CEO interview: Saudi tourism will come back stronger than ever- Red Sea project developer

The Red Sea Development project, the first tourism project of its size to run entirely on renewable energy, is banking on a greater emphasis on sustainable travel, according to CEO John Pagano

  
John Pagano, CEO of The Red Sea Development Company.

John Pagano, CEO of The Red Sea Development Company.

Though the future of global tourism remains uncertain as the world attempts to recover from the COVID-19 pandemic, the CEO of Saudi Arabia’s ambitious Red Sea Project is optimistic.

Tourism development is a key target for Saudi Arabia’s Vision 2030, and the kingdom aims for it to account for 10 percent of its GDP by 2030. The country has ambitions to develop world-class tourism destinations and attract visitors as part of diversification plans to reduce its dependence on oil revenue.

But how has the pandemic impacted one of its most high-profile developments?

ECOTOURISM

The project, located on Saudi Arabia’s western coast, is being marketed as a luxury destination that will set new standards in sustainable development. Promising to mitigate carbon emissions as well as waste production, its goal is to be carbon negative through plans to support and grow natural habitats. Noise and light pollution at the level equivalent of a Marine Protected Area, as set out by the International Union for Conservation of Nature (IUCN), is another of the project’s key environmental pledges.  

The pandemic may have threatened the project’s progress in 2020, but John Pagano, CEO of The Red Sea Development Company (TRSDC) said the company has been able to maintain 40 percent of its workforce at the site, located between the cities of Umluj and Al Wajh, despite strict government restrictions, meaning progress remains on track to welcome the first guests next year.

Pagano said the company had also made “significant progress” in terms of investment, awarding 500 contracts worth SAR 15 billion ($4 billion). Its largest to date is with ACWA Power, which will design, build, operate and transfer the project’s utilities infrastructure.

“This was unique in that rather than investing capital, we committed to purchasing utilities from the consortium for the next 25 years,” said Pagano.

“Through this partnership, we will house the world’s largest battery storage facility, at 1,000 MWh, and as a result, the entire destination will be powered by 100 percent renewable energy and will remain completely off-grid 24 hours a day and seven days a week.

“A tourism project of this size, powered solely by renewable energy, has never been achieved on this scale anywhere in the world.”

A new slice of the finance pie was revealed in late April, when the company announced that it had secured a $3.76 billion loan from four banks, Banque Saudi Fransi, Riyad Bank, Saudi British Bank and Saudi National Bank. It was the kingdom’s first riyal-dominated loan to receive green finance accreditation.

TRSDC is a closed joint-stock company wholly owned by the Public Investment Fund (PIF) of Saudi Arabia, but Pagano said the company is actively seeking suitable partners across a variety of assets.

He added that the ACWA Power utilities package brought with it direct investment from domestic and international parties, including the UK’s Standard Chartered Bank and China’s Silk Road Fund.

IF YOU BUILD IT, THEY WILL COME

Construction work on the development started in 2019, and the completion date for the entire project is 2030, but how well will the first phase of the project fare as the world tries to come to grips with travel in the post COVID-19 era? 

The World Economic Forum (WEF) says the global tourism industry lost $1.3 trillion in 2020 as border closures and lockdowns related to the pandemic stopped travel in its tracks, noting as well that the majority of experts believe business will not return to its pre-pandemic levels until 2023. 

So is the Red Sea project hoping that it will be a case of “if you build it, they will come”?

“The pandemic has impacted the entire world, but we are confident the tourism industry will come back stronger than ever,” said Pagano. “Tourism in Saudi Arabia is an under-explored market segment with high growth potential, and the government has shown strong commitment to moving forward with the development of the giga-projects, despite the economic crisis created by the arrival of COVID.”

The project is unique in its commitment to ecotourism, which falls in line with a growing interest from consumers in how travel impacts the environment, he said, adding that the resort’s use of renewable energy will save half a million tons of CO2 emissions per year for the first phase of the project. 

In addition, 75 percent of the 90 islands that make up the resort’s area, nine of which are designated as special conservation zones, will remain untouched. Therefore, according to Pagano, the resort will particularly attract those who want to make sure their travel does not harm the planet.

“At TRSDC, we have realised that sustainability is not good enough. To ensure that we are doing all we can to become standard-bearers in luxury ecotourism, we aim to be one of the first global destinations to demonstrate a regenerative tourism approach,” he said. “We go beyond low or zero impact [and] beyond conservation; we choose regeneration. Our guests will be safe in the knowledge that their travel choices will not harm the environment, and we look forward to welcoming inquisitive customers who require genuine sustainability, conservation, and regeneration commitments.”

Pagano said there is definite evidence that tourists want to travel more sustainably now than before the pandemic. “Rather than this trend slowing down, we expect it to accelerate as we move into the new normal.

Research at the end of last year from booking.com revealed that over half (53 percent) of global travellers want to travel more sustainably in the future. Destinations that can deliver this, while also providing unique experiences, stand to reap the rewards.”

Pagano has also observed an emphasis from governments to push a sustainability agenda post-pandemic.

At the Red Sea development, a Smart Destination team is examining how technology can be used to protect and enhance the environment, such as 3D coral printing and coral farming to boost coral populations.

 “We are embracing nature-based solutions in addition to technical approaches for carbon sequestration, including growing more mangroves and seagrasses, and even exploring the use of mechanical trees and algae farms, which will help us achieve 100 percent carbon neutrality and even surpass this goal,” Pagano said.

The project also has a partnership with UAE-based Al Falah Ready Mix for the daily production of around 1,200 cubic meters of green concrete, a type of concrete that uses waste materials as at least one of its components or has a production process that does not lead to environmental destruction.

Energy Efficient Airport

But what of the project’s own dedicated airport, due to open next year? How can a new airport be part of a carbon neutral or negative enterprise?

Red Sea said the design of the airport is specifically focused on minimising the carbon footprint and delivering efficiencies through reduction of dependence on air conditioning, opting instead for shaded areas and natural ventilation. Transport within the destination, including the airport, is also to be powered by renewable energy and reliance on electric vehicles.

Projects to balance flight-related emissions, such as expanding coral, seagrass and mangrove habitats by 30 percent by 2040 to support carbon sequestration (capturing and storing atmospheric carbon dioxide), have also been also planned.  

“Studies indicate that, pound for pound, mangroves can sequester up to four times more carbon than rainforests can, with most of this carbon stored in the soil beneath mangrove trees,” said Pagano. 

He highlighted other schemes to mitigate emissions such as mechanical trees, futuristic-looking metal columns which extract CO2 from the atmosphere, and the development of algae farms, which can also sequester carbon and potentially be converted into biofuel for planes.

The remainder of Phase One of the development will be completed in 2023 with a total of 16 hotels, or 3,000 rooms, across five islands and two inland resorts, as well as commercial, retail and leisure facilities.

“Next year, we welcome our first guests and, while we remain on track, there is still plenty of work to be done. We’re starting to shift our focus from design to completing the procurement phase and construction of key assets,” said Pagano. 

There are currently 7,000 workers on site. The development so far requires two employee accommodation developments. The Construction Village, which is due to house 10,000 workers in total, is already open. The Coastal Village, which will be home to around 14,000 people who will eventually work at the destination, is scheduled to open within the next few months.

According to Pagano, 50 percent of the current workforce are Saudi nationals and 70 percent of contracts awarded have been to Saudi companies.

In total, the 28,000 sq. km. resort aims to create 70,000 jobs and attract 1 million visitors by 2030. It will eventually boast 8,000 hotel rooms across 50 resorts, as well as 1,300 residential properties.

(Reporting by Imogen Lillywhite; editing by Seban Scaria)

(imogen.lillywhite@refinitiv.com)

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© ZAWYA 2021


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