Critical Factors for Hotel Investment in a Post-Pandemic Society

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The World Travel & Tourism Council (WTTC) has published 'Critical Factors to Attract Hotel Investment', a report underlining the importance of attracting capital investment to help rebuild the Travel & Tourism sector following a 25 percent drop in 2020. 

Launched at the Sustainability and Investment Summit in San Juan, Puerto Rico, the report delves into the critical enabling factors for hotel investment and success stories of destinations that have employed such elements and displayed strong growth in investment.

In 2020, when international travel came to an almost standstill, the Travel & Tourism industry witnessed 62 million job losses and its GDP contribution halved, representing a burdening loss of nearly USD 4.9 trillion.

According to the paper, capital investment in the sector also plunged significantly during the height of the pandemic, from nearly USD 1.1 trillion to USD 805 billion, between 2019 and 2020, representing an almost 25 percent drop.

Investment in the sector continued to dwindle last year with a further 6.9 percent decline to USD 750 billion.

However, the report also provides grounds for optimism as it expects a substantial boom in Travel & Tourism investment over the next decade. The global tourism body warns that governments worldwide must create a favourable enabling environment to achieve this.

In addition to political stability and liquidity, straightforward, open and consistent government action and support, favourable tax incentives, and safety and security, amongst others, are essential for investment.

"Hotel investment is absolutely key for the recovery and growth of the Travel & Tourism sector. Destinations must have a clear commitment and take a holistic approach to become resilient and competitive," said Julia Simpson, President & CEO of WTTC.

"As we recover from the pandemic and build back better, investments need to benefit destinations economically, but more importantly, socially and environmentally."

According to the report, the essential enabling factors for hotel investment include governance and the rule of law, a key enabler for investors, as it determines how easily and successfully a business operates, physical infrastructure, air and ground connectivity, and workforce.

Several popular destinations which benefitted from implementing these elements were also analysed. For example, the Netherlands provides an enabling environment for foreign investment with less restrictive regulations and strict laws to penalise corruption.

In addition, physical infrastructure, air and ground connectivity are prerequisites to attract investment as well-connected hubs support broader regional development and offer access to lesser-known destinations that promote tourism opportunities.

South Korea, for example, is one of the best-connected countries globally. The country's announcement as the 2018 Winter Olympics host incentivised investment in transport infrastructure, which saw a hotel room supply skyrocketing by almost 15 percent, outstripping the healthy overall Travel & Tourism capital investment growth of 8.7 percent in 2017.

The paper also highlights the importance of reskilling and upskilling the workforce. Portugal is leading the way in this area, focusing on strategies to help reskill the sector, such as the Tourism Training Talent (TTT) programme to improve the quality of tourism training services.

Additional factors and success stories in the report include:

  • Liquidity in the Maldives.
  • Government aid in Saudi Arabia.
  • Taxation in Colombia.
  • Destination planning and sustainability in Singapore and Rwanda.
  • Service culture in the Philippines.
  • Travel facilitation in Aruba.

With contributions from STR, KSL Capital Partners, and JLL, the report is backed by extensive experience to inspire both the public and private sector, as they develop and execute Travel & Tourism investment policies that will encourage the long-term post-pandemic recovery of the industry.

To read the report in full, please click here.