Financial Feasibility study - tobago

Financial Feasibility Analysis of a Proposed Climate Adaptation Initiative in Tobago

Project: Financial Feasibility Analysis of a Proposed Climate Adaptation Initiative in Tobago

Client: Inter-American Development Bank

Beneficiary: The Island of Tobago 

Duration: 9 months

The challenge

Coral reefs provide substantial economic services to many coastal communities in Tobago. The Buccoo community is most impacted. The Buccoo Reef Marine Park (BRMP) is Tobago’s main tourism attraction with over 50% of the island’s tourists visiting the site.  The economic contribution of tourism associated with the reef alone has been estimated at USD 7-8.8 million per year. 

In addition to Buccoo Reef’s tourism value, it protects a low-lying and developed section of Tobago’s shoreline from erosion and storm damage, avoiding an estimated USD 5.6-10 million per year in damages.

Over the years the ecosystem has been negatively impacted by overcapacity of visitors to the site and excessive land-based pollution. Additionally there are more recent negative impacts related to climate change in which mass coral reef bleaching events. These impacts will most likely be exacerbated if measures are not put in place to alleviate the level of stressors to the ecosystem. As such, the Inter-American Development Bank, through the Cropper Foundation, retained our team to carry out a Financial Feasibility Study on the implementation of a proposed Underwater Art Installation as a Climate Change and Coastal Adaption mitigation measure to drive traffic away from the sensitive Buccoo Reef.

Activities:

  • Carried out an analysis of similar underwater art installations around the world in destinations such as Grenada, the Bahamas, Lanzarote and Cancun.
  • Carried out extensive engagement among a number of different stakeholder interest groups including fisherfolk, glass bottom boat operators, tourism public sector representatives, hoteliers, tour operators, dive operators, as well as, domestic and international visitors.
  • Conducted an analysis of the Underwater Art Installation’ potential as a tourism asset using thee FAS approach to gauge market attractiveness
  • Carried out a price analysis to determine what people were willing to pay for access to the underwater art installation.
  • Carried out a detailed financial evaluation of potential income using a variety of possible sources / revenue structures including park fees, memorabilia and trinkets, photos, snacks and refreshments, and guided tours.
  • Carried out a detailed financial evaluation of potential expenditure considering all possible expense sources including staff, utilities, commissions, licenses, fees, etc.
  • Carried out a risk assessment considering a number of possible income and expenditure options, and different market possibilities.
  • Developed a detailed five-year demand and income forecast using three possible scenarios – optimistic, realistic and pessimistic assumptions.
  • Conducted a cost-benefit analysis weighing in both quantitative and qualitative considerations such as economic impact, environmental impact, social impact, and business impact.

results

The Most Financially Feasible Investment

The analysis allowed us to determine what was the most financially feasible investment outlay to develop the Underwater Art Installation without running in to losses.

US $1.2 Million in Annual Revenues

Our detailed research revealed that the underwater park could generate the equivalent of 10% of the annual demand of the popular attraction in Cancun and generate approximately US $1.2 million in annual revenues to be used in the Trust Fund for the rehabilitation of the Buccoo Reef.

Five-Year Financial Statements

Produced projected financial statements for a five-year period to help guide the initial development, installation and operation of the underwater art installation.

Buy-In from All Stakeholder Groups

Gained the support and buy-in from a number of stakeholders including dive operators, tour operators, oat operators, public sector representatives, hoteliers and visitors.

Investment Guide

Produced an Investors Dossier to assist developers in attracting investors for the project.

Economic Potential Model

Developed an Economic Potential Model considering 7 financial and economic variables to assist managers of the underwater art installation in planning and developing projections of income and expenditure.