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Financing Options for Cultural Tourism in Rural Areas


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During the EUROPETOUR meeting in Veliko Tarnovo, Bulgaria, project partner Wolfgang Kniejski presents an overview of financing instruments for cultural tourism in rural areas.

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Financing Options for Cultural Tourism in Rural Areas

  1. 1. Financing of Cultural Tourism in Rural Areas Prof. h.c. Dr. h.c. Wolfgang Kniejski INI-Novation GmbH
  2. 2. 1. Introduction 2. Funding Instruments 3. Grants and Donations 4. Support from Banks 5. Private Equity 6. Integrated Cultural Tourism Concepts 7. Conclusions July 2011 2 Outline
  3. 3. 1. Introduction 3July 2011
  4. 4. Long-term Revenue Orientation Goal Income for Project Development Instrument Project Acquisition Basis Tourism Concept to be based on a business plan 4July 2011
  5. 5. • The Business Plan and the Financial Model set the framework for – Founding, financing, developing, and capitalising a project and is therefore a key requirement for – The project team as well as for their external stakeolders, e.g. investors, partners • It is also a living documentation of all relevant aspects of the project and ist evaluation and value-generation. The Business Plan is about the Strategy ….. and about money!!! 5July 2011 Purpose of a Business Plan
  6. 6. • … is a key part of the busines plan and the financial plan • … has to be understood as Sales and Marketing which is the main „cash- in“ source Project Marketing is about the Strategy ….. and about money!!! 6July 2011 Project Marketing
  7. 7. • Legal Frameworks as Obstacles • Missing Awareness and Sensitiveness • Missing Integrated Concepts • Missing Integration of Tourism Competence with Business Competence (Team Composition) • Missing Sales Forces High Risks in Early Stages (Financing Gap) 7July 2011 Financing Challenges
  8. 8.  dxxixf )exp( 2 1 )(   ? InvestorInventor ? ? ? ??? 8July 2011 Financing Dilemma
  9. 9. 9July 2011 2. Funding Instruments
  10. 10. External Financing Equity Loans Equity Financing Mezzanine- Financing Loan Financing • Private Equity • Venture Capital • IPO • Loan • Warranties • Corporate Bonds • Leasing • Factoring • Asset Backed Securities Internal Financing 10July 2011 Financing Instruments Donations/ Grants … combines elements of equity financing and loan financing
  11. 11. Losses Profits Break Even Early Stage Phase Later Stage Phase Expansion Phase Seed Phase Start-up Phase Grants Donations Private Pers. Business Angels Incubators Bus. Angels Crowdfunding Strategic Inv. VC/CVC Loans Grants VC/CVC Private Equity Loans Grants Private Equity Investment Bank 11July 2011 The Hockey Stick
  12. 12. 12July 2011 3. Grants and Donations
  13. 13.  National Grant Schemes (Operational Programs)  Regional Grant Schemes (CBC, Danube Program)  European Grant Schemes (Horizon 2020)  International Foundations with cultural and/or tourism orientation Additional aspects  Free Consulting (Consulting Agencies)  Supplemental Funding 13July 2011 Sources of Grant Funding
  14. 14. European Funds  European Fund for Strategic Investment  European Regional Development Fund  Cohesion Fund  European Agriculture Fund for Rural Development European Programmes  LIFE (environmental and nature conservation)  COSME (Competitiveness of Enterprises and SMEs)  Creative Europe  Programme Employment and Social Innovation 14July 2011 Overview on European Funds
  15. 15. The International Fund for Cultural Diversity • is a means to support the implementation of the Convention, by fostering the emergence of a dynamic cultural sector in developing countries. 15 International Council of Museums (ICOM) • supports its network through three major grant programmes: * Annual subsidies to International Committees * Support to National, International Committees and Regional Alliances in organizing special projects • Bursary programmes to foster the attendance of young members at the annual meetings of ICOM’s International Committees. Examples of Donators/Foundations
  16. 16. The European Cultural Foundation • facilitates and catalyses cultural exchange and new forms of creative expression. They share and connect knowledge across the European cultural sector and advocate for the arts on all levels of political decision-making.- 16 Nordic Culture Fund • to support a broad spectrum of cultural co-operations between the Nordic countries. Examples of Donators/Foundations
  17. 17. DOEN Foundation • The ambition is to help build a world in which everyone can make a contribution. DOEN is looking for pioneers who will make a positive contribution to the following developments: cultivating positive effects on Climate Change, cultivating Culture and Cohesion and promoting New Economy. 17 The Hivos Culture Fund • set up in 1995, supports independent artistic initiatives in developing countries. Those initiatives must also be accessible for a wide audience and have national and international appeal. Examples of Donators/Foundations
  18. 18. The Prince Claus Fund • The objective is to expand insight into cultures and to promote interaction between culture and development. The Prince Claus Fund selects projects and programmes on the basis of quality, originality, engagement and development relevance. 18 The Finnish Cultural Foundation • is a private trust dedicated to promoting the arts, science, and other field of intellectual and cultural endeavour in Finland. • provides grants to individuals, groups, and organizations from a central fund and 17 regional funds, and arranges courses, lectures, and other events. Examples of Donators/Foundations
  19. 19. 19July 2011 4. Support from Banks
  20. 20. • Management Support and Consulting • Information flow to asses preferable conditions for taking loans • Local, Regional Networks • Co-operation within an Innovation Team • Organisation of and Participation in Fairs • Loans But: • Rating Requirements 20July 2011 Potential Support from Banks
  21. 21. 21July 2011 5. Private Equity
  22. 22. Equity Eq. Mezzanine Loan Mezzanine Loans Private Equity „Source of Equity Financing or similar Instruments without financing through the stock market“ Private Equity
  23. 23. Institutional Investors (Banks, Insurance Companies, Private Investors etc.) Private Equity-Company/ Funds Portfolio Company Investment Investment + Management Consulting Return Return + Fee Private Equity
  24. 24. • Private Equity Investors are Co-Owners of the Company: They share Risks and Profits • They target Investments in Companies that are not listet in Stock Markets • Private Equity Investments target generally for both: Majority or Minority Participation • Participation may be active or in-active as well Private Equity
  25. 25. • Private Equity Investor targets a Return of 20% to 25% • Normally they do not look for Desinvestments • They use to take Management Responsability • They target an Exit after 4 – 7 Years Private Equity It is almost impossible to attract private equity, but BAs or CVC may be worthwhile
  26. 26. 26July 2011 6. Integrated Cultural Tourism Concepts
  27. 27. Define an INTEGRATIVE concept
  28. 28. Define a POWERFUL BRAND
  29. 29. Define the STAKEHOLDERS
  30. 30. Example: Michelstädter Weihnachtsmarkt
  31. 31. Stakeholder Integration
  32. 32. 32July 2011 7. Conclusions
  33. 33. Clear picture of concept and roles Commitment of the involved partners Perfect project management (masterplan/timing/decision making/progress tracking/timeline Excellent knowledge and cooperation on possibilities of infrastructural funding Appropriate communications strategy Adequate will for investment Appropriate project development control Critical Success Factors
  34. 34. Questions/Comments
  35. 35. Aktiva Passiva Assets Liabilities Equity 35July 2011 Assets and Liabilities in Corporate Accounting Balance Sheets - P&L Statements - Cash Flows