Sustainable Tourism
Sustainable Tourism
Business Model Description
Investment in setting up a beach resort and hotel under a business to customer (B2C) model. The resort may include an average size lodging of 50-52 bedrooms, along with a set up for water sports. The business model may also consider scaling-up current facilities towards sustainable tourism-oriented business models. Examples of companies active in this space are:
Founded in 1919, Hilton (NYSE: HLT) is a global hospitality company comprising 4,700 managed, franchised, owned and leased hotels and timeshare properties with 775,000 rooms in 104 countries and territories. In 2021, Hilton signed an agreement with Dhabi Hospitality for building an upscale Doubletree by Hilton brand in Pakistan by 2025. (7)
Islamabad-based Roomy Hotels (Private) Limited (Roomy.pk) established in 2018 is a business that shares budget hotel market economy with unbranded hotel property owners, making it affordable for people to obtain branded quality hotel facilities at a cheaper price. Roomy closed a USD 1 million Pre-Series A round led by Lakson Venture Capital (Lakson VC) in 2020. (8)
Expected Impact
Improving the living standards of the local community by provide them adequate employment opportunities in tourism and hospitality
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
- Pakistan: Balochistan
- Pakistan: Sindh
Sector Classification
Services
Development need
Prior to covid 19, in 2019, the tourism industry contributed 5.8 per cent to the GDP, which is USD 18 billion, and the industry provided 6.1 per cent of total employment which is employment to 3.89 million people. Pakistan has a strong tourism potential and with a renewed sustainability approach, the sector has the potential to contribute significantly to the economy. (1)
Policy priority
Tourism is a priority of federal as well provincial governments, and Punjab and Khyber Pakhtunkhwa (KP) Governments have introduced their own policies to cater to tourists. The Board of Investment as well as Strategic Trade Policy Framework have included tourism in their priority sector list. By 2020, 35 motels and four restaurants owned by the official Pakistan Tourism Development Corporation (PTDC) have been closed , after the 18th Amendment handed tourism to provinces. This provides a strong segue for private sector participation in the sector. (2)
Gender inequalities and marginalization issues
The majority of women in Pakistan still face challenges as tourism sector strictly adheres to gendered divisions of labor in the industry. (3) The gender pay gap in the tourism sector is high as men get 102 per cent more than women as compared to the gender pay gap in the broader economy where men get 60.8 per cent more than women (4)
Investment opportunity's introduction
In 2019, the contribution of tourism to GDP was 5.7 per cent, generating 5.5 per cent of total employment. During covid-19, when the global average contribution to GDP and employment dropped by 60 per cent, the impact in Pakistan was marginal as the country was not as impacted by COVID-19 shocks in comparison to the global average. (1)
Key bottleneck's introduction
Pakistan's negative image as a tourism destination, lack of uniform provincial tourism policies, lack of enforcement of standards and certifications and lack of proper promotion and marketing, hampers development of the tourism industry in Pakistan. (5)
Hospitality and Recreation
Development need
Due to 2022 floods, a loss of USD 93 Million and a damage of USD 10 Million has been caused to tourism sector. Almost 4,170 direct jobs in private sector have been adversely impacted by floods. There is need for post-floods recovery as well as sustenance to existing industry to continue its contribution to employment and to the economy (6)
Policy priority
The Strategic Trade Policy Framework (STPF) 2020-2025 has prioritized tourism as a potential sector for investment to complement the efforts of ministry of commerce. The Khyber Pakhtunkhwa (KP)Tourism Policy 2015 and Punjab' s policy 2018 focuses on tourism and allied infrastructure development, training of work force and creating enabling environment for investments.
Gender inequalities and marginalization issues
Considering the tourism and hospitality sector, 54% of people employed worldwide are women, while in Pakistan they comprise only 3.29 percent of the accommodation and food service (hospitality) workforce. There is a huge gap that is furthering job-based gender inequalities in opportunities. (4)
Investment opportunity's introduction
Pakistan declared 2020 as the ‘year of the Blue economy’ and has included blue economy in the 2025 vision goal of the state, which will pave the way for ocean industries and among other opportunities, business models in tourism and water sports will be pertinent.
Key bottleneck's introduction
Some of the key bottlenecks to the Hospitality industry include a lack of infrastructure and International Standard Facilities, Lengthy Regulatory Processes and adverse impact of Covid on the industry. (2)
Hotels and Lodging
Pipeline Opportunity
Sustainable Tourism
Investment in setting up a beach resort and hotel under a business to customer (B2C) model. The resort may include an average size lodging of 50-52 bedrooms, along with a set up for water sports. The business model may also consider scaling-up current facilities towards sustainable tourism-oriented business models. Examples of companies active in this space are:
Founded in 1919, Hilton (NYSE: HLT) is a global hospitality company comprising 4,700 managed, franchised, owned and leased hotels and timeshare properties with 775,000 rooms in 104 countries and territories. In 2021, Hilton signed an agreement with Dhabi Hospitality for building an upscale Doubletree by Hilton brand in Pakistan by 2025. (7)
Islamabad-based Roomy Hotels (Private) Limited (Roomy.pk) established in 2018 is a business that shares budget hotel market economy with unbranded hotel property owners, making it affordable for people to obtain branded quality hotel facilities at a cheaper price. Roomy closed a USD 1 million Pre-Series A round led by Lakson Venture Capital (Lakson VC) in 2020. (8)
Business Case
Market Size and Environment
> USD 1 billion
< 5%
Tourism has created 3.35 million jobs and tourist have spent USD 9420 million (2021) (1)
Pakistan tourism and hotel market was valued at ~USD 20 billion in 2020, growing at a CAGR of 3 percent during 2018-2028. (7) There are more than 50 million domestic tourists each year, and the number is likely to increase due to decrease in global travel restrictions. (9)
Indicative Return
20% - 25%
> 25%
Small and Medium Enterprise Development Authority's Pre-feasibility study for local and foreign investors estimates that the IRR for the IOA is 21 percent. (9) The GPM hovers around 37-42 percent from 2017-2021 for the industry. (10)
Investment Timeframe
Medium Term (5–10 years)
As per SMEDA's pre-feasibility payback Period of 5.48 years. The capacity utilization during year one is worked out at 65 percent and it will increase over years gradually. (9)
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Business - Business Model Unproven
Capital - CapEx Intensive
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
In Pakistan both domestic as well international tourism has huge potential. Development of tourism industry can strengthen the local economy by generating jobs and the local economic cycle with the influx of tourists. (11)
In 2021, tourism sector contributed 3.7 percent of GDP and generated 3.3 million jobs. (3) Due to COVID-19 and floods in 2022, jobs were lost as well as damages to the infrastructure. Need is to ensure sector has sustainable practices for climate resilience and continuation of provision of jobs.
Due to 2022 floods, almost 4000 direct jobs were lost, which included permanent losses of seasonal jobs and partial losses in long-term jobs within the tourism industry. (6) the IOA will provide jobs, improve livelihoods and aid in reconstruction post 2022 floods.
Gender & Marginalisation
According to the World Tourism Organization Report, sustainable tourism is possible when women participate in all aspects of the tourism industry. The business model will support the participation of women in the sector by creating employment, training and entrepreneurial opportunities. (12)
The role of women has to be participatory in terms of digital platforms, hotels and lodgings, tour operators and community-based tourism. In 2020, pay gap in tourism is 102 percent and in women in industry are 3.4 percent of the sector's workforce (12)
Expected Development Outcome
Strengthening the local economy, provision of jobs and better quality of life, especially in areas where the only source of income is through (directly or indirectly) by tourism. In addition to this, the IOA also has an indirect impact on providing opportunities to local economy.
Gender & Marginalisation
Creation of multiple levels of jobs as already women's participation in this sector is the lowest. Additionally, women and youth are supported with training and mentorship to improve their business acumen and are linked to markets where they can sell their products and services.
Primary SDGs addressed
8.9.1 Tourism direct GDP as a proportion of total GDP and in growth rate
The contribution of tourism sector to GDP was 5.7 percent in 2019 but decreased to 4.4 percent owing to covid-19.
The national and provincial policies do stress on the need to increase spending on tourism sector and fostering the sector to generate more revenues but do not provide a specific quantifiable target.
13.2.2 Total greenhouse gas emissions per year
From 2012 to 2017 the greenhouse gas emissions have increased at a rate of 8.5 percent per annum with 456 MtCO2e in 2017. (13)
As a part of new policies, the government has set a target to contain the greenhouse gas emission to 1258 MtCO2e by 2030 (13)
5.5.2 Proportion of women in managerial positions
The percentage of women in managerial positions has increased from 2.70 percent (2014) 4.53 percent in 2019 (13)
The National Vision 2025 by Government sets the target of increasing women labor force participation from 24to 45 percent by 2025 but does not give a specific target of increasing their presence in managerial positions. (14)
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
Expansion of tourism can lead to disruption of local community lifestyle as the destination country can have a varied culture. Domestic tourists have been observed to disregard the local lifestyle.
Gender inequality and/or marginalization risk: Persistence of norms in terms of employment and involvement of women in the tourism sector may continue limiting their opportunities.
Impact Risks
Absence of regulations may lead to disruption of habitat for wildlife and the landscape around the resorts, and increased pollution if measures are not taken to collect and dispose garbage and waste.
Gender inequality and/or marginalization risk: There has to be a general sense of sensitivity to the local communities and respect towards their culture and traditions.
Impact Classification
What
Outcome is likely to be positive, because community-based and sustainable tourism improves the livelihoods of local communities while preserving culture and natural heritage
Risk
if not sustainably done, the industry in Pakistan may contribute to increased carbon emissions and harm the habitat of local wildlife as well as the environment
Contribution
The IOA contributes to the recovery and reconstruction in post-covid and post floods scenario.
Impact Thesis
Improving the living standards of the local community by provide them adequate employment opportunities in tourism and hospitality
Enabling Environment
Policy Environment
National Tourism Strategy 2020-2030: The strategy envisions to make Pakistan the number 1 destination for tourism with three aims: economic viability, environmental sustainability, cultural conduciveness. (16)
Punjab Tourism Policy aims to develop tourism as priority industry, tourism as engine of economic growth, develop infrastructure, improve regulatory regime, introduce new packages and do reforms at three levels: institutional, regulatory and investment related reforms (17)
KP Tourism Policy proposes six areas of focus: development of tourism related infrastructure, ensuring quality assurance, creating an enabling environment for investments, doing institutional and regulatory reforms, marketing and doing image building and workforce development. (18)
Financial Environment
Financial incentives: Refinance facility under the Export Finance Scheme for Consultancy Services. Services provided by Hotel’s exempt from Income tax deduction. (22) Tourist Visa on Arrival. Business Visa on Arrival.
Fiscal incentives: Reduced duty on prefabricated structures for hotels and on machinery and equipment. Sales tax exemption for import of capital goods for Hotels in Gwadar area. Set off of losses of companies operating hotels. (22)
Other incentives: In case of special economic zone: Exemption from income tax for ten years for Zone Developers, Co-developers and Zone Enterprises and One time exemption from all custom-duties and taxes on import of capital goods to Zone Developers, Co-developers and Zone Enterprises (23)
Regulatory Environment
The Pakistan Restaurants Rules, 1977: The rules classify hotels on types, set and revise fairs and state compliance for health and hygiene and comfort and finally state process of registration of hotels (19)
KPK Tourism Act 2019: The act creates the tourism, culture and heritage authority, with the objectives to prescribe measures for sustainable tourism; register, license and standardize all hotels; develop and implement code of ethics for tourism among other objectives. (20)
Punjab Tourism, Culture and Heritage Authority Ordinance 2021: The ordinance creates tourism, culture and heritage authority, with objectives to prescribe measures for sustainable tourism; register, license and standardize all hotels; develop and implement code of ethics for tourism. (21)
Travel Agencies Act and Rules 1976, Tourist Guide Act and Rules 2021, Hotel and Restaurants Act and Rules 1976 and 1977. These acts and rules set the laws and rules to regulate, register and license travel agencies, tour guides and hotels and restaurants.
Marketplace Participants
Private Sector
Luxsus Hunza, Roomy, Hotel Sarai (recent ventures), P.C., Avari, Marriott, Holiday In. Hilton. Lakson venture capital.
Government
Tourism Development Authority of Pakistan and Provincial tourism development departments
Multilaterals
Asian Development Bank, World Bank International Finance Cooperation.
Non-Profit
Pakistan Hotels Association, Overseas Investors Chambers of Commerce and Industries (CCI), Federal and Provincial CCIs.
Public-Private Partnership
PPP are promoted under the 2010 PPP law in cultural centers, entertainment and recreational facilities and tourism related infrastructure) (24)
Target Locations
Pakistan: Balochistan
Pakistan: Sindh
References
- (1) World Travel and Tourism. 2022. “Economic Impact Report- Pakistan” . https://wttc.org/Research/EconomicImpact/moduleId/704/itemId/179/controller/DownloadRequest/action/QuickDownload.Accessed 28 March 2023
- (2) Iqbal Institute of Policy Studies. 2023. “Challenges of Hospitality Industry in Pakistan.” https://iips.com.pk/challenges-of-hospitality-industry-in-pakistan/.Accessed 28 March 2023.
- (3) Sayira, T., H. Andrews, and Q. Ayesha. 2021. “Are Women Empowered Producers of Tourism in Pakistan?” Women in Tourism in Asian Muslim Countries (pp.81-96) Chapter 6, Springer. https://www.researchgate.net/publication/350086128_Are_Women_Empowered_Producers_of_Tourism_in_Pakistan.Accessed 28 March 2023.
- (4) UNWTO (United Nations World Tourism Organization). 2019. Global Report on Women in Tourism – Second Edition. https://www.e-unwto.org/doi/epdf/10.18111/9789284420384.Accessed 14 April. 2023.
- (5) Elahi, W. 2022. “Research Report on Tourism Industry of Pakistan.” Trade Development Authority of Pakistan Research Reports. https://tdap.gov.pk/wp-content/uploads/2022/04/Updated_Research-Report-on-Tourism-converted.pdf.Accessed 28 March 2023.
- (6) UNDP (United Nations Development Programme). 2022. “Pakistan: Flood Damages and Economic Losses over USD 30 billion and Reconstruction Needs over USD 16 billion.” UNDP press releases. https://www.undp.org/pakistan/press-releases/pdna-pakistan-floods.Accessed 28 March 2023.
- (7) Mordor Intelligence. 2023. “Tourism and Hotel Industry in Pakistan – Growth, Trends, COVID 19 Impact, and Forecasts (2023-2028).” https://www.mordorintelligence.com/industry-reports/market-entry-tourism-and-hotel-industry-in-pakistan.Accessed 28 March 2023.
- (8) Hassan, T. 2020. “Hotel Management Startup Roomy Raises $1 million in Pre-Series A Round Led by Lakson VC.” https://profit.pakistantoday.com.pk/2020/12/04/hotel-management-startup-roomy-raises-1-million-in-pre-series-a-round-led-by-lakson-vc/.Accessed 28 March 2023.
- (9) SMEDA (Small and Medium Enterprises Development Authority). 2021. “Pre-Feasibility Studies.” https://smeda.org/index.php?option=com_phocadownload&view=category&id=125:tourism-and-travel&Itemid=308Accessed 29 March 2023.
- (10) PACRA (The Pakistan Credit Rating Agency Limited). 2021. Rating Report – Service Industries Limited. https://www.pacra.com/summary_report/RR_2041_9360_27-Sep-21.pdf.Accessed 28 March 2023.
- (11) Manzoor. F. Wei. L. Asif. M. Haq. M. Z. U. and Rehman. H. U. (2019). “The Contribution of Sustainable Tourism to Economic Growth and Employment in Pakistan.” International Journal of Environmental Research and Public Health. 16 (19). 3785. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6801594/Accessed 29 March 2023.
- (12) UNWTO (World Tourism Organization). 2019. Global Report on Women in Tourism. https://www.e-unwto.org/doi/pdf/10.18111/9789284420384Accessed 29 March 2023.
- (13) Federal SDGs Support Unit. 2022. Pakistan’s Voluntary National Review 2022. https://www.sdgpakistan.pk/uploads/pub/VNR_2022_Pakistan_Report.pdfAccessed 28 March 2023.
- (14) Ministry of Planning Development and Reform. 2014. Pakistan 2025. https://www.pc.gov.pk/uploads/vision2025/Pakistan-Vision-2025.pdfAccessed 14 April 2023.
- (15) FutureLearn. 2021. “What is sustainable tourism and why is it important?” . https://www.futurelearn.com/info/blog/what-is-sustainable-tourismAccessed 29 March 2023.
- (16) PTDC (Pakistan Tourism Development Corporation). 2022. “Welcome to Pakistan.” https://tourism.gov.pk/pakistan.html.Accessed 28 March 2023.
- (17) Tourism. Archaeology and Museums Department. Government of the Punjab. 2020. Punjab Tourism Policy. https://tourism.punjab.gov.pk/system/files/Tourism%20Policy%20Approved_0.pdfAccessed 29 March 2023.
- (18) Tourism Department Khyber Pakhtunkhwa. 2016. Tourism Policy 2015. https://kptourism.com/uploads/images/downloads/1634731179095-tourism-policy-2015.pdfAccessed 29 March 2023.
- (19) PHA (Pakistan Hotels Association). 1977. The Pakistan Hotels and Restaurants Rules. http://www.pha.org.pk/Docs/Pakistan%20Hotels%20and%20Restaurants%20Rules1977.pdfAccessed 29 March 2023.
- (20) Provincial Assembly of Secretariat Khyber Pakhtunkhwa. 2019. For the Extraordinary Gazette Issue of the Khyber Pakhtunkhwa. https://www.pakp.gov.pk/wp-content/uploads/Tourism-Act-2019.pdfAccessed 29 March 2023.
- (21) Law and Parliamentary Affairs Department. Government of The Punjab. 2021. A Bill to Promote Travel and Tourism in the Punjab. https://punjablaws.punjab.gov.pk/uploads/articles/punjab-tourism-culture-and-heritage-authority-act-2021-pdf.pdfAccessed 29 March 2023.
- (22) BOI (Board of Investment). 2021. “Tourism Sector Incentives.” https://invest.gov.pk/node/1454Accessed 29 March 2023.
- (23) BOI (Board of Investment). 2021. “Incentives in Special Economic Zones.” Special Economic Zones Incentive Package. https://invest.gov.pk/sez#gallery-1Accessed 28 March.
- (24) ADB (Asian Development Bank). 2021. Public-Private Partnership Monitor: Pakistan. https://www.adb.org/sites/default/files/publication/720491/public-private-partnership-monitor-pakistan.pdfAccessed 29 March 2023.