Bahrain retail sector rises to BHD 2.2 billion, but growth will need tourist focus

06 February 2018 Authored by

Bahrain’s retail market has grown to a value of BHD 2.2 billion per year according to a new study by KPMG, with a low average retail density per resident indicating the potential for further growth. Yet, as the sector is being driven by tourism, future growth may depend on attracting more visitors and increasing their length of stay.

The retail market of Bahrain has tripled in capacity over the past ten years, growing at a compound annual growth rate of 13% from 279,000 square meters in 2007 to 948,000 last year. And this trend is expected to continue, with a forecasted CAGR of 13.4% set to push the estimated 1 million square meters of gross leasable area (GLA) of today out to 1.2 million sqm over the next two years.

Overview of the retail market in Bahrain

This rise has been in part attributed to the 3.5% annual population growth in Bahrain together with a household income growth of 5%, yet the nation’s 1.3 million residents currently only account for around BHD 530 million of the total yearly value of the retail sector, with its 10 million annual tourists contributing the remaining BHD 1.7 billion.

And with at least 65% of these tourists originating from Saudi Arabia, and in respect to the Saudi Kingdom’s liberalisation of its tourist visa regime and investments in hospitality and retail, the authors of the KPMG study argue that a proactive approach to the retail market in Bahrain with focus on attracting greater levels of tourism is a necessity to build in resilience in the sector to changes in the external environment.Overview of the retail market in Bahrain - By gradeAs it stands, Grade A malls, those which offer a number of international retailers such as upscale department stores as well as franchised food and beverage offerings and entertainment options like cinemas and family centres, account for approximately 90% of Bahrain’s retail GLA together with Grade B malls – which have a supermarket and/or a department store but a limited selection of international retail brands.

As an indication that consumers are eager for more upscale shopping experiences, the number of large A-grade variety of malls are expected to grow at a rate four times faster than that of the B-grade malls over the two-year forecast period. The top ten malls in Bahrain, consisting of two large-sized malls, five medium and three small, receive 51 million guests per year.Top 10 malls Bahrain in term of annual footfallsThe majority of this footfall is generated on the weekends via inbound traffic from the King Fahad Causeway – with the estimated seven million annual Saudi visitors attracted to the cinemas, food courts and family entertainment on offer. These causeway tourists, who add up to about 84% of Bahrain’s total number of tourists, spend on average roughly BHD 90 per day on retail, nearly double that of the daily BHD 46 spend from tourists arriving via air.

The total average daily expenditure per tourist in Bahrain is BHD 119 according to figures from the Bahrain 2015 Tourism survey, yet the KPMG study highlights the differing patterns of spending between overland visitors and those touching down at the nation’s airports, as well as the impact on the figures from Bahrain’s large number of single-day visitors as to a comparatively high overall ratio of retail spending against accommodation and other expenditure.

The report states; “Airport tourists tend to stay, on average, four days longer than the tourists arriving through the causeway. In addition, the latter group accounts for more than 90% of the 1-day visitors per year. The average spend per tourist per day for arrivals through the causeway is 13% higher than for airport tourists, possibly because the latter spread their spend over a greater number of days. In terms of the spending mix, causeway visitors dedicate 75% of their budget to shopping, F&B and entertainment, whereas, airport visitors tend spend 43% of their budget on the same.”International overnight tourist spendDisregarding the high number of one-day visitors, in terms of the average length of stay per visitor, Bahrain at 2.6 days still currently sits some way behind benchmark cities such as Hong Kong (3.3 days at a similar number of annual visitors) and Dubai (3.6 at over double Bahrain’s number of vistors), and well off international destinations like London (6.2 days on average) and New York (6.4) which combine for over 33 million tourists per year.

According to the report’s authors, these statistics, coupled with a current retail density (retail square meters per resident) at less than half of cities such as Dubai and New York, indicate that there is still plenty of scope for retail growth in the Kingdom. “If Bahrain invests in creating a tourism destination catering for the needs of target tourist segments, the number of tourists, the average stay and the average expenditure per tourist would continue to increase further. In this case, the retail sector could grow significantly.”

As a projection, Kenan Nouwailati, Head of Management Consulting at KPMG in Bahrain, stated that, in addition to the report’s estimate of BHD 33 million in revenue for the government from various taxes, and a potential BHD 100 million boost to the hospitality sector; “If Bahrain attracts an additional 1 million tourists and increases the average stay length to 3.6 days, the country could generate BHD 300 million of additional revenue from tourists’ expenditure on the retail sector alone.”