EB5 Investors Magazine Volume 2 Issue 2 | Page 14

Guest Expenditure: A Revival? by Julia Lin Hotels and resorts are among the most popular types of projects in the EB-5 industry, both from the investor and project developer point of view. The projects provide consistent cash flow, real estate as collateral and relatively generous EB-5 job counts, boosting the confidence of investors. Additionally, hotel and resort developers are becoming more and more comfortable with the use of EB-5 funding as part of the capital stack. Marriott International alone has endorsed over 14 EB-5 projects since 2008 with more on the way. Over the last 18 months, developers for Hilton Worldwide, Hyatt Hotels and Starwood Hotels & Resorts Worldwide have also turned to EB-5 financing. industry, such as transportation, entertainment, recreation, restaurant, and retail stores. Once the amount of visitor spending for each industry is determined, they will be used as inputs in the applicable economic model to calculate the employment impact with the corresponding multiplier for each industry. USCIS scrutiny USCIS has historically been hostile to the use of guest expenditures as an input to the econometric model for counting jobs created by a hotel project. Since 2012, USCIS has challenged the use of guest expenditures as a basis for job calculation by issuing many requests for evidence (RFEs) to projects, including regional center applicants, attributing jobs to visitor spending. Hotel projects are especially attractive because, in addition to counting jobs generated by construction expenditures and revenue from operations, economists can also calculate the jobs generated by visitor spending using the spending of hotel guests on goods and services outside of the hotel as inputs in the econometric model. Including the jobs generated from guest expenditures often significantly increases the number of jobs included in the EB-5 job count for the project, allowing the project to raise additional EB-5 funds or create a bigger job buffer. What is the visitor spending/guest expenditure job calculation? The visitor spending job calculation uses expenditures of hotel guests on goods and services outside the hotel as an input in an economic model to calculate job creation in the hotel context. These are expenditures made by hotel guests above their spending at the hotel, resulting in additional jobs created in the region that would not have otherwise been created had the hotel guests not visited the area. To capture these ripple effects generated by the hotel guests’ expenditures, economists use data from reports prepared by a tourism industry consultant and/or convention and visitor’s bureau to calculate the average amount of money spent per night by visitors to the area. Using the hotel’s occupancy rate, the economist can then determine the total amount of visitor spending generated by the hotel guests in each 12 E B 5 I n v e s to r s M ag a z i n e