Selling the vision to investors
In many cases the tourism development will require not only to integrate businesses, land and facilities’ owners, but also to invest in developing new infrastructure or renovating heritage and urban aesthetics, for it may be necessary to attract investors beyond the local players. In this regard, the local government should play a decisive role in supporting the development of the destination model, at least in the early stages and until the model is consolidated and profitable. Such support could consist on assuming many investments and integrating within the platform as a stable shareholder, or taking the role of platform’s guarantor to external shareholders and financial institutions.
As destination models 3.0 are mission driven models whose value is ultimately derived from the impact they make on the society and its environment, they require investors who share the same vision and so agree upon prioritizing the long-term profits over the short-term. Shareholders have to assume that the success of their investment will only come as a result of being faithful to the values and the mission, to obtain the engagement of all stakeholders.
Fortunately, there is already a growing concern among investors about sustainability, considering the long-term policies that guarantee the preservation of the environment and social cohesion as key sources of competitive advantage that manage to set destinations apart from their competitors.
Needless to say that many investors are not likely to share this vision or be willing to support the project over a long period of time, for which it would be convenient to create a two-tier shareholding structure whereby long-term shareholders would be given more power than the short-term oriented ones when deciding the corporate strategic direction, to help the long-term oriented votes clearly outweigh the short-term oriented ones.
However, investors want to assess the long-term benefits of sustainability –namely profitability and returnability- through metrics that quantify them financially. In his book “Marketing 3.0”, Philip Kotler suggests three metrics:
- Improved cost productivity is mainly attained through the lower marketing costs of the experience and story generation & distribution system through the social networks, compared to conventional product development and marketing campaigns. Further, mission driven businesses obtain higher engagement from their employees and partners, which ultimately boost their productivity.
- Higher revenue from new market opportunities, due to the higher market penetration that mission driven businesses tend to achieve, as they touch not only people’s minds and hearts, but also their human spirit. Further, the government is also more likely to support businesses that intend to address some of the local challenges and improve people’s lives.
- Higher corporate brand value is the long-term result of sticking to the brand values, pursuing the mission and successfully generating compelling stories which are extensively distributed.
To foster long-term focused shareholding, the destination model should encourage somehow all stakeholders to become shareholders, especially those located in the destination’s community. As mentioned before, the government should also play a key role, at least in the early stages of development, as a key support benefiting the long-term welfare of the community.
Would you consider other strategies when selling the vision to investors?