News

Tourism development risks in public-private partnerships ‘need sharing’

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.”

Share article

View Comments

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.