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Global Trends in Tourism Investment - Benefits and Risks

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Part 1 of the SW Associates presentation to the Tourism Working Group of COMCEC of the newly released report "Enabling Tourism Investment Climate:Challenges and Prospects for Tourism Investments in the COMCEC Region." This presentation was made by Scott Wayne, President of SW Associates in Ankara on March 4th, 2014.

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Global Trends in Tourism Investment - Benefits and Risks

  1. 1. Enabling Tourism Investment Challenges and Prospects for Tourism Investment in the COMCEC Region Presented by: Scott Wayne and Manuel Knight, SW Associates, LLC Washington, DC
  2. 2. Agenda • Global Trends in Tourism Investment: Benefits and Risks • Enabling Tourism Investment Climate in the COMCEC Region: Challenges, Prospects and Solutions SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 2
  3. 3. Global Trends in Tourism Investment: Benefits and Risks • Importance of Tourism Investment • Key Benefits and Positive Impacts • Key Risks and Negative Impacts • Problems and Impediments SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 3
  4. 4. Importance of Tourism Investment • Engine for sustainable growth: Economy, jobs, incomes, protection of natural and cultural heritage. • People to people industry • Lower barriers of entry • Relatively easy for investors SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 4
  5. 5. Tourism – an attractive investment? SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 5
  6. 6. Over US$2 trillion from tourism to GDP SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 6
  7. 7. TRAVEL & TOURISM INDUSTRY Accommodation, recreation, catering, entertainment, transportation, and other related services TRAVEL & TOURISM ECONOMY Printing/Publishing,concrete, utilities, financial services, furnishing & equipment suppliers, foods, security, administration, ship building, beverage supply, iron/steel, aircraft manufacturing,wood, mining, chemicals, textiles, oil/gas suppliers, plastics, sanitation services, metal products, computers, resort development, wholesalers, rental car manufacturing, laundry services. WTTC
  8. 8. Sources of Investment • Domestic and Foreign Direct Investment – Insurance companies – Pension funds – Religious institutions – Labor unions – Multilateral Development Banks – Private equity funds – Real estate investment trusts SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 8
  9. 9. Crowdfunding: A new potential source of tourism investment • • • • Raises capital from many donors Could maximize local engagement Helps market the investment and destination Two types: – Equity-based – Non-equity or donation based • Compatible with Islamic finance • Potential projects? Hotels, restaurants, retail, destination attractions SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 9
  10. 10. Examples of tourism investment with public participation Religious Pilgrimage Sites Stadiums & Fair Grounds Museums & Cultural Centers Congress Halls National Park Facilities Tourism Training Facilities SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 10
  11. 11. Key Benefits and Positive Impacts of Tourism Investment • • • • • • Economic development Poverty alleviation Foreign exchange generation Urban revitalization Natural and cultural heritage preservation Capacity building SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 11
  12. 12. Economic development • Generates – Attractive financial returns – Tax revenue – Foreign exchange • Benefits broad supply chains • Boosts small and medium-sized enterprises SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 12
  13. 13. Poverty Alleviation • Relies on non-skilled labor • Offers opportunities for: – Women – Racial, ethnic or low income minorities – SMEs • Generates extensive capacity building SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 13
  14. 14. Cultural and Natural Heritage Preservation • Urban revitalization • Preservation of heritage at risk • Preservation of biodiversity via strengthening of protected lands SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 14
  15. 15. Key Risks and Negative Impacts of Tourism Investments • Environmental impacts • Land tenancy challenges • Infrastructure failures • Financial risks • Incompatible neighboring developments SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 15
  16. 16. Environmental Impacts • Inadequate waste and sewage treatment • Inadequate natural resource planning and management – Poorly regulated activities at attractions • Inadequate urban planning – Lack of traffic management • Poor construction practices SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 16
  17. 17. Land Tenancy Obstacles • Unclear land title, contracts and usage rights • Insufficient cadaster or land registry • Customary or other local ownership may not be reflected in legal system • Restrictions on foreign ownership SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 17
  18. 18. Infrastructure Failures Boosting Capital Costs • Water or energy failures are costly for projects • Installing own alternative systems is costly • Inadequate road access SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 18
  19. 19. Financial Risks • Exist for all types of projects, including tourism infrastructure – Risk of default on debt – Insufficient demand for offers – Too many rooms – Management underperformance – Denied repatriation of capital and profits – Non-convertibility of profits – Risk of incompatible development SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 19
  20. 20. Problems and Impediments • Problems Related to Factors of Production • Financial and Administrative Obstacles/Problems • Problems Related to Promotion of Tourism Investments SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 20
  21. 21. Problems Related to Factors of Production • Land, labor, supplies, equipment, and utilities required by projects. • Restrictions in importing and/or hiring foreign labor  High tariffs and duties  Delays and expense clearing goods through customs  Restrictions on foreign labor SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 21
  22. 22. Financial and Administrative Obstacles • High income taxes • High interest rates • Repatriation of capital and profits • Administrative red tape • Local partner requirement SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 22
  23. 23. Problems related to promotion of tourism investments • Inexperience formulating tourism projects • No institution for tourism investment promotion • Industry statistics unavailable or outdated SW Associates, LLC - Enabling Tourism Investment in COMCEC Countries 23

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