Decisions about where to invest will be influenced by numerous criteria, including airlift, infrastructure, community engagement, regulatory environment, and financial support.
Sustainable destination development
While hotels can be crucial to attracting infrastructure investment and tourism, the attractiveness of some destinations has led to overtourism and overdevelopment. As a result, Iceland has increased its tourist tax and Japan introduced a visitor tax. Destination management company strategies are now targeting sustainable tourism, not mass tourism. So, what should investors consider when deciding where to invest?
There are plenty of reasons investors would be interested in an already popular and well-known destination such as Greece, points out Marinos Giannopoulos, CEO of Enterprise Greece, the government agency for investment and trade. In fact, EY’s 2023 Attractiveness Survey showed foreign direct investment (FDI) projects in Greece grew by 57% in 2022, at a time when investment in Europe increased by just 1%. 40% of respondents said they intended to invest or expand their operations in the country; the highest figure since the launch of the survey in 2019. Indeed, Greece’s tourism sector accounts for almost a quarter of its GDP.
With a strong food culture and a warm climate, it’s not a hard sell. However, stability and infrastructure are also key. The latter is a focus for Enterprise Greece, including the expansion and improvement of marinas and airlift, particularly in secondary and tertiary destinations – but in a sustainable way.
“You don't want to have an oversupply of a product, not just because the price will fall, but then the environment will also suffer,” explains Giannopoulos. He stresses the importance of public-private partnerships (PPPs) to build and develop slowly.
“[It’s] having new marinas that can bring better boats or that can fix boats as well, so you can bear them for the winter. You need infrastructure overall to be able to support a better product,” he adds.
Imad Barrakad is chairman and CEO of the Moroccan Agency for Tourism Development. Morocco is also thinking about sustainable destination development, promoting lesser-known destinations outside of Marrakesh, and developing each destination’s ‘storytelling’, whether that’s hiking, beach or history. Incentives are based on both encouraging investment into less developed regions, and whether a hotel aligns with the strategy of the location.
“We don't have the same hotels in a resorts area [and] a hitchhiking area. It's not the same hotels, it's not the same investor, it's not the same size,” explains Barrakad.
Developing a whole destination
Panos Loupasis, market managing director for Türkiye, Middle East & Africa for Wyndham Hotels & Resorts, points out that investors need to understand the whole product to make it a success. That means, he argues, “understanding the visitor that you have, who are they, where they're coming from, how long are they staying, how much are they spending, what's their nationality, what are their patterns? Then understanding your competition”.
This may result in the best plan in the world, but plans also need to be well-executed, with funding “the critical, most important factor for the viability of a tourism development plan”, he says.
Loupasis offers Saudi Arabia’s Vision 2030 as an example, with the Kingdom’s Tourism Development Fund reviewing feasibility studies and offering development consultancy, as many applicants are first-time hotel developers, he says. “They're also connecting international groups and brands with local developers and their interest is not only hotels but looking at an integrated development,” he explains.
For a hotel to succeed, a big picture approach is needed for the entire destination. “You just don't go for the beach. You go to experience the nice village, to have a nice meal, to go on a trek, to see a play or concert,” says Giannopoulos.
“You need to give back to the community by employing local people. You need to enable the investor... but at the same time having the necessary infrastructure for the Greeks to capitalise on that investment.”
Tackling overdevelopment
Destinations that have become overdeveloped are deploying strategies to counteract the negative effects of overtourism, for example Machu Picchu’s visitor cap and the temporary closure of Thailand’s Maya Bay. Although, Loupasis isn’t convinced by Venice’s new entry fee.
“Will this alleviate or control? Not really, because everybody wants to go there,” he says. Instead, he suggests expanding the season using attractions and events, and funnelling visitors into other areas.
“It's a very interesting one, but not an easy one,” he adds.
All those quoted in the article appeared on stage at the International Hospitality Investment Forum Europe, the Middle East and Africa (IHIF EMEA), held in Berlin between April 15 and 17 2024, in a session called: Destination Dynamics: Strategic Stakeholder Partnerships to Cultivate Appeal for Travellers, Investors and Local Communities.