Is Tourism Affecting Real Estate in the Emerging Markets?

The increasing number of tourists traveling to the emerging markets is supporting the growth of real estate in developing countries, according to global real estate portal, Lamudi.

To celebrate the United Nations’ World Tourism Day on September 27th, the property platform explores how tourism affects real estate in the developing world.

The relationship between tourism and real estate is interdependent. Tourism fuels some of the world’s largest real estate developments. As more tourists flock to the likes of Indonesia, Sri Lanka, and Mexico, these cities must develop their infrastructure to not only handle the capacity, but to attract more visitors.

Kian Moini, co-founder and managing director of Lamudi, comments: “As tourists arrive, demand increases for new developments, including restaurants, retail outlets, and luxury hotels. Subsequently, international tourism is financially enabling the construction of these new projects, which in turn are attracting more tourists to the area.”

Statistics from the Bali Government Tourism Office reveal that in 2014, Bali welcomed 3.76 million tourists, a 14.89 percent increase from 2013. According to Knight Frank’s Wealth Report 2015, luxury real estate prices have risen by 15 percent year on year. As a result of growing tourism, an increasing number of investors are attracted to the region’s potential, investing in the development of commercial and residential properties to accommodate the influx of tourists.

The first half of 2015 saw an 8.9 percent increase in tourism in Mexico, compared to the same period in 2014. The country’s strengthening economy has created an attractive destination for international visitors. These tourists are driving expansion, fueling demand for new developments. As a result, commercial real estate is gaining attention from international property investors, looking to benefit from new projects catering to the tourists’ demands.

Last year, travel and tourism contributed 11.1 percent of Sri Lanka’s gross domestic product. According to the World Travel and Tourism Council, this is forecast to rise by 6.1 percent per year from 2015 to 2025. In Sri Lanka, a strong tourism sector is fueling the growth of the retail property market. Not only malls, but smaller individual showrooms and storefronts are being constructed in and around Colombo to meet this need, resulting in increased interest in commercial real estate.

“The emerging markets are presenting new destination options, as tourism becomes increasingly affordable in these countries, compared with their Western counterparts. As a result, real estate developers must adapt and create new projects to meet the growing demand,” said Moini.

Every year, the United Nations celebrates World Tourism Day, to highlight the importance of tourism and its social, cultural, political and economic value.