Islands Business - WE SAY: How to bolster tourism in the region

‘It is in nobody’s interest to write off a project like this simply because it does not appear to
address the bulk of tourism operations in the region in the first instance. That premise is misplaced and does no good to the only potential way forward to bring foreign direct investment into the region’s
tourism sector in a channelled, calibrated manner’

There is always a measure of skepticism that accompanies large conferences, especially when they turn out to be talkfests over several days, mostly delivered by experts in diverse fields talking about the world’s latest trends, technologies and practices that might have little to do with the ground realities of the Pacific islands environment.
But every once in a while, these conferences do throw up a bright idea or two, which if followed up with persistence and a modicum of passion by concerned stakeholders do seem to have a strong potential to make a difference.
Yet another international conference about boosting the Pacific Islands region’s tourism industry concluded in Samoa last month.
The Bangkok headquartered Pacific Asia Travel Association organised TIDES (Tourism Investment for the Development of Enterprise and Sustainability), brought together experts from Europe and around the Asia Pacific to think up ways and means to build the one industry whose growth is most crucial to the well-being of most Pacific islanders.
Following in the footsteps of two similar events funded by organisations affiliated to the European Union and the African Caribbean Pacific (ACP) grouping since 2005 that did not go down well in several quarters around the region because of poor communication between organisers and industry and mismatched expectations between them, PATA seems to have got it right in this year’s rebranded exercise.
At the end of last month’s event, there was little doubt in anyone’s mind that there were indeed practical ways and means to get around two of the most important issues that have held back tourism in the region for decades—investment and air connectivity.
The proposal for a managed investment vehicle that will cater for investment in tourism infrastructure around the region in a professional manner with all aspects of sustainability and provisions for return on investment built into it might well be the most practical way yet to garner foreign investment into the sector in a professional and businesslike manner as never seen before in the region. That the proposed fund would be run by a team of qualified professional managers well versed in managing international investment portfolios and who have considerable experience within the Pacific Islands region lends credibility to the proposed exercise, though as we know for a fact from last year’s experience on Wall Street and its equivalents all over the world that it can still be extremely iffy.

However, the proposal shows an excellent understanding of the problem of investing in the Pacific islands region from the perspective of international investors who have had little recourse so far to expertise that could both advice and manage portfolios gainfully in tourism assets across the region, thereby spreading risks while at the same time addressing the issues of the nitty gritties of investment in assets across nations that have different sets of rules.
The idea certainly seems to have legs according to international investment bankers who have a keen interest in the region and who attended the two-day conference. And it would certainly seem appealing if not reassuring to big ticket investment organisations that understood little about the political dynamics in a region as far removed from the world’s financial power centres as the Pacific Islands, if they were assured of the quality of the fund, its structure and managers.
The proposed fund addresses several of the problems that have proved to be barriers in the way of big professional investors channelling their funds into the Pacific Islands region. It proposes to offer equity into existing properties, many of which have great potential but are stuck in a rut because of the lack of both avenues to raise capital and commercial loans; is open for minority investment, therefore well within the investment control regimes of most governments; and is open ended, ensuring safety of tenure.
And this is not only about large hotel chains that are interested in expanding into the region. It opens the door for a range of financial institutions flush with investible funds especially interested in the Asia Pacific and the rim regions such as pension funds in Australia, New Zealand and even some Pacific Islands countries, besides entrepreneurs, banks and a host of other types of commercial organisations that have investible funds.
The idea of the fund seems to be a result of a fair volume of research among a range of stakeholders and positive feedback from investors wishing to look afresh at the region. It is set for a second leg of research to fine-tune how the fund might work given the fact that the Pacific Islands region is perceived as an inherently high risk zone.
But is the fund really relevant to the region? There is a legitimate school of thought that a fund such as this does not address the need of a majority of operators in the region given that a significantly large number of enterprises in the region are small to medium operations that fall into the small hotels category, requiring investments tiny enough to turn off most institutional investors.
While it is quite true that small investments will not excite investors to get engaged in a project like the one being proposed, the fact remains there is also no mechanism so far to lure big ticket investments into the region in any case. Also, it is quite possible that if the fund in question does get up and running, it is within the realm of possibility for its management to set up a smaller fund to cater to the small and medium enterprise (SME) segment in the tourism industry.
It is therefore in nobody’s interest to write off a project like this simply because it does not appear to address the bulk of tourism operations in the region in the first instance. That premise is misplaced and does no good to the only potential way forward to bring foreign direct investment into the region’s tourism sector in a channelled, calibrated manner—of a kind that has never been tried before in the region on the scale that has been proposed.
The smaller operators, no doubt of great importance to the region’s economy, could be well catered for with different arrangements that the fund could well spawn. This is possibly the best shot so far at garnering substantial tourism sector investment in the region. The big picture must not be lost. It is important that the issue does not fall victim to politicking to please the majority.
If the big fund succeeds, that may indeed pave the way forward for the bulk of small operators—and for the whole islands economies themselves.