Tourism development support measures abroad…
Several countries have used government
intervention as a means of stimulating tourism. The government intervenes through legal measures, either via
subsidies, tax incentives or long-term loans.
Government intervention in the rate on
development of tourism, a number of measures of legislative character
stimulating development of tourist infrastructure, in particular, of hotels is
usually undertaken. Thus state bodies and the financial establishments
recognize that investments in tourism create new workplaces, and also generate
revenues in hard currency. In the majority of the countries is immediately made
a decision for the benefit of attraction of the foreign and internal
investments and loans by an establishment for them of tax incentives. Among
such measures first of all it is possible to quote the following:
- Aid in the allocation of construction
sites suitable for hotel and tourism infrastructure development;
- City tourism and state tourism
bureaux, which can furnish potential investors with needed market research
- High investment yields under heavily
privileged government conditions and options for reimbursement moratoriums in
case of government financial aid,
- State support in urban planning
infrastructure development (roads, irrigation, beaches, motorways, sewage).
- Tax and customs exonerations for
deliveries of the equipment under the project which is not made in the country.
To other privileges it is possible to
underline the absence of the taxes on profit (Estonia, UAE, and harmonisation in the whole taxation (Baltic States. In spite of
the fact that the direct financial support of the hotel projects on the part of
the state is shown to a minimum, in some countries the tourist infrastructure
uses essential privileges of financial character:
- In Turkey hotels- a tourist complex relies on a generous 40 % subsidies from the
state, which enables a given hotel facility to establish competitive prices.
The tourist zone also provides the option for tourists of using either the
local currency or foreign currency such as Euros or Dollars.
- In Israel up to 30 % hotel sector
investment yields can be accounted for as direct deductions and tax privileges
(under condition of achievement of the certain volumes of attraction of the
- In Mexico – the tax free zones around of
the resorts of Cancun, are created, where US dollars
are used in transactions instead of the local currency (the Mexican peso).
- In Spain the plan of increase of competitiveness
Spanish tour product has been adopted, where the
priority direction allocates reconstruction and modernization of hotels in the
major resort areas, development of village tourism in areas without beaches
(Valencia), the Baleares and the Canary Islands – Zones that reduces cost not
only tourist services (including hotels), but also is reflected in cost of
other products, including exoneration of excise tax on luxury items such as
cigarettes and petrol. The government invests large sums on development of
regional and local infrastructure. In Tenerife for example, proceeds from the
tourism boom have in part financed the construction of four-lane motorway and
the extension of airport to successfully counter increases in air traffic.
- In Morocco – Muhammad VI
proclaimed a decree, to promote and subsidise tourism development projects in
the kingdom. This is based on direct government subsidies priority tourism
schemes such as entertainment parks, hotels and resorts.
The schemes used to stimulate investment
in developing countries are in part engineered to reduce the degree of risk
associated with foreign direct investment as well a creating a favourable
investment climate for tourism related projects. The synergetic effect of
investment promotion schemes include the management of the hotel business in
hard currency, creation of jobs, transferring professional savoir-faire to
community. Occasionally, Tourism development schemes in some countries require
that the architectural appearance of the hotels blend into the local
architecture, as evidenced in Morocco, Spain, or Indonesia.
Other government support measures for
project investments in the hospitality industry conducive to the creation of a
favourable investment climate include:
- Information and consulting help
future investors. Correctly to estimate prospects of the project, the investor
should have the information hotel market behaviour over several years to better
understand the dynamics inherent to the given location. To extract these items
of information differently, than from official state sources or at specialized
consulting companies, it is not obviously
governmental subsidies. Under governmental guarantees a number of hotel assets
in the countries of CIS, for example, "Shodlik"
in Tashkent is constructed. The similar form of co-operation suits the foreign
investors and is most widespread in business practice of the countries with a
transitional and/or developing economy.
- Development of the legislation
protecting interests of the investor. Protection of interests of the investor
implies an establishment of tax privileges and guarantees with regard to the
distribution of profits.
Certainly, not all of the above listed
measures can be used in Moscow, since the policy of the federal authorities now
is directed on reduction of tax privileges and refuses to grant any state
guarantees to the potential investors. As a whole in a number of regions of
Russia, in particular, in Moscow, it would be possible to attract investments
in hotel sector on existing conditions, assuming that processing of
construction permits is facilitated and becomes more transparent. Before the site has gained clearance of all outstanding legal permits
and paperwork, the average time frame for such processing can require up to one
In this context it is possible to offer
the following measures promoting investments in hotel and tourism development
- To facilitate the tendering and
construction permit documentation
- To reduce the investor obligations to
the development of local infrastructure (roads, drains, side-walks, utilities
- To consider create a financial incentive
in hotel construction by creating long-term low interest loans on 10 to 15 years at an initial rate of 5%, and using
the real estate under operation as reimbursement collateral for most
- To implement a tax break for the
projects under first grade priority (as a delay of payments of the tax on
profit for 3 years).