Growing your tourism business: Investment and capital

Written by: Clark Hoskin , Senior Manager, Deloitte

The Importance of Tourism Businesses

Tourism businesses in Canada are very important contributors to the economy on a local, regional, and national level. They create jobs. They funnel new dollars into our communities through visitor spending. Unfortunately, small- and medium-size (SME) businesses are often overlooked by investors, and must go it alone if they want to grow.

These circumstances are changing. More business owners are seeing themselves as active players in Canada’s tourism ecosystem. Industry associations, like TIAC, are supporting businesses with knowledge and the tools to grow. TIAC is also actively engaging with governments at all levels to help them see the investment potential of the industry and are advocating to retool tax regulations. Governments also have the tools and power to create incentives to spur private-sector and foreign-direct investment.

If you are a tourism business owner, pursuing capital can be daunting. Start by building your knowledge and your network. There may be investors aligned with your needs but you will only know if you educate yourself and others.

What Makes Investors Tick

Here’s what you need to know about investors: Investors are money people focused on business decisions. They understand the cost of development and the valuation of projects and properties. They are familiar with business life cycles. They evaluate investment risk daily, whether it is perceived or actual. Any business pursuing investment must see things through the eyes of the investor and be prepared to provide accurate and relevant answers. Be prepared for investment analysts to pick them apart. Passion alone is not enough.

Our research shows that investors identify the cyclicality of the economy and the seasonality of the tourism industry as the main operational risks leading to volatile demand and cash flow. Most financial institutions don’t understand the potential of tourism and are too quick to rule it out. Often lenders view all tourism businesses through the same lens and are dissuaded from considering opportunities.

On the flip side, investors with experience in more perceived volatile sectors see the long game and are best able to help tourism operators. There are also government-sponsored lenders with mandates to operate in this space.

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Navigating the Capital Pursuit

Even before seeking capital and investment, tourism business owners must have a team that supports them. Speak with your accountant, financial advisor, and lawyer, to determine who can assist you in your quest. If they understand tourism, they will know others who do too. They should be able to connect you with investor networks or firms looking for opportunities like yours. More importantly, your business advisors should know if your financial situation, credit record, business structure, and other circumstances are positioning you to be viewed positively by potential investors.

Get to know other tourism businesses. Successful ones are usually led by someone who wants to see the industry and other businesses grow, and may be willing to act as your mentor or coach. Build your network and your business case so you are prepared when you do find that chance to make your elevator pitch (backed up by real numbers) to a potential investor.

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Expanding Networks and Community Engagement

If your team of business advisors is not equipped to help you, then a tourism business will need to expand its network to include staff at the local economic development or tourism office, local small business or enterprise centre, and other tourism organizations. National and local tourism associations can also promote their benefits to you, so consider joining to expand your network.

It is also critical to building awareness among your community’s elected leaders at all levels of government. For tourism businesses to be taken seriously, your community’s representatives must be champions of tourism. Encourage them to invest in community amenities, transportation access and internet connectivity that support a resilient tourism industry. Advocate for them to create incentives and investment tools that support tourism businesses. Push them to promote your area to bring awareness of its potential to investors. If your community does not see itself as a tourism destination and isn’t willing to be an active destination management steward, consider finding a community that will embrace you.

If a tourism business puts the effort and preparation into its business case, and leverages its network of advisors, it is in the best position to attract the investment it needs to grow.

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About Clark Hoskin: With 25 years of experience in tourism, destination marketing, and economic development, Clark has been at the forefront of community-level initiatives in Ontario. His work with Deloitte includes collaboration with Destination Canada and other key players in the industry. Join Clark as he shares insights gained from projects like the Ottawa Nightlife Economic Strategy. Operating remotely from Norfolk County, Clark and his wife own and operate a thriving tourism business.?

Want to learn even more about how to grow your tourism business?

Join Clark Hoskin , of Deloitte, and the Tourism Industry Association of Canada at the Investor Forum on February 11-13 for a thought-provoking session:

?? Resilience in the Face of Hospitality Headwinds

The hospitality industry is grappling with significant challenges, including rising costs, staffing shortages, and shifting customer expectations due to the profound impact of the pandemic on tourism. To address these issues, businesses are urged to strengthen their operations against future uncertainties. Join our session to learn how investing in talent strategies, technological solutions, customer experience excellence, and reputation management can enhance resilience.

Register now

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