Tourism Financing - Unlocking The Potential of the Sector Matt van Roosmalen Consulting Director, EMC 21 November 2019 - Sofitel Phnom Penh Phokeethra, Cambodia Emerging Markets Consulting
Tourism Investment Figures 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. Investment increase % Value of Investments 47% 2016 – Aug 2019 Asia-Pacific: (CDC Data) Tourism Related 467 projects $9 bn (38 Projects) $37.8bn 2016 Aug-19 investment Investment growth YoY (Period of 1 st 8-months) Cambodia: Projects Other $13.5bn (775 Projects) 94% 2018 2019 2 Sources: fDi Markets, Tourism Investment 2018: Global greenfield investment trends in tourism; Council for the Development of Cambodia, Qualified Investment Projects 2019. EMC
Tourism Investment Projects 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. Number of International YoY increase (period of 1 st 9-months) Visitors 11% 10% 6.2m 4.8m Siem Reap Eco-tourism 4.3m 5.5m Opportunities 2017 2018 2018 2019 Hotels and Food and Gaming and accommodation beverage leisure Phnom Penh 4.3m Coastline Resorts Resort Shopping Tour agencies developments 3 Sources: Ministry of Tourism Statistics; Map courtesy of NordNordWest under Wikimedia Creative Commons by-sa-3.0 de License. EMC
Global and Regional Trends Tourism in Cambodia, and consequently the developmental needs and investment opportunities of its tourism sector is driven by global and regional macro-trends. Global Trends Regional Trends Technology; e.g. Consolidation of Increase in ASEAN, China and Booking platforms, global hotel Domestic, as well as other Asian countries Short-term rentals operators (with Regional tourism, experience tourism (Airbnb), Mobile diversified brand due to emerging boom payments portfolios) middle classes For western Responsible and Safety, security, operators, Cambodia MRA for Tourism sustainable tourism, health, and hygiene still reliant on Professionals (in the environmental concerns packaged tours AEC) impact (Mekong, SEA) 4 Sources: World Economic Forum, The Travel & Tourism Competitiveness Report 2019; Hotel Management, Mergers and acquisitions in hospitality expected to accelerate (Oct 12, 2017). EMC
Investment Conditions Investment in public infrastructure and investment policy are crucial enablers for private investments in the tourism sector. Airports / Ports Foreign investments protected • New Phnom Penh Airport ($1.5 bn) Very open policy; no restrictions on: • Siem Reap Airport Plan ($880 mn) • Sihanoukville Airport Upgrade (n/a) • Equity participation • Dara Sakor International ($350 mn) • Capital requirements • Mondulkiri Airport (under study) Only a few restrictions: Roads • Foreign personnel • PP SHV Expressway (underway) • Land ownership (but common in the region) • PP Bavet Expressway (planned) Lack of specific investment incentives Railway • Not eligible for QIP status: • Northern Line / Thailand • Tourism services, Hotel below 3-star grade • Southern Line / Sihanoukville (operational) • Resort smaller than 50 hectares Urban Infrastructure • Current QIP incentives more targeted to export / • Public transport; various options manufacturing sector; only tax holiday • Ring Road No. 3 (Dec 2021) 5 Sources: Council for the Development of Cambodia, Investment Guidebook; CBRE, Cambodia’s Infrastructure Development and its Impact on Real Estate. EMC
Hotel Investments 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. While bank lending accounts for most tourism real estate Major hotel chains recently asset financing, more private funds target hotels worldwide invested in Cambodia* * Greenfield as well as portfolio expansion 6 Sources: Various local news sources; JLL, Hotel Investment Outlook 2019. EMC
Example Investment Projects Some examples of recent or planned tourism investments: Shangri-La 148 keys JV with WorldBridge Morodok Decho Sports Complex Sleuk Rith Institute $157 million, 60,000 seats $40 million (on hold ) 38,000 sqm Hyatt Regency $100 million, 250 keys Angkor Wildlife & Aquarium JV with Chip $70 million Mong Group 100ha of land 7 Sources: CBRE; Various company press releases; Various local news sources. EMC
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. Tourism Infrastructure Small and medium sized enterprises • Implementation risk / project delays • Lack of investable businesses • Underdeveloped financial and regulatory • Lack of exit opportunities systems are problematic to project financing • Small businesses lack of growth capital; • Exposure to foreign financing – exposed to • Few (but growing) domestic angel and economic performance of foreign partners venture capital scene • CSX small growth board only just starting • Service business lack assets to secure credit lines • Competition from the informal sector 8 Source: David Totten, Managing Director – Emerging Markets Consulting. EMC
Tourism Investment Opportunities Apart from the large-scale infrastructure, hotel and resort developments, opportunities exist along various points of the tourism value chain. 1 2 3 4 Hotel,Resort, Tour Company, Shopping Training Accommodation, Holiday Package Restaurant Rationale: At present, Cambodia’s Cambodia has rich Cambodia possesses a Still in lack of human average hotel occupancy cultural, historical and wide range of resource with rate is 68.9%, indicating natural resources traditional arts, such professional service that there is still room which are still as textiles, which have experience and skills for growth unknown and recently experienced that meet international Increasing tourist unexplored revival thanks to standards arrivals and spending tourists’ attention. Opportunities: Invest in hotels, Develop attractive Produce and market Provide training resorts and guest ecotourism or cultural souvenirs made services such as houses or equivalent tourism packages with local arts / foreign languages Operate medium to Link tourpackages designs and (English and Chinese), high end restaurants with other ASEAN materials hospitality and hotel Shopping malls for in potential tourist tourist attractions. management skills. destinations regional visitors 9 Source: Kasikornbank Cambodia Investment Guide, May 2018. EMC
Q&A AND PANEL DISCUSSION 10 EMC
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