Tourism

DEVELOPING TOURISM AND BUSINESS INFRASTRUCTURE ENHANCING ECONOMIC GROWTH IN EMERGING MARKETS HOTELS: ENHANCING ECONOMIC GROWTH IN EMERGING MARKETS HOTELS: ENHANCING ECONOMIC GROWTH IN EMERGING MARKETS Since 1956, IFC has invested over $2 billion in 220 hotel projects in more than 80 countries. Hotels play an important role in the development of many IFC client countries, as they catalyze tourism and business infrastructure. Hotels bring great potential for job creation, growth in tax revenues, improvements in foreign exchange earnings, and opportunities for related smaller businesses. This ability to facilitate local, regional, and national economic growth, thus helping reduce poverty, is the reason IFC is deeply committed to the industry. Our commitment extends to environmental protection and cultural preservation, with investments in hotels that complement unique natural habitats and enhance the attractiveness of historically significant sites. What We Offer IFC, a member of the World Bank Group, is the largest multilateral source of loans and equity finance for private enterprises in emerging markets. We offer clients the strength of our $11 billion net worth, global focus, local presence, and industry expertise. • Long-term financing that might not be available in local markets, tailored to meet the client’s cash flow needs on commercially reasonable terms: – Equity and quasi-equity investments in individual hotels or hotel companies to support expansion plans or strengthen balance sheets – Long-term debt with tenors of up to 15 years, from IFC’s own account or through loan participations – Local currency financing, either directly or through partial credit guarantees in selected markets • Advisory services that encourage best practice in such areas as HIV/AIDS, energy efficiency, local supply chain development, and environmental protection – Assistance in developing local supply chains that benefit our clients and local entrepreneurs – Leadership in sustainability to help raise environmental and social standards, enhance the client’s brand, and mitigate risks such as fire and life safety for employees and customers IFC’s Track Record Our investments in the hotel sector span the globe, supporting city center and airport hotels that contribute to business infrastructure, as well as tourist hotels and resorts, including eco-tourism and all-inclusive properties. We also support historic and environmental preservation tourism projects that encourage redevelopment of historic buildings and preservation of historic sites. In addition, we invest in mixed-use facilities, such as hotels combined with shopping centers, office towers, and residences. Our partners include leading domestic and international investors and companies, such as Occidental, Orient Express Hotels, TPS Serena, Shangri-La, the Marriott Group, Starwood, and the Inter-Continental Group. Impact on the Ground As a development bank, with a mission to promote private sector growth and job creation in the developing world, IFC helps clients understand the business case for social and environmental responsibility: lower costs, less political risk, better community relations, higher productivity, and brand enhancement. IFC’s hotel investments: • Create thousands of jobs, directly and indirectly • Generate government revenue, contributing funds for critical infrastructure and improvements to health, social welfare, and education • Support the market for business travel: more hotel, retail, and conference capacity attracts business meetings, increasing business opportunities in a country and revenue for local small businesses • Improve economic opportunity for small local suppliers, such as farmers, through supply chain linkages • Generate foreign exchange • Improve sustainable access to natural and cultural heritage sites TOURISM AND POVERTY REDUCTION The latest research from the World Travel and Tourism Council suggests that the travel and tourism industry generates 234 million direct and indirect jobs worldwide, contributes over 10 percent of global GDP, and accounts for a third of all international trade in services. International visitors spend close to $900 billion on goods and services annually, with tourismrelated inflows often the primary source of foreign exchange in many developing countries. Tourists spend more than $200 billion annually in emerging market nations. No other sector spreads wealth and jobs across poor countries in the same way as tourism: statistics indicate that 1 in 12 jobs globally is related to travel and tourism. HOTELS: ENHANCING ECONOMIC GROWTH IN EMERGING MARKETS IFC’S EXPERTISE IFC’s hotel sector expertise, local and regional knowledge, and leadership in sustainability offer significant value to our clients in addition to our full suite of financial products. Through a network of industry contacts, we facilitate hotel investments in our client countries, including investments between emerging market nations and in countries where the business environment can be challenging. Creating Long-Term Partnerships with Global and Regional Players IFC works with both emerging and wellestablished hotel chains and hospitality firms with strong track records. We focus on investments that help such firms grow more broadly, and that encourage more activity in emerging markets. Grupo Posadas – An Emerging Hotel Chain IFC first invested in Grupo Posadas in 1992 when the chain operated 31 hotels and was seeking to expand rapidly to meet market demand. Over the years, IFC has provided a total of $155 million in three separate investments, including $80 million in loan participations. Posadas is now one of the largest hotel chains in Mexico and has expanded into South America. IFC’s investments covered construction of new properties, refurbishment of existing hotels, and the group’s acquisition of the Caesar Park Group, operating in Argentina and Brazil. In addition to providing financing, IFC helped the company adopt improved fire and life safety standards. IFC’s early participation also increased the profile of the company and allowed it to secure long-term funds from U.S. institutional investors. The chain now operates 98 hotels. IFC Role/Additionality • Long-term financing to expand operations in Mexico and South America • Better access to international capital markets • Adoption of improved life and fire safety standards CEASAR PARK IPANEMA, BRAZIL Orient Express Hotels – Moving into Emerging Markets IFC first invested with OEH in a joint venture in Peru in 2000. That investment supported the refurbishment of the Machu Picchu Sanctuary Lodge and Hotel Monasterio, a 16th century converted Spanish monastery in Cusco. To strengthen the community benefits from this investment, IFC subsequently provided advisory services, continuing the work started by Orient-Express with local food producers and service providers, to improve quality and production methods so that they could become a key supplier for the hotel. The results of this pilot project prompted the company to design a more comprehensive project to forge additional local partnerships. SERENA ISLAMABAD HOTEL, PAKISTAN TPS – Hotels as a Foundation for Economic Growth Tourism Promotion Services, an organisation of the Aga Khan Fund for Economic Development, manages a franchise of 28 hotels under the Serena brand name, located in Afghanistan, Kenya, Mozambique, Pakistan, Rwanda, Tanzania, and Uganda. In its efforts to develop tourism potential, particularly in regions with poor supply of accommodations, TPS first began working with IFC in the 1970s with investments in Kenya, and in the 1990s in Tanzania. In 2005, IFC supported the restructuring and listing of the TPS companies in East Africa into a consolidated entity, TPS Eastern Africa Limited, by converting our equity and subordinated loans in individual projects into common equity in the newly created company. In 2004, IFC provided a quasi-equity instrument to TPS Afghanistan Limited to help renovate and expand the historic Kabul Hotel. In 2007, IFC invested equity in TPS Pakistan Limited (TPSP), which owns and operates hotels across Pakistan. TPSP is expanding its hotel operations and entering the commercial real estate business to take advantage of higher demand and limited availability of hotel rooms and office space. IFC’s investment is helping the company expand its Serena Islamabad hotel and develop an office tower on adjacent land, doubling the capacity of the existing hotel and raising standards for office space in the city. MONASTERIO HOTEL, PERU IFC Role/Additionality • Provision of long-term capital to support hotel expansion and office development • Advice to enhance the Corporate Governance practices as the company prepares to go public • Compliance with World Bank Group environmental and social guidelines, including fire and life safety standards In 2004, IFC established a $50 million debt facility to help Orient Express Hotels expand strategically in emerging markets. Resulting investments include the Miraflores Park Hotel in Lima, Peru; the acquisition of the Grand Hotel Europa in St. Petersburg, Russia; and acquisition and renovation of the Casa Sierra Nevada Hotel in San Miguel de Allende, Mexico. In 2007, IFC approved another investment in Peru Orient Express Hotels (POEH) joint venture company to support further expansion and the development of new destinations in Peru. IFC Role/Additionality • Long-term financing to support expansion into emerging markets • Assistance in developing supply chains. HOTELS: ENHANCING ECONOMIC GROWTH IN EMERGING MARKETS Occidental Hotels and Resorts: A Long-Term Commitment Occidental Hotels and Resorts is a midsize Spanish hotel company with most of its operations in Mexico, Central America, and the Caribbean. IFC first began working with the company in 1993, providing a $6.7 million loan to a subsidiary to finance expansion and renovation of the Flamenco Playa resort in Puerto Plata, Dominican Republic. This was followed by a $35.7 million investment package in 1998, which included loan participations, for Occidental’s 877-room Flamenco Bavaro Hotel in Punta Cana, Dominican Republic. Following the slowdown in the tourism industry in 2001, IFC provided $10 million in equity and $70 million in long-term loans (including loan participations) for Occidental’s Mexican subsidiaries to support the company’s financial restructuring plan. This support was extended to three hotels in the Dominican Republic in 2005, with IFC providing $70 million in long-term loans, including $30 million from IFC’s own account to better match anticipated cash flows with debt repayments. FLAMENCO BAVARO HOTEL, PUNTA CANA, DOMINICAN REPUBLIC While IFC’s support helped ensure the continued success of a midsize hotel chain in Mexico and the Caribbean, IFC’s investments in the Dominican Republic with Occidental and others also highlight our approach in supporting the overall development of a country’s tourism industry. Here tourism has been a key part of an overall strategy to reduce poverty for over two decades. Benefits to the country have included a reduction in the overall unemployment rate, an increase in foreign exchange and tax revenues, and strong linkages with the rest of the economy. In addition to Occidental, IFC invested in Melia Bavaro, one of the first properties developed in the Punta Cana area.IFC has also made other investments to support tourism development in the country, including a power project in Punta Cana, airport concessions, a cruise port, and a toll road connecting a key airport to pristine beaches on the Samaná peninsula. IFC Role/Additionality • Long-term financing to develop new destinations and to support financial restructuring efforts • Complementary infrastructure investments to support tourism development in the country IFC Investments in Business Hotels: Key Infrastructure for Growth IFC supports city center and airport hotel developments because of their positive impact on business infrastructure. International standard hotels are a prerequisite for accommodating potential investors and are thus an essential element of economic growth in any developing country. A number of IFC’s investments have provided support to the first hotels in emerging business destinations, including the Polana Hotel in Maputo, Mozambique; the Metropole in Hanoi, Vietnam; and the Grand Hotel in Skopje, FYR Macedonia. Similarly, IFC’s support for mixed-use facilities, which can include hotels, conference centers, commercial, residential, and retail components, often plays a key role in developing the business infrastructure in cities and towns in IFC’s member countries. Caribe Hospitality built its first Marriott Courtyard in Costa Rica in 2001, followed by hotels in Trinidad and Tobago, Dominican Republic, and El Salvador. IFC partly financed the development of the Trinidad and Tobago property in 2004, with a $3.8 million loan. In 2007, IFC committed a new $28 million debt and equity corporate financing package to Caribe Hospitality to build up to six new hotels. MARRIOTT COURTYARD, TRINIDAD Marriott Courtyard – Meeting Affordable Mid-tier Business Needs Caribe Hospitality, a locally owned hotel company focusing on Central America and the Caribbean, is developing mid-tier business hotels under the Marriott Courtyard and Residence Inn brand names. While most major cities in the region are well stocked with four-to five-star hotels, Caribe Hospitality’s business model addresses a shortage of mid-tier hotel rooms, especially for business people, a growing segment of travelers across Central America and the Caribbean. The company is seizing opportunities in this undersupplied market by developing smaller (100-150 room) business hotels that, once completed, are managed by Marriott. Caribe Hospitality contributes to business infrastructure in Central America and the Caribbean by building affordable hotels in cities where there is an acute need for such accommodation. The company follow Marriott’s international best practices to develop and operate its properties. Relying on local contractors and suppliers, while creating jobs, Caribe Hospitality’s hotels establish strong links with the local economies. The company is also a good example of a Central American sponsor expanding in the larger region by investing in the Caribbean’s island economies. IFC Role/Additionality: • Equity financing for new investments is in short supply for Central American sponsors • Provision of debt with tailored grace and repayment periods for each planned property to suit differing market conditions • IFC’s 2007 investment is structured as a facility covering several hotel properties • Provision of valuable technical advice to improve the project’s long-term viability, as well as address downside risks KABUL SERENA, AFGHANISTAN HOTELS: ENHANCING ECONOMIC GROWTH IN EMERGING MARKETS Panari: Meeting Business and Tourist Demand in Kenya Safaris are not the only reason visitors travel to Kenya. Today, business people and safari-bound travelers alike are meeting at the Panari Center in Nairobi. Panari Center Limited (“Panari”) is a Kenyan company operating a multipurpose complex, with a 137-room hotel, shopping mall, ice-skating rink, two movie theatres, and a conference center. Panari, Nairobi’s first hotel investment in more than a decade, benefits from a convenient location near the city’s industrial area and Nairobi International Airport, the most important regional hub in East Africa. Park Hyatt Baku: A Mixed-Use Development IFC provided a $17.5 million loan to support the expansion of hotel and office facilities in Baku, Azerbaijan, with the construction of a five-star Park Hyatt Hotel and an office tower complex. The expansion addresses growing demand from the business community for hotel rooms, longterm accommodation, and office space in the country’s capital. IFC Role/Additionality • Long-term financing to attract the business community to help diversify Azerbaijan • Improvements in life and fire safety design SETTHA PALACE, LAOS The Settha Palace, Laos: Updating a Unique Historic Property PARK HYATT BAKU, AZERBAIJAN IFC Role/Additionality • $7.3 million in long-term loans to support the start-up phase and implementation of life and fire safety upgrades. • Advice to enhance their corporate governance practices and internal controls • Support for implementation of an HIV/AIDS prevention program. A small, historic hotel in Laos remains true to its 1930s-era French colonial architecture, but with decidedly up-to-date amenities. In the 1990s, the Settha Palace hotel had fallen into disrepair after years of neglect. After a family-owned company bought the hotel in 1997, extensive renovation and refurbishment restored it to its original glory, attracting increased visitors as Laos opens up to international travel. Today, this gem of a hotel is consistently rated among the top-quality hotels in the country: “The Settha is perhaps the most charming of its colonial brethren,” raves Forbes Global Magazine. IFC Role/Additionality: • $1.5 million loan for renovation of the 29room hotel in Vientiane in 1997, the first IFC investment in the country • Refurbishment included use of local materials and suppliers SUPPORTING TOURISM DESTINATIONS In some less developed countries, there are few business opportunities apart from the tourist trade. IFC’s investments in resorts and tourist hotels encourage increased arrivals and spending in local economies, while often raising quality standards. Hotel and resort investments can also encourage improvements in infrastructure and public services. At the same time, IFC targets investments that contribute to environmental and social sustainability, including the protection and preservation of local heritage. Our projects have helped restore historically significant buildings and improved access to environmentally sensitive areas. Amankora Resorts, Bhutan: Guest Lodges Launch International Tourism Bhutan appeals to world travelers seeking exotic locations and unique habitats. However, limited hospitality infrastructure has prevented the country from taking advantage of its natural beauty to attract the tourist trade. Amankora Resorts helped address this need in 2003, beginning construction of the first of six guest lodges in rural areas, eventually resulting in the creation of 300 jobs. These developments have also stimulated an arts community, as local craftspeople, artisans, and performers benefit from tourist spending. Once all six lodges are complete, guests will enjoy trekking tours across Bhutan that include stays at each lodge. Located in the valleys of Bumthang, Gangte, Paro, Punakha, Thimpu and Trongsa, each lodge features a distinct geography, habitat, and climate. Treks begin with blessings from local monks for safe journeys. Lodges are built in an ecofriendly manner, and the tours are designed to minimize the impact on the environment. IFC Role/Additionality: • $10 million investment – IFC’s first in Bhutan • IFC’s environmental standards encourage construction of individual sewage treatment plants in hotels as appropriate AMANKORA RESORT, BHUTAN HOTELS: ENHANCING ECONOMIC GROWTH IN EMERGING MARKETS OUR APPROACH IFC supports hotel projects and companies that are commercially viable, have a positive development impact, and fit with the country’s needs and tourism priorities. IFC seeks to partner with strong, stable firms that have a good understanding of local and regional markets and that seek our support to invest in emerging markets. We seek firms with good track record and strong commitment to transparent corporate governance, social responsibility, and environmental sustainability. Our partnerships in the hotel sector include: • High-quality local, regional, and global hotel companies: owner-operated firms or regional chains and franchises of global management companies that are interested in new construction, refurbishment, and acquisition investments, or in strengthening their balance sheet • Clients seeking corporate-level, multiproject financing: those bringing domestic, regional, or global diversity of properties, by type and location • Single asset investments in locations that lack quality hotels or that investors consider a higher risk • Selective equity investments where there is potential upside and a viable exit • Mixed-use developments, including retail, office buildings, or residential components, in addition to hotels IFC’S ADVISORY SERVICES AT WORK: PROTECTING PRECIOUS CULTURAL AND NATURAL ASSETS IFC brings added value beyond the financing we offer. Our experts help hotel clients in diverse ways, ranging from exploring new approaches to preserving endangered natural wonders and historically significant architectural sites, to increasing the economic impact of tourism, to improving energy and water conservation. CORAL REEF RECOVERY IN THE MALDIVES: The increase in ocean temperatures as a result of El Niño have decimated coral reefs that attracted thousands of international tourists to this scenic island chain in the Indian Ocean. In 1998 IFC’s advisory team investigated and provided state-of-the-art techniques for accelerating recovery and protection of the fragile coral reefs. IFC’s hotel clients in the Maldives, Taj MPL and Villa Hotels, supported the work as well. IMPROVING ENERGY AND WATER EFFICIENCY: IFC advises clients on ways to reduce energy and water costs and become more sustainable. We can use reimbursable grants to defray the costs of an energy and water audit, engaging internationally recognized consultants to do such work. In instances where these operational costs are well above industry benchmarks, the audit may identify significant opportunities for cost savings. For example, an energy audit for SMPH, a hotel company active in Mali and Burkina Faso, identified cost savings of 25 percent, equivalent to 10 percent of the firm’s annual profits. TAJ EXOTICA, SOUTH MALE ATOLL, MALDIVES SMPH, MALI HOTELS: ENHANCING ECONOMIC GROWTH IN EMERGING MARKETS IFC’S HOTEL INVESTMENTS As of June 30, 2007, IFC has invested over $2 billion in more than 220 projects across all developing regions: World 1% Eastern Europe 5% East Asia 12% Africa 37% Latin America and Caribbean 19% Africa 12% World 10% Eastern Europe 7% Southern Europe and Central Asia 11% South Asia 5% East Asia 17% Southern Europe and Central Asia 10% Middle East 14% Middle East 11% Latin America and Caribbean 24% South Asia 5% IFC’S Hotel Investments No. of Projects IFC’S Hotel Investments US$ million For further information, please contact: Henrik Elschner Pedersen 1-202-458-7807, or hpedersen@ifc.org Lukas Casey 1-202-458-9418, or lcasey@ifc.org Carolyn Cain 1-202-473-8843, or ccain@ifc.org Printed on material that meets international environmental standards and is from sustainably managed commercial forests. ® 2007 INTERNATIONAL FINANCE CORPORATION 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 U.S.A. Telephone: 202 473-1000 Facsimile: 202 974-4384 Internet: www.ifc.org