The Location determinants for hotel foreign direct investment (FDI) in Zanzibar

Ussi, M. U.; Jianguo Wei
April 2011
International Proceedings of Economics Development & Research;2011, Vol. 8, p105
Academic Journal
Zanzibar is a semi autonomous state within United Republic of Tanzania. In early 1990's Zanzibar declared tourism sector as the driver for its economic growth, replacing agricultural sector. Thus, it aims to attract a substantial number of foreign direct investments (FDI) to its tourism industry in order to alleviate the poverty. However, achieving this objective has remained a major challenge for Zanzibar as its investment promotion agencies [including Zanzibar Investment Promotion Authority] lack the knowledge and understanding of the major factors that determine the FDIs location decision in hotel sector, a sub sector of tourism industry. Being the first study of its kind in Zanzibar, this paper explored the major location determinants for the Hotel FDI in Zanzibar. We applied an email survey approach, to a sample of 44 foreign owned hotels located in Zanzibar to test the proposed set of hypotheses. The logistic analysis used to analyze the collected data. Regional tourism market, availability of diverse tourism assets, infrastructure, economic growth, political stability, and openness were found to be the principal variables that attract hotel FDI to Zanzibar. The influence of labour cost, and investment cost is moderate. The study revealed no significant relationship between hotel FDI inflows and exchange rate.


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