Tourism & Recreation

Industry:

Analysis & Investment

Opportunities

Department of Investment Services,

Ministry of Economic Affairs

 Table of Contents

I. Global Trends in Tourism Industry Development.... 1

II. The Status of Tourism & Recreation Industry

Development in Taiwan ............................................... 3

(I) Supply & Demand ...............................................................................3

(II) An Analysis of Existing Gaps in the Industry Supply Chain,
Investment Niches, and Prospective Foreign Investors.................4
(III) Major Suppliers in Taiwan.............................................................6

III. Optimum Investment Items for Foreign Investors 10

(I) Hotels and Resorts ............................................................... 10

(II) Airline Industry ................................................................... 11
(III) Water Related LR&T ........................................................... 12

IV. Successful Examples of Cross-Border Strategic

Alliances and Foreign Investment in Taiwan .......... 13

(I) Starwood Hotels & Resorts Worldwide .................................. 13

(II) Mori no Kaze Hotel Iwate .................................................... 14

V. Industrial Investment Incentives.............................. 16

VI. Industry-Academia Collaboration in Taiwan ......... 17

I. Global Trends in Tourism Industry Development
The global tourism & recreation industry has been growing rapidly since
1996. Even with the external upsets resulting from the global economic
slowdown in 2001, and the Iraqi War and SARS in 2003, the industry
maintained annual growth in the number of travelers and tourism-related
expenditures. According to the World Tourism Organization (WTO) and
World Travel & Tourism Council (WTTC), more than 70 million were
directly employed by the industry in 2006. In the same year, the number of
international travelers reached 840 million, and tourism industry output value
comprises 10.4 % of global GDP and 12.2% of global export output value. In
the coming decade, the industry is expected to have a compound annual
growth rate of 4.3% .

Tourism is the primary source of government foreign exchange income

for many countries, and plays a vital role in many a nation’s economy. The
industry is expected to maintain steady growth in the forseeable future with
steady demand from emerging economies, economic development, and
tourism. By 2020, global tourist numbers are expected to reach 1.56 billion. It
is no wonder that nations around the world continue to develop their natural,
human, and cultural resources to promote this so-called tertiary industry.

The Asia-Pacific region is the fastest growing region next to Africa. By

the WTO and Pacific Asia Travel Association’s (PATA) estimation, the of
Asia-Pacific regional tourism market experienced over 7% market growth
from 2006 to 2007, and approximately 380 million visitors came to the
Asia-Pacific region in 2007.

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 Foreign Tourist Numbers for Asia-Pacific Region Countries (2003-2006)
Unit: Million
Countries/Year 2003 2004 2005 2006
Japan 5.21 6.14 6.73 7.33
South Korea 4.75 5.82 6.02 6.16
Singaproe 6.13 8.33 8.94 9.75
Malaysia 10.58 15.70 16.43 17.55
Thailand 10.08 11.74 -- --
HongKong 15.54 21.82 23.36 25.25
China 91.66 109.04 120.29 124.94
Taiwan 2.25 2.95 3.38 3.52
Source: Annual Report on Tourism issued by the Tourism Bureau, Ministry of Transportation
and Communication; compiled for the present study, 2008/1

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II. The Status of Tourism & Recreation Industry
Development in Taiwan

(I) Supply & Demand

According to the 2008 WEF Travel & Tourism Competitiveness Report,

Taiwan ranked 52nd among the 130 countries evaluated worldwide, and 7th in
Asia, behind Hong Kong, Singapore, Japan, Korea, Malaysia, and Thailand.
This is a great setback from its 2007 rankings of 30th worldwide and 4th in the
region.

Rankings have slid in three major WEF categories in 2008, especially

for the Human, Cultural and Natural Resources Sub-index, where Taiwan fell
from 23rd to 79th place. Taiwan also slid from 45th to 69th place in the
Regulatory Framework Sub-Index, and from 28th to 29th place in the
Commercial Climate and Infrastructure Sub-Index.

In the WEF Travel & Tourism Competitiveness Index, Taiwan

performed best in the information and communication technology (ICT)
infrastructure category, taking 10th place. The island also ranked 13th in the
world for both ground transport infrastructure and human capital; but the
country’s overall ranking was brought down by a respective 103rd and 101st
place in natural & cultural resources and health & hygiene categories.

The Taiwan tourism & recreation market can be divided into two
primary categories according to domestic demand (leisure recreation) and
foreign demand (tourism). While in recent years foreign visitor numbers have
been climbing at the rate of over 5% overall, sometimes even at the rate of
over 10% per year, 60% of the market is still composed of domestic demand.
However, with the demands of profitability, government policy, and global
ranking, the future of the tourism industry is bright.

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 With regard to foreign visitors, 43% come for tourism purposes and
27% for business. As for visitor origins, 33% come from Japan, 12% from
Hong Kong and Macao, 11% from the U.S., 6% from Korea, and 5% from
Singapore. While we have great expectation for the local tourist market with
respect to China, laws and regulations have limited visitor numbers up to now.
Only about 100,000 visited Taiwan from China in 2006, which was less than
3% of the total visitor number.

With aspect to supply, the tourism industry employs over 200,000

persons on average, with the food and beverage, ground transportation, and
hotel industries employing the largest share.

(II) An Analysis of Existing Gaps in the Industry Supply Chain,

Investment Niches, and Prospective Foreign Investors

The main target for the tourism & recreation industry in Taiwan are
those international tourists with higher spending power. And the increasing
number of inbound tourists from China in 2008 will greatly boost industry
development. A continuously expanding local market is also important. In
cooperation with related flagship projects and local government investment,
bridging Taiwan’s tourism and recreation industry gap should be a top
priority.

Amazing Holdings PLC (England) is currently involved in a

multi-billion-NTD large hotel and holiday resort development project in
Penghu County. Janfusan, which owns the Janfusan Fancyworld theme park
and Nice Prince Hotel, is likely to become the future manager of Amazing’s
business affairs in Penghu. Amazing has signed a memorandum of
understanding (MOU) with Janhusan in December 2007 for the establishment
of a consulting company and in preparation for obtaining a gaming license
for tourism casinos.

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 Other potential foreign investors include Home Inns (China’s largest
budget hotel chain), the Aman Group (who have showninterest in eastern
Taiwan regional projects), France’s Accor Hotels (who have shown interest in
Taipei County BOT projects), and Starwood Hotels and Resorts. Potential
investors from the investment industry include Merrill Lynch and General
Electric in the U.S., Lehman Brothers Asia Holdings Limited, and the
Government of Singapore Investment Corp. Potential deep sea water
investors include Japan’s Shimizu Corporation.

Tourism & recreation industry development in Taiwan is focused on

event-oriented activities, recreational traveling, and themed vacations.

1. Developing Event-oriented Activities

There are five major types of tourism activities in Taiwan, which

revolve around the Taiwan Lantern Festival, various religious activities,
indigenous tribes, traditonal Hakka cultural activities, and special interests.
Also important are the municipal and county flagship tourism activities, such
as the Yilan International Chidren’s Folklore & Folkgame Festival, and the
Keelung Mid-summer Ghost Festival.

2. Development of Theme-Based Travel

(1) Botanical Tours

Taiwan is flush with diverse botanical landscapes and many kinds of

outdoor activities. Climbing up Jade Mountain, the highest Northeast-Asian
mountain range, whale-watching on the east and northeast coasts, and
white-water rafting on the Siouguluan River.

(2) Taiwanese Cultural Tours

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 There are many historical and cultural sightseeing tours in Taiwan which
are of interest to foreign visitors. These include historical heritage sites
(including colonial heritage sites and aboriginal culture villages), and
festivals and scenic spots of religious and cultural importance (such as the
Yanshui Beehive Rockets Festival, local temples and temple festivals, etc.).

(3) Longterm Stays

The longterm stay recreation industry is developed for specific client

groups (especially for Japanese retirees).

(4) Medical Tourism

Hotspring therapy and Chinese medicinal treatments, combined with

medical facilities (for general healthcare, laser treatments, knee replacements,
etc.) are the mainstay of these tours, which are becoming more popular and
globally competitive.

(5) Other Unique Tours in Taiwan

Railways tours, recreational farm tours, teen tours, and honeymoon tours
are all packed with uniquely Taiwanese products. Water sports such as
surfing, scuba diving, and sailing are gaining popularity on the island, as is
cycling.

(III) Major Suppliers in Taiwan

In compliance with the government’s “Plan to Double the Number of

Tourist Arrivals” and “ Guidelines for the Development of Tourism and
Sports Recreation Service Industries” (a part of the “Service Industry
Development Guidelines and Action Plan”), as well as the recently proposed
“Phase I Three-year Head-start Project of Taiwan’s Economic Development

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Visions for 2015 (2007-2009),” “Eastern Taiwan Sustainable Development
Plan,” and the “Taiwan Tourism Flagship Plan,” the government is
encouraging private investment for the acceleration of development turning
Taiwan into a multi-faceted tourism environment. For tourism-intensive areas
(mainly eastern Taiwan, Penghu and other offshore islands, and Taipei
County), these plans also mean investments in local infrastructure, the
building and renovation of related facilities (including plans for the
development of large banqueting facilities, elevating the quality of
conventional hotels, and the renovation of major scenic spots around the
island), and the development of supporting industries (hot spring resources,
eastern Taiwan’s deep sea water industry, etc.). Total annual investment from
the public and private sectors are expected to reach NT$10 billion.

1. Hotel Industry

There are 60 international tourism hotels in Taiwan (approximately

18,000 rooms), 29 conventional tourism hotels (about 3,000 rooms), and
3,218 other hotels including hostels and B&Bs. Eight other tourism hotels
(1,500 rooms), worth an estimated NT$7.6 billion in investments, are
currently in the application or planning process.

2. Tourist & Entertainment Industry

The tourism & recreationindustry is a capital, human resource, and

knowledge intensive industry of great benefit to the local economy, though
this type of industry tends to cater mostly to domestic demand. In order to
keep pace with consumers preferences, industry businesses need to make
constant adjustments in accordance with market trends, and consistently
upgrade or reinvest in its facilities in order to maintain competitiveness.
There are currently 21 large entertainment and amusement businesses in
Taiwan, and they are mainly located in western Taiwan.

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 3. Travel Agencies

As of the end of 2006, there were 2,126 travel agencies in Taiwan,

including 89 full-service travel agnecies. These agencies employ an estimated
38,000 employees.

Visitor Expenditures Statistics of Taiwan

Item/Year 2002 2003 2004 2005 2006
Foreign Exchange 4.58 2.98 4.05 4.98 5.14
Income
(Unit: USD billion)
No. of Foreign Visitors 2.98 2.25 2.95 3.38 3.52
(Unit: million) (2.35) (1.81) (2.83) (2.8) (2.86)
Domestic Tourism 6.85 6.31 7.38 5.98 6.89
Income
(Unit: NTD billion)
No, of Domestic Visitors 106 102 109 93 108
(Unit: million)
Total (Unit: USD billion) 11.43 9.28 11.43 10.96 12.02
Percentage of GDP 4.06% 3.25% 3.45% 3.09% 3.30%
Source: Annual Report on Tourism issued by the Taiwan Tourism Bureau (TBROC), and the
Industrial Economics & Knowledge Center (IEK)

Note: ( ) Refers to the total number of foreign visitors after substracting overseas Chinese.

Total Tourism & Recreation-Related/Foreign Visitors’ Expenditures

(2002-2005)

Unit: NTD Bbillion

Entry/Year 2002 2003 2004 2005
Accomodation 62.4 / 19.8 52.2 / 14.4 55.2 / 15.5 49 / 19.4
Foods 120.3 / 60.8 95. / 43.2 132.2 / 64.6 116.7 / 69.9
Transportation and 95 / 37.1 82.9 / 34.6 92.5 / 37.6 88.6 / 44
Communications
Entertainment 33.5 / 17 25.1 / 9.7 35.6 / 11.1 25.6 / 12.6
Shopping 79.2 / 28.5 65.2 / 17.5 78.8 / 24.9 76.4 / 35
Others(including 29 / 19.4 25.6 / 8.6 14.8 / 7.6 26.6 / 9.4
tourist service)
Total 419.4 / 182.6 345.8 / 127.8 409.1 / 161.3 382.9 / 190.3
Source: Annual Report on Tourism issued by the TBROC, the Taiwan Institute of Economic
Research, and the IEK
Note: The two numbers in each box refers to total tourism & recreation-related (right) and

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foreign visitors’ (left) spending in Taiwan.

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III. Optimum Investment Items for Foreign Investors

(I) Hotels and Resorts

In conjucntion with toursim industry projects implemented by the

national and local governments, more tourism hotels and resorts are now
being built on offshore islands, as well as in Taipei County and eastern
Taiwan.

The four major development projects in Taipei County are the

“exclusive 4-and-5-star hotels” project, “Taipei County Arena Investment
Project,” and the “Jin Jiuo Cable Railway” and “Tamshui Fisherman’s
Wharf” development projects; there is also the “Super HOPSCA” project in
Hsin-Ban District. This is a project to establish the district of Hsin-Ban as a
metropolis under the hotels/offices/parking/shopping/conventions/apartments,
or HOPSCA design concept. Through projects like these, Taipei County is
hoping to attarct foreign investment for its “5-star Hotel BOT Project.”

The tourism-centered “Sustainable Developing Program for East

Taiwan” expects to enable the development of the tourism, organic
agriculture, cultural innovation, and marine biotechnology industries through
the promotion of unique and natural local resources.

The “International Resorts Project” is a sustainable development

program and vital project bringing major landmarks and international tourism
together. This large development program brings together indigenous cultures,
foods, and music on Taiwan’s scenic eastern coast. Development strategies
call for the introduction of international resorts and hotels to this region in an
effort to advertize the island’s natural beauty to the world, which will in turn
attract more international visitors. Therefore, when it comes to hotel business
recruitment, international tourism business brands will be given first

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consideration. International technical tourism projects, professional
construction teams, and leading international investors in tourism will also be
invited to set up shop for the creation of an industry cluster. Foreign investors
may also be interested in the development of the aesthetic therapy and related
healthcare (such as aroma therapy), hot spring villa, recreational agriculture,
and deep sea water applications industries.

(II) Airline Industry

Airline industry development is mainly focused on the liberalization of

foreign investors’ shareholding rate and approved business types (allowing
private enterprises to operate airports and small commercial aircrafts).

At present, foreign shareholders are allowed to invest in Taiwanese

airlines without the right to manage them. With the recommendation of the
Council for Economic Planning and Development (CEPD) and foreign
chambers of commerce, the Ministry of Transportation and Communications
(MOTC) passed the draft Civil Aviation Act in 2006, increasing the approved
percentage shareholding for foreign investors in Taiwanese airlines from 33%
to 49%. This was done in an effort to attract foreign investment in Taiwanese
airlines, establish strategic alliances with foreign airlines for technical
knowledge exchange, and to create more diverse means of fund-raising.

In addition, the revised Civil Aviation Act authorizes private enterprises

to operate airports and small commercial aircrafts. This will greatly benefit
foreign investors in Taiwan, as private enterprises are now free from former
limits set by the government; the private ownership of private and
commercial aircrafts is also expected to be liberalized. While private aircrafts
make for an expensive hobby and are not approved for business use, the dual
advantages of privacy and efficiency have attracted the attention of many
domestic enterprises. Privately-owned commercial aircrafts would be

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managed by airlines, which can provide charter flight services (with a
maximum capacity of 19 passengers).

(III) Water Related Tourism & Recreation

Local governments and private enterprises are now devoting much effort
to the development of deep sea water applications. Major projects include the
“Yilan Marine Biotechnology Park,” “Hualien Deep Sea Water Park,”
“Hualien Deep Sea Water Hotel,” “Hualien Marine Biotechnology Park,” and
Taitung County’s BOT projects for the development of deep sea water
infrastructure and peripheral industries. It is estimated that related agencies
and private enterprises will have invested over NT$10 billion in the
development of Taiwan's deep sea water resources by the end of 2009.
Foreign investors should take this opportunity to invest in tourism &
recreation industry development on the east coast of Taiwan according to
their core operations (deep sea water technology and extended applications,
etc.) .

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IV. Successful Examples of Cross-Border Strategic
Alliances and Foreign Investment in Taiwan

(I) Starwood Hotels & Resorts Worldwide

Starwood Hotels & Resorts Worldwide, Inc. is a leading international

hotel & recreation company with approximately 890 properties in more than
90 countries. Starwood Hotels is the fully integrated owner, operator and
franchiser of internationally-renowned hotel and resort brands. Starwood is
already involved in three successful investment and cooperation projects in
Taiwan.

The first of these projects is the Sheraton Taipei, which has been
operating under the name of Lai Lai Sheration Hotel since 1981. In 2002,
management control was officially tranfered to the Humble House
Hospitality Management Consulting Firm, and a global franchise and
technical agreement was signed with Starwood to provide 5-star facilities and
services, whereupon Lai Lai became the Sheraton Taipei Hotel.

Owned by RSL Enterprise Co. and operated by Starwood, the Four

Points by Sheraton Chung Ho Taipei Hotel is the first Four Points by
Sheraton hotel in Asia. Designed by the Hirsch Bedner Associates (HBA)
design consultants, this exquisite and modern hotel holds 126 comfortable
rooms, and many restaurants serving Chinese and Western cuisine to both
business and vacation guests. Four Points by Sheraton Chung Ho Taipei
Hotel is famous for the brand’s core value of honest and uncomplicated
comfort, reasonable pricing, and an international service standard.

The Sheraton Yilan Resort in Taiwan opens at the end of 2008, and will
provide 180 spacious guest rooms, 39 hot spring houses, and over 1,300
square meters of flexible meeting and function space. The hotel is situated in

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a breathtaking mountainous setting with spectacular views of the Pacific
Ocean, city of Yilan, tea plantations, and surrounding landscape.

(II) Mori no Kaze Hotel Iwate

Taking hot spring baths has become a popular pastime in Taiwan in

recent years. The industry attracts many Japanese visitors to Taiwan, as hot
springs play an important part in Japanese culture. The Mori no Kaze Group,
one of the top three hot spring resort management companies in Japan, saw
the recent liberalization of Taiwan travel for Chinese tourists as a major
motivation for the development of this resort, and signed a contract with
Taiwan's Meiho Water Resort in Taitung County's Chihben hot spring district
to develop and invest in the Taiwanese hot spring industry. Mori no Kaze
Group will own 5% of the hotel by means of cross-shareholding. Land and
construction costs for the facility will be approximately NT$30 billion and
NT$15 billion, respectively, and the hotel will be financed by
Japanese-funded banks.

This is a major development project which marks the first time Japanese
and Taiwanese companies have cooperated to build a hot spring resort. This
collaboration and business and cultural exchange opportunity will no doubt
elevate Asia’s hot spring culture. To be named the “Mori no Kaze Taitung,”
this resort is being built in beautiful Taitung County on the east coast of
Taiwan.

With 388 rooms decorated in the Southern Pacific and Oceanic style, it
will be the largest 5-star tourist hot spring hotel in Taitung County. Mori no
Kaze also plans to pursue other hotel development projects in the Taipei,
Taichung, and Kaohsiung counties.

The Mori no Kaze Taitung Resort is expecting 60,000 Japanese tourists

per year once it opens, according to a commitment from JTB Tohoku Inc., a

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branch of JTB, the largest tourist agency in Japan and second largest tourism
agency in the world.

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V. Industrial Investment Incentives
In conjunction with government policy implementation, Taiwan is
currently planning infrastructure-related investments, recruitment, facilities
renovation, and complementary industries development. Major incentive
measures include tax exemptions for investment costs, incentive loans,
incentives for land rental, etc. Incentive items/policies will differ for different
areas and industries.

Take Taipei County for example—local BOT projects allow any

qualified parties to apply for a five-year tax exemption. Local government is
also in charge of leasing lands in the local cultural and creativity park to
spare companies the burdens of high land costs.

Taking a closer look at eastern Taiwan, we see that counties on the east
coast (such as Yilan, Hualien, and Taitung) have the chance to cultivate a
lucrative marine tourism industry through BOT projects.

The government is also offering land-leasing incentives for western

Taiwan industrial parks (such as the Changbin Industrial Park) as a way to
promote the tourism industry (such as through the introduction of museums),
attract more visitors, and create an entertainment environment with the added
purpose of social education.

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VI. Industry-Academia Collaboration in Taiwan
Taiwan is actively promoting tourism & recreation industry
development through the integration of its government organizations, and
corporate and industry associations.

Collaborating Promotional Institutions in Taiwan

Institution Website
Tourism Bureau www.taiwan.net.tw
Industrial Development Bureau, MOEA www.moeaidb.gov.tw
Commerce Industrial Services Portal, MOEA gcis.nat.gov.tw
Water Resources Agency, MOEA www.wra.gov.tw
Department of Investment Services, MOEA www.dois.moea.gov.tw
Council for Cultural Affairs www.cca.gov.tw
Council of Agriculture, Executive Yuan www.coa.gov.tw
Sports Affairs Council, Executive Yuan www.sac.gov.tw
Department of Health, Executive Yuan www.doh.gov.tw
Taiwan Visitors Association www.tva.org.tw
Travel Agent Association of R.O.C., Taiwan www.travelroc.org.tw
Taiwan Tourist Hotel Association www.tourist-hotel-asso-taiwan.org.tw
Taiwan Hotel Association www.roc-hotel.org.tw
Taiwan Convention & Exhibition Association www.taiwanconvention.org.tw
Industrial Economics & Knowledge Center (IEK) iek.itri.org.tw
Corporate Synergy Development Center w1.csd.org.tw
Taiwan External Trade Development Council www.taiwantrade.com.tw
Footwaer & Recreation Technology Research Institute www.bestmotion.com
Source: Compiled for the present study, 2008/02

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