Since it’s World Tourism Day, I bring you an idea from my recent travels. I just got back from a fabulous vacation on the Dalmatian coast of Croatia. Its pristine and dramatically beautiful Adriatic coastline has become a magnet for tourists in recent years. Tourist trade brings a much needed boost to the Croatian economy, and with it a drive towards over development. Government policies aimed at stretching out the two-month summer season speak volumes about the attitude of the regulators towards assuring Croatia’s position in the global ranking of world’s top tourist destinations.
The temporary nature of tourism introduces loads of disposable items into, in this case, a country without yet an infrastructure to handle it well. Paper cups, plastic bags and bottles look especially jarring floating in the aquamarine water above corals.
But how to create greater economic prosperity without destroying the “golden goose” — that same beautiful natural environment?
Perhaps the answer here is the same as with any investing business: the best practice is to take a long-term approach to investing. It’s common corporate-finance knowledge that something in the order of 60 to 80% of the value of a business lies in its long-term cash flows. As such, investing with a short-term horizon leads to giving up the value creation of a business.
Furthermore, as eloquently put by David Blood, formerly head of Goldman Sachs Asset Management, and now managing partner of Generation Investment Management, which he co-founded with Mr. Gore:
“We are operating the Earth like it’s a business in liquidation. More mechanisms to incorporate environmental and social externalities will be needed to enable capital markets to achieve their intended purpose–to consistently allocate capital to its highest and best use for the good of the people and the planet.” (Source: “For People and Planet,” Wall Street Journal)
The tourism industry in Croatia, and all industry frankly, should heed this advice if they want to remain viable in the long-term.