Photo: Red Sea Global Group CEO, John Pagano. Credit: Red Sea Global.
By Elena Astorga
In 2016, Crown Prince Mohammed bin Salman of Saudi Arabia presented Vision 2030, an ambitious strategy aimed at improving the country's image, attracting foreign investment, and diversifying the economy to reduce its reliance on oil. According to the King Abdullah Petroleum Studies and Research Center (KAPSARC), the crude oil sector contributed approximately 42% of Saudi Arabia's total GDP in 2019. Oil also accounts for up to 90% of the country's export value, responsible for more than 16% of global oil exports. In 2020, the Saudi Ministry of Energy commissioned the state-owned oil company Aramco to expand its maximum production capacity to 13 million barrels per day by 2027. Furthermore, in 2022, oil and natural gas activities in the country increased by 32.7%, to which the 8.7% growth of the national GDP during that year is largely due.
However, estimates suggest that oil demand could begin to decline by 2040. Saudi Arabia has also committed to achieving CO2 neutrality by 2060. As a result, boosting other industries, attracting foreign capital and achieving a greener development model have become priorities for a country that aspires to position sustainability and innovation as its hallmark.
Playing a key role in this endeavor is the developer Red Sea Global, which serves as the driving force behind two prominent luxury tourism projects along the country's west coast: The Red Sea and AMAALA. At the helm the company is veteran John Pagano, with more than three decades of experience in the industry. Having served as the Chief Executive Officer of The Red Sea Development Company since 2018, Pagano also assumed leadership of AMAALA in January 2021. Both projects became part of the Red Sea Global company in 2022 and are under the umbrella of the sovereign wealth fund Public Investment Fund (PIF), although they have also received debt financing.
Along with other giga projects such as NEOM, envisioned as the cognitive city of the future; or Qiddiya, the planned "entertainment capital," The Red Sea and AMAALA aim to drive Saudi Arabia's transformation into a more sustainable country through innovation. "The Red Sea was conceived to spearhead the introduction of a new economic sector in the Kingdom," Pagano stresses. "Tourism is a globally important economic sector, which before the pandemic accounted for more than 10% of the world's GDP. However, in Saudi Arabia it was underrepresented, so one of the ambitions for 2030 was to help diversify the economy by betting on key sectors such as this one,” he adds.
Regenerative tourism, a flagship in the Red Sea
The Red Sea consists of a 28,000 km2 resort complex and includes an archipelago of more than 90 islands. The first phase of development is scheduled for completion by the end of 2024, with a total of 16 hotels offering 3,000 rooms, although the first hotels will open later this year. By 2030, the facilities will reportedly include 50 hotels with 8,000 rooms, up to 1,000 residences and an international airport. So far, more than 1,500 contracts worth nearly US$6.3 billion (about €5.71 billion) have been awarded, per Red Sea Global.
This initiative aims to have a positive impact on the Saudi population at the national level. According to Red Sea Global estimates, it will create 70,000 jobs and contribute $5.86 billion (nearly €5.37 billion) to the Saudi economy each year. "The way large-scale projects are usually implemented, local people unfortunately don't have the opportunity to participate, experience it and learn from it," Pagano reflects. "We wanted a different twist, to put people and the planet first, and change the whole narrative about what development is. And in doing so, we created the capacity for local people to retain the knowledge we gain as we develop. These are generational projects," he says.
The development of these mega-projects takes sustainability into account, Pagano points out. Red Sea Global has set the goal of turning The Red Sea into a regenerative tourism initiative, i.e., one that not only does not harm the natural environment, but also contributes to increasing biodiversity by 30% by 2040. In an environment of special ecological value such as the Red Sea, Red Sea Global has developed a careful operation to measure the impact of development on the environment: "Using a computer simulation of the marine space, we dissected it into thousands and thousands of squares. We then assigned conservation values to each of them and iterated what would happen if we developed on one or the other to measure the impact of the construction phase, the operational phase, guest activity, etc." This allowed them to select those islands that would be developed to achieve the lowest possible environmental impact, a total of 22. "Less than 1% of the total area of the zone is being developed, and 75% of the islands in the archipelago are preserved for conservation," Pagano highlights.
Moreover, the destination will be powered entirely by sustainable energy. "We are building the largest battery storage facility in the world, with the capacity to provide 1.2 gigawatt hours or 1,200 megawatt hours [82% complete as of June 2023]. It's a utility-scale storage system," Pagano explains. They have also built a recycling and waste treatment plant in collaboration with the Dubai company Averda, to manage the waste generated by the 25,000 people currently working on the project. The compost generated is used to nourish the nursery where they grow the plants that will form part of the resort's facilities, in an example of circular economy.
The efforts to achieve net zero emissions do not end there: from electric vehicles to zero-emission flights, from a solar power plant to the cultivation of mangroves (known for their ability to capture CO2), The Red Sea is aiming high in terms of sustainability.
AMAALA, a bet on luxury tourism
AMAALA, on the other hand, is an exclusive resort of more than 4,000 km2 on the northwest coast of Saudi Arabia, about 200 kilometers from The Red Sea. The resort will feature amenities such as a luxury Yacht Club and facilities aimed at leisure, wellness, sports or the arts. In recent months, partnerships have been announced with several luxury hospitality companies to offer facilities such as a medical and wellness center aimed at increasing longevity, among others. When completed, in 2027 according to Red Sea Global projections, AMAALA will have more than 3,000 rooms spread over 29 hotels, and some 1,200 private luxury homes.
Similar to The Red Sea, the enclave aspires to be more than a leisure destination and become a driver of environmental conservation. Red Sea Global is developing only 5% of the land, concentrating activity in three distinct tourist areas that include an island, a coastal enclave and a marina. The British firm Foster + Partners, selected as "architectural advisors" for the development, has been commissioned to design the marine life institute to be located on the latter, which will provide leisure experiences as well as support scientific research for the conservation of the marine environment.
Technology will also play a key role in the visitor experience. "We are creating a smart destination," explains John Pagano. "We will employ IoT (internet of things) sensors, artificial intelligence and machine learning to help us monitor the environment in real time,” he adds.
Large scale, large impact
Together, the two destinations cover a land area of 32,000 km2, which is the size of a small country, according to Red Sea Global's CEO. As flagships of environmentally conscious luxury tourism, "the two destinations are unique but complementary". To minimize the environmental impact, The Red Sea and AMAALA will only be visited by one million and 500,000 people a year respectively.
The economic impact of both destinations on the local and international economy is expected to be significant. Red Sea Global aims to award contracts for AMAALA and The Red Sea worth US$8 billion (around €7.34 billion) in 2023. The company further estimates that it will create 120,000 jobs and contribute 33 billion rials (about €8.07 billion) annually to Saudi Arabia's economy from 2027.
As well as taking a step towards the country's Vision 2030 in terms of diversifying the economy, these developments are designed to be a bridge between cultures. "If you want to open up the country and dispel people's preconceived ideas about what Saudi Arabia is and what its people are, there is no better vehicle than tourism," Pagano says.