World Tourism day & Green invest

27 September 2023
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World Tourism day & Green invest

Happy World Tourism Day!

“Global tourism is on track to return to pre-pandemic levels by the end of year. By investing in people and projects that make a difference, we can deliver on the sector’s potential to drive growth and opportunity for all.” – Mr. Zurab Pololikashvili Secretory General UNWTO

The COVID-19 pandemic has reshaped our world, particularly impacting the tourism sector. Yet, within this disruption lies an opportunity – a chance to redefine the path of tourism investments. With a keen eye on Agenda 2030 and the Sustainable Development Goals, the United Nations World Tourism Organization (UNWTO) has placed investments at the forefront of tourism’s recovery and future growth. We need both traditional and non-traditional investments that benefit People, foster sustainability for the Planet, and drive Prosperity. This is the essence of UNWTO’s vision, and as we approach World Tourism Day 2023, it’s a call to action for governments, financial institutions, development partners, and private sector investors to unite around a new tourism investment strategy. The mission is clear: to invest in education, sustainable infrastructure, innovation, and entrepreneurship to harness tourism’s extraordinary potential for positive change across People, Planet, and Prosperity.

Global Investment Insights

In the dynamic world of global tourism, recent insights from fDi Markets and UNWTO paint a vivid picture. The 2022 Tourism Investment Report reveals that while the tourism sector has displayed signs of recovery, foreign direct investment (FDI) remained subdued in 2021 and continued its decline in the first half of the current year.

UNWTO data shows a robust 5.3% increase in global tourist arrivals in 2021, nearly tripling during the first quarter of 2022 compared to the same period in 2021. In the first half of this year, Europe experienced a remarkable 3.5-fold surge in airport traffic compared to 2021, a trend expected to persist as COVID-19 travel restrictions ease.

Despite this surge in demand from eager travelers, a resurgence in tourism investments remains elusive. In 2021, foreign investors announced 250 FDI projects worth approximately $9.5 billion in tourism, marking an 8% decline from the previous year’s 271 projects valued at $17 billion.

The landscape of global tourism FDI projects and capital expenditures varies across regions. Western Europe saw a marginal 2% decrease in tourism capital expenditure between 2020 and 2021, while the Middle East recorded an impressive 70% increase. Africa demonstrated early signs of investment recovery, announcing more than twice as many projects in 2021 compared to 2020. In contrast, China’s stringent zero-COVID policy led to a 60% decline in FDI projects in 2021 compared to the previous year in the Asia-Pacific region.

Accommodation remains the primary investment focus, representing 59% of announced projects. However, emerging sub-sectors such as travel tech and software are gaining traction in terms of capital inflow. Travel arrangement and reservation services, along with software publishers (excluding video games), collectively accounted for 21% of announced investments from 2019 to 2021.

Among top investors, Marriott International retains its position as the largest foreign investor in the tourism sector, with 97 global projects from 2017 to 2021. US-based hotel groups Hyatt International and Travel + Leisure Co secure the second and third positions among the top 10 foreign investors in tourism FDI projects.

Notably, Selina represents the Latin American region in the top 10, while Minor International is the face of the Asia-Pacific. The list also includes renowned European players like Accor, InterContinental Hotel Group, Barcelo, Melia Hotels International, and TUI Group. These industry leaders are at the forefront, shaping the future of tourism and green investment on a global scale.

fDi Insights

Drivers and Trends Shaping Investment in Tourism:

A. Investment Indicators for the Tourism Sector

1. Consumer Behavior and Demand Dynamics

  • International tourist arrivals are projected to grow to 1.8 billion by 2030, with the majority from Asia.
  • Millennials and Generation Z, digital natives, will dominate this market and seek personalized, digital, and transparent travel experiences.
  • Investment opportunities span from traditional infrastructure to digital solutions and sustainability enhancements.

2. Innovation and Technology Drivers

  • Growing demand for technologies like 5G, Cloud services, and AI is reshaping tourism.
  • VC investments in Travel Tech have surged, with unicorn valuations reaching USD 61.6 billion.
  • Subsectors like Alternative Housing, AI, Electric Vehicles, and more offer diverse investment prospects.

3. Sustainability and Inclusion Drivers

  • Tourism trips are set to reach 37.4 billion by 2030, with a focus on sustainability.
  • Sustainable investments aim to transition the sector towards long-term resilience and renewal.
  • Investment in green initiatives and responsible practices is essential to meet evolving traveler needs.
  • B. Barriers and Limitations to Investments in Tourism

2.1. Measuring Capital Formation in Tourism

  • Measuring the economic impact of tourism is complex due to its multi-dimensional nature.
  • Tourism doesn’t have a formal industry classification, making it challenging to gauge its size and importance.
  • The rise of Travel Tech startups adds further complexity in tracking capital flows in the sector.
  • Investment data from Greenfield tourism financial FDI and fDi Intelligence aids in understanding and bridging this information gap.

2.2. Evolving Value Chains and Ecosystems

  • Tourism is a major global employer, with around 300 million jobs worldwide.
  • It has a far-reaching impact on local value chains, including passenger transport, accommodation, food and beverage, and digital startups.
  • The tourism value chain is expanding to include non-mobility and mobility subsectors driven by capital allocation to travel tech innovations.
  • These subsectors represent substantial capital formation and offer fresh investment opportunities, particularly post-COVID-19.

2.3. Attractiveness and Foreign Direct Investment (FDI)

  • Tourism FDI reached USD 61.8 billion globally in 2019, supporting over 135,000 jobs.
  • Despite global economic challenges, the tourism sector remained resilient, with increasing FDI projects.
  • Major sources of tourism-related FDI are in developed countries, but there’s a growing trend in Latin America and the Caribbean.
  • Developing countries seek capacity building and expertise to enhance their tourism investment strategies and attract FDI.
  • C. Frameworks to Foster Sustainable and Inclusive Tourism Investments

3.1. Shift from Traditional to Non-Traditional Investments

  • Traditional tourism investments, totaling USD 195 billion (2015-2019), predominantly flowed into Asia-Pacific (41%) and Europe (27%), with Latin America and the Caribbean seeing increased investments.
  • “Accommodation” accounted for 57% of Greenfield investments, reflecting conventional construction-related projects.
  • Non-traditional investments in services related to software technologies, like travel arrangement services and internet publishing, constituted 32% of total investments during 2015-2019.
  • Venture Capital (VC) investments in Travel Tech and Corporate Venture Capital (CVC) are on the rise, amounting to USD 449 billion (2014-2019), revolutionizing the tourism sector with technology-driven innovation.
  • However, emerging economies are yet to fully tap into the potential of global travel tech investments, making it imperative to support innovation in these regions.

3.2. Tourism Investment Strategies

  • UNWTO outlines a three-stage framework for Tourism Investment Strategy (TIS):
  • Organizational Strategy (Enabling Capacities):Establishing a clear vision and ownership for FDI attraction.
  • Attractiveness Strategy (Enabling Conditions):Creating favorable investment conditions, including macroeconomic stability and regulatory environment.
  • Promotion Strategy (Enabling Opportunities): Developing a compelling value proposition, identifying key projects, and leveraging industry trends to attract investors.
  • The COVID-19 pandemic underscores the need for sustainable tourism investments that go beyond traditional growth-focused projects.
  • Non-traditional investments fostering innovation and sustainability are crucial for the sector’s long-term resilience and alignment with SDGs.
  • Governments should promote policies and new investment mechanisms to recover, retain, and attract foreign direct investments, reimagining tourism for a more sustainable future.

Investments in Pakistan

In the heart of Pakistan lies a landscape of unparalleled beauty, a tapestry woven with lush green valleys, towering Himalayas, Karakoram, and Hindukush mountain ranges, meandering rivers, and captivating coastlines. This breathtaking natural canvas is adorned with a rich cultural heritage, including the ancient Buddhist ruins of Gandhara, the mysteries of the Indus Valley, and the enigmatic city of Mohenjo Daro. It’s a land that inspires awe and reverence, drawing travelers from across the globe.

However, as investments flow into the northern regions, a troubling concern looms. The absence of clear-cut policies and investor-friendly guidelines has resulted in a haphazard approach that threatens the very essence of this remarkable landscape. Local communities, deeply rooted in these lands, watch with growing unease as their culture and way of life face the encroachment of unchecked development.

Erum Khan, an advocate/Expert on Sustainable Tourism, recently visited Gilgit Baltistan as part of the project ‘Towards Sustainable Tourism.’ In a compelling video, she shed light on the crucial issue of fixing hotel rates in tourist destinations of Pakistan. The main focus of Miss Erum Khan’s visit was to explore the potential and feasibility of implementing sustainable tourism policies and rules in the picturesque region of Gilgit Baltistan. Miss Erum Khan’s insightful discussion encourages authorities and stakeholders to consider sustainable practices in tourism, not only in Gilgit Baltistan but also in other tourist destinations across Pakistan. By embracing sustainable tourism policies, the country can achieve long-term economic growth, preserve its natural beauty, and offer a more enjoyable experience for travelers.

It is time to heed the call for change and take decisive action. We implore our policymakers to enact comprehensive tourism policies in every province, policies that not only protect our natural wonders and cultural treasures but also promote sustainable development. The moment has come to establish a unified Tourism Board, inviting stakeholders and experts from around the world to join hands in shaping the future of Pakistan’s tourism.

As we embark on the path of tourism diplomacy, let us extend our appeal to embassies and diplomatic missions, urging them to partner with us in this noble endeavor. Together, we can forge a road ahead that preserves our heritage, empowers our communities, and opens our doors to the world, inviting travelers to experience the splendor of Pakistan.

Standing at this pivotal juncture, we recognize that the key to a brighter future lies not only in prudent investments but also in responsible, green investments. By prioritizing sustainability in Pakistan’s tourism sector, we can combat the challenges of climate change and ensure that our natural wonders endure for generations to come.

(Written by Erum Khan, UN Fellow on SDG’s Next Generation Leader (Fellow NGL),

Sustainable Tourism Expert, Sustainable Brand Strategist, Director Innovation & Planning Travel Explorer Weekly, Director Odyssey, Tourism Diplomat, Presenter at UN International Conference on Sustainable Development, New York)