IFC's tourism strategy

1. 1
IFCIFC’’s Tourism Strategys Tourism Strategy
Presentation by Sérgio Pimenta
BBL, Wednesday 13 June 2007
Venue: I-7-022
IFC’s Tourism Strategy
• Focus on supporting strong, experienced hotel
companies active in emerging markets
• Multiple properties
• Diversified locations
• New build and acquisitions
• Balance sheet restructuring
• Syndications
•Fewer single asset investments
• Frontier countries
• Business hotels
• Where demand clearly outstrips supply
• Chains of 3-4 star properties in larger countries
•Mixed use developments
Hotels are part of and support the further
development of a country’s infrastructure…
Hotel investments facilitate economic growth…
“WBG must place tourism
amongst their key priorities for
infrastructure and
entrepreneurial support.”
UNWTO - Jan 2007
No sector spreads wealth and
jobs across poor countries in the
same way as tourism.
”1 in 12 employed in tourism”
International visitors spend
almost $900bn worth of goods
and services annually.

2. 2
Benefits of Hotel Projects…
A new hotel project/ an
expansion/ or a
refurbishment in an
Emerging Market
Government Taxes
Improved fire and safety
standards in EM markets
Improvements in local environment;
e.g. solid waste, roads, airports
Quality resorts;
Happy Tourists/
Business Travelers
Indirect employment
opportunities; handicrafts,
restaurants; tours etc….
Linkages with local suppliers;
construction & service
companies
Long term loans in
markets often unavailable
Job opportunities
Foreign Exchange
IFCIFC’’s Experience in Tourisms Experience in Tourism
• Tourism Portfolio as of
April 30, 2007: US$319
million – about 90% is
debt financing
• Since 1956, IFC has
invested in over 214
tourism projects in
about 80 countries, for
approximately US$2
billion (including
syndications)
60100%$318.5Total
16.6%17.5World
79%28.7Middle East and North
Africa
2019%60.5Sub Saharan Africa
518%57.6South Asia
31%2.5East Asia and Pacific
410%32.2Central & Eastern Europe
21%2.8Southern Europe, Central
Asia
1437%116.7Latin America
No. of
Projects
% of
Portfolio
Exposure
(US$ in
millions)
IFC Investments in
Tourism per Region,
As of April 30, 2007

3. 3
Committed Portfolio in LACCommitted Portfolio in LAC
$116.7
2
7.4
22.3
34.3
50.7
Committed
Exposure (US$
in millions)
100%
3%
6%
19%
29%
43%
% of
LAC
Portfolio
3Peru
3Dominican Republic
6Mexico
14Total
1Grenada
1Brazil
No. of
Projects
LAC Tourism Investments
as of April 30, 2007
Tourism Sector PortfolioTourism Sector Portfolio
• Almost exclusively hotels;
• 54% City, 46% Resort;
• Primarily single asset investments
• Some corporate or multi-asset investments;
• Primarily 4, 5 star properties;
• Size varies from tented camps to large;
• City center hotels but average size only US$6 million;
• Some mixed-use;
• 50% in frontier areas.

4. 4
Key Components of a Good Hotel DealKey Components of a Good Hotel Deal
• Good existing/ expected supply/demand environment;
• Marketing system in place;
• Strong location;
• Good sponsor with a good reputation and track record;
• Strong operator;
• Acceptable project cost relative to the market;
• Manageable debt levels (D:E 50:50);
• Long grace period/ long repayment schedule;
• Clear title to land;
• Appropriate permits/ licenses in place;
• Management contract structured to fit the financing structure;
• Environmental, health and safety guidelines taken into
account;
• Skilled labor and existing training schemes.
GlobalGlobal –– Orient Express HotelsOrient Express Hotels
88
Project: 4-5 Projects
IFC Financing： US$50 million Debt Facility
• Follows 2001 investment (A loan US$6 million; C loan USS$4
million) to Peru Orient Express Hotels for the refurbishment of
3 concessions around Macchu Picchu;
• Standby debt facility to encourage OEH expansion into
emerging markets;
• Primarily acquisition/renovation financing;
• Delegated authority from WB Board, standardized loan
documents for efficient processing;
• Pre-established criteria: D/E structure, security, use of
proceeds;
• Benefits: efficient access to long term debt, IFC country,
tourism knowledge, TA;
• Projects financed to date: Peru, Russia.

5. 5
Mexico & Dominican Republic:Mexico & Dominican Republic:
OccidentalOccidental HotelsHotels
99
Projects: US$159 million and US$92 million
Total IFC Financing： Equity: US$10 million
“A” Loan: US$60 million
“B” Loan: US$80 million
“C” Loan: US$10 million
• Existing client, acquired highly leveraged hotel chain pre 9/11,
facing 9/11 industry downturn;
•Mid-sized Spanish Hotel Chain with 20,000 rooms, mainly in all-
inclusive segment;
• Balance sheet restructuring aimed at extending debt tenor,
converting corporate debt into limited recourse debt, providing
some grace period, consolidating smaller loans;
• Benefits: access to LT financing during industry downturn post
9/11, match debt service to cash flow, free up resources for new
investments.
Caribbean Region: Caribe HospitalityCaribbean Region: Caribe Hospitality
1010
Project: US$79 million
IFC Financing: “A” Loan: US$23 million
Equity: US$5 million
• Repeat client: initial US$3.8 million investment in 2004 to
finance a regional hotel company’s first investment in Port of
Spain;
• Company focuses on small (100-150 room) Marriott Courtyard
hotels in Central America and the Caribbean;
• Project supports a greenfield development of 6 hotels in
Barbados, Costa Rica, Jamaica and Nicaragua;
• Financing structured as a facility covering several hotel
properties, tailored to meet the requirements of each subproject.

6. 6
IFC Technical Assistance in TourismIFC Technical Assistance in Tourism
• SME linkages, e.g. Peru OEH;
• TA to develop standards and brands for small
hotels in the Carribbean in 2000;
• Other types of TA in tourism:
– Energy audits, particularly in Africa;
– HIV/Aids support;
– Maldives coral reef rehabilitation study.
Integrated Investments in TourismIntegrated Investments in Tourism ––
The Case of Dominican RepublicThe Case of Dominican Republic
• US$124 m in hotel investments since 1986 (5
projects);
• US$22 million investment in a power project –
Punta Cana;
• US$70 million investment in airport concessions
and developments – 5 destinations;
• US$18 million for Cruise ship terminals – Santo
Domingo.

7. 7
WBG/ IFC CollaborationWBG/ IFC Collaboration
IFC Investments IFC TA
World Bank FIAS/MIGA
How can we take this further?