Travelex looks at expansion into Saudi Arabia amid kingdom's $800bn tourism push

Travelex, the UK-based foreign exchange company, is exploring opportunities for its entry into Saudi Arabia as the kingdom aims to invest $800 billion to develop its tourism sector, attract international visitors and diversify its economy away from oil revenue.

The global travel money services business is currently in discussions to enter the lucrative market and is considering airports across the country as part of wider plans to expand into high-growth markets in the Middle East and Asia, Richard Wazacz, chief executive of Travelex, told The National.

"We operate in every GCC market except Kuwait and Saudi Arabia, and we are very interested in operating in other markets. Saudi Arabia is the one that interests us the most," Mr Wazacz said, citing the country's international tourism growth targets, strong domestic travel market and pilgrimage travellers.

"Saudi [Arabia] has a great diversified customer base, which is good. There is the Umrah and Hajj market. So they're all areas we're very interested in.

"We are looking at how to get into the Saudi market and we're discussing with various people ... we're interested in all the airports in Saudi Arabia where we think our proposition could help travellers."

Saudi Arabia recorded a 17 per cent annual increase to a record 62 million passengers in the first half of 2024 as the number of flights increased 12 per cent to 446,000, "well above pre-pandemic levels", the General Authority of Civil Aviation (Gaca) said in July. The kingdom's air connectivity expanded to 163 destinations, a 23 per cent increase on 2023, Gaca said.

Saudi Arabia hosted a combined 60 million international and domestic tourists in the first six months of the year, who spent 143 billion Saudi riyals ($38.1 billion) in the country, the Ministry of Tourism said.

After surpassing the Vision 2030 target of attracting 100 million visitors annually in 2023, seven years ahead of schedule, the country revised its target to 150 million. This is part of its ambitions to become a travel hotspot, with planned investments of $800 billion to develop its tourism sector.

The country is investing in a new airline, Riyadh Air, which is set to be launched next year, and a new hub in Riyadh, King Salman International Airport, that is expected to be one of the world’s largest, covering an area of about 57 square kilometres and projected to handle 100 million passengers in 2030.

Middle East and Asia plans

With its headquarters in London, Travelex employs about 6,000 people worldwide, with operations spanning more than 600 shops and 800 ATMs in 20 countries. Its retail business segment offers cash and prepaid Travelex Money Cards at airport bureaux, off-airport shops and online, where customers can top-up via a mobile app. It has bureaux in 80 airports, including in Dubai and Abu Dhabi, as well as department stores and railway stations.

The company plans to expand into new fast-growing markets with affluent and frequent travellers in the Middle East and Asia and is also seeking to extend its product offerings to new areas.

"In terms of new countries, we always look for high-growth markets where there's a growth in the number of customers travelling and there's also an increase in wealth, so fast-growing economies where you have a middle-class forming," Mr Wazacz said. "So the two regions that interest us the most are Asia and the Middle East for growth."

Travelex is keen to expand in countries in South-east Asia such as Indonesia. It already has operations in Malaysia, Singapore and Hong Kong.

In the Middle East, besides pursuing opportunities in Saudi Arabia, Travelex is also monitoring the development of new mega-hubs such as Dubai's planned new terminal at Al Maktoum International Airport as well as Riyadh's King Salman International Airport, Mr Wazacz said.

"We are actively tracking these airport developments. As soon as it becomes clear that there are commercial opportunities available, then we will look at all these opportunities."

Travelex is also seeking to expand its product offering to new markets. For example, it is studying the potential of exporting the UK's travel money model to other countries, whereby Travelex works with retailers such as supermarkets and department stores to provide foreign currency services to their customers.

The Middle East markets are saturated with money-exchange businesses "but this B-to-B-to-C optionality is something we're interested in exploring", he said.

Travelex is also exploring introducing its prepaid travel money card, in partnership with MasterCard, to markets in the Middle East and Europe, Mr Wazacz said.

"We are very excited about bringing that proposition into the region ... the UAE would be a good market to potentially start in," he said.

These multicurrency prepaid cards are a quick way to spend abroad, can be topped up online, offer ATM cash withdrawals and are accepted at 35 million Mastercard merchants globally.

Travelex is also seeking to expand its wholesale bank note services, whose customers range from small financial institutions to major banking groups and central banks in 80 countries, into more countries in the Middle East, the chief executive said.

"Our Middle East and Turkey business is our best performing region at the moment," Mr Wazacz said. "The Middle East has cemented its place as this fantastically located transport hub linking East to West, it's taking advantage of its position and its infrastructure brilliantly and we are seeing the benefits of that through the performance of our stores."

Dubai International Airport, the world's biggest hub by international passenger traffic, is Travelex's "biggest generator of revenue in the world now because of the number of passengers going through Dubai", he said.

Travelex has made significant investments in the Middle East and Turkey region. Group revenue from the region in the first quarter of 2024 rose by 12 per cent year-on-year to £23.4 million ($30.5 million) and Ebitda (earnings before interest, taxes, depreciation and amortisation) by 27 per cent on an annual basis.

Travelex has doubled its bureaux in Abu Dhabi's Zayed International Airport from seven to 14 and also expanded in Doha and Dubai international airports.

'Leaner and fitter' post-Covid

Previously part of now-defunct Finablr, Travelex faced a double whammy in 2020 due to the Covid-19 pandemic that paralysed international air travel and a cybersecurity breach that forced it to temporarily disable its systems.

It then went through a prepack administration, which led to hundreds of job losses and creditors seizing control of the company.

Travelex's fortunes have since reversed. Its financial performance improved as international travel resumed with the easing of pandemic restrictions and the so-called revenge travel phenomenon.

The group's net revenue in the first quarter of 2024 rose three per cent year-on-year to £120.7 million, driven by continued improvement in the core business and ongoing expansion in Asia, the Middle East and Turkey.

"The business since the pandemic has bounced back very strongly off the back of growth in travel ... we've come back much leaner and fitter than pre-pandemic," Mr Wazacz said.

"A lot of the cost that was cut out because of the pandemic, we haven't put it back in ... so the business is back to rude health and we are generating the same levels of Ebitda that we were generating pre-pandemic but the business is a little bit smaller," he said, noting that Travelex no longer operates in the US, France or Belgium.

"Now that the recovery phase has been finished, we are very much looking at what does growth for Travelex mean going forward."

In July, passenger demand for air travel reached a record high for the industry and in all world regions except Africa, despite the significant disruption caused by the CrowdStrike IT blackout, according to the International Air Transport Association (Iata).

Total travel demand, measured as revenue passenger kilometres, rose 8 per cent in July, compared with the same month in 2023, according to Iata's latest available data. Demand outpaced the 7.4 per cent year-on-year growth in capacity.

Shareholders' decision

Travelex's largest shareholders are funds managed by Barings with a 52.2 per cent share, while Corre Partners Management holds a 20.63 per cent stake, Vector Capital Management owns a 14.7 per cent share, Mariner Investment Group has a 10.41 per cent shareholding and other institutional shareholders have about a 5 per cent shareholding, according to the company's financial statements for 2023.

Asked about any potential changes in the company's ownership, following a rebound in business, Mr Wazacz said its current shareholders are debt funds and credit funds.

"What naturally happens is when one of these funds has a stake in the business that's now recovered and back to growth, they want to divest their stake to reinvest it in another distressed [businesses]. So it's no surprise to us or the market that our shareholders are now considering their options on how they can sell their stakes. But it is not a rush, it's a very steady, planned process," he said.

These investors are expected to start making a decision on the future of their position in Travelex within 12 months to 24 months, Mr Wazacz said, noting that any decision and time frame will ultimately be up to the shareholders.

"My team and I are really excited about the growth opportunities of Travelex, we've got supportive shareholders that are [backing] us with our growth ambitions and it is for them to decide how they want to take their ownership forward, but we are excited about what we can do at the company," he said.

Mixed travel trends

While regions such as the Middle East are recording strong travel demand, there are signs of a slow down in other markets such as Europe and Australia where inflationary pressures have led to a cost of living crisis that has dented consumers' purchasing power.

"We've seen some of the effects of that, but the beauty of Travelex is we're a globally well-diversified business ... our ambition that we as a group perform well but we recognise that in some years one region will perform better than the other and that's the strength of global diversification," Travelex's chief executive said.

Asked about the future of travel money in an increasingly digital world, Mr Wazacz said that cash remains an important part of the business as it is the "common denominator" that is accepted everywhere in the world.