Trends: how international tourism was developing before the pandemic
Trends - series of FEZ Grodnoinvest materials on key events in global and regional investment policy, the dynamics of foreign direct investment (FDI). This article will focus on investments in tourism industry over the past five years, up to COVID-19 and the pandemic. The industry has faced new challenges and the coronavirus. However, the trends set several years earlier will have an impact on the prospects of international tourism in 2020 and subsequent years. The material was prepared based on the data of Tourism Investment Report 2019 service of the Financial Times.
The past five years have been characterized by a boom in tourism industry. In 2014-2018 global volume of foreign direct investment (FDI) in tourism sector is estimated at $ 131 billion. The peak of investments occurred in 2018, when 613 investment projects worth $ 57 billion were announced, which will create about 140 thousand new jobs.
The United Kingdom has become the world leader in the number of investment transactions in tourism industry. Since 2014, 145 projects have been announced here. The United States (130 projects) and China (91) entered top 3. In terms of investment, the United States ($ 13.2 billion) is the leader. This is followed by China and South Korea ($ 8.5 and $ 7.8 billion).
In 2019, growth continued both in the number of investment transactions and in the number of tourists. Over five years, the number of tourists around the world has grown by 23% to 1.4 billion people. In Europe, their number increased by 24%, in Asia and Oceania - by 28%, in America - 19%, in Africa - 22%, in the Middle East - 7%.
However, the distribution of tourists by region has changed slightly. Previously, the number of tourists in advanced economies grew at a faster pace. However, starting in 2017, the situation has changed in favor of emerging economies. In 2017 and 2018 the number of tourists in developed countries increased by 6.3% and 5.0%, respectively, in developing countries - by 7.9% and 6.5%. Thus, by 2019, the ratio between developed and developing countries in terms of the number of tourists was 55% versus 45%.
713 million people visited Europe in 2018, 40% of whom traveled to the countries of the European Union. Eastern and Central Europe accounted for 142 million people, an increase of 23% compared with five years ago. High growth rates of tourists shows the region of Southern Europe and the Mediterranean. In 2017, the number of tourists increased by 13%, in 2018 - by 8%. The number of tourists in Central and Eastern Europe increased by 5% and 6%, respectively.
In 2018, a record in the number and volume of transactions with FDI was set in the European tourism sector: 189 projects worth $ 11.6 billion, within those 29 thousand new jobs will be created. In just five years, $ 29 billion has been invested in the region. A quarter of all projects with FDI in tourism sector attracted the United Kingdom (145 out of 519). However, Spain became the only country that since 2014 has shown steady growth in the number of projects. In 2018, it attracted $ 1.3 billion in foreign direct investment. Ireland became the only country that annually since 2014 has been increasing the volume of attracted FDI instead of projects number .
In Latin America and the Caribbean, Mexico became the driver of FDI. In five years, 73 projects worth over 5.5 billion US dollars have been implemented in the country. Top 3 included Colombia (36 projects) and Brazil (33). Despite the overall increase in the number of projects with FDI, the region has seen a decrease in the cost of projects (from 60 to 53 million US dollars per project). In general, over five years, the region has significantly increased annual FDI in tourism sector - by 7.3 times. The largest project was the construction of a hotel complex in Jamaica by American company Karisma Hotels & Resorts. The project cost is estimated at 900 million US dollars and includes the creation of 4000 rooms for the accommodation of 8 thousand people.
Since 2014, North America has implemented 146 projects worth over $ 13.4 billion. In five years, New York State has become the largest recipient in the region (30 projects). Next are Florida and California. New York also attracted the largest investment (39% of North America). In Canada, the largest province Ontario has become the leader in attracting FDI in tourism sector. Over five years, it has implemented 7 projects worth $ 29 million.
Over five years in Asia and Oceania, 535 projects worth 56 billion US dollars were implemented. The peak of activity occurred in 2018. The tourism sector forms 11% of the GDP of China and Australia, 9% - of India. The volume of investments since 2014 increased by 4.5 times, the number of projects - by 8.4 times. China has become a leader in the region, but over five years it has reduced its share in the volume of attracted FDI from 21% to 13%. In India, in 2018, 17 projects were announced compared to 7 a year earlier. Almost half of all FDI-created jobs were in China, Japan, Thailand, and South Korea.
In Central Asia and Africa, over the past five years, 213 investment projects with FDI in the tourism sector worth $ 16 billion have been implemented, a third of which came from the UAE. Morocco was ahead of South Africa in attracting FDI among African countries, having implemented 15 projects worth $ 1.3 billion over five years.
Since 2014, the American Marriott International network, which has implemented 77 projects around the world, has become a key investor in tourism sector. The second in the ranking was Selina (43 projects). This company was founded in Panama in 2015 and aims to create a range of services (accommodation, tours, experiences, wellness, etc.) for the traveler. Currently, the company’s structure includes 52 locations in Latin America and Europe, and by 2023 it is planned to increase their number by 9 times. The largest investors include InterContinental Hotels Group (26 completed projects since 2014), Booking Holdings, Melia Hotels International (25 projects each), Accor, Wyndham Worldwide (22 projects each), Hyatt International (20), Expedia (19), NH Hotels (18).
The driver of investment activity in tourism industry was hotels and other real estate (870 projects since 2014). The second place in terms of the number of transactions was taken by services for organizing leisure and booking tickets (423). Among the three leaders is the development of special software for the tourism industry (125). This is followed by visual arts and sports (70 projects), theme parks and amusement parks (60), gambling (45), recreation (31), museums and historical sites (10). Construction, sales, marketing and tourist support are key business areas in the tourism industry. They accounted for 95% of the total number of transactions with FDI. Since 2014, 911 projects were related to construction, 712 projects related to sales and marketing, 75 projects related to the creation of headquarters and business offices of international companies.
In recent years, cities of the “second level” have become an important area of FDI in the tourism sector. These include cities with a population of 200 thousand to 5 million inhabitants, which are not the capital of the state, the volume of attracted FDI does not exceed 10% of the national indicator. These locations are becoming the growth points of the tourism industry in their country and region. In Asia and Oceania, these include Bali (Indonesia), Gurgaon (India), Brisbane, Perth (Australia). In North America - Las Vegas, Orlando, Portland (USA), Vancouver (Canada). In Latin America - Cancun, Leon, Queretaro (Mexico), Cartagena, Barranquilla (Colombia) In Africa and the Middle East - Marrakesh, Agadir (Morocco), Ras al-Khaimah, Sharjah (United Arab Emirates), Durban (South Africa), El Khobar (Saudi Arabia). In Western Europe - Edinburgh, Manchester, Glasgow (Great Britain), Hamburg, Cologne, Leipzig (Germany).
Grodno could become such a city in Belarus. There are attractive conditions for the development of the tourism industry. The city and its surroundings are located in a historically and logistically attractive place in a cross-border region on the border of the European and Eurasian Economic Unions. The regulatory framework, transport and tourism infrastructure are improved annually. Since 2016, a visa-free regime has been operating in the region through 14 checkpoints for up to 15 days for citizens of 73 countries of the world.
All this allows to increase the tourist flow from the countries of near and far abroad every year. For five years, the number of organized tourists visiting the Grodno region has grown 58 times to 125 thousand people. According to this indicator, Grodno was ahead of all regions of Belarus, including the capital Minsk. In the future, the tourist boom in the region will continue due to the development of aviation and railway infrastructure, attraction of low-cost airlines, and the creation of new tourist facilities.
To implement investment projects in the Grodno region, a unique investment platform was created for Belarus - a special tourist and recreation park Augustow Canal. Preferences within the park allow increasing the efficiency of the investment project due to exemption from income tax, real estate tax, VAT and import customs duties. Land is provided without auction, and rent is determined using a reduced coefficient of 0.0025. Recently, a new resident is registered in the Park, who will create a complex of tourist infrastructure facilities and reconstruct the buildings of the former brewery, the history of which dates back to the 16th century.
FEZ Grodnoinvest administration will provide the necessary support when choosing an investment site and implementing a project on the territory of Park Augustow Canal . Our contacts: