FDI returns to the global tourism sector
Middle East only region where Q1 2023 tourist arrivals exceeded those of Q1 2019
The steady recovery of international tourist arrivals is firming up foreign direct investment (FDI) in the global tourism industry following the unprecedented and historic lows it touched during the pandemic, according to a newly released report jointly produced by the World Tourism Organization (UNWTO) and fDi Intelligence.
The report, ‘Tourism Investment 2023 – Global greenfield investment trends in tourism’, is based on data from fDi Markets, fDi Intelligence’s proprietary database of greenfield FDI projects, and international tourism data from UNWTO.
The new data provides a broad overview of the ongoing investment cycle in the global tourism industry.
- The renewable energy sector has attracted the highest total capital investment globally for the fourth year.
- Inbound FDI for China declined further in 2022. Compared to 2019, the number of projects in China in 2022 was down 60%.
- Following Russia’s invasion of Ukraine in early 2022, the number of announced FDI projects in Russia plummeted to only 13.
- Foreign investors announced 2,415 FDI projects in the tourism sector between 2018 and 2022. These projects involved a total capital investment of AED645.84 billion ($175.5 billion) and created an estimated 388,000 jobs.
- While international travel continues to rebound from the coronavirus pandemic, the number of greenfield FDI projects in the tourism industry started tentatively recovering in 2022 after posting declines in 2020 and 2021.
- FDI project numbers and job creation in the tourism cluster grew by 23%, from 286 investments in 2021 to 352 in 2022. Job creation in tourism FDI increased by 23% to 36,400 in 2022.
- The sector entered 2020 after a solid FDI performance in 2019, with 753 greenfield projects announced — a 5.8% increase from 2018 and the peak year for tourism projects since fDi Markets began recording data in 2003.
- As one of the areas of FDI most affected by the coronavirus pandemic, tourism has taken a long time to recover from the initial shock of 2020 — when the sector experienced a 59% year-on-year decrease in the number of projects, dropping to 312. Capital investment in the industry also experienced a 70% decrease, with estimated capital investment dropping from AED224.11 billion ($60.9 billion) to AED66.97 billion ($18.2 billion).
- Western Europe was the leading destination region for tourism FDI projects in 2022, with 143 announced investments at a combined estimated value of AED8.09 billion ($2.2 billion).
Report stakeholders’ viewpoints
Jacopo Dettoni, Editor-in-Chief of fDi Intelligence, stated: “International tourism arrivals are not quite there yet, but they are coming back. They more than doubled globally from 2021 to 2022, reducing the gap with pre-Covid levels to 34.3%.
“The recovery peaked further in the first quarter of 2023 when the gap narrowed to 20.4%, UNWTO data shows.
“But this recovery is very nuanced. The Middle East is the bright spot, being the only region where arrivals in the first quarter of 2023 exceeded those of the same period of 2019 (+15.4%) as the light-touch approach to lockdowns and travel restrictions of many governments in the region set the scene for a quick comeback.
“Policymakers in China took a very different approach, leaving in place draconian zero-Covid rules until early 2023. Inevitably, this affected tourism flows across the Asia-Pacific region, where arrivals remain far below pre-pandemic levels (-46% year-on-year in the first quarter of 2023, but bouncing back at tremendous pace),” Dettoni added.
Dettoni continued: “Foreign investors have finally started navigating the nuances of the global tourism recovery. Although capital expenditure figures have yet to recover, they announced 21% more projects in the tourism cluster in 2022 than they did in the previous year, as shown by the analysis that follows in this report, which is based on the fDi Intelligence proprietary database of greenfield FDI projects, fDi Markets.”
Zurab Pololikashvili, UNWTO Secretary-General, noted: “To ensure the growth and competitiveness of the sector, significant investments must be made in education and talent by upskilling the professional workforce and implementing vocational and technical programmes.
“Only in this way can we equip young people — of whom only 50% have completed secondary education — with the knowledge and capabilities they need to thrive in the sector.
“These investments will pave the way for a skilled workforce that can deliver exceptional growth, drive innovation, and, by embracing digital technologies, enhance the competitiveness and resilience of the tourism sector,” said Pololikashvili.
Natalia Bayona, Executive Director of the UNWTO, added: “As the sector steers its course towards recovery and growth, UNWTO now, more than ever, prioritises innovation, education and strategic investments as the pillars for recalibrating and adapting to these ever-evolving market dynamics.
Spearheading a series of initiatives, we equip the professional workforce with new skills through upskilling and vocational workforce programmes, creating quality job opportunities, and raising average wages across the entire tourism value chain,” Bayona noted.
FDI projects in the Middle East and Africa:
• A total of 322 tourism FDI projects were recorded in the Middle East and Africa (MEA) region between 2018 and 2022, representing AED76.91 billion ($20.9 billion) of capital investment and creating more than 47,900 jobs.
• Tourism FDI projects in the MEA region increased by 43% from 47 in 2021 to 67 in 2022.
Tourism FDI into the region in 2022 created more than 6,700 jobs and generated more than AED9.2 billion ($2.5 billion) of capital investment.
• The UAE attracted the highest number of tourism FDI projects between 2018 and 2022, receiving 114 announced projects, representing more than a third (35%) of the total market share in the MEA region.
Following a 65% increase in 2021, the UAE attracted the highest number of tourism-related investments in 2022, with 33 announced projects at a combined value of more than AED2.76 billion) ($752 million).
• Between 2018 and 2022, Saudi Arabia attracted 31 tourism-related FDI projects. The giant Gulf country attracted nine tourism FDI projects in 2022, which was on par with its performance in 2019 and up 80% from 2021.
• Between 2018 and 2022, the MEA region was the source of 131 tourism-related investments. Of these, 72 projects came from firms based in the UAE. During this period, outbound tourism FDI from the UAE was valued at more than AED13.24 billion ($3.6 billion).
Tourism FDI into the Middle East and Africa (2018–2022):
- 322 projects
- 47,922 total jobs
Location of tourism FDI projects in the Middle East and Africa (2018–2022):
35% UAE, 9.6% Saudi Arabia, 5.9% Egypt, 5.0% Morocco, 4.3% Qatar, 4.0% Oman, 3.1% South Africa, 3.1% Bahrain, 3.1% Tanzania, 2.8% Israel, 24% Other
• The hotel and tourism sector accounted for almost two-thirds of all projects in the tourism cluster between 2018 and 2022. FDI project numbers increased by 25% from 2021 to 2022. However, capital investment in the hotel and tourism sector declined from AED179.95 billion ($48.9 billion) in 2018 to AED28.70 billion ($7.8 billion) in 2022. Meanwhile, job creation in the industry has remained at less than a third of its 2019 high of 94,300 since 2020.
• Between 2018 and 2022, accommodation remained the largest sub-sector of tourism FDI globally, accounting for more than half (51%) of all FDI projects. More than 70% of capital investment (AED 466.62 billion/$126.8 billion) and job creation (270,000) in the tourism sector were generated by the accommodation sub-sector during the same period.
• Travel arrangements and reservation services ranked as the second-largest sub-sector for tourism FDI by number of projects recorded between 2018 and 2022. FDI project numbers in the sub-sector grew almost 2.5 times from 29 in 2021 to 72 in 2022 — equal to the sub-sector 2019 total, signalling a solid rebound in the industry as international tourism started to recover following the impact of Covid-19.
• Software and IT services were the second-largest sector for tourism FDI projects between 2018 and 2022. Its share of global FDI tourism projects grew from 10% in 2018 to 16% in 2020, 22% in 2021 and 28% in 2022, indicating the sector’s resilience and ongoing shift towards digitisation. The software publishers (excluding video games) sub-sector was the third-largest recipient of FDI projects, growing by 32% between 2018 and 2022.
The UN-affiliated organisation serves as a global forum for tourism policy issues and a practical source of tourism knowledge.
UNWTO’s membership includes 159 countries, six territories, two permanent observers and over 500 Affiliate Members.
With headquarters in London, England, fDi is a world leader in investment promotion solutions powered by data and media from the Financial Times.
Featured image: A tourist bus operator awaits sightseeing customers in Philadelphia City, United States. Image: Arnold Pinto
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