.
Tayyar said the Arab Spring uprisings around the region had not hurt his company’s operations significantly, but added that they had shifted tourism destinations in the region.
“Egypt was the biggest attraction to Saudi tourists - now it comes at the end of the list, along with Syria. Lebanon also was one of the biggest luxury tourism spots, and now it attracts no one.”
Tourists in the region have switched their destinations to the UAE, Europe, Turkey and the United States, he said. The latest official figures showed Saudi spending on outbound tourism rose 8.9 percent in 2011 to 61 billion riyals.
“Tourists are the most fearful persons in the world, unlike those who travel for purposes of education, treatment or work. Tourism means entertainment not risk, and unless Arab Spring countries have stable security, I don’t expect improvement in tourism there,” Tayyar added.
The company had big plans for investment in Egypt before its 2011 uprising, but is now watching the situation and will consider reviving the plans when the country enjoys stable security and a stable government, he said.
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Editing by Andrew Torchia
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