The Investment Opportunities in Luxury Tourism
By Jay Rosen, Chief Financial Officer at The Red Sea Development Company (TRSDC)
‘The Neo-Renaissance’, the title of this year’s Future Investment Initiative (FII), summarized the unparalleled opportunity nestled in the destructive effects of Covid-19. This year’s conference offered the global investment community the chance to take a moment to reflect on the last 12 months and discuss how we can work together to build a more resilient and sustainable future.
It’s not surprising then, that the topic of ESG (environment, social and governance principles) weaved its way through virtually all the sessions at the event. If we are to be sure that the global economy and the world emerges from the crisis in a better place than before, the environment, social equity and governance is where we should start.
For The Red Sea Development Company, as we look forward to a post-Covid-19 world, our considerations focus on how we can go beyond sustainability to apply a more regenerative approach to the development of tourism projects. This is not only in the environmental sense, a strategic pillar of our destination, but also both from socio-economic and investment perspectives.
Applying a regenerative approach means that we build resilience into the project to ensure longevity for future generations. This mindset has been embedded since the inception of this project so the reflections at this year’s FII resounded. We are proud to lead the way in doing something different.
Indeed, we have continued to make significant progress throughout the pandemic and remain on track to deliver the destination on time. We have completed more than 70km of a planned 80km of road infrastructure, including our new airport road. Our Construction Village, capable of housing some 10,000 workers and designed to set new standards in worker welfare is in the process of opening and our Landscape Nursery, the largest in the region at one million-square meters, is fully operational and set to provide over 15 million plants required to landscape the destination.
Momentum is building as we advance with this construction onsite, begin to deliver on our sustainability commitments and sign our most valuable contracts to date – all with the future resilience of the destination front of mind.
Maintaining Momentum with Investors & Partners
Maintaining momentum with prospective partners and investors, who share our vision and values, has also been a success throughout the pandemic.
At the end of 2020, we awarded our largest contract to date to an international consortium led by ACWA Power for our utilities package, a first-of-a-kind fully integrated multi-utility concession. Under the agreement, the destination will be powered using 100 percent renewable energy, 24 hours a day. Not only is this an incredible sustainability milestone, as we will be building the world’s largest battery storage facility which will allow the project to function entirely off-grid, it is also a significant investment landmark.
The successful completion of this contract demonstrates the sizeable interest from global investors in our project as the partnership agreement is financed by both domestic and international banks.
This agreement is also just one milestone in our broader achievements to date: we have signed over 500 contracts to date, with commitments of approximately SAR 14.5 billion (nearly $4 billion). By current predictions, the contribution of tourism to the GDP of Saudi Arabia will be 10 percent by 2030, compared to the just over 3 percent it contributes now. We hope to play a key role in this growth as the Kingdom of Saudi Arabia has opened up to international visitors like never before. With the introduction of e-visas, festivals, and sports events, both domestic and international tourists now have an opportunity to visit this untouched corner of the world for the first time. Visitors at The Red Sea will also benefit from the destination being designated as a Special Economic Zones that will permit more relaxed social rules and norms in addition to providing a regulatory framework created to encourage investment opportunities and activities.
As we look forward to a post-Covid-19 world, tourists will start to travel again and when they do, they will want to travel to projects like ours positioned to capitalize on regenerative and luxury tourism.
The Red Sea Project has always held strong ambitions for changing the way we approach tourism projects. It’s undeniable that our destination provides a unique chance for global investors to be part of shaping Saudi Arabia’s growing tourism industry and provides an encouraging growth prospect.
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