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Tourism Investment and Finance Accessing Sustainable Funding and Social Impact Capital

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Tourism Investment and Finance Accessing Sustainable Funding and Social Impact Capital GlobalGSTA Sustainable Tourism Alliance TOURISM INVESTMENT AND FINANCE ACCESSING SUSTAINABLE FUNDING AND SOCIAL IMPACT CAPITAL Sustainable Tourism: International Cooperation for Development ONLINE TOOL KIT AND RESOURCE SERIES 4 Sustainable Tourism: International Cooperation for Development ONLINE TOOL KIT AND RESOURCE SERIES http://lms.rmportal.net/course/category.php?id=51 ST101. Global Tourism Achieving Sustainable Goals ST102. Project Development for Sustainable Tourism A Step by Step Approach ST103. Tourism Destination Management Achieving Sustainable and Competitive Results ST104. Tourism Investment and Finance Accessing Sustainable Funding and Social Impact Capital ST105. Sustainable Tourism Enterprise Development A Business Planning Approach ST106. Tourism Workforce Development A Guide to Assessing and Designing Programs ST107. Tourism and Conservation Sustainable Models and Strategies ST108. Scientific, Academic, Volunteer, and Educational Travel Connecting Responsible Travelers with Sustainable Destinations ST109. Powering Tourism Electrification and Efficiency Options for Rural Tourism Facilities GlobalGSTA Sustainable Tourism Alliance TOURISM INVESTMENT AND FINANCE ACCESSING SUSTAINABLE FUNDING AND SOCIAL IMPACT CAPITAL Sustainable Tourism: International Cooperation for Development ONLINE TOOL KIT AND RESOURCE SERIES Primary Authors Jim Phillips Jamie Faulkner Solimar International Contributors Roberta Hilbruner, USAID Donald E. Hawkins, George Washington University This publication is made possible by the support of the American People through the United States Agency for International Development to the Global Sustainable Tourism Alliance cooperative agreement #EPP-A-00-06-00002-00. The contents of this publication are the sole responsibility of the author(s) and do not necessarily reflect the views of USAID or the United States Government. Table of Contents Table of Contents ..................................................................................................................................................................... 1 Acronyms .................................................................................................................................................................................... 2 Preface .......................................................................................................................................................................................... 4 Unit 1: Identify Trends and Opportunities .................................................................................................................... 6 Unit 2: Evaluate Investment Environment ................................................................................................................ 21 Unit 3: Project Identification............................................................................................................................................. 33 Unit 4: Financial Feasibility ............................................................................................................................................... 49 Unit 5: Project Definition, Design, and Promotion ................................................................................................... 55 Unit 6: Identify and Access Funding .............................................................................................................................. 63 Unit 7: Monitor and Evaluate Sustainable Tourism Investment and Finance Projects ............................ 80 Glossary ..................................................................................................................................................................................... 92 References ................................................................................................................................................................................ 95 Annex A: RFP Example from TourismROI.com ...................................................................................................... 100 Annex B: Tourism Sector Diagnostic Tool Investment Drivers ....................................................................... 103 In accordance with Title 17 U.S.C. section 107, any copyrighted material herein is distributed without profit or payment for non-profit research and educational purposes only. If you wish to use copyrighted materials from this publication for purposes of your own that go beyond “fair use,” you must obtain permission from the copyright owner. International Institute for Tourism Studies The George Washington University 2201 G Street, NW Washington, DC 20052 Acronyms AED — Academy for Educational Development ADB — African Development Bank AFD — French Development Agency AI — African Investor BRIC — Brazil, Russia, India, and China CI — Conservation International CEED — Center for Entrepreneurship and Executive Development CREST — Center for Responsible for Travel CSR—- Corporate Social Responsibly DANTEI — Development Assistance Network for Tourism Enhancement and Investment DAI — Development Alternatives, Inc. DMO — Destination Management Organization ESTA — Ecuador Sustainable Tourism Alliance FDI — Foreign Direct Investment GDP — Gross Domestic Product GEF — Global Environment Fund GDA — Global Development Alliance GIIN — Global Impact Investing Network GSTA — Global Sustainable Tourism Alliance GSTC — Global Sustainable Tourism Criteria GW — The George Washington University IC — Investor’s Circle IDB — Inter-American Development Bank IFC — International Finance Corporation IFI — International Financial Institutions IPA — Investment Promotion Agency IPI — Investment Promotion Intermediaries TOURISM INVESTMENT & FINANCE 2 IRIS — Impact Reporting and Investment Standards IRR — Internal Rate of Return LDC — Least Developed Countries MDG — Millennium Development Goals MIGA — Multilateral Investment Guarantee Agency NGO — Nongovernmental Organization NPV — Net Present Value OPIC — Overseas Private International Corporation ODA — Official Development Assistance P&L — Profit and Loss SEAF — Small Enterprise Assistance Funds SGB — Small and Growing Businesses SIFT — Sustainable Investment and Finance in Tourism Network SMEs — Small and Medium Sized Enterprise ST — Sustainable Tourism SWOT — Strengths, Weaknesses, Opportunities, and Threats ROI — Return on Investment TI — Transparency International TNC — The Nature Conservancy T&T — Travel and Tourism UNCED — United Nations Conference on Environment and Development UNCTAD — United Nations Conference on Trade and Development UNDP — United Nations Development Program UNEP — United Nations Environment Program UNWTO— United Nations World Tourism Organization USAID — United States Agency for International Development WBG — World Bank Group WEF — World Economic Forum WTO — World Tourism Organization WTTC — World Travel & Tourism Council TOURISM INVESTMENT & FINANCE 3 Preface As one of the world’s largest industries, tourism has grown rapidly and continuously for more than half a century and has become a significant source of global employment and economic output. The World Travel & Tourism Council (WTTC) reported that in 2010 tourism directly contributed to 2.8% of global GDP, accounted for 259 million direct jobs, and 4% of global investment. Including indirect impacts, WTTC estimates that in 2011 the industry will contribute nearly US$6 trillion to global output, or 9% of world GDP. Travel and tourism investment is expected to reach US$652.4 billion in 2011 and is forecast to increase to US$1.5 trillion by 2021 (World Travel & Tourism Council and Oxford Economics, 2011). Tourism is also the top export earner in 60 countries and the primary source of foreign exchange earnings for one third of developing countries and one half of least developed countries (UNCTAD, 2010). Developing countries particularly benefit from the tourism industry’s positive economic, environmental, and social impacts, through the creation of jobs, preservation and celebration of indigenous culture, reduction of poverty, and promotion of environmental conservation (environmentally-friendly alternative livelihoods). In Tanzania, for example, “gross tourism receipts accounted for less than 10% of total export earnings in the 1980s. By 2000, tourism was the top export earner, above coffee and cotton, and now accounts for over 35% of total goods and services exports” (UNCTAD, 2010). International development agencies and developing countries have recognized the numerous positive impacts of tourism and actively pursue tourism development to promote economic growth and development assistance objectives. Tourism can also have negative impacts. Particular attention must be paid to environmental and social concerns, as well as pressure placed on non-renewable resources and infrastructure. Assessing and managing these impacts is a core function of the investment promotion process outlined here. This Guide provides development practitioners with the information and tools necessary to successfully facilitate the financing of small-scale, sustainable tourism projects, and to transfer these skills to their clients and counterparts. TOURISM INVESTMENT & FINANCE 4 More specifically, it is designed to assist organizations and individuals working with micro, small, and medium-sized enterprises to conduct pre-feasibility studies, understand the market and financial analysis process, prepare investment briefs, identify potential sources of financing, understand how
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