'Large number' of resort deals at Crimson Sea tourism project signed

Red Sea Development Business, the programmer of the mammoth tourism project on Saudi Arabia’s west coastline, said it signed deals with “a significant number” of hotel companies for the project’s initial phase and will reveal the line-up of operators soon.

The business, which is owned by the kingdom’s Public Investment Fund, is developing 16 hotels with 3,000 rooms across five islands and two inland sites within the first phase which will be delivered by 2023. Period one also includes construction of a fresh international airport.

“We've signed agreements with a huge number of these hotel companies and considerably more are coming," the company’s chief executive, John Pagano, told The National.

"We're going to make an announcement later on in the entire year where we'll announce the steady of brands. But you'll not be shocked or disappointed by the manufacturer stable that we will be presenting to industry.”

Red Sea Advancement Company’s masterplan covers a 28,000 square kilometre site - a location slightly smaller than Belgium - including an archipelago of 90 offshore islands and 200 kilometres of coastline, with inland sites offering mountains, canyons, wadis and an extinct volcano. Once complete by 2030, it'll house 50 accommodations containing 8,000 areas.

The first phase will definitely cost around 28 billion Saudi riyals to 29bn riyals ($7.46bn-$7.73bn) to build up, 14bn riyals that will be credit debt funded through a good syndicated mortgage, with participation principally from local lenders.

“We’re only finalising the loan service, which we desire to sign before the end of the entire year,” Mr Pagano said.

The project is moving “at pace”, Mr Pagano said, with 5,000 personnel already on site and 7.5bn riyals ($2bn) worth of agreements awarded to day. This will increase to 15bn riyals by the finish of this year, including the recently announced general public private partnership arrangement with Acwa Power, which will provide 100 per cent renewable energy for phase one, together with water, wastewater treatment, waste products operations and district cooling.

The deal with Acwa Vitality involves building the world’s most significant battery storage facility, which is linked to a solar and wind facility providing the majority of the power, although some installations will be built locally on islands.

The hotels will at first be owned by The Crimson Sea Development Company.

“With that said, there are possibilities and we're having discussions with several investors who are considering participating in the hotel possessions. We'll probably have significantly more to say about that in the coming months.”

The Red Sea Creation Company’s capital is focused on the project so it doesn’t need external investors, but attracting private sector partners will add credibility, he said.

“If the individual sector is underwriting, then there's more confidence in what we're doing,” he added.

The company isn't interested in selling sites for others build on, because production is being carried out in a “critical habitat”, Mr Pagano said.

"If I screw up one section of the lagoon, I screw up the whole lot. So we're not ready to consider that risk,” he said.

Instead, it is offering joint ventures through which somebody could buy out the whole house at a later date.

“Or we are able to look at various other mechanisms by which there's a capital function, whether we spin it off into a owning a home trust, whether we simply just refinance with permanent financing in place. There are many opportunities for all of us to then recycle capital.”

The project has been built under a “regenerative tourism” model, which aims not merely to protect local habitats, but to create the conditions for native environments to thrive. Only 22 of the 90 islands will be made on and visitor quantities to the website will come to be capped at one million a yr.

"It will likely be a less crowded vacation spot, which I think will resonate well in a post-Covid world," Mr Pagano said.