The Covid-19 pandemic caused overall greenfield foreign direct investment (FDI) project numbers to decline by 17.5% in 2020. However, as the world reopened in 2021, investors reacted quickly and FDI levels rose by 18.1%, according to the Global FDI Annual Report 2022.
Most sectors witnessed a rise in their number of projects in 2021, with companies keen to make up for lost time, yet the rise is not expected to be sustained. Investment levels will likely fall again in 2022. Russia’s invasion of Ukraine has led to heightened geopolitical tensions, a global cost of living crisis, slow economic growth and continued supply chain disruptions, all of which will claw back the resurgence FDI experienced in 2021.
Tourism FDI declined in 2021
When it comes to greenfield tourism FDI, our FDI Projects Database shows that there were 881 projects in tourism in 2021, down from 972 the year before. The number recorded was also below the 1,242 projects recorded in 2019, signalling the industry’s prolonged Covid-19 hangover.
Out of all the projects in tourism FDI in 2021, 95% were new, while the remaining 5% were expansion projects.
Where are the leading destinations for tourism FDI?
Western Europe was the leading region when it came to attracting FDI projects in tourism in 2021, with 27.6% of all projects announced or opened globally. However, the number of projects in the region in 2021 – 243 – was still lower than the 320 projects recorded in 2019.
Asia-Pacific came in second with 239 projects in 2021 but witnessed a 48.6% decrease from the number in 2019, when the region scored 465 projects.
The Middle East and North Africa did see an increase in its level of tourism FDI over the period affected by Covid-19, rising to 160 projects in 2021 from 138 in 2019.
The UK and China were the leading destination countries for tourism FDI in 2021, each with a total of 53 projects, a decline from the 96 recorded in 2019 in the UK and 108 in China. The United Arab Emirates, with 47 projects, ranked second, but with an increase from the 35 recorded in 2019.
Singapore was the key source market for tourism investments into the UK, with the country being responsible for 16 out of the 53 recorded projects in 2021.
The US was the key source market for tourism investments into China, with the country being responsible for 38 out of the 53 recorded projects in 2021.
One striking investment over the period was announced by the Student Hotel, a Netherlands-based hotel chain and co-working space provider, which is planning to invest $63.2m to open a new 500-bedroom student hotel in Glasgow. The hotel will have accommodation, co‐living and co‐working spaces, a bar and restaurant, conference rooms and a fitness centre. The project is due for completion in July 2023.
Another large investment over the period was by Dalata Hotel Group, an Ireland-based hospitality company, in a 300-room property, also in Glasgow. The $48.8m property features spacious air-conditioned bedrooms, a bar and restaurant, a resident's gym and state-of-the-art business facilities. The hotel will create 80 jobs.
What are the top tourism FDI operations?
Construction continued to be the leading business operation for foreign investors in tourism in 2021. A total of 834 projects were recorded, down 27% from 2019, when 1,143 projects were recorded.
Sales, administration and marketing, and headquarters ranked second and third, respectively, in 2021, with 41 and two projects.
The UK was the leading destination for construction projects in tourism FDI in 2021, with a total of 53 projects, while China was second with 52 and Saudi Arabia was third with a total of 46 projects.
What are the top subsectors for tourism FDI?
Hotels and similar accommodation was the top subsector when it came to FDI projects in tourism in 2021. However, the subsector saw its number of projects decrease from 933 in 2020 to 839 in 2021. Travel agency activities came in second with 24 projects in 2021, and tour operator activities ranked third with a total of nine projects.
One of the most striking investments was from Jumeirah Egypt Trading & Contracting Company. It announced plans to establish a new Naia Bay hospitality project at Ras El Hekma on Egypt's north coast. The project investment is $447m and construction was expected to start by the end of July 2021. It will be spread over an area of 470,400m2 and will include 720 residential units, a five-star hotel, and a boutique hotel to be completed by 2026.
Where are the leading tourism investors located?
The US remained the leading source market for outbound tourism FDI in 2021. However, the investment level in 2021 was 32% below that of 2019. There were a total of 289 outbound projects in 2021, far from the 425 recorded in 2019.
The UK came in second with 122 projects, down from 158 in 2020, while China ranked third with 104 projects.
China was the top destination for US companies in tourism FDI in 2021 with a total of 38 projects. India was in second position with 22 projects, while Mexico came in third with 18 projects.
What does the future hold for FDI in tourism?
The recovery in the tourism sector from the Covid-19 pandemic is still ongoing, with only the Middle East and North Africa seeing a small increase in tourism FDI in 2021 in comparison with 2019 levels, going from 138 projects to 160. All other regions were still experiencing declines in the number of projects over the three-year period.
While tourism is picking up as countries lift Covid-19 restrictions, the data shows that in terms of FDI flows, there is still a long way to go to reach pre-pandemic levels. New challenges are arising as well, such as the Ukraine-Russia conflict and the cost of living crisis, which might potentially impact FDI in tourism in 2022.