By Dan Fenton and Mark Wynn Smith
This article explores the value of tourism to real estate investment strategies and the global real estate market. It highlights the significant economic growth and job creation generated by the travel and tourism industry and emphasizes the importance of considering tourism factors when determining investment strategies. The article provides a list of non-traditional factors to assess the true value and investment potential of a tourism destination. It also discusses the impact of governmental policies on tourism and real estate development. The article concludes by showcasing the positive impact of tourism on property values in a specific example, emphasizing the need to consider the value of tourism in real estate decision-making.
The travel and tourism industry, a dominant force in the global economy, holds a prominent position both currently and in the foreseeable future, driving substantial economic growth, job creation and prosperity for destinations and countries around the globe. As a result, the industry has become a driving force and valuable component to the real estate investment decision-making process.
When thinking about tourism and its value, however, what does that mean from an investment perspective? Are investors in all sectors considering the true value of what tourism brings to the table when determining investment strategies?
We know that real estate is more valuable in high-demand tourism markets such as the Bahamas and Miami. From an investor standpoint, these top tier destinations tend to provide the perfect combination of visitor, business, and economic activity to drive real estate values and therefore demand.
However, determining true value for destinations that might have a strong economic base, but limited leisure activity can be more challenging. Therefore, it’s important to look outside the box and consider some non-traditional thinking to determine a tourism destination’s true value and overall investment potential, including:
- Are companies relocating to or moving away from this destination?
- Is there potential for tourism development and growth?
- How has tourism impacted the local community and its economy?
- Has tourism activity dropped off and if so, how is that impacting the local industries?
- Is Tourism clearly a component of the destination brand?
- How is the tourism sector performing, and how is it positioned within the destination’s overall ecosystem?
- Are there tourism activities that also improve quality of life for residents?
- Does the tourism industry elevate the perception of the destination as a place to invest?
- Are there policies in place that support the sector’s growth and development?
Governmental policymaking decisions can also play a role in enabling tourism’s impact and value to grow.
In 2019, the World Travel and Tourism Council found that the shift to visa-free travel led to a 16.6 percent growth in travel demand. Countries such as India saw a 21 percent increase in arrivals when it shifted to its eVisa; Indonesia’s visa waiver saw a 24 percent increase; and Mexico’s third-party visa saw an increase of 17 percent in tourism demand.
Here in the U.S., restrictions on the visa entry policy make it difficult for individuals from other countries to come here for a special event, such as the World Cup and Olympics, due to the many challenges of entry. The fact that the U.S. is so behind in policies and restrictions regarding entry and access makes travel more difficult and stressful, resulting in the U.S. slipping behind it terms of its competitiveness for global tourism. This throttling of potential demand also diminishes a destination’s standing on the national and global stage.
On a positive note, however, the U.S. Customs and Border Protection agency released its Mobil Passport Control app, which “allows eligible travelers to submit their travel document, photo, and customs declaration information through a free, secure app on their smartphone or other mobile device.” This will surely help to streamline the entry process and decrease the overall wait times through customs.
Governmental policymaking also has the potential to transform real estate usage to energize the development market, attract investors, and foster a continuously adaptable real estate landscape.
According to the World Travel & Tourism Council’s latest annual research:
- In 2023, the Travel & Tourism sector contributed 1 percent to the global GDP; an increase of 23.2 percent from 2022 and just 4.1 percent below the 2019 level.
- In 2023, there were 27 million new Travel & Tourism jobs, representing a 9.1 percent increase compared to 2022, and only 1.4 percent below the 2019 level.
- Domestic visitor spending rose by 18.1 percent in 2023, surpassing the 2019 level.
- International visitor spending registered a 33.1 percent jump in 2023 but remained 14.4 percent below the 2019 total.
In addition, the JLL and World Travel & Tourism Council’s “Destination 2030” report showed that Travel & Tourism outpaced the growth of the global economy for almost a decade until 2019, with an annual growth rate of 4.2 percent while at the same time creating one in four jobs during the five years prior to the pandemic. In addition, it accounted for 10.3 percent of global Gross Domestic Product and 1 in 10 jobs on the planet.
Understanding the economic power and the value of the Travel and Tourism industry can open doors to commercial real estate investment opportunities that might have otherwise been overlooked.
With the continuous expansion of the tourism industry, the value of commercial and residential real estate sees an upward trend across all sectors, extending beyond just hotels and tourism-related attractions. Nashville, Tennessee serves as a prime example, as it has undergone remarkable growth and development over the past decade, resulting in a substantial surge in commercial property prices. The city has emerged as a sought-after destination for businesses, residents and tourists alike, making a valuable contribution to the overall increase in property values.
By taking the value of tourism into account, investors and local governments alike can make informed decisions that maximize their potential for success in the overall tourism and real estate market.
About the Authors
Dan Fenton – Managing Director. Based in San Francisco, Dan Fenton is a Managing Director with JLL’s Hotels & Hospitality Group specializing in tourism and destination strategic planning. He provides operations, sales and marketing support for destinations, public assembly venues and hotels. With more than 25 years of experience in hospitality and tourism, Dan has extensive knowledge of market research and tourism development.
Mark Wynn Smith – Global Head for Value and Risk Advisory. Based in the United Kingdom, Mark Wynn Smith is CEO for Global Head, Value and Risk Advisory for JLL. Leading professionals who appraise over $3 trillion of real estate across all sectors annually.
