A project is economically feasible if it provides a rate of return that is acceptable to the investors in the project. Most people favor time-value measures. The net-present-value and internal-rate-of-return techniques assume that money has a time value. A dollar received today is worth more than a dollar received a year from now, since the dollar received today can be reinvested to produce a higher overall return.
Cash flow projections provide a basis for determining the amount of money available in the future. Future flows of money are then discounted at assumed rates of return to give an overall estimate of the return on an investment.
Lenders want to know if the project will produce sufficient operating profits and cash flow to cover interest and principal payments when they become due.
Public officials are principally concerned with a project's impact on:
- employment
- personal income
- living standards
- the balance of payments
- the physical environment
- the sociocultural environment
- tax revenue
- secondary demand for agricultural products and locally produced goods
If a project looks positive to investors, lenders, and those in the public sector, it will go forward. Organization at the local or community level will ensure its success. Managing tourism at the community level is, then, the subject of the next chapter.
Study questions
- Why is the involvement of the public sector important in the development of a large-scale tourism development project and what is its role?
- What are the steps in the tourism development process?
- What are the key questions that should be answered as a result of a market analysis?
- How can target markets be identified using geographic segmentation?
- List the ways that the development of parking can be accomplished.
- Why is an analysis of the residents of the proposed development area important?
- What information is necessary during the analysis of the business environment for tourism?
- What factor determines the suitability of an area for development?
- What are the four elements of a master plan?
- What factors are important regarding the parts of a master plan?
Discussion questions
- What roles should the private and public sectors play in the development of a tourism destination?
- What information must be collected to provide an estimate of the long-term flow of tourists to a destination?
- What role does a planning and engineering, socioeconomic, and legal and business analysis play in the development of a tourism development plan? What kinds of information must be collected as part of the process?
- Give examples of how collected data is synthesized into statements of where a destination is and where it wants to be.
- Identify the importance to tourism of the factors that are part of an area-wide master plan.
- Identify and give examples of the principles of tourism planning that can be used to guide the development of any tourism project.
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