SAUDI ARABIA - Tourism
CEO, Red Sea Global
John Pagano was appointed CEO in January 2018 and is responsible for leading The Red Sea Project’s development from the ground up to create a unique luxury and environmentally sustainable international tourism destination. Pagano brings more than 35 years of international experience in delivering large-scale development projects, previously serving as President of Baha Mar Development Company Ltd. (BDMC) based in Nassau in the Bahamas. He then spent over 23 years at the world-renowned Canary Wharf development in London, holding several leading executive positions. He holds a bachelor’s degree in engineering from the University of Toronto.
John Pagano, CEO of Red Sea Global & AMAALA
What are the common denominators of The Red Sea Project and AMAALA?
John Pagano: The Red Sea has untouched beauty, which is remarkable today. There is a pristine marine environment; globally we have numerous projects up and down the Red Sea coast, and there are thousands of islands. They are unique because they haven’t been built upon. It is an amazing opportunity for tourism development but also a huge responsibility. We have beautiful islands, an amazing marine environment, and importantly, thriving coral reefs. We are operating in the fourth largest barrier reef in the world; being on the west coast of Saudi Arabia far from the Indian Ocean, El Nino and other bleaching events that have decimated other reefs have not touched ours. The burden for us is the responsibility not to impact this unique, special, and pristine environment.
In what sense are these projects game changers for the tourism industry regionally and internationally?
John Pagano: The projects we are working on will be a game changer for Saudi Arabia. Vision 2030 is about diversifying the economy and moving away from the dependence on oil. And meanwhile, tourism is an important sector representing over 10 percent of global GDP: before the pandemic, it had employed 1 in 10 people worldwide, and almost 1 in 4 jobs were supported by tourism. Saudi Arabia is a highly visited country but so far mostly by pilgrims coming to Mecca and Medina. We are developing projects that present huge growth opportunities. Regionally and domestically, it is a game changer for the Kingdom particularly as it relates to our ambitions to satisfy Vision 2030. The projects will grow the Kingdom’s GDP; The Red Sea and AMAALA will create 120,000 jobs, half will be direct and half indirect. It is clear that we have a unique opportunity. We are backed by the Crown Prince himself and the Public Investment Fund; this is nothing less than an opportunity to change the meaning of tourism and hospitality in the country.
What is your approach to the concept of “regenerative tourism,” and how is it applied to the projects you are in charge of?
John Pagano: Sustainability has become a buzzword. We set out to be the leaders in the transition toward regenerative development. We have to do things differently to change the trajectory of where the world is going, and what we are doing can have an impact on that. At COP26 and COP27, people were talking the talk, but I don’t see anyone walking the walk. With The Red Sea, we are walking the walk. We will open our first resorts in 2023, first three then a further 13 a year later: 16 hotels, totaling 3,000 rooms. We are doing that so that we are the biggest tourism destination powered 100% by renewable energy 24 hours a day, completely off grid, with the biggest micro grid system in the world powered by renewable energy. The largest battery storage system in the world, at 1.2 million MWh. And this is only one example of how we are trying to lead to a better future by demonstrating existing technology. Consumers will pay incrementally more because of the commitments we are making to protect and enhance the environment. We also set ourselves apart in that we spent the first year or more doing baseline surveys of the marine and terrestrial environment before we even had a plan. We had a marine simulation that modeled the ecosystems and assigned conservation values to specific areas; we laid out a master plan using that data to indicate where we would build, where we would not build, we would do it, and how guests would get around. We looked not just at sustainability, but at ways to increase the conservation value. Duly we set a goal of not just maintaining but improving the destination by achieving a 30% Net conservation benefit over subsequent decades. There are no single-use plastics, and consumers, too, should no longer accept it. That’s easy. But we are trying to take the more difficult steps through efforts on the energy side and to be operationally net zero. We are starting to buy our land and marine transport. All our guest transport will be electric, so we have started to procure cars, buses, and delivery vehicles; we are experimenting with hydrogen powered marine vessels built for us to transport guests to the outer islands. As for aviation, we have built an international airport, and will try to introduce sustainable aviation fuel to minimize carbon emissions. We are also looking at eco-friendly seaplanes. I recently signed an MoU with the UK company Zeroavia; it enables scalable, sustainable aviation by replacing conventional engines with hydrogen-electric powertrains. We are looking at carbon sequestration.
How will nature-based solutions help you to maintain and improve the quality of the habitat and biodiversity of your areas of operation?
John Pagano: Nature-based solutions are the most effective. Mangroves help with this: they are beautiful, they protect the island against sea level rise and erosion, and they are some of the most effective for sequestering carbon. Mangroves can be 50 times more effective than forests at doing this; we will use seagrasses for the same purpose. We will also grow micro and macro algae on land to sequester carbon. We consider ourselves an innovation hub. And while we don’t have all the solutions today, we are searching for them and supporting others doing so as well. We are going to grow coral because we don’t want to be complacent about ecosystems. We aren’t immune to climate change so we have a research agreement with the King Abdullah University of Science and Technology (KAUST), which is focused on the Red Sea. One of their professors is on our advisory board helping us fulfill our ambitions regarding the protection of the marine environment. We will transplant coral once we grow it, and may even have our guests participate in that the process. We are working with numerous NGOs to improve the natural reproductive cycle of coral. Along with the scientific community, we are trying to understand why our reefs are more tolerant of high temperatures and higher salinity, so that we can share that information with the rest of the world in the hopes of protecting reefs elsewhere.
The Red Sea Project will comprise 50 resorts, offering up to 8,000 hotel rooms and around 1,300 residential properties across 22 islands and six inland sites when fully complete in 2030. How are you working to position this project as the ideal platform for private investments?
John Pagano: The financial support we are getting from the Public Investment Fund allows us to do the heavy lifting to create an environment that is attractive to the private sector. We are fully funded, and our capital and equity are in place. We have signed a SAR14.1 billion green loan facility, the first ever and largest ever Saudi riyal denominated green loan; however, it is important to create opportunities for the private sector to be involved. It is vital for it to share our values and the commitment to protect and enhance the environment. The joint venture will be our model: we will stay in any deal to ensure the proper execution of the projects. It is important the worst side of human nature doesn’t come into play once the deal is signed. I would like the whole destination area to be deemed a critical habitat. What happens in one part affects the other, so I can’t take a risk that a road developer causes damage that affects everyone. The private sector has already invested in a significant way. A few years ago we signed a big deal with a consortium called ACWA Power to deliver our utilities infrastructure. With that came direct investment in the project and FDI because it’s an international consortium with funds from the UK and Asia. We signed with them in 2020 and financially closed the deal this year. In the early days there was a healthy degree of skepticism as to whether the project would be a success. We have been able to go about our business and build thousands of accommodations for our staff, the runways for the airport, almost 100km of road, and the utilities infrastructure. The solar arrays are going in, we have thousands of solar panels installed, and we have transformers in place to take the 100,000 volts and distribute it. Investors are willing to participate; we have a large number of ongoing discussions but are selective and not in a rush. We will do deals if they make sense for us. We certainly do want to engage with the private sector so they are part of the success of Saudi tourism. We are assuming a 50/50 mix of international and domestic/regional visitors. Demand will outstrip supply, but we are going to limit ourselves. We have 28,000 sqkm to deal with, making this the biggest of the giga projects. We will need to limit the number of visitors. Our studies have helped determine our ecological ceiling, which will be a maximum one million visitors per year. We don’t want to develop beyond that. By monitoring in real time we are building a smart destination. We will focus on making the guest experience seamless, but the most important aspect is the monitoring of our marine environment and using machine learning and AI to detect changes we might otherwise miss until it’s too late, so that we can do something about it in timely fashion.
What emphasis are the projects you are realizing in The Red Sea and AMAALA placing on art, the value of cultural heritage, and authenticity?
John Pagano: Tourists demand authenticity. Disney has a great brand, but I don’t want to be another Disneyland. I want to be quintessentially Saudi because I am proud of the culture and people of this land and I want to celebrate them. Everything we do is built around the people who live around us: we want them to be part of the success of The Red Sea. We are working with local artisans and craftspeople and farmers. We are creating a cooperative to help the farmers become better organized and adopt sustainable techniques so they can sell their produce to us, among others. We are positioning the project as celebrating the Saudi culture and people. The hospitality is renowned and genuine. We work with the Ministry of Culture, having signed MOUs with them to help promote culture and the arts; AMAALA has a much bigger emphasis on this, and we’re building art galleries there. We sponsor a major annual arts event in Jeddah. AMAALA will notably celebrate local art and talent. We recently signed a deal with the University of Napoli and with the Ministry of Culture regarding a sunken shipwreck just south of AMAALA. The wreck contains thousands of jars and we are going to recover them to reveal their secrets. We can help travelers to experience the entire rich culture of the country, during one vacation.
What are your short-term targets?
John Pagano: My top priority is to ramp up and open doors in 2023. We will be opening our first three resorts: St. Regis Red Sea Resort, Nujuma, A Ritz-Carlton Reserve, and Six Senses Southern Dunes, The Red Sea. And meanwhile, we will continue to make progress on the other 13 hotels as part of phase one at The Red Sea. At the same time, we have eight hotels under construction at AMAALA, which will open at the end of 2024. Our short-term priority is operationalizing the destination. We are in a remote location so we have to take care of every consideration ourselves. We have to make sure the supply chain is in place, and that will be the focus of the next six months.
SAUDI ARABIA - Economy
Chairman of the Board & KSA Country Senior Leader, PwC Middle East
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