by Sir Rocco Forte is planning a trip to Saudi Arabia next year to scout hotel locations.
The tycoon, whose £1.2bn group includes Brown’s Hotel in Mayfair and the Balmoral Hotel in Edinburgh, is eyeing Middle Eastern expansion after inking a deal with Saudi Arabia’s sovereign wealth fund.
Under the tie-up, the Public Investment Fund (PIF) is taking a 49pc stake in Rocco Forte Hotels, with the remaining 51pc held by Sir Rocco and his sister Olga Polizzi.
The agreement does not require the opening of new hotels in Saudi Arabia itself.
But doing so could be a wise investment: the kingdom is trying to wean itself off dependence on fossil fuels by transforming into a global tourist destination instead.
“Although I’m under no obligation to do anything there, I’ll have a good look around,” says the 78-year-old.
With net zero on the horizon, Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman, known as “MBS”, knows that Saudi Arabia must prepare for a post-oil world.
The Crown Prince has drawn up an official plan called Vision 2030 which outlines plans to build a range of obscure schemes across the country, which only opened to general tourism in 2019.
The Gulf state is now racing to build the infrastructure and attractions needed to attract visitors.
PIF’s investment in Sir Rocco’s group comes against this backdrop and is just one example of Saudi cash washing up on British shores as the Kingdom seeks to diversify.
Other recent investments include a 10pc stake in Heathrow Airport, a fund that owns 50pc of department store Selfridges and an £80m stake in luxury car maker Aston Martin, which races in Formula One under the sponsorship of a state oil company. Saudi Aramco.
A fund insider insists that investments in Sir Rocco’s empire and Heathrow are purely financial and have nothing to do with the push into tourism. But at least they are meeting those ambitions.
Heathrow’s investment is particularly significant after the Crown Prince launched a new flag-carrying airline, Riyadh Air, in March.
It is understood that the PIF is open to further investments in Britain which could further its goals in Vision 2030.
“Britain is seen as a world leader in tourism, restaurant and hospitality management,” says Kate Nicholls, from trade group UKHospitality. “Therefore, there is a huge appetite in that part of the world as they look to develop their tourism offer, to come and get the very best of British expertise and brands.”
Investments in brands such as Rocco Forte Hotels not only bring credibility but also the ability to share the tried and tested western hospitality experience. Clearly they can encourage investment.
Possible hotels include: the capital, Riyadh; the Red Sea coast; desert locations such as the AlUla oasis; and even a proposed futuristic city in the north-west called “The Line”.
“Of course I can’t speak yet, because I haven’t seen it. But people talk about the Red Sea area as having the most amazing coral, mostly untouched.”
The Saudis want the private sector’s contribution to GDP to rise from 40pc to 65pc. That will require large sums of foreign investment of the kind that Sir Rocco is now considering.
In many ways, the Saudis are following a playbook already shown by the rulers of Dubai who also sought to transform their city into a global destination using huge oil funds.
Nicholls says: “The Saudis have looked at Dubai and they want a piece of the action. Their aim is to get 70 million visits a year – so they will have to look at expanding the hospitality infrastructure very quickly, and develop those skills.”
According to Sir Rocco, interest from the PIF came after he hired consultants at Schroders to quietly investigate the interest in investing in his business about a year ago. As a result, plans for a competitive auction were quickly shelved.
Other British brands that have already gone to Saudi Arabia include InterContinental Hotels subsidiary Holiday Inn, which has two franchise hotels in Jeddah, and Mayfair seafood restaurant Scott’s, which has opened an outpost in Riyadh.
Celebrity chefs such as Wolfgang Puck and Jason Atherton have also announced plans to open restaurants in the kingdom.
One chief executive at a major restaurant business says he is aware of many conversations taking place between British businesses and investors in the Middle East. However, most come to nothing, he says.
“In my experience, nine out of 10 fail before they get anywhere,” says the executive. “There’s a lot of potential, which is conflicting when it comes to dotting the i’s and crossing the t’s.”
Most of them go nowhere because Middle Eastern investors want only one or two branches to open in the region, which is not financially viable.
Those who enter the market are gambling. They are betting on Saudi Arabia becoming a tourist destination, which is by no means certain.
The kingdom is spending horribly, very attractively building a whole new city in the desert called NEOM.
But this spending spree is straining even Saudi finances. The kingdom is heavily dependent on oil and crude oil must be sold at least $86 per barrel to balance the national budget, according to the International Monetary Fund. The commodity has largely stayed below that level this year and was selling for around $75 a barrel on Thursday.
Riyadh is forecasting budget deficits until 2026 and officials this week pushed back the timeline for Vision 2030 in response to the heavy cost of the investment programme.
“The delay, or the extension of some projects, will serve the economy,” finance minister Mohammed Al Jadaan told reporters.
Even if all the big plans in Vision 2030 come to fruition, there is no guarantee that tourists will come.
The kingdom’s human rights record is poor and visitors still have a harsh culture.
The Foreign Office says that men and women should refrain from any public display of affection, such as holding hands.
Although dress codes are not strictly mandatory for travelers, they are strongly recommended, especially inside government buildings, airports, healthcare facilities or shopping malls.
The advice says: “If you are not dressed modestly, you may be asked to enter these locations or be refused entry.”
It also notes that it is against local laws to post anything on social media that “could be seen as criticizing, mocking or mocking” the Saudi government, royal family or culture.
On a more prosaic note, Sir Rocco highlights another issue that will discourage many holidaymakers in the West: the country’s continued alcohol ban.
“If they really want to expand tourism, that’s something they’ll have to do,” he says.
For now, Sir Rocco will do without a cocktail on his adventure to the Red Sea.
