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While the global tourism industry is reeling from the effects of Covid-19 on international travel and travellers choose to stay put, one of the most ambitious luxury leisure developments in the world is quietly taking shape in a corner of Saudi Arabia rightly described as the last hidden gem in the world. Jola Chudy speaks to Red Sea Development Company CEO Jon Pagano about how a quest to build a resort of unmatched luxury goes hand in hand with a determination to safeguard and protect priceless natural habitats for generations to come.

Saudi Arabia's Red Sea development dreams begin to take shape

John Pagano, chief executive of The Red Sea Development Company.

Unless you have a keen interest in off-the-beaten-track scuba diving destinations, you might be forgiven for not knowing much about Saudi Arabia’s West Coast. A barely-touched area of rich biodiversity that includes mountains, desert, dormant volcanoes, mangroves and astonishing coral reefs, it’s an environmentalist’s dream ecosystem.  You’d also, unless you’ve been keeping a particularly close eye on developments in Saudi Arabia, be forgiven for not immediately associating the oil-rich sovereign state with sterling eco credentials.

However, one thing that hasn’t escaped many eyes is the stratospheric pace of change afoot in the kingdom, fuelled by its ambitious Vision 2030 program, and one of the cornerstones of this is tourism development. The country expects this sector to account for around 10 percent of its annual GDP by 2030 and a recently announced $4 billion Tourism Development Fund underpins this ambition, injecting cash like rocket fuel into nearly 40 separate developments around the country.

A lynchpin of this vision is slowly rising up out of the earth on Saudi Arabia’s western coastline. The Red Sea Project, led by a specially formed entity called The Red Sea Development Company (TRSDC), will encompass around 48 hotels and 8,000 rooms when finished in 2030 – Phase One is set for completion in two years’ time with 16 hotels and 3,100 rooms set to welcome guests to an experience-laden destination unlike any other.

Work is already under way for the project, which was announced at the end of July 2017 and bears the status of ‘gigaproject’, a moniker that may well have been coined specifically to describe a kind of next-level development not previously seen anywhere else. In fact, the first page of an online search of the word brings up several Saudi projects including Amaala  and Neom. Unprecedented new words for unprecedented times and a development that will span more than 28,000 km2 of pristine land and water, encompass an archipelago of more than 90 islands and be built around canyons, ancient heritage sites and important conservation areas.

The first, preparatory phase at the Coastal Village, which will house 14,000 employees, is already underway along with construction of a 3.3km crossing to the main hub on Shurayrah Island. Leading the development is John Pagano, whose 35-plus years of experience includes roles as Managing Director of Canary Wharf Group, President of one of the largest development companies in the Bahamas and head of his own investment company. Pagano, an industry veteran, was in Europe when he was headhunted to the role.

“I had taken a step back from my career when I got a call out of the blue asking if I would come to Saudi Arabia. It wasn’t on my horizon but after I came out and met MBS, I was taken with the vision and the ambition – more so than the development itself – but what got my attention was the chance to be part of something really big,” he tells CEO Middle East from his office in Riyadh during our Zoom interview.

That ‘something big’, The Red Sea Project, seeks not just to redefine the parameters of luxury travel, but, in its way, to play its role in transforming an entire country. His vision for TRSDC stretches beyond the building of The Red Sea Project. “I want it to be a real estate company for the future, for tomorrow’s Saudi employees. We are proud that 50 percent of our staff today are Saudi nationals and that women are increasingly entering the workforce.”

A sea change

Saudi Arabia is undergoing a huge period of change within its own society while at the same time unfurling to the rest of the world. Alongside this, its stratospherically ambitious economic Vision 2030 is touted as the masterplan that will propel the kingdom beyond its oil-based income. It’s an opportunity that many investors are looking at – the chance to stake a claim in a remarkably unsaturated landscape, in a supremely wealthy country that in 2020 still represents huge potential for growth, development and change.

“Before Covid-19, tourism represented around ten percent of global GDP and one in ten people derive their employment from tourism; in Saudi Arabia, that figure is around three percent and most of that has traditionally comprised religious tourism,” says Pagano. “The market has huge growth potential; investors that come in early will see huge returns because the destination will resonate with people around the world.”

With its borders increasingly more open and accessible to visitors and with rules relaxed for visitors, the aim of boosting foreign investment could not be clearer. The kingdom issued 350,000 visas in 2019 Q4, according to Ahmad Al-Khatib, chairman of the Saudi Commission for Tourism and National Heritage.

Building vision in times of crisis

“The difference between good companies and great companies is that good companies focus on what they do and great ones have a higher purpose. I believe we are building great hotels, but what drives us is our passion for Saudi Arabia and the environment, and that is building a culture that will feed into what guests experience when they come here,” says Pagano.

A seasoned leader, Covid-19 is certainly the most unexpected situation Pagano has encountered, but having led businesses through economic crises, challenges and even bankruptcy, he is adamant that in times such as this, there is much scope for learning and staying the course.

“You learn more from adversity than you do when things are going well and you can call upon experiences from the past – it’s in the muscle. Every one of the situations is different and key to this particular crisis, for me, is the question of how to maintain momentum. I was keen to ensure that we kept the team together, maintained good communication whilst we grappled with the challenges. Most of these have related to restrictions on movement but what I have been most encouraged by is the organisation’s determination to maintain progress. We had slowdown – but no stop.”

As the offices open up over the summer with people back up on site and in the offices, Pagano is keen to resume the “people-based business” despite being an advocate for flexible and distant working that has become the norm in recent months.

Greener than green

One of the ways that the impact of the build is being minimised is through building off-site. Elements such as the overwater villas are being created away from their final position, the components delivered by boat and assembled on site. “We reduce the number of people on the islands and protect the environment this way. The other aspect is looking at the carbon content of the materials.” Monitored by external independent bodies including The Ministry of Environment, LEED  and GRESB, the project has, from the beginning, sought to exceed global sustainability and environmental standards in green building.

Another is through deliberately sourcing green materials – such as through awarding contracts to companies that meet rigorous sustainability criteria; a key contract for concrete was won by a company that creates low-carbon concrete, and the company is innovating with suppliers to find solutions to its unique requirements.

“One of our objectives is to go above and beyond what exists in environmental regulation in this country. We are looking for the best examples around the world and seeking to raise the bar higher. We are 100 percent reliable on renewable energy, a claim you might hear from many entities, but nobody has ever done it on this scale, 24 hours a day, 7 days a week. We are an-off grid solution and the reason for this is we wanted to remain completely true to our principals,” says Pagano. “I didn’t want to run on solar panels during the day, and then at night have to connect into the national grid and take energy created by burning fuel – that would, to me, have been a cheat.”

It’s a premium he says is worth paying, because he anticipates it will resonate in a post-Covid world, and also to travellers who, post Greta Thunberg, increasingly want to ensure that their far-flung vacations incorporate ethical, environmental credentials.  Environmental awareness, far from being a trend, is a cornerstone for the travel industry of the future and one that The Red Sea Project is responding to, head on.

“It’s what the project has been about from the beginning and I think it will play out very well when the resort opens.”

Habitats vs holidaymakers

Built in and around some of the world’s most unspoilt natural habitats, there hangs a question as to just how respectful a gigaproject development can ultimately be towards the fragile ecosystems that it will encroach upon.

The master-plan and environmental impact plans were approached differently, with environmental scientists brought in right from the beginning, partnering with the King Abdullah University of Science and Technology (KAUST), who are leading experts on the Red Sea. The marine-spatial planning exercise drew on the combined expertise of the Saudi researchers alongside the National Technical University of Athens and executives from TRSDC – including Pagano -- to ensure that the masterplan was designed with eco credentials incorporated from the very start.

“We assigned ‘conservation values’ to each of around 30,000 individual squares that represent the  lagoon of roughly 2,000 square kilometres, an archipelago of 90 pristine islands, and the coral reefs,” he explains. “And we ran simulations of the master plan for operations and also for the build itself. We then changed the plan based on the results of the simulation, with the goal in mind of enhancing the conservation value of the aggregate total.”

The painstaking research means that just 22 of 90 islands will be developed. Yet, amongst those being left alone, is one that was particularly appealing to the developers, but its established colony of nesting Hawksbill turtles prohibited any build on the site.

“Maybe something that attracted us to the island likewise attracted the turtles, but if we were to develop the island we would displace a critical nesting site,” he notes. “That island is set aside and protected for future generations; we may organise strictly monitored visits to allow our guests the chance to witness something amazing. This underscores that we are putting the environment ahead of commercial gain. What the marine spatial planning exercise demonstrates is that development and the environment can co-exist.”

The number of people visiting the islands will be limited; the ultra-luxury segment will naturally support this, but the decision to make The Red Sea Project exclusive underpins the development’s overriding commitment to making it a truly sustainable project for both the bottom line and its irreplaceable natural eco-systems.

“Luxury tourism is about experiences and authenticity and we are not trying to build a fantasy, but develop a place that embraces that embraces the natural environment, the incredibly hospitable culture and the heritage of Saudi Arabia. People will come to the country and want to experience that, and we want to cater to both global visitors but also the local and regional market.”

Ultimately, over and above its spotless green build credentials, ability to generate its own power supply and its employment of a local workforce – all laudable ambitions – the project’s sustainability – as with any other commercial leisure destination – will hinge on its ability to entice and maintain a regular stream of visitors from the country, the wider region and the rest of the world. With its desert experiences, its mountains, mangroves, dormant volcanoes and pristine marine environment – one of the last hidden treasures in the world – that looks like a distinct possibility.

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