Tourism Financing - Unlocking The Potential of the Sector Matt van - - PowerPoint PPT Presentation

Emerging Markets Consulting

Tourism Financing - Unlocking The Potential of the Sector

Matt van Roosmalen Consulting Director, EMC 21 November 2019 - Sofitel Phnom Penh Phokeethra, Cambodia

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Tourism Investment Figures

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Tourism FDI in the Asia-Pacific region reached $6.6 bn in 2017, totaling $37.9 bn over the 2013-2017 period. Cambodia experienced a sharp growth in tourism projects.

Sources: fDi Markets, Tourism Investment 2018: Global greenfield investment trends in tourism; Council for the Development of Cambodia, Qualified Investment Projects 2019.

467 projects $37.8bn investment

2016 Aug-19

Investment increase % 47%

2018 2019

Investment growth YoY (Period of 1st 8-months) 94% Value of Investments 2016 – Aug 2019 (CDC Data)

Tourism Related Other Projects

$9 bn (38 Projects) $13.5bn (775 Projects)

Cambodia: Asia-Pacific:

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Tourism Investment Projects

Hotels and accommodation Food and beverage Gaming and leisure Resort developments Shopping Tour agencies

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Cambodia will receive 7.5 million international arrivals by 2020 and 15 million by 2030. China is currently the largest source of tourists (2 million in 2018), followed by intra-ASEAN travelers.

Sources: Ministry of Tourism Statistics; Map courtesy of NordNordWest under Wikimedia Creative Commons by-sa-3.0 de License.

Siem Reap Phnom Penh Coastline Resorts Eco-tourism Opportunities

2017 2018

Number of International Visitors 11% 6.2m 5.5m 4.3m 4.8m

2018 2019

YoY increase (period of 1st 9-months) 10%

4.3m

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Global and Regional Trends

Technology; e.g. Booking platforms, Short-term rentals (Airbnb), Mobile payments Consolidation of global hotel

• perators (with

diversified brand portfolios) Responsible and sustainable tourism, environmental impact Safety, security, health, and hygiene concerns

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Tourism in Cambodia, and consequently the developmental needs and investment

• pportunities of its tourism sector is driven by global and regional macro-trends.

Sources: World Economic Forum, The Travel & Tourism Competitiveness Report 2019; Hotel Management, Mergers and acquisitions in hospitality expected to accelerate (Oct 12, 2017).

Increase in Domestic, as well as Regional tourism, due to emerging middle classes ASEAN, China and

• ther Asian countries

experience tourism boom For western

• perators, Cambodia

still reliant on packaged tours (Mekong, SEA) MRA for Tourism Professionals (in the AEC)

Global Trends Regional Trends

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Investment Conditions

Airports / Ports

• New Phnom Penh Airport ($1.5 bn)
• Siem Reap Airport Plan ($880 mn)
• Sihanoukville Airport Upgrade (n/a)
• Dara Sakor International ($350 mn)
• Mondulkiri Airport (under study)

Roads

• PP  SHV Expressway (underway)
• PP  Bavet Expressway (planned)

Railway

• Northern Line / Thailand
• Southern Line / Sihanoukville (operational)

Urban Infrastructure

• Public transport; various options
• Ring Road No. 3 (Dec 2021)

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Investment in public infrastructure and investment policy are crucial enablers for private investments in the tourism sector.

Sources: Council for the Development of Cambodia, Investment Guidebook; CBRE, Cambodia’s Infrastructure Development and its Impact on Real Estate.

Foreign investments protected Very open policy; no restrictions on:

• Equity participation
• Capital requirements

Only a few restrictions:

• Foreign personnel
• Land ownership (but common in the region)

Lack of specific investment incentives

• Not eligible for QIP status:
• Tourism services, Hotel below 3-star grade
• Resort smaller than 50 hectares
• Current QIP incentives more targeted to export /

manufacturing sector; only tax holiday

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Hotel Investments

Major hotel chains recently invested in Cambodia* *Greenfield as well as portfolio expansion

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Recent investments in hotels by major international chains is a clear sign of investors confidence in the

• market. Phnom Penh is now also seeing more projects where the traditional focus was on Siem Reap.

Sources: Various local news sources; JLL, Hotel Investment Outlook 2019.

While bank lending accounts for most tourism real estate asset financing, more private funds target hotels worldwide

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Example Investment Projects

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Some examples of recent or planned tourism investments:

Sources: CBRE; Various company press releases; Various local news sources.

Sleuk Rith Institute $40 million (on hold) 38,000 sqm Angkor Wildlife & Aquarium $70 million 100ha of land Morodok Decho Sports Complex $157 million, 60,000 seats Hyatt Regency $100 million, 250 keys JV with Chip Mong Group Shangri-La 148 keys JV with WorldBridge

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Tourism Infrastructure

• Implementation risk / project delays
• Underdeveloped financial and regulatory

systems are problematic to project financing

• Exposure to foreign financing – exposed to

economic performance of foreign partners

Small and medium sized enterprises

• Lack of investable businesses
• Lack of exit opportunities
• Small businesses lack of growth capital;
• Few (but growing) domestic angel and

venture capital scene

• CSX small growth board only just starting
• Service business lack assets to secure

credit lines

• Competition from the informal sector

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Tourism Investment Challenges

Challenges exist to development of enabling infrastructure for tourism investments, as well as for the myriad of domestic and foreign-owned SMEs.

Source: David Totten, Managing Director – Emerging Markets Consulting.

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Opportunities:

Tourism Investment Opportunities

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Apart from the large-scale infrastructure, hotel and resort developments,

• pportunities exist along various points of the tourism value chain.

Source: Kasikornbank Cambodia Investment Guide, May 2018.

Rationale:

• Cambodia possesses a

wide range of traditional arts, such as textiles, which have recently experienced revival thanks to tourists’ attention.

• At present, Cambodia’s

average hotel occupancy rate is 68.9%, indicating that there is still room for growth

• Increasing tourist

arrivals and spending

• Cambodia has rich

cultural, historical and natural resources which are still unknown and unexplored

• Invest in hotels,

resorts and guest houses or equivalent

• Operate medium to

high end restaurants in potential tourist destinations

• Develop attractive

ecotourism or cultural tourism packages

• Link tourpackages

with other ASEAN tourist attractions.

• Produce and market

souvenirs made with local arts / designs and materials

• Shopping malls for

regional visitors

Hotel,Resort, Accommodation, Restaurant

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• Still in lack of human

resource with professional service experience and skills that meet international standards

• Provide training

services such as foreign languages (English and Chinese), hospitality and hotel management skills.

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Tour Company, Shopping Training Holiday Package

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Q&A AND PANEL DISCUSSION

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