TOURISM: A GROWING INDUSTRY FOR AFRICA'S ECONOMIC PROSPERITY
BY DAVID J. SAUNDERS
Tourism, including both leisure and business travel, is a vital sector of the world's economy. According to the World's Travel and Tourism Council's 2000 Travel and Tourism's report, it is the world's largest civilian industry, with annual sales of close to $4 trillion, and accounts for nearly fifteen percent of the world's GDP. The travel and tourism industry has enjoyed consistent growth over the past three decades, employing more than 200 million people worldwide with twelve percent of the global workforce and is the leading generator of tax revenues with more than $600 billion generated annually in both direct and indirect sales.
Each year tourism investments attract approximately $700 billion in new capital, representing twelve percent of the worldwide capital investment. The travel and tourism industry is also an important source of foreign exchange for many developing countries. International tourism expenditures currently account for fourteen percent of total world exports and over twenty-five percent of the world's trade in services. Continued growth of tourism is forecast through 2010 at an annual rate of three to five percent.
With regard to the travel and tourism industry, the Continent of Africa is projected to be the most attractive sector of foreign direct investment during the next decade. Recent trends in the travel and tourism industry for Africa indicate that potential travelers are becoming more aware of a wide diversity of people and environments in Africa unequalled in any other location in the world, from its fantastic wildlife and natural landscapes to its fascinating and cultural historical heritage. According to the 1999 World Investment Report issued by the United Nations Conference on Trade and Development, from 1996 to 1998, tourism ranked third behind tele-communications and agri-business industries that received considerable foreign direct investments in Africa.
Moreover, it is a little known fact that the travel and tourism industry is the only major sector in international trade in services in which developing countries recorded surpluses. The World Tourism Organization currently ranks the African Continent as one of the fastest growing destinations for international tourists. As a result, tourism organizations, tour operators, governments, hotel groups, airlines and other service-related providers in Africa are now joining forces to ensure that the continent is put firmly on the map as one of the world's premiere travel and tourism destinations.
A number of factors have supported and will continue to support tourism's impressive growth and development in Africa, to include the following:
Economic liberalization and rapid development in several countries;
Relaxation of in-bound and out-bound travel restrictions as well as foreign exchange movements;
Airline deregulation, resulting in more convenient travel routes, more flexible schedules, and lower prices;
Social and demographic changes enlarging the pool of potential travelers; and
Technological advancements that increase transportation route options for travelers with reduced travel time and computerized reservation systems.
According to the World Tourism Organization, many African governments support the growth of both domestic and international tourism due to the sector's immense potential for job creation, tax revenue generation, economic diversification, and foreign exchange earnings. Resort tourism is often welcomed for its ability to alleviate regional disparities of income and employment. City hotels and restaurants are also needed in emerging and transitional economies in order to attract international investors and business travelers. Consequently, many African tourism ministries are actively working with a number of international organizations and governments to develop their tourism research master plans.
Tourism's contribution to economic development in African countries is recognized primarily through the support of hotel investments, although private sector tourism infrastructure projects can also be financed. Two highly successful examples are: Victoria Falls Lodge in Zimbabwe, which is a 72-room lodge spread over 78 hectares at an elevation of approximately 30 meters with an unobstructed view of Zambezi National Park. After investing approximately three million, the lodge opened in late 1994 and was recently selected by the Association of Zimbabwe Travel Agents as the best safari lodge in Zimbabwe.
In Ghana, the Labadi Beach Hotel is a 104-room hotel located on the outskirts of Accra, catering primarily to business travelers. After investing approximately seventeen million, it opened in 1991 and quickly established itself as the preeminent hotel in Accra. According to investments in tourism records from 1971 to 1999, an estimated $392 million has been committed to 70 hotel development projects in twenty-six different countries on the Continent of Africa.
Today's tourism investment opportunities in Africa can be quite diverse with respect to geographic location, infrastructure requirements and project development. Primary tourism investment projects focus on hotel development and can range in size from 20 rooms to more than 1,000 rooms as well as from low-rise village resorts and eco-tourism lodges to high-rise city hotels. Hotel development project sponsors can be individual entrepreneurs as well as large corporations, both foreign and domestic. Hotel operators generally include international hotel chains and experienced local tour operators but in some cases, the hotel owners themselves are involved.
Typical project costs for individual properties can range from $5 million to $150 million although smaller projects can be considered given the right conditions and investment interest. While each tourism development project will always be evaluated on its own merits and eventual return on investment contributions, particular emphasis will be placed on projects which correspond to the following investment criteria:
Represent early investments in transitional economies opening up to the private sector;
Create critical hotel infrastructure for business development and foreign investment;
Target African countries that have few development prospects besides scenic beauty and historical or cultural assets, where tourism is an important component of the economy;
Facilitate the development of specialty market segments as a country's tourism industry expands;
Invest in competitive markets where an improved product serves to raise standards and enlarge the market;
Contribute to the dispersal of economic activities through a country;
Enhance the conservation of natural resources and the environment;
Promote high standards of environmental safety; and
Each project must be financially, commercially, and technically viable.
In closing, Africa is truly an immense, diverse and endlessly fascinating continent and the travel and tourism industry of Africa offers unlimited potential for economic growth and opportunity. Given the diversity of tourism attractions and the commitment of progressive investment policies being channeled in this lucrative industry by many African nations, the future of investment opportunities in the travel and tourism industry looks very promising. While there are many challenges ahead, those who invest early and wisely will ultimately reap the benefits for themselves and Africa as a whole.
About the author: David J. Saunders is the co-founder and CEO of Venue International Professionals, Inc. (VIP) - a full-service travel, tourism and trade consulting firm based in the Washington Metropolitan Area that specializes in travel, tourism and trade-related opportunities to the Continent of Africa. He is also the Director of Administration and Management Services for the Constituency for Africa (CFA), which is the premiere advocacy-based non-governmental organization (NGO) based in America focusing on Africa's political, social and economic issues and concerns. He is a frequent panelist of radio and television talk shows as well as a featured writer of articles for newspaper, magazine and trade publications on the subject of the travel and tourism industry as well as trade and investment opportunities in Africa. He can be contacted at (202) 371-0588 or (301) 856-9188 and e-mail: firstname.lastname@example.org.