Financing of Cultural Tourism in Rural Areas

Prof. h.c. Dr. h.c.

Wolfgang Kniejski

INI-Novation GmbH

www.ini-novation.com

1. Introduction

2. Funding Instruments

3. Grants and Donations

4. Support from Banks

5. Private Equity

6. Integrated Cultural

Tourism Concepts

7. Conclusions

July 2011 2

Outline

1. Introduction

3 July 2011

Long-term Revenue Orientation

Goal

Income for

Project

Development

Instrument

Project

Acquisition

Basis

Tourism

Concept

to be based on a business plan

4 July 2011

• The Business Plan and the Financial Model set the framework for

– Founding, financing, developing, and capitalising a project

and is therefore a key requirement for

– The project team as well as for their external stakeolders, e.g. investors,

partners

• It is also a living documentation of all relevant aspects of the project

and ist evaluation and value-generation.

The Business Plan is about the Strategy

….. and about money!!!

5 July 2011

Purpose of a Business Plan

• … is a key part of the busines plan and the financial plan

• … has to be understood as Sales and Marketing which is the main „cash-

in“ source

Project Marketing is about the Strategy

….. and about money!!!

6 July 2011

Project Marketing

• Legal Frameworks as Obstacles

• Missing Awareness and Sensitiveness

• Missing Integrated Concepts

• Missing Integration of Tourism Competence with Business

Competence (Team Composition)

• Missing Sales Forces

High Risks in Early Stages (Financing Gap)

7 July 2011

Financing Challenges

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Investor Inventor

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8 July 2011

Financing Dilemma

9 July 2011

2. Funding Instruments

External Financing

Equity Loans

Equity Financing Mezzanine-

Financing

Loan

Financing

• Private Equity

• Venture Capital

• IPO

• Loan

• Warranties

• Corporate Bonds

• Leasing

• Factoring

• Asset Backed

Securities

Internal Financing

10 July 2011

Financing Instruments

Donations/

Grants

… combines elements of equity financing and loan

financing

Losses

Profits

Break Even

Early Stage Phase Later Stage

Phase Expansion

Phase

Seed

Phase Start-up

Phase

Grants

Donations

Private Pers.

Business

Angels

Incubators

Bus. Angels

Crowdfunding

Strategic Inv.

VC/CVC

Loans

Grants

VC/CVC

Private Equity

Loans

Grants

Private Equity

Investment

Bank

11 July 2011

The Hockey Stick

12 July 2011

3. Grants and Donations

National Grant Schemes (Operational Programs)

Regional Grant Schemes (CBC, Danube Program)

European Grant Schemes (Horizon 2020)

International Foundations with cultural and/or tourism orientation

Additional aspects

Free Consulting (Consulting Agencies)

Supplemental Funding

13 July 2011

Sources of Grant Funding

European Funds

European Fund for Strategic Investment

European Regional Development Fund

Cohesion Fund

European Agriculture Fund for Rural Development

European Programmes

LIFE (environmental and nature conservation)

COSME (Competitiveness of Enterprises and SMEs)

Creative Europe

Programme Employment and Social Innovation

14 July 2011

Overview on European Funds

The International Fund for Cultural Diversity

• is a means to support the implementation of the Convention, by fostering the emergence of a dynamic cultural sector in developing countries.

15

International Council of

Museums (ICOM) • supports its network through three major

grant programmes:

* Annual subsidies to International

Committees

* Support to National, International

Committees and Regional Alliances in

organizing special projects

• Bursary programmes to foster the

attendance of young members at the

annual meetings of ICOM’s International

Committees.

Examples of

Donators/Foundations

The European Cultural Foundation

• facilitates and catalyses cultural exchange and new forms of creative expression. They share and connect knowledge across the European cultural sector and advocate for the arts on all levels of political decision-making.-

16

Nordic Culture Fund

• to support a broad spectrum of

cultural co-operations between

the Nordic countries.

Examples of

Donators/Foundations

DOEN Foundation • The ambition is to help build a

world in which everyone can make a contribution. DOEN is looking for pioneers who will make a positive contribution to the following developments: cultivating positive effects on Climate Change, cultivating Culture and Cohesion and promoting New Economy.

17

The Hivos Culture Fund

• set up in 1995, supports

independent artistic initiatives in

developing countries. Those

initiatives must also be accessible

for a wide audience and have

national and international appeal.

Examples of

Donators/Foundations

The Prince Claus Fund

• The objective is to expand insight into

cultures and to promote interaction

between culture and development.

The Prince Claus Fund selects

projects and programmes on the

basis of quality, originality,

engagement and development

relevance.

18

The Finnish Cultural

Foundation • is a private trust dedicated to

promoting the arts, science, and

other field of intellectual and cultural

endeavour in Finland.

• provides grants to individuals,

groups, and organizations from a

central fund and 17 regional funds,

and arranges courses, lectures, and

other events.

Examples of

Donators/Foundations

19 July 2011

4. Support from Banks

• Management Support and Consulting

• Information flow to asses preferable conditions for taking loans

• Local, Regional Networks

• Co-operation within an Innovation Team

• Organisation of and Participation in Fairs

• Loans

But:

• Rating Requirements

20 July 2011

Potential Support from Banks

21 July 2011

5. Private Equity

Equity

Eq. Mezzanine

Loan

Mezzanine

Loans

Private Equity

„Source of Equity Financing or similar Instruments without financing through the stock

market“

Private Equity

Institutional Investors

(Banks, Insurance Companies, Private Investors etc.)

Private Equity-Company/ Funds

Portfolio Company

Investment

Investment +

Management Consulting

Return

Return +

Fee

Private Equity

• Private Equity Investors are Co-Owners of the Company: They

share Risks and Profits

• They target Investments in Companies that are not listet in Stock

Markets

• Private Equity Investments target generally for both:

Majority or Minority Participation

• Participation may be active or in-active as well

Private Equity

• Private Equity Investor targets a Return of 20% to 25%

• Normally they do not look for Desinvestments

• They use to take Management Responsability

• They target an Exit after 4 – 7 Years

Private Equity

It is almost impossible to attract private equity,

but BAs or CVC may be worthwhile

26 July 2011

6. Integrated Cultural Tourism

Concepts

Define an INTEGRATIVE concept

Define a POWERFUL BRAND

Define the STAKEHOLDERS

Example:

Michelstädter Weihnachtsmarkt

Stakeholder Integration

32 July 2011

7. Conclusions

Clear picture of concept and roles

Commitment of the involved partners

Perfect project management (masterplan/timing/decision

making/progress tracking/timeline

Excellent knowledge and cooperation on possibilities of

infrastructural funding

Appropriate communications

strategy

Adequate will for investment

Appropriate project development control

Critical Success Factors

Questions/Comments

Aktiva Passiva

Assets

Liabilities

Equity

35 July 2011

Assets and Liabilities

in Corporate Accounting

Balance Sheets - P&L Statements - Cash Flows