The World Travel & Tourism Council has published a new report highlighting the importance of attracting capital investment to drive growth in the travel and tourism sector following a 25 percent drop in 2020.
"Critical Factors to Attract Hotel Investment," launched at the Sustainability and Investment Summit in San Juan, Puerto Rico, looks at key enabling factors for hotel investment, and success stories of destinations that have employed such factors and shown strong growth in investment.
In 2020, when international travel came to an almost standstill, the travel and tourism sector reported 62 million job losses. The sector's GDP contribution dropped by half, representing a loss of nearly $4.9 trillion. According to the report, capital investment in the sector also fell substantially during the height of the pandemic from nearly $1.1 trillion in 2019 to only $805 billion in 2020, representing an almost 25 percent drop. Investment in the sector continued to decline last year with a further 6.9 percent decline to $750 billion.
Grounds for Optimism
The report does provide grounds for optimism as it forecast a strong growth in travel and tourism investment over the next decade. However, the global tourism body warns that to achieve this, governments around the world must create a favorable enabling environment. In addition to political stability and liquidity, considered essential for investment, a clear, open, and consistent government action and support, favorable tax incentives, and safety and security remain prerequisites to attract hotel investments.
“Hotel investment is absolutely key for the recovery and growth of the travel and tourism sector," WTTC President and CEO Julia Simpson said in a statement. "Destinations must have a clear commitment and take a holistic approach to become resilient and competitive.
“As we recover from the pandemic and we build back better, investments not only need to benefit destinations economically, but more importantly, socially and environmentally.”
Key Factors
According to the report, key enabling factors for hotel investment include governance and rule of law (a key enabler for investors, as it determines how easily and successfully a business operates), physical infrastructure, air and ground connectivity and workforce.
The report analyzed a number of popular destinations which benefited from implementing these elements. For instance, the Netherlands provides an enabling environment for foreign investment with less restrictive regulations and strict laws to penalize corruption.
Physical infrastructure, air and ground connectivity is also crucial to investment as well-connected hubs support wider regional development and provide access to lesser-known destinations that offer tourism opportunities.
South Korea, for example, ranks as one of the best-connected countries in the world. The announcement of the country as the 2018 Winter Olympics host incentivized investment in transport infrastructure, which resulted in hotel room supply soaring by almost 15 percent, outstripping the healthy overall Travel & Tourism capital investment growth of 8.7 percent in 2017.
The paper also highlights the importance of reskilling and up-skilling the workforce. Leading the way in this area is Portugal, which focused on strategies to help reskill the sector, such as the tourism training talent program, committed to improving the quality of tourism’s training services.
Some additional factors and success stories in the report include liquidity in Maldives, government aid in Saudi Arabia, taxation in Colombia, destination planning and sustainability in Singapore and Rwanda, service culture in the Philippines, and travel facilitation in Aruba.
With contributions from STR, KSL Capital Partners and JLL, the report draws from experience to inspire both the public and private sector, as they develop and implement Travel & Tourism investment policies that will boost the long-term recovery of the sector.