FDI in the hotels and tourism sector increased dramatically in 2008, compared with previous years.

Many factors contributed to this increase, including the low-fare airlines boom, which revolutionised travel overseas. But as the global recession took hold in the third quarter of 2008, has the fall in FDI in 2009 been caused by the recession as consumers tighten their purse strings, or has the era of cheap travel passed its peak?

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FDI in the hotels and tourism sector remained at a relatively steady level prior to 2008. Between 2003 and 2007, the sector accounted for an annual average of 289 FDI projects, a combined investment of $31.75bn and the creation of an estimated 67,663 jobs. Yet in 2008, FDI in this sector boomed, with project numbers increasing by 92%, investment up 92%, and job creation more than doubling, up 116% on the 2003 to 2007 annual average.

The latest results released by fDi Markets show that FDI in the hotels and tourism sector declined slightly in 2009 but has not dropped to pre-2008 levels. In 2009, 370 FDI projects were recorded, constituting $37.2bn of investment and resulting in the creation of an estimated 87,288 jobs. Only 2010 will tell whether FDI in the hotels and tourism sector has passed its peak, or if 2009 is just a glitch in its growth pattern.

By the numbers

Since 2003, FDI in the hotels and tourism sector has accounted for a total of 2370 FDI projects, which consisted of a combined total investment of $257bn and the creation of an estimated 571,526 jobs. Between 2003 and 2009, FDI in the hotels and tourism sector experienced an annual average increase of 9% in project numbers. The majority of this growth occurred in 2008, when FDI project numbers increased by 87% on 2007’s figures.

China ranked as the top destination for FDI in the hotels and tourism sector, attracting 8.6% of all FDI projects. Together, the top five destination countries – China, the UK, the United Arab Emirates, India and Russia – attracted nearly one-third of all FDI projects in the hotels and tourism sector. Although China was the top destination country, the UAE’s Dubai ranked as the top destination city globally. Between 2003 and 2009, 71 FDI projects were located in Dubai and 24 FDI projects were located in Abu Dhabi. These two cities accounted for 86% of FDI projects into the UAE in the hotels and tourism sector. US-based companies were responsible for the vast majority of FDI in the sector, accounting for 28% of global projects.

Due to the nature of the hotels and tourism sector, most of the FDI projects were involved in construction activities. The construction of hotels and tourist attractions accounted for 83% of all FDI in this sector, whereas sales, marketing and support activities accounted for 13% of projects.

Major hotel groups have been responsible for the bulk of FDI projects in the hotels and tourism sector. Hotel giants Accor, InterContinental, Marriott, Carlson and the Hilton group accounted for one-quarter of all investments. Dubai Holding accounted for half of all FDI projects created by companies from the UAE, with 97% of these projects set up in 2008 and 2009.

The most popular motive for investing in the sector, stated by 51% of companies, is ‘domestic market growth potential’. Other motives stated included ‘proximity to markets/customers’ and ‘regulations/business climate’.

For more information contact fdiintelligence@ft.com or +44 (0)207 775 6667.

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