Regeneration is a fundamental aspect of the Red Sea Project in the Kingdom of Saudi Arabia, according to John Pagano, the CEO of the Red Sea Global (RSG) company. Speaking on the sidelines of the Future Investment Initiative in Riyadh, Pagano said: “We are the guardians of a very precious environment. Our goal and commitment is to ensure that it is not spoiled.”
Regeneration and Environmental Preservation
The project includes 8,000 rooms in 50 hotels and 1,000 residential units. It consists of more than 90 islands over an area of 28,000 square kilometers, and 22 islands will be developed for travelers.
Pagano explained that he had to forego commercial success to protect an important habitat for endangered turtles. The coastal area is home to green sea turtles and hawksbill turtles, which are being tracked and their habitats preserved.
Pagano stated: “We discovered a beautiful island that was perfect for a resort destination. However, through extensive baseline studies, we found out that it was a preferred habitat for the endangered hawksbill sea turtles.” He added: “I had to choose to give up commercial success to protect a vital habitat for an endangered species. So, we did not develop that island and remembered that the turtle was here first.”
Environmental Protection and Sustainable Development
Nine islands have been designated as special areas for environmental conservation. To ensure the protection and regeneration of the site, Pagano said they were setting an environmental ceiling – limits on the safe space that people can live in alongside the land system. Pagano added that simulation models were used to plan marine areas, relying on technology, the Internet of Things, machine learning, and artificial intelligence to monitor environmental conditions in real-time.
Buoys equipped with sensors to measure water clarity and quality have been deployed during the construction phase. Pagano said: “If there is a sudden spike in any of these metrics beyond what we want, we stop construction and try to figure out the cause of those disturbances. We want to ensure that there are no lasting negative impacts.”
These efforts to preserve natural oceans extend to the logistics in the area surrounding the project. The largest network for charging off-grid electric vehicles is being established, with a goal of planting 50 million mangrove trees by 2030, and creating the world’s first carbon-free 5G network, with the entire project powered by renewable energy.
Aiming for Environmental Goals
RSG aims to increase the net value of environmental conservation by 30 percent. Pagano stated: “We have mapped and studied the entire ecosystem. We are publishing those reports, and we measure our success or failure based on those reports with complete transparency. We want to be clear that we started from here: how do I achieve a 30 percent increase.”
Additionally, RSG, owned by the Saudi wealth fund PIF, controls the Red Sea Project and the Amaala project, which Pagano said would assist in strategically planning projects. He added: “We will define the boundaries of development and stay within our environmental ceiling. We will not devour ourselves.”
A Distinguished Destination
The year-round destination is expected to see strong demand from local and regional travelers, in addition to travelers from Western Europe, Africa, and Asia. Pagano noted that 80 percent of the world’s population can access the coastal area within eight hours, and 250 million people can reach it in just three hours.
Although island resort destinations are not new to the industry, Pagano emphasizes that the cooler weather compared to regional competitors, the lack of seasonal restrictions on access to places like the Maldives and Bora Bora, and the availability of a variety of experiences and landscapes in Saudi Arabia, such as AlUla, Abha, and Taif, will distinguish this new development from others.
Landmark
Prominent for Vision 2030
Many major brands in the hospitality sector, such as IHG and Marriott International, are establishing a presence on the ground. Pagano stated that RSG is selective in choosing service providers, adding that “all the major brands in the hospitality sector, every hotel brand I can think of, wants to be here.” He continued: “They want to be here because this is the biggest growth market in tourism in the world.”
On October 24, RSG signed an agreement with Kingdom Holding Company, which owns the Four Seasons and Accor hotel chains, to develop a resort on a private island with a 50 percent stake for each.
Pagano commented on the recent agreement: “They are strong both internally and globally,” noting that the investor aligns with RSG primarily in protecting and enhancing the natural environment.
The opening of the project for tourists, with the Six Senses Southern Dunes resort ready for accommodations and the St. Regis Red Sea resort set to open in the first quarter of 2024, will be a significant achievement as one of the many mega projects being realized under the goals of Saudi Vision 2030. The Ritz-Carlton Reserve on the Al-Ula Islands is also expected to open in the first quarter of next year.
Guests will be able to access these luxury resorts via the recently opened Red Sea International Airport, which is currently served by the national carrier of Saudi Arabia, Saudia. There is currently a weekly air service connecting Riyadh, the capital, and the international airport.
The airport is also set to begin operating flights to and from Jeddah soon, raising the number of domestic flights to five weekly flights at the new airport, according to Pagano.
As RSG works on opening the remaining 13 resorts in the first phase during 2024 and 2025, he indicated that services to and from Dubai are expected to start in November 2023, although he did not specify the carrier.
For international travelers, the RSG president plans a hub-and-spoke model. He said: “Realistically, for long-haul flights, that won’t happen until we open more destinations because the three hotels only represent 250 rooms. So, that’s not enough supply and demand to justify long-haul flights at this stage.”
A Mix of Equity and Debt
In May 2023, Pagano told Bloomberg that the company is considering raising funds from the market through an initial public offering (IPO) or a real estate investment trust (REIT) by 2026.
In October 2023, Pagano told Al Arabiya English that internal discussions are still ongoing regarding “different vehicles” aside from the IPO, and that the latter is not “imminent.”
The RSG president stated: “An IPO is not necessarily the best solution for a real estate company.” He added that if the company entered the market now, while it is still in the development stage, it would have to launch at a discount, “leaving a lot of value on the table.”
Pagano noted: “We don’t need capital at this stage. We are fully funded. Our capital structure is in place. The Saudi wealth fund, the PIF, provides us with capital. We have secured a loan of 14.1 billion Saudi Riyals ($3.7 billion) for the first phase of Red Sea construction, which is the first green loan facility in Saudi currency and the largest green loan grant certified by HSBC.”
He added: “We will come to market according to the approach in financing and developing real estate – a mix of equity and debt. We will come to the markets as early as next year to secure a debt facility for Amala.”
Pagano concluded by stating: “If you think about the last five or six years,” including the COVID-19 pandemic in 2020 and the ongoing volatility in oil prices due to geopolitical concerns mainly, “we haven’t deviated from our path. We’ve never stopped, we haven’t taken a break. We’ve been working at full capacity. So, the commitment is clear. We are now opening the destination.”
The addition:
“When we started, the economic contribution of tourism was about 3.4 percent. Today, it is already seven percent and we have just begun. The global average is 10, and I believe we will exceed that”.
Leave a Reply