Saudi Arabia unveils Red Sea resort project

A project to transform a large area of the Red Sea coast into a luxury tourism destination has been announced as part of the Kingdom’s plans to diversify its tourism offerings, attract investment and expand the sector’s role in the economy.

Announced on August 1 by Crown Prince Mohammed bin Salman, the Red Sea project involves the development of 200 km of coastline and 34,000 sq km between the cities of Umluj and Al Wajh in the Tabuk Province into a beach resort with luxury hotels and private residences.

Some 50 islands off the coast are also included in the development plans, and with abundant coral reefs, a protected nature reserve and the historical ruins of Mada’in Saleh situated nearby, the project has been designed to appeal not only to beach tourists but to nature and adventure travellers too.

The resort will be governed by independent laws and a regulatory framework different from those applied in the rest of Saudi Arabia, according to information released by the Public Investment Fund (PIF), the Kingdom’s sovereign wealth fund. Visas will not be required for most nationalities, while others will be able to apply online before arrival.

According to a press release issued after the launch, construction of the first phase is expected to start in the third quarter of 2019 and be completed in 2022, with seed funding provided by PIF.

While the state will be the driving force behind the development, partnerships with the private sector are also expected, according to Majid bin Abdullah Al Qasabi, minister of commerce and investment.

“[The Red Sea project] will provide great investment opportunities in Saudi Arabia and will lead to global partnerships with the world’s leading companies in the field of tourism,” he said in a statement issued on August 2.   

In fact, the extensive infrastructure and construction work required for a project of this scale – including a regional airport, port, infrastructure and transport services – could mean that investment opportunities extend beyond the tourism industry, including within the materials, services, technology and logistics segments.

Overall the development aims to generate SR15bn ($4bn) a year and create 35,000 jobs, with many of these to be filled by Saudi citizens as part of a wider policy to reduce dependence on expatriate workers.

Vision 2030 to expand leisure tourism segment

Efforts to recapture domestic tourism and boost revenues outside of pilgrimages to Makkah are also in line with the Vision 2030 aim of expanding non-religious tourism to position the wider industry as a significant contributor to future economic development.

In addition to leisure resorts like the Red Sea, Vision 2030 envisages building other cultural and entertainment projects in the Kingdom, targeting an increase in household domestic spending on cultural and entertainment activities from 2.9% to 6%.

Some of these have already got off the ground. On April 8 the construction of a 334-sq-km cultural, sports and entertainment city in Al Qidiya was announced. The mega project, which includes a Six Flags theme park, is expected to start construction in 2018 and launch in 2022.

To pursue the Vision 2030 targets, Saudi Arabia established a General Entertainment Authority (GEA) in 2016, mandated with planning, licensing, regulating and supporting the growth of entertainment activities.

In the last few months, the GEA has promoted social events nationwide and launched the Roznamah online entertainment calendar, providing information on leisure activities in all parts of the Kingdom. On September 20 the creation of an Entertainment Investment Company under the PIF umbrella was also announced with initial capitalisation of SR10bn ($2.7bn).

Boosting domestic tourism spend a key priority

The developments dovetail with another of the programme’s aims, and the wider tourism strategy of Saudi Arabia, which is to recapture the money spent by the Kingdom’s citizens in foreign markets and channel it into the local economy instead.   

Saudis spent SR98.8bn ($26.3bn) on trips abroad in 2016, according to regional press reports, a year-on-year increase of 17%. Of this, SR65.2bn ($17.4bn) was spent on holidays and shopping compared to SR21.6bn ($5.8bn) on visiting relatives and friends.

In contrast, domestic travel spending was estimated at SR46.7bn ($12.5bn) in 2016, and is forecast to rise to SR59.2bn ($15.8bn) this year, according to an annual report by the  World Travel & Tourism Council (WTTC).

With the country still largely closed to international leisure tourists, domestic vacationers account for the majority of spending in the sector, with local travel generating 57.6% of direct GDP input in 2016, according to the WTTC.

Another study on the Saudi Arabian hospitality market by Colliers International reports that domestic tourism will expand by 7.5% annually through to 2020, outstripping growth in the foreign market, which is forecast to increase by 6.1% per annum. 

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