Saudi Arabia’s Tourism Development Fund has teamed up with Al-Ameen Real Estate, a subsidiary of the kingdom’s Al Nahla Group, to launch a 300 million Saudi riyals ($79.9m) tourism project in the city of Taif.
Named ‘Taif Front’, the 100,000-square-metre destination will be located in Taif in Al Khalidiyah district of the kingdom. It will include upscale accommodations with more than 150 rooms, and premium retail and entertainment offerings including food and beverage outlets.
The site is also close to attractions such as King Fahd Park, the largest garden in Taif.
“This signature mixed-use destination in Taif reflects our commitment to developing untapped tourism destinations in line with the National Tourism Strategy,” TDF’s chief executive Qusai Al-Fakhri said.
“With its ideal climate and strong agriculture industry, Taif is in a prime position for development, and we look forward to providing local and international tourists with best-in-class offerings to enhance the region’s tourism offerings,” Mr Al-Fakhri said.
Tourism is one of the key pillars of the kingdom's Vision 2030 transformation programme, which seeks to diversify the economy and reduce its dependence on oil.
Saudi Arabia plans to invest more than $1 trillion in the tourism sector over the next 10 years, Ahmed Al Khateeb, Saudi Arabia's Minister of Tourism and chairman of the TDF's board of directors, said in October.
TDF aims to transform the kingdom’s tourism sector through the enablement of private sector investments. It has enabled projects with an investment value of around 6 billion riyals, including more than 4bn riyals in private sector investments, which will add an estimated 3,500 rooms and 21,000 jobs over the next three years.
Saudi Arabia, the world’s biggest oil exporter, is rapidly transforming its economy as it aims to reduce its dependence on oil, nurture domestic industries, boost jobs and diversify revenue.
The Arab world’s largest economy's famous tourism projects include Qiddiya, a huge entertainment and sports project, and Neom, a $500bn futuristic city comprising a nature reserve, coral reefs and heritage sites on islands along the Red Sea.
“We believe in the kingdom’s potential and focus on high-quality real estate investments in line with our strategic vision,” executive general manager of Al-Nahla Group Sultan Khaled Al-Turki said.
“We are pleased to sign this agreement with TDF to develop the mixed-use destination in Taif, a location with significant potential that will benefit both residents and tourists alike,” he added.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
