Saudi Arabia's tourism fund signs deal with banks to finance up to $43bn worth of projects

The new deal is expected to leverage more private sector investment in the kingdom's tourism sector

The Red Sea Project is one of Saudi Arabia's biggest tourism projects. Courtesy The Red Sea Development Company 

Saudi Arabia's Tourism Development Fund signed an agreement with two of the country’s major lenders, Riyad Bank and Banque Saudi Fransi, to finance tourism projects worth up to 160 billion Saudi riyals ($43bn) in the kingdom.

As part of the deal, the fund and the banks will set up a mechanism to support the financing of tourism projects across the kingdom, according to the official Saudi Press Agency.

The new initiative “is part of the fund’s efforts to encourage and stimulate investments in the tourism sector and support the private sector, including the small and medium enterprises”, the statement on SPA said.

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Saudi Arabia set up the fund with an initial investment of $4bn in June this year to boost the tourism sector and fund development at 38 sites across seven destinations by 2022.

Tourism is a key pillar of Saudi Arabia's Crown Prince Mohammed bin Salman's ambitious reform strategy to reduce the economy's dependence on oil. The kingdom wants the sector to contribute 10 per cent of gross domestic product by 2030, up from about 3 per cent currently.

Saudi Arabia began issuing tourism visas in September 2019, but the coronavirus outbreak led to a temporary halt as the kingdom closed its borders to foreign visitors in March to contain the spread of the pandemic.

However, as new cases subside and movement restrictions ease worldwide, the kingdom is planning to re-open to leisure visitors and issue tourism visas by early 2021, the country’s tourism minister told Reuters earlier this week.

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Abundant marine life in the Red Sea. Photos: Saudi Tourism Authority

Hammad Al Balawi, general manager of tourism investment at the kingdom’s tourism ministry, said the tourism development fund is “one source of funding that could help and accelerate the growth” of projects in the country.

“We are truly committed that the sector would be developed by the private sector … 75 per cent of room keys from now until 2023 will be developed by the private sector,” he said at the Arabian Hotel Investment Conference on Tuesday.

“The kingdom opened its doors for travellers from all corners [of] the world ... 80 per cent of global travellers could be granted the visa in less than five minutes, both e-visa on the website or even visa on arrival and that sets the ambitious strategy for what we want to achieve.”

Saudi Arabia is aiming to attract 100 million visitors by 2030 and the tourism sector would provide jobs to 1.6 million people, Mr Al Balawi said.

“There is no better place to feel [the] Arabian experience than Saudi Arabia. It has wonderful sites and wonderful heritage. We welcome local and international investors to invest in the country and develop new projects.”

Meanwhile, the kingdom's travel services company Seera Group signed a memorandum of understanding (MoU) with the Tourism Development Fund to finance the development of more than 1,000 hotel rooms in cities including Riyadh, Jeddah, Al Baha, Abha, Taif, Al Ula and Hail.

"The massive investment stimulus will help build a robust tourism infrastructure that is crucial to driving the industry's long-term growth, and will also serve the cultural, entertainment and hospitality sectors – all important when it comes to promoting tourism, domestic and international," Abdullah Aldwood, chief executive of Seera Group told The National. 

"The agreement will allow the kingdom to finance tourism projects across the country as part of the government's efforts and Vision 2030 to accelerate and drive international tourism," Basel Talal, Radisson Hotel group's regional director for Saudi Arabia, Kuwait and the Levant, said.
"We believe the fund will play a critical part in developing the visitors' experiences and unlocking the country's full potential as a destination."

Radisson is planning to open eight additional hotels in Saudi Arabia next year to grow its presence in the country, he added.