Hospiteum

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	27741
Company name	Hospiteum Corporation
Country	Central America Region
Sector	Accommodation & Tourism Services
Environmental category	B
Department	Global Manufacturing & Services
Status	Pending Signing

Date SPI disclosed	April 29, 2009
Projected board date	May 29, 2009
Previous Events	Approved: June 30, 2009

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Hospiteum Corporation (“Hospiteum”) is one of the few established Central American hotel chains. Currently, it owns and operates four 4 to 5 star properties which are located in Guatemala City (Guatemala), San Salvador (El Salvador), Managua (Nicaragua) and San Pedro Sula (Honduras). The company proposes to expand its hotel network with up to four budget, 120-room greenfield hotel developments in the Central America region.

Anticipated development impact of the project

The project will have the following developmental impacts:
Expand Business and Tourism Infrastructure: The project is expected to add to the country’s business and tourism infrastructure by expanding and improving the existing base of accommodation facilities and business services. In addition, it should encourage increased tourism, business and meetings, incentives, conferences and exhibitions (“MICE”) travel.
Mid-market hotel development: The proposed project will help the development of the three-star limited service market, thereby extending the product range in the targeted cities, where there is currently a shortage of supply, especially in this segment.
Benefits to the local economy: The project will create opportunities for economic links (local and regional) between tourism and other sectors, both in the development phase (construction services and building supplies) and during on-going operations (employment and operating supplies). In addition, the project will create both direct and indirect jobs, as well as provide training opportunities for employees. It will also contribute to maintain and increase foreign exchange and tax revenues. Spending by visitors would keep help support a wide range of local economic activities, restaurants, transportation, tours, entertainment, sports and leisure activity, etc.

IFC's expected development contribution

In order for Hospiteum to consolidate regionally, it needs to expand its long-term capital base. IFC is offering a quasi-equity instrument that meets this goal. In addition, IFC’s participation would enhance the company’s perception prior to a potential association with or trade sale to a strategic player. IFC will also provide input and expertise to strengthen the company’s corporate governance systems, and to ensure compliance with IFC’s Performance Standards, particularly regarding international standards for fire and life safety.

Environmental and social issues - Category B

The Environmental and Social (E&S) appraisal considered the existence of corporate systems, capacity and the operations of the existing hotels. The key environmental and social issues have been identified as the existence of a social and environmental assessment and management system, and specifically a site screening/assessment procedure, contractor management and management of hotel operations. Appropriate procedures and protocols need to be developed to address potential impacts from land acquisition, biodiversity and cultural heritage when these are brought into effect on specific projects. E&S issues to be considered in the existing and planned hotels include: labor and working conditions, efficient use of energy, water and resources, life and fire safety, food safety, and solid waste management, reduction and disposal.

Visits to the land plots identified as potential sites for development demonstrated that these plots were located in urban, developed, commercial environments within the cities. The key impacts associated with the construction and operation of the proposed hotels would be limited in number and site specific (i.e., labor, EHS, waste management, traffic). As a result of its due diligence, IFC has concluded that the potential adverse environmental and social impacts presented by the project are few in number, site-specific and can be readily addressed through mitigation measures. It is therefore concluded that this is a Social and Environmental Category B project.

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