Frankly Speaking | S2 E3 | Jerry Inzerillo CEO of Diriyah Gate Development Authority
Hello and welcome to Frankly Speaking, the show where we drill deep into the insights of some of the leading policymakers and business people in the Middle East and indeed the world. I’m Frank Kane. Today I’m delighted to be joined in the studio by Jerry Inzerillo, chief executive of Ad Diriyah Gate Development Authority. Diriyah Gate is one of the flagship projects or Saudi Arabia’s Vision 2030 strategy, a $40 billion development in the historic heart of Riyadh and a global hub for leisure and cultural tourism. Mr Inzarillo, welcome to Frankly Speaking.
Thank you, it’s a great honor to be with you Frank especially face-to-face in the studio, thank you. Absolutely, it’s always better face-to face-isn’t it. It is indeed. Mr Inzerillo, let me jump straight in and ask you: Diriyah Gate plans to attract 100,000 residents, 27 million visits by 2030.
Well, with Saudi Arabia a relative newcomer to the tourism industry and with the effects of the pandemic that we’re still going through, tell me — frankly speaking — is this remotely feasible? We think it is and you know there’s two things: One is a fact and that is that you know when we considered opening up the Kingdom to tourism in September 2019, we said to ourselves let’s monitor this a little bit, so out of the 238 countries we only opened up to 49 countries plus Macau and Hong Kong. Then we put in the new electronic visa system thanks to His Excellency Ahmed Al-Khateeb at our Ministry of Tourism, we were doing 55,000 visas a week, prior to protecting the society and having to shut it down due to COVID-19 in March of 2020. That gave us an indication of the great interest in the Kingdom from Saudi travel — Saudi within Saudi travel — Gulf travel, and international travel. So statistically we feel very strongly in the Ministry of Tourism and the Saudi tourism authority and the giga projects of which Diriyah as the birthplace of the Kingdom is one that is very achievable now. The other thing is that in the Vision 2030, His Royal Highness went on TV a month ago you may recall with very specific initiatives and resources to upgrade the city of Riyadh to be one of the 10 great cities in the world and to take its population base from 7.2 million
to 15 million people. Because we have so many people by the hundreds of thousands, and soon millions, moving back so there are demographic factors and there are tourism factors that make us very, very confident especially in the mother city, the principal city, and especially because Diriyah is the birthplace of the Kingdom, the birthplace of the Arabian Peninsula and the House of Al-Saud. So we feel very comfortable. Okay. you’re after heritage and cultural tourism, but who is the target audience?
Are they Saudis? Are they international tourists? Who are you after? Who do you want to get there? It’s a great question. We’re different from even some of the other giga projects because we look at the target audience in five segments broadly. Now obviously when we have meetings in tourism it’s 100 or 200 segments, but let’s look at it in five buckets.
We feel very deeply that we have to benefit the community we serve because a lot of times around the world you get these big developments and they leave their own community behind, so right now we don’t buy a single thing without buying from Diriyah first. Now Diriyah is a thriving community within the municipality, within the metroplex of Riyadh, so even our first district which will be ready by the new year, is catered to Diriyah residents, that’s one bucket, with a full marketing plan. Riyadh as a global city, as a full market plan, Saudis traveling within Saudi, which was abundant during the pandemic, we could talk about that. Then the Gulf, because Saudis have one of the highest tourism spends outside the Kingdom, we had one of the highest tourism spends in the world during COVID-19 because of nationalism and Saudi supporting the Kingdom. So Saudis coming back to their birthplace, and then of course the entire international market.
OK so it’s both, you want citizens of Saudi Arabia and international tourists, but regardless of who they are, there is an awful lot of competition out there isn’t there? Why would an aficionado of leisure and culture want to come to a comparatively small Diriyah in Riyadh compared to for example the Pyramids or the Acropolis or the Colosseum in Rome? it’s exactly that reason because — and this also changed during COVID-19 — what happened with COVID-19 when people were locked up for a year and this only accelerated a trend that was happening for the last 20 years, and that is people want human touch, but they want authenticity they want to see real things not fake things. Now listen, you can go and see make-believe Pyramids where I went to school in Las Vegas — not as emotional as seeing the real pyramids. You could create a Petra somewhere, but not as real.
The Crown Prince had a state visit from President Vladimir Putin of Russia. As you know, President Putin is a very composed person and doesn’t demonstrate great emotion in public. He had a dinner with the Crown Prince at Diriyah, and you know what he said? This is a very emotional place because it’s rich.
It's got 300, 400 years of culture. So, the birthplace of the Kingdom. is actually that, it is to Saudi Arabia what the Acropolis is to the Greeks, what the Colosseum is, what Machu Picchu is. So when people come to the Gulf they’re going to want to say where did it start? Where is the House of Al-Saud, one family in continuity and vision for 130 years. Now, sometimes people say to me you have so many giga projects going around the Kingdom are they in competition of each other? No, they’re very carefully thought out. Because the Kingdom controls 45 percent of the Red Sea, it’s abundantly beautiful.
We have five UNESCO World Heritage sites, all with different personalities. So people are going to come to see a beautiful country that they’ve never seen before. I was going to ask you about that, Mr Inzerillo, about the fact that there are a lot of projects in a similar vein in the Kingdom.
It seems that the Kingdom is almost rediscovering its heritage and its history. Are those competing, are they complementing and how does a Diriyah fit into that scheme? They are not in competition. They’re very intelligently crafted to complement each other.
Here’s a way to look at it: If you look at the tourism profiles of the G20, these profiles have been put together 50 years like Singapore, 100 years, 200 years you look at the richness of Spain, France, Germany, England. Now all of that is here in the Kingdom, but for different reasons, and we know them historically, we could talk about them, we had the courage thanks to the Custodian of the Two Holy Mosques and our dynamic Crown Prince, to open the Kingdom to tourism. Well you’re not opening the Kingdom to one city, you’re opening the Kingdom to a large country with vast geographical personalities, so even in the Kingdom, food, dance, music, costuming, topography. You know when you say to people it snows in the north and Tabuk — “wait a minute I thought Saudi Arabia was just deserts and camels?” Kind of a boring stereotype, but you can’t reverse this stereotype unless people come to visit, which is why you have to praise the Custodian of Two Holy Mosques and the Crown Prince to allow it.
Now it appears that there’s a lot of giga projects, but it’s only because if you look at Singapore what Lee kuan yew did 50 years ago, what a success story, you look at the great vision of the Emirates, 30 years, basically. The Crown Prince is going to accomplish that in 15 years and a big beautiful country so you need all these giga projects, but none of them are in competition with each other; they’re all complementary. And by the way, all of the CEOs are very very close to one another, because we’re excited about the national profile.
Mr Inzerillo, you have insisted that the pandemic lockdown will not affect the progress of Diriyah and other projects — how can you be so certain of this? How can Diriyah possibly escape the economic and financial effects of the lockdown recession? It’s again, thank you for that, because there’s two things — there’s a reality of interruption of revenue right? Now because our national tourism strategy is in its infancy, it is just beginning right. So we’re only three percent of GDP — we will grow to 10 percent of GDP — so if you’re going to have an interruption and you’re Spain or you’re France or your’re America and your contribution is eight percent, nine percent, 10 percent of GDP, the effects of COVID-19 were very devastating on a national level, on those tourism profiles and globally. But because we were coming off a low base we didn't feel the seismic result of that as other countries did.
But then we had something else happen and that is because of the nationalism and the spend of the Saudis by everybody staying in the Kingdom and going from Jeddah to Diriyah or Diriyah to AlUla or AlUla to the Red Sea. We almost had not only no interruption in the drop in revenue, our domestic revenues went up OK. So because we started from a lower base we really didn’t have the disruption.
But here’s the other thing — the Crown Prince knew we’re going to come up with a solution to COVID-19 — there will be a vaccine, we will vaccinate and protect our society first and foremost. So we have to be bold and we’re not cutting back their budgets, so our budgets and the other giga projects. But he was strict — you must stay on time — so we executed our exact strategy all of 2020, we did not cut back, he was bold all of 2021, so now as a result of it the major giga projects in the Kingdom — remarkably with the good news of the vaccines, thanks to his vision and his tenacity and I would say his courage — are on time and on budget. OK, and this applies to all of them? There’s no sense in which Diriyah Gate is the preferred project, you know the birthplace of Saudi Arabia? All of the projects are on time and on budget.
However, there’s only one Diriyah. We’re the first born, we’re the favorite son. My fellow CEOs would come on the show and say no we’re great, they’re all great we love them, but there’s only one Diriyah.
Let me ask about the finances because there seems to be a change here doesn’t there? The budget figure was $27 billion. Now I hear that it’s $40 billion. What’s happened? Have you been given some more money? Yes we have but it’s not that we were given some more money, that’s a result of a change in vision. This is very interesting because a lot of people don’t notice about the Crown Prince — the Crown Prince is not a sequential learner.
He is left brain, right brain, he’s very methodical — what’s your process? How did you study this issue? Who did you study it with? Did you study it with the world’s best? What did you learn and what options are you bringing to me? He studies them meticulously, but even though he’s the smartest guy in the room, his visual acuity is amazing. So when you leave a meeting with an approval he doesn’t stop — one day, two days, five days later you’ll get a call from him — “if you connect that with that doesn’t make Diriyah better?” Yes sir, we didn’t see that. “If you add this asset to that, does it make Diriyah better? doesn’t it make it more fun?” So now what’s happened is that the master plans on its research have evolved into a broader vision to allow it to be a component to take Riyadh to be one of the 10 great cities of the world.
So the same way Paris was master planned, and laid out the same way Berlin was laid out, the same way Manhattan which is a very complicated long island was laid out — this is how the Crown Prince looks at all the cities and that’s why we’ve grown. So in the growth, you have to have the money to correspond, to add the assets to that which is why the budget is grown. Just on finance again — what’s the financial mix? I guess the big proportion is government money, but what about private investment, what about foreign investment? That’s where COVID-19 had an impact on us — now I'll give you an anecdote in a second to show how courageous and bold the Crown Prince is — prior to the pandemic, we had a lot of Saudi investments, Saudi conglomerate, Saudi entrepreneurial investment, a lot of Gulf investment, and we had a surprising amount of foreign investment. So much so that the Crown Prince set up a whole new ministry.
You had His Excellency Al Falih on recently — a great show — and he’s an amazing guy — but where COVID-19 confused things, is that in the CEOs, they still don’t know what the bottom is in their commercial. So we did not lose one project, one announced project, but a lot of the foreign CEOs came back to us and said Jerry we need another budget cycle before we can determine the equity pick up. The Crown Prince said in the board “do not do not lose any time,” so if we have to fund it to build the commercial assets while the entrepreneurial investors are figuring out their investment strategy, we will give them the opportunity to buy the equity out. Now, what we will do as DGDA, and as a government, on assets that are low return on investment (ROI) assets — infrastructure, cultural institutions, a mosque, a museum that doesn’t have the same ROI as a hotel or restaurant — we will build and be the developer on those and we will own and operate them right? We don’t want anybody owning and operating the House of Al-Saud because that’s the House of Al-Saud, we will own that. But all the other commercial assets are meant for foreign investment and Saudi investment.
so it seems that the government bridge the gap that was there but that gap could still be filled by foreign and private investment anyway? Yes, and we have a whole division of the DGDA — again a rock star team — that are meeting every single day now — with foreign investors, Gulf investors and an unbelievable amount of Saudi investors. Now, just with the Ministry of Investment, Ministry of Commerce, Ministry of the Economy and Ministry of Finance, there isn’t a single day where we’re not hosting someone at Diriyah, or taking them out to dinner. Mr Inzerillo, you have vast experience of the global tourism business. You trained in Las Vegas, you worked with Kerzner, one of the great names in the international business, you were editor of the Forbes Travel Guide for many years, so you know this business.
Frankly speaking — tell me can any destination really compete on a global basis without alcohol in its food and beverage mix? Yeah it’s a great question and when we started doing focus groups on what would attract people to Saudi Arabia, those questions came up, questions about you know custom, and apparel. Those questions came up. We had some questions that came up in the preliminaries that were honest but a little strange — am I allowed to stay in the same hotel room with my wife, right? Well this is because the Kingdom wasn’t open to tourism. But this is very interesting — when we did the post review after people had visited us, issues about alcohol weren’t even in the top five, because what happened is that people were astonished about the beauty of the Kingdom, Instagram given all the different views around the Kingdom. They were astonished at the warmth of the Saudi people, how much fun they had, that by the time their first day, second day came those weren’t even issues.
Now we did relax dress code and all the people that came like non-Muslim women traveling into the Kingdom, if you don’t want to wear in an abaya or you don’t want to wear headscarf, you don’t have to. But you know what we found out in the post? Many people enjoyed it, because now it’s a fashion item , it’s not just the conservative apparel that was you know 1979, 1989, or even 1999. So now a lot of the visitors that are coming, they like dressing up, and they find it respectful to the customs of the Kingdom. So some of the issues that continue to come up we have found that there are less of an issue when we asked them in the post.
Okay, you’re an American obviously from Brooklyn but you live in Riyadh and the Kingdom has tried to promote the expat life in the Kingdom as more comfortable, more liveable. What’s your view? What would you say to Americans considering working in the Kingdom now? I would say it broader than Americans, I would say all expats. Now 20 percent of our staff are expats because there are still areas of expertise that Saudis are learning in certain areas. Saudis are abundant with engineers, great contractors, but certain development areas they are learning in the issues of marketing, and the issues of entertainment, they are learning.
But if you look at another former guest, His Royal Highness Prince Abdulaziz at the wonderful Ministry of Sport, you look at our great General Entertainment Authority, you look at the amazing job that Prince Badr is doing in the Ministry of Culture — we attract expats. What I would say, and this came up: I did 100 interviews during the G20. One of the biggest questions: What’s your favorite thing about Saudi Arabia? Here’s the thing — in most of the G20 countries now for one reason or another the societies are polarized, people are not polite to each other, they don’t talk to each other, they raise their voice, there's conflict, even in America. This is one of the things that all my expats love. You know I haven’t lost one expat to lifestyle, I’ve lost them with COVID — “I miss my kids” — COVID-19 is complicated.
But what everybody likes is a polite society. Now you can go out to restaurants, the same beautiful restaurants you have here (in Dubai) you have in Saudi — music, boys, girls everybody having a good time. You have everything there. But the number one thing that people like is civility, it’s the fact that you’re treated warmly and kindly. And the one great thing about the Kingdom right now as a society? It’s optimistic, it’s positive.
Now If you look at King Fahad’s Minister of Education when he became king and then when King Abdullah became king and then when king Salman became king, they doubled down, tripled down on investing in college education for young Saudis. There's 600,000 Saudis that benefited from the generosity of the Kingdom. You know what happened? They’re all coming home — they’re young, they’re fired up. Now at Diriyah out of almost 1,200 people the average age of my staff is 31 — you take me out, the average is probably 24 right — but they're fired up, the society is positive and optimistic and that spills into the expat community. Finally, what differences have you noticed in terms of management style, business culture between working in the US or elsewhere in the world and Saudi Arabia? I wish we could give the Crown Prince a different title, I wish we could call him instead of CEO we call an SCCEO — because we could call him the Supercharged CEO because you know he’s 80 hours a week, he’s focused, he’s in all the details but he’s kind — what would make Diriyah better? What would make the Red Sea better? What would make AlUlla better? Because he wants a good quality of life for everyone right.
So with us now, we look at all the positive things and we now know we’re on something special. So the next few years are going to be very bright. We say to the world: Come visit us — only one Diriyah. I have to say that because we’re Diriyah.
But there is only one Diriyah. Mr Inzerillo, your enthusiasm is infectious, and I'm very grateful for your insights today. Thank you very much for coming on to Frankly Speaking. Thank you, it’s a great honor for me, thank you