Crow Afr ICANDO speech by 86nImH

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									                CONSTRUCTING A TOURISM INFRASTRUCTURE

                        A Hotel and Resort Developer’s Perspective


      Presented at AfrICANDO 2003
      Miami, Florida July 23, 2003

                  By: John R. Crow
           Crow Hospitality Investment Group, LLC


Outline of Key Points

I.      Introduction
The cost of developing tourism infrastructure is high, but the returns are even higher


II.    Basic Infrastructure Requirements
There are basic infrastructure requirements necessary to attract private capital for the
development of hotels, golf courses, and attractions, including:
             a. Transportation
                       -Airports
                       -Seaports
                       -Roadways
                       -Local public transportation
               b. Utilities
                       -Water
                       -Sewerage and solid waste disposal
                       -Electricity
                       -Telecommunications
               c. Trained, or trainable, labor force in the immediate vicinity of the
               tourism developments
   III.      Why Governments Initially Pay for the Basic Infrastructure, not Private
             Developers
Basic infrastructure such as those listed above are very expensive, but typically
provide benefits to multiple projects as well as the residents and businesses in local
communities. Individual hotels, resorts and attractions cannot afford to bear that
burden.


   IV.       The Economics of Hotel, Golf and Attractions Developments
The Development Cost of Hotels, particularly luxury hotels is high, and returns on
investment can be low, especially in the first several years of operation.


   a. A 5-star luxury hotel built to US or European brand standards can cost
          anywhere from US $200,000 to $400,000 or more per room. A 200-room
          luxury hotel with a golf course may cost US $50 million to US $90 million to
          develop.


   b. A mid-price hotel can cost between $100,000 and $150,000 per room


   c. An economy limited service hotel can cost between $40,000 and $75,000 per
          room


   d. If land cost is high, as it can be in many countries, the development cost is
          even higher


   e. In order for hotels to be profitable, they often require tax breaks, duty
          waivers, and other concessions, as well as government commitments tourism
          marketing, job training, etc
f. In the case of luxury hotels, they still may not be profitable without the
      ability to also develop surrounding real estate, for example, residential
      condominiums, time-share, single-family lots, or commercial development.
      This becomes difficult if non-citizens are not allowed to own property or to
      get clear title to property


g. It takes a minimum of three years, and usually more to develop a luxury
      hotel. That includes two years or more of design and construction and
      another year or more of planning and permitting. The more lengthy the time
      required to go through the process with the local governments, the more
      expensive it becomes and the less likely it becomes that private investors and
      developers will remain interested. There are too many other places they can
      go and get a quicker return on their investment


IV.       Local Ownership vs. International Ownership
In an ideal situation, hotels and attractions are varied in size and quality,
appealing to a broad sector of the market. The smaller hotels are often locally
owned and the large luxury hotels and resorts are usually owned by international
investors. They both have strong economic impact on the local government, but
a portion of the income from investment in large projects is often repatriated to
another country, reducing the impact on creation of wealth in the local
community. Further, top management positions are often given to non-citizens
because of a lack of qualified individuals in country. Over time one of the goals
of tourism development should be to enhance local ownership and to grow the
local, trained work force to develop qualified and management. The strength of
local ownership and local management candidates in turn enhances localities
attractiveness for outside investors in additional new projects.
   V. Summary and Conclusions
Development of tourism infrastructure is best done with private investment, with
strong government support. There are a number of things that national and local
governments can do to create an environment to attract private capital for investment
in hotels, resorts and attractions. With these in place to create opportunity, private
development will follow.




                                Biographical Information

                                     John R. Crow
                                        President
                         Crow Hospitality Investment Group, LLC
                                  Atlanta, GA 30319
                                     404-261-0969
                                  404-261-1129 Fax
                               crowhotels@comcast.net


     Mr. Crow is a 30-year veteran of the hospitality industry. He was formerly
     Senior Principal with Pannell Kerr Forster (PKF), an international hotel
     accounting and consulting firm, and Senior Vice President and Regional
     Director of PKF Consulting, Inc. He has served as an advisor for the
     development and management of hundreds of hotel, resort, golf, and attractions
     in more than 20 countries in Africa, Asia, Europe, Latin America and
     throughout the US and Canada. His clients have included developers,
     investors, lenders, major hotel companies and governments. For the past 8
     years, Mr. Crow has headed his own hotel development company and his own
     management consulting company, specializing in international destination
     resort projects.

								
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