Financing of Cultural Tourism in Rural Areas Prof. h.c. Dr. h.c. Wolfgang Kniejski INI-Novation GmbH www.ini-novation.com
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