High-End Eco-Tourism Offerings on Small Islets
High-End Eco-Tourism Offerings on Small Islets
Business Model Description
Construct and operate tourism products and associated services such as high-end hotels, resorts, amusement and recration activities by utilizing the rich and diverse terresterial and marine environments of small islets to create high-end eco-friendly tourism experiences through a Land Lease Agreement with the government after a bidding process. Any type of high-end investment project could be proposed by the investor in the 2-stage bidding process based on the project advertisement. With a 1500 USD application fee, investors can join the first step of the bidding during the 60 days of advertisement duration for the islets. At the first step, potential investors’ project offers are evaluated based on the requirements specified at the sectoral advertisement. The experience and ability to develop, operate and manage investment projects, financial capacity, ability in conserving the environment, biodiversity, cultural heritage and community development are some of the key features evaluated. Following this stage, shortlisted investors are invited to make application to the bid, and the process is finalized approx. in 2 weeks (8).
Expected Impact
Lessen the industry-induced environmental burden, boost economic growth, and encourage the participation of local communities.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Zanzibar: Small Islets
Sector Classification
Services
Development need
The Tourism and Hospitality sector contributes 28% to GDP and is the source of 82% of the foreign exchange earnings and approx. 60,000 jobs in Zanzibar (1, 10). However, dominated by small to mid-sized hotels and guest houses, the sector lacks development of niche markets and the ability to add value and uniqueness to the visitor experience (2).
Policy priority
Zanzibar Development Vision 2050 prioritizes building an integrated, inclusive and sustainable tourism sector, promoting high-value tourism for economic empowerment of locals and prevent foreign capital flight (3). Blue Economy Policy highlights promoting natural and cultural heritages of Zanzibar while preserving them as well (9).
Gender inequalities and marginalization issues
Zanzibar faces higher unemployment for women, wage gap, underemployment, and has fewer women in highly skilled work (4). Almost 48.7% of the total persons in private sector formal employment were directly engaged under Zanzibar’s services sector (5).
Investment opportunities introduction
Before the COVID-19 outbreak, over 500,000 tourists had visited Zanzibar in 2018 and 2019. This indicates a higher possibility by the rising number of foreign visitors. Some of the investment potential in the industry are high-end hotel development, cultural and eco-tourism, halal friendly offerings and marine tourism via private public partnership models (8).
Key bottlenecks introduction
Due to archipelago's nature, sector is very vulnurable to climate change while there is not a common standardization or a sustainable certification of the tourism offerings. Fears over cultural erosion by local communities, ineffective environmental management and leakages of sectoral earning from local economy are some of the key challenges (9).
Hospitality and Recreation
Development need
Number of international visitors reached to 394,185 in 2021, showing 51% increase from 2020 (10). This growing demand creates the need to diversify and strengthen the sectoral offerings as there is a lack of competition of niche tourism products promoting Zanzibar's singularity and a geographical imbalance created by the sector (2).
Policy priority
Zanzibar Tourism Strategic Plan prioritizes facilitating the development and promotion of diversified tourism portfolios such as eco-tourism, sports tourism, cultural tourism, conference tourism and shopping tourism (6). The government encourages private sector on participating in joint financing for MSMEs in tourism sector (7).
Gender inequalities and marginalization issues
Tourism sector operations concentrate mainly on the coastal sides of the islands. This geographical imbalance results in rural populations' isolation from the sector and sectoral opportunities and weak integration among local culture and the lifestyle promoted by the visitors (9).
Investment opportunities introduction
Building or investing in hotels/resorts and facilities for diversified touristic experiences and development of island hopping activities are some of the opportunity areas which would benefit from incentives available for the real estate sector and respond the increasing demand of the sector (8).
Key bottlenecks introduction
Poor standards setting, regulation, monitoring, enforcement, and upgrading for tourism businesses, lack of public-private partnerships, a lack of infrastructure with insufficient capacity to handle combined resident and visitor demands, and poor or absent standards are few of the challenges specific to the tourism sector (2).
Hotels and Lodging
Pipeline Opportunity
High-End Eco-Tourism Offerings on Small Islets
Construct and operate tourism products and associated services such as high-end hotels, resorts, amusement and recration activities by utilizing the rich and diverse terresterial and marine environments of small islets to create high-end eco-friendly tourism experiences through a Land Lease Agreement with the government after a bidding process. Any type of high-end investment project could be proposed by the investor in the 2-stage bidding process based on the project advertisement. With a 1500 USD application fee, investors can join the first step of the bidding during the 60 days of advertisement duration for the islets. At the first step, potential investors’ project offers are evaluated based on the requirements specified at the sectoral advertisement. The experience and ability to develop, operate and manage investment projects, financial capacity, ability in conserving the environment, biodiversity, cultural heritage and community development are some of the key features evaluated. Following this stage, shortlisted investors are invited to make application to the bid, and the process is finalized approx. in 2 weeks (8).
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
Zanzibar's international visitor amount reached to 394,185 in 2021, showing 51% increase from 2020 (10).
According to Investment Guide of Zanzibar Investment Promotion Authority, average visitor expenditure is 192 USD in Zanzibar (8).
Based on the UNDP stakeholder consultations with private sector, it is estimated that 30% of guests only come to to Zanzibar because of Chumbe Island, which puts forward a great potential for alternative high-end and ecological tourism offerings (17).
Indicative Return
20% - 25%
Chumbe Island Coral Park Ltd. has achieved an ROI of 20% (17, 23).
Investment Timeframe
Medium Term (5–10 years)
Chumbe Island Coral Park Ltd's business data indicates that it would take nearly 10 years for a break-even as the profit from the hotel (excluding marine park and forest reserve) is 300,000 USD in a year, while the investment cost was 3,500,000 USD(17, 23).
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Impact Case
Sustainable Development Need
Zanzibar experiences lower gross volumes from tourists' expenditure and spend-per-tourist compared to regional competitors and a shorter average length of stay due to weak supply chain linkages and a limited range of activities, resulting in lost employment opportunities for the community (13).
Growing tourist numbers create the need for diversification of tourism offerings as the lack of diversification results in geographical imbalance with notable tourism growth concentrated in a small number of places (2).
Conventional sea, sun and sand tourism dominance in Zanzibar pressures urban infrastructure, particularly water, electricity, sewers, and solid waste. Combined with uncontrolled waste generation polluting the marine ecosystem, uncontrolled underwater activities increase coral degradation (2).
Expected Development Outcome
High-end eco-friendly tourism on small islands will create new employment opportunities for the community and generate higher income and value addition, mitigating the increasing pressure on the marine environment and attracting sustainable travellers.
Increase in the international visitor numbers will benefit the local value chains in the Unguja and Pemba islands as the sectoral activity will be increased between main islands and the small islets.
Sustainable and eco-friendly tourism options on small islets will increase the sustainable and diversified tourism products and activities, resulting in sustainable use of marine environment and decreased negative impact on coral ecosystem.
Gender & Marginalisation
Primary SDGs addressed
8.9.1 Tourism direct GDP as a proportion of total GDP and in growth rate
Tourism and hospitality sector generated 757.4 billion TZS (approx. 325.5 million USD) in 2021, 28% of total GDP of Zanzibar (10).
N/A
12.b.1 Implementation of standard accounting tools to monitor the economic and environmental aspects of tourism sustainability
N/A
N/A
14.2.1 Number of countries using ecosystem-based approaches to managing marine areas
Marine protected areas in Zanzibar covers a marine area of 2281.7km2 in total which is 7.36 percent of territorial waters and about 1.02 percent of the EEZ (11).
10% marine protected area of each country’s EEZ (11).
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Planet
Corporates
Outcome Risks
Poor execution of eco-tourism offerings could lead to severe destruction of the natural resource base, thus contributing to environmental degradation (13).
Higher local pricing for the local populace may result from more tourist arrivals, restricting local inhabitants' (if any) access to services.
An increasing number of international arrivals would lead to a growth of international flights which could lead to higher greenhouse emissions and waste generation from aviation.
Impact Risks
If the local communities are excluded from the tourism supply chain, the earnings from the business model may fail to improve the welfare of the Zanzibar population.
High-end eco-tourism facilities may fail to empower the local community if the requirements of the Small Islet Leasing Program are not met.
The archipelago's vulnerability to the high temperatures, rising sea levels, flooding and drought can diminish the positive impact targeted by the eco-friendly tourism offerings (21).
Impact Classification
What
High-end ecotourism offerings will contribute to the sectoral gross domestic product and diversify the tourism offerings of Zanzibar.
Risk
Failure to include the inhabitants of the islets in the high-end tourist supply chain in addition to existing climatic stressors may impede the positive impact intended by the IOA.
Contribution
Eco-tourism adds to climate change adaptation efforts and provides a sustainable source of income with accelerated value addition of the tourism sector.
Impact Thesis
Lessen the industry-induced environmental burden, boost economic growth, and encourage the participation of local communities.
Enabling Environment
Policy Environment
Zanzibar Development Vision 2050: The Vision prioritizes investment in high-end hotels with positive cultural and environmental impact, aiming to create a strong, sustainable, and resilient market for high-value tourism characterized by high avarage expenditure per tourist (3).
Zanzibar Blue Economy Policy 2021: The policy puts forward implementation strategies such as promotion of integrated resilient tourism and ensuring extended tourism investment in coastal communities as a response to ineffective environmental protection of marine areas (9).r
Zanzibar Tourism Policy, 2018: Policy underlines the government's strengthened efforts to capture the high yielding tourists, while ensuring Zanzibar’s biodiversity, natural resources, landscapes and seascapes are conserved, protected and well managed (7).
Financial Environment
Financial incentives: UNDP and UNCDF are leading "Integrated Tourism Recovery and Resilience in Zanzibar", 2,996,000 USD worth project, to create conducive environment for sustainable and inclusive private investment in Zanzibar’s tourism industry (12).
Fiscal incentives: Incentives entail a 5-year grace period on land and marina leases, a 100% duty and tax exemption for local purchases of building supplies and materials, an exemption from income tax and interest payments on capital borrowed from foreign banks (22).
Other incentives: 100% foreign ownership, employment of expatriates in key positions and 100% allowance for R&D activities are some of the other incentives available (8).
Regulatory Environment
Tourism Act, 2009: The Act provides the institutional framework, administration, regulation, registration and licensing of tourism facilities and activities in Zanzibar (14).
Hotel Levy Act, 1995: In order to provide mechanisms for better administration of hotel and sale taxes on tourist services and related issues, the Act consolidates and ratifies the legislation relating to the imposition and collection of these taxes on tourism-related matters.(15)
Environmental Management for Sustainable Development Act, 1996: The Act binds government to ensure that all public work and workplans should include overall environmental protection and environmentally-sound implementation while ensuring sustainable use of renewable and nonrenewable resources (16).
Zanzibar Investment Promotion and Protection Act 2004: The act establishes Zanzibar Investment Promotion Authority (ZIPA) as a government authority for the promotion and facilititation of investment. ZIPA is the official focal point of the Small Island Leasing Programme (19).
Marketplace Participants
Private Sector
Chumbe Island Coral Park Ltd, Zanzibar Association of Tour Investors, Zanzibar Commission for Tourism, Zanzibar Association of Tour Guides, Zanzıbar Association of Tour Operators, Zanzibar National Chamber of Commerce, Industry and Agriculture.
Government
Ministry of Tourism and Antiquities, Ministry of Blue Economy, Zanzibar Investment Promotion Authority (ZIPA), Zanzibar Employees' Association. (ZANEMA), Office of the Chief Government Statistician (for exit surveys).
Multilaterals
World Bank, UNDP, UNCDF.
Non-Profit
SNV-Netherlands Development Organisation, VSO, USAID.
Target Locations
Zanzibar: Small Islets
References
- (1) World Bank. 2022. Tanzania Economic Update: Empowering Women - Expanding Access to Assets and Economic Opportunities. https://documents1.worldbank.org/curated/en/099850002282226344/pdf/P174894034150b0080a42e081bd547a37b8.pdf
- (2) World Bank. 2019. Zanzibar Tourism Integrated Strategic Action Plan. https://documents1.worldbank.org/curated/pt/993701565250577192/pdf/Zanzibar-A-Pathway-to-Tourism-for-All-Integrated-Strategic-Action-Plan.pdf
- (3) Zanzibar Planning Commission. 2020. Zanzibar Development Vision 2050. https://www.planningznz.go.tz/english/Downloads/current/ZDV2050.pdf
- (4) UN Women. 2021. Zanzibar's Gender Indicators. https://africa.unwomen.org/sites/default/files/Field%20Office%20Africa/Attachments/Publications/2021/08/Infographics%20-%20Zanzibar%20SDG%20Gender%20Indicators.pdf
- (5) UNECA Sub Regional office for Eastern Africa (SROA-EA). 2022. Zanzibar tourism satellite account : estimating the contribution of tourism to the economy of Zanzibar. https://repository.uneca.org/handle/10855/47591
- (6) Zanzibar Tourism Strategic Plan. 2015. Zanzibar Comission for Tourism. http://www.zanzibartourism.go.tz/images/joomlart/documents/STRATEGIC_PLAN_2015.pdf
- (7) Zanzibar Commission for Tourism. Zanzibar Tourism Policy. http://www.zanzibartourism.go.tz/images/joomlart/documents/Zanzibar_Tourism_Policy.pdf
- (8) Zanzibar Investment Promotion Authority. 2022. Zanzibar Investment Guide with Sector Profile.
- (9) The Revolutionary Government of Zanzibar. 2021. Blue Economy Policy. Available upon request.
- (10) Office of the Chief Government Statistician. 2022. Zanzibar Statistical Abstract, 2021
- (11) United Nations Environment Programme/Nairobi Convention Secretariat. 2021. Marine Protected Areas Outlook: Zanzibar. https://www.nairobiconvention.org/clearinghouse/sites/default/files/MPA%20Outlook_Zanzibar.pdf
- (12) UNDP. 2022. Fact sheet: Integrated Tourism in Zanzibar 2022. https://www.undp.org/sites/g/files/zskgke326/files/migration/tz/undp-tz-IGfactsheet-IntegratedTourismZanzibar2022.pdf
- (13) Revolutionary Government of Zanzibar (RGZ), 2019. Tourism Integrated Strategic Action Plan (TISAP)
- (14) Revolutionary Government of Zanzibar. 2009. Zanzibar Tourism Act. https://zanzibarassembly.go.tz/document/the-zanzibar-tourism-act-no-6/
- (15) Revolutionary Government of Zanzibar. 1995. Hotel Levy Act. https://www.zanrevenue.org/resources/view/the-hotel-levy-act-no.1-of-1995-revised-edition-of-2016
- (16) Revolutionary Government of zanzibar. 1996. Environmental Management for Sustainable Development Act. http://www.rttz.org/wp-content/uploads/2013/11/environmental-management-for-sustainable-development-act-19961.pdf
- (17) UNDP. 2022. Stakeholder Consultations.
- (18) Chumbe Island. 2022. https://chumbeisland.com/
- (19) Revolutionary Government of Zanzibar. 2018. Zanzibar Investment Promotion and Protection Act No 14. https://procedures.tic.go.tz/procedure/427/step/1782?l=en
- (20) Manta Resort. 2020. https://themantaresort.com/
- (21) D. Chikodzi, G. Nhamo et al. 2022. Climate change risk assessment of heritage tourism sites within South African national parks. https://www.sciencedirect.com/science/article/pii/S2577444122000533
- (22) Frequently Asked Questions. 2023. ZIPA. http://zipa.go.tz/islands/phase2/faq/
- (23) Chumbe Island Coral Park. 2021. Chumbe Island Investment Overview. Available upon request.