After the second edition of the Tourinvest Forum, read about the panel "Creating a new tourism supply, "Creation of a new tourism supply, unblocking real estate and financial partners: who will succeed?" Which brought together several experts who debated over these key challenges for investment on French and African markets.
Today there is a wide variety of financers: REITs, franchisees, independents, as well as hotel operators who bring visibility and safety to hotel projects. The range of sources of funds is broad and must be paired with interesting projects so financial resources are well remunerated. Any kind of investment is driven by profitability and how a project is approached depends on the actor and the sponsor, who must be on the same wavelength. A very seasonal touristic project cannot, for example, be presented to an American institutional investor as its economic mechanics would not be appropriate, and, inversely, individual entrepreneurs cannot carry enormous, complex projects for a 5 to 10 year period. Naturally, the creation of a new supply requires high traffic flow and local demand, even if France’s current drop in hotel supply makes it easier to introduce new supply. Finally, any legal and fiscal tools can help development and tax measures are part of that.
Bertrand Pulles, Associate Director, Extend AM
Today, there are real opportunities for entrepreneurs to find funds and partners. Our first job is to accompany entrepreneurs in their projects by providing financial support. It is thus our job to partner with projects where there is a tangible asset, which may result in business or real estate investment. As far as our strategy is concerned, we rarely look at assets that have already reached maturity; instead, we focus on assets where several performance levers have not yet been exploited. There is no one magic recipe for stimulating hotel performances: levers can be in the form of construction, change of brand, change of segment or a commercial policy that is consistent with current market changes. Today, a fund subscriber will prioritize two things: the fiscal envelope associated with his investments, and the appropriateness of a project -in terms of duration as well as the risk/profit ratio- in respect to its personal investment strategy.
Benoit Labat, Director of Property Development, Société du Grand Paris
The development of the transportation network in the Paris Region is an example of strategic investment for the future and of a project trigger. It acts as an accelerator on land & real estate values and encourages public and private actors alike to totally change their approach to avoid missing out this opportunity. When we enter territories, we act as a trigger and accelerator for projects in the area. Around the train stations we are developing, we identify all nearby real estate where there is potential for change, where densification is possible. Today, this represents a global potential of some 4,000 hectares. These have different owners, public and private, who then must be convinced. This is when we act as the trigger by getting things moving. A train station is typically an element of urban density around which real estate can be developed at full speed, with the development of accommodations or other projects on our available land, and it is a motor for the development of the hotel and tourism supply.
Gaël Le Lay, Deputy CEO, Foncière des Murs
Traditionally, location and accessibility are what constitute good real estate & land. But the importance of land is currently emphasized by the fact that investment costs are rising and it is difficult to cut building costs: one of the possible adjustment variables for making the economic equation work is thus the price of land. In terms of investment, the most important is the balance between the level of risk taken and the expected yield. As the hotel industry has become an asset class in and of its own, the risk premium between office spaces and hotel rooms, which was very high, is shrinking today, although there is still a premium. It is also often easier to buy an existing asset than to develop through new-build, which requires creating a history with the hotel operator, choosing the location and the positioning of a property. The implementation time for a new hotel is also important, and sometimes patience is paramount.
Dario Filippone, Development Manager, Mangalis
The African continent is vast and investing there is quite different from one country to the next. In some countries, for example, the current law concerning land is not very clear and thus requires vigilance, but generally speaking it is not complicated to find and purchase land in Africa, because the government supports it. As far as bringing a project to fruition is concerned, timing varies significantly from one country to the next: it can take years, due to financing, construction and logistics (transportation of building materials from ports), or it can be very quick. In port cities, for example, with good organization, port access, and a good partner who knows the market, it is possible to open a hotel in just 10 months. The market is very dynamic in Africa and operations there are generally more profitable than in Europe. Average daily rates there are high due to the limited supply and growing demand, while personnel costs are naturally much lower than those in Europe. In terms of risk inherent to these markets, our perception is lower than that of other investors, and we believe that the potential of the African continent is enormous. Nonetheless, it is important to have solid local partners and good government relations.
Malekah Mourad-Condé, CEO, Sodertour Lacs
The goal of the president of Ivory Coast was to turn Yamoussoukro, the country’s political capital, into a veritable tourist destination. But to develop tourism in a country it is necessary to have the fiscal tools and availability of land. Here, available real estate exists and the way into it is Sodertour, a state company for tourist development responsible for planning in the city of Yamoussoukro. We still have much land available for any investor wishing to open a property in West Africa: in Yamoussoukro, for example, we have 30,000 hectares of land set aside for tourism development. In terms of taxation, since 2012 we have a new investment code in Ivory Coast that is very attractive. The tax exemption policy is divided into three areas: the region of Abidjan, which offers five years of tax benefits (VAT, customs duties...); the area of Yamoussoukro, where benefits last eight years; and special economic areas, where the duration of benefits is fifteen years. While competition is strong in Africa, Ivory Coast remains a motor for the continent. The region overall has strong demand, and tourists expect infrastructures that meet international standards, but we do not have enough such properties yet.
Also on this theme: Does the value of hotels still rely on fundamentals?
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