Ambitious Red Sea project awaits funding

Saudi Arabia’s sovereign wealth fund plans to transform a 200-kilometre area of Red Sea coastline, twice the size of Belgium, into a luxury resort area to encourage tourism, including health travellers.

Saudi Arabia’s Red Sea Development Company, a closed joint stock company owned by the Public Investment Fund, Saudi Arabia’s sovereign wealth fund has started discussions with local lenders to raise US$3.5 billion in what would be its first borrowing. The funds would go toward development along the country’s Red Sea coastline in a bid to reduce dependence on oil. The Public Investment Fund will back a 15-year consortium loan, although the terms of the financing are still under discussion.

The Red Sea Project will respond to international global tourism trends as well as capturing a share of domestic tourism in Saudi Arabia. The destination will operate as a Special Economic Zone, with its own laws and regulatory framework to encourage investment opportunities and commercial activities. The first phase of the Red Sea project is to be completed by 2022. In total, the project is meant to cover 90 islands and 11,000 square miles.

The Red Sea Project will create top of the range luxury hospitality options. These will range from exclusive mono-island luxury properties to beachfront resorts; holistic wellness retreats and destination spas, to unique inland experiences in the mountains and desert dunes.

Much depends on international investors and phase one may not ready for customers by 2022. Doubts remain on the long-term political stability of the region and whether there are enough high net worth luxury travellers interested in sustainable tourism in Saudi Arabia to make investment profitable. Financial return could be a decade away.