Destination governments pursuing public-private partnership (PPP) deals with investors on tourism projects need advice on structuring agreements so the investors share the risk.
That is according to Inter-American Development Bank economist Therese Turner-Jones who told the Evora ‘A World for Travel’ forum: “PPPs have become really popular, probably for many of the wrong reasons.
“Governments are stressed fiscally so having private money involved [in projects] is important. Governments realise they have assets that can mobilise investors to get involved in tourism.”
However, she warned: “There are a lot of holes governments can fall into. A lot of governments risk thinking a PPP is the solution to their financial problems.
“Deals have to be structured properly so the value does not all go to the private sector.”
Turner-Jones told the forum: “The question is, how do you structure the risk [on a tourism development project] so it is evenly spread?”
Henry Briance, senior managing director of investment management company Certares, pointed out: “Investors need a high degree of confidence. A PPP is trying to access capital a government does not have.”
He argued: “Everyone is looking for new product, but if you’re investing in Paris you have a high degree of confidence.”
With a newer destination, he said: “Are you sure the destination is going to be open? Is it going to be easy to get into? Can a travel agent be comfortable sending customers there? Can agents be confident the airport works, the hotel is good?”
Jerry Mabena, chief executive of South Africa’s Thebe Tourism Group, noted: “It’s difficult to access funds in South Africa and people don’t have the skills to put together financial plans to present to investors. We have to hold their hands.
“We spend a lot of time demystifying financial processes [because] financial institutions are designed for those who understand the financial space not those who don’t.”