Tourism and Local Economic Development

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Tourism and Local Economic Development


How can businesses in travel and tourism increase

the contribution of the industry to local

economic development and pro-poor growth?

PARTNERS & SPONSORS


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The International Tourism Partnership recently held an event entitled Tourism and Local Economic

Development. This event was chaired by Dr Harold Goodwin of the International Centre for ResponsibleTourism, University of Greenwich, and Chair of the Academic Advisory Panel of the International TourismPartnership and sponsored by Sco Wilson to examine tourism and local economic development.

Key speakers included Stuart Robson of Sco Wilson who made a presentation on the Equator Principlesand the policy frameworks; Dilys Roe of IIED on tourism in Poverty Reduction Strategy Papers; and PeterNizee of the International Centre for Responsible Tourism on the Nepalese government national policy andimplementation strategy to tackle poverty, which has tourism as its focus.

Focussing on private sector initiatives, Caroline Ashley of ODI talked about their Pro-Poor Tourism Pilot inSouth Africa; Susy Karamel of GTZ presented the results of their work on the local economic impact of all-

inclusives and Stephen Naras of Exodus presented a tour operators perspective on developing complementaryproducts.

Following the presentations, the seminar addressed the issue of How can businesses in travel and tourismincrease the contribution of the industry to local economic development and pro-poor growth? There were

participants from the industry, destinations, consultancies and research institutes.

THE CHALLENGEThe seminar raised a variety of challenges that face the tourism sector. How these challenges are met will certainlyinfluence the sector in the long-term, and it is clear that positive initiatives by the industry will enable local and regionaleconomic development, including that which has a poverty alleviation agenda, to take place in parallel with the needs of aviable economic business. In fact, it was argued by some that these two components of tourism should not be separated.

To achieve this aim there needs to be a co-ordinated approach across the sectorand this includes the financiers, developers, operators, hoteliers and Government.This task might best be achieved through adoption of a framework to guide thoseinvolved in the sector.

The National Guidelines for Responsible Tourism developed in South Africa werepublished by the Department for Environmental Affairs and Tourism in 2002 and theywere adopted as the national sector planning guidelines for tourism. The guidelinescover the economic, social and environmental agendas for responsible tourism. Thesection on Guiding Principles for Economic Responsibility is a specific checklist ofactions that people in the industry could take to increase the positive impact on localeconomic development. For a copy of the Guidelines for Responsible Tourism visitwww.icrtourismsa.org where you can download South Africas Responsible TourismGuidelines and the handbook published in 2003 Responsible Tourism Handbook2003.

These guidelines were developed with and for the industry in South Africa. It is recommended that, using the SouthAfrican example as a guiding principle, different guidelines could be developed for other destinations and that there is

scope to develop guidelines for particular parts of the industry for example hoteliers, tour operators and guides.

Introduction


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LOCAL ECONOMIC DEVELOPMENT

AND POVERTY REDUCTION

The UN Millennium Development Goals include specific commitments toreduce by one-half the proportion of people living in extreme poverty by 2015.

Poverty is a multi-faceted concept which embraces not only insufficient levelsof income but a lack of access to essential services such as education, water andsanitation, health care and housing.

At the same time, the World Tourism Organization estimates that tourismaccounts for up to 10% of global gross domestic product, making it the worldsbiggest industry. The potential for tourism to contribute significantly topoverty alleviation is considerable. Work since 1998 by the Pro-Poor TourismPartnership (Ashley, Goodwin & Roe) has demonstrated that tourism cancontribute to poverty reduction and that for many of the least developedcountries, and in many rural areas, tourism is one of the few current viablestrategies for economic development.

The World Tourism Organizations report on Tourism and Poverty Alleviationpublished for the World Summit on Sustainable Development in Johannesburgin 2002 drew substantially on the work of the Pro-Poor Tourism Partnershipwww.propoortourism.org.uk and there are now a range of initiatives takingplace on pro-poor tourism.

An Agenda for Change?Discussion focussed on what could be done to further the local economicdevelopment agenda at the inception and development phase by investorsand developers, the role of hoteliers and that of tour operators. In each of

these tourism sectors the significance of Socially Responsible Investment hasa differential impact depending upon the extent to which there is perceivedcommercial advantage.

The following points illustrate the general consensus of the delegates; specificareas of concern and opportunity are addressed subsequent to this.

There was general agreement about the importance of facilitating localcommunity access to the tourism market (comprising tourists and thetourism industry locally) in order to maximise linkages and minimiseleakages.

Support for strategies which assist the development of local capacity to

realise these opportunities. Developers and financiers, hoteliers and tour operators can all act to createthose opportunities to assist local communities to benefit from them.

The importance of measuring and demonstrating impacts on local economicdevelopment and the reduction of poverty was emphasised, it is time tomove beyond statements of general principles and to measure and reportthe impacts of initiatives in specific terms.

It is time to move from pilot projects and experiments to programmes ofaction.

Scalability is the current challenge. How do we take what we know abouthow to enhance the impact of tourism on local economic development andthe reduction of poverty and implement it at the destination to make realchange?

What is Pro-Poor Tourism?

Pro-poor tourism is not a specifictourism product; it is an approachto tourism development andmanagement which ensures thatlocal poor people are able tosecure economic benefits fromtourism in a fair and sustainablemanner.

Pro-poor tourism may improvethe livelihoods of poor people in

three main ways:

1. Economic gain throughemployment and micro-enterprise development;

2. Infrastructure gains: roads,water, electricity,telecommunications, wastetreatment;

3. Empowerment throughengagement in decisionmaking.

The language of pro-poor tourismis being used widely and there isnow an emerging consensus thatit is important to move beyondgeneral talk about trickledownand multipliers and to focus onmeasurable impacts on improvingthe livelihoods of poor people.

In summary, traditional views of

growth in the tourism sector needto be accompanied by a focus ongenerating economic benefi ts forpoor people in destinations.



THE ROLE OF THE GOVERNMENT

Whilst the role of government was not the focus a number of issues were raised:

Establishing a whole government agenda for tourism development is rarely achieved; this applies both betweendepartments at national level and between national and local government.

How can other departments of government be engagedin the issues of tourism development? Ministries ofTourism are oen seen as junior players in governmentand it can be very difficult to engage ministries offinance, trade and industry in cross government effortsto harness tourism for development.

Tourism is oen seen as an industry which benefitselites. When people look at the industry they seehoteliers and tour operators, they see wealth. Howdo we raise awareness in government, and amongst

national decision makers in other sectors, about thecontribution which tourism makes to local livelihoodsand engage them in joint initiatives to increase thelocal economic development and poverty reductionimpacts?

If pro-poor growth and poverty reduction through tourism is to become part of national strategy then it is essentialto engage other national government ministries. This requires that the positive impacts on the local and nationaleconomy and in particular success in achieving poverty reduction targets can be convincingly demonstrated,measured and reported.

Tourism is mentioned in some national Poverty Reduction Strategy Papers (PRSPs) but there is lile referencing

between national tourism policy and the poverty reduction strategies.

THE BUSINESS CASE FOR ENGAGEMENT WITH LOCAL ECONOMIC

DEVELOPMENT AND POVERTY REDUCTION

To prosper the tourism industry needs to operate in environments which remain aractive to tourists. The industryneeds a relatively well-educated work force, functioning health systems and relatively good transport, communications,water and energy infrastructure. These services and facilities are also valuable to local communities.

There are risks and opportunities in the tourism sector which financiers, developers, hoteliers and operators need tomanage. Many of those present felt that tourism does not have to do very much to have a significant impact on householdincomes and livelihoods in a local area. This can amount to a significant national impact if the tourism industry as awhole adopted international best practice.

There is an increasingly strong business case for the investors and developers, hoteliers and resort owners and touroperators to address these issues. The trend towards higher expectations of Corporate Responsibility (CR) performancefrom increasing numbers of consumers and investors will not pass the travel and tourism industry by.

The ways that businesses do their business will determine the extent to which they contribute to the generation of localeconomic development and the reduction of poverty. Where businesses act together they are able to reduce transactioncosts and secure more significant impacts than they would be able to achieve individually and improve the businessenvironment; by adopting common standards across a shared platform, with appropriate compliance guidelines and

verification, they can ensure a relatively level playing field and reduce the risk of legislation and regulatory interventionby national or local authorities.


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Minimising Risk

Business has been using tools to manageenvironmental risk for some time. There is nowincreasing emphasis on the economic and socialaspects of the triple boom line of business. Brandimage and value are key elements for an industrywhere the product is intangible at the point ofpurchase and where the experience is much more thanthe directly purchased transport, accommodationand guide services. Reputational risk is a significantissue in an industry that is highly competitive anddifferentiated; and where the product purchased bythe consumer extends beyond what is owned anddirectly managed in the supply chain.

Licence to Operate

Good relationships with local communities, positiverecognition of demonstrable concern for the naturaland cultural environment and the maximisation ofthe contribution which the industry makes to locallivelihoods, economic development and the reduction

of poverty are all important to the industrys licenceto operate. Enterprises, particularly where theycollaborate to achieve local economic development,can improve the general environment for businessand enable them to stay ahead of legislation.Resentful communities can make it significantlymore expensive for the industry to operate andreduce the quality of the experience.

Market Advantage

Extending responsible business practices beyondthe environmental agenda to address the economicand social aspects builds reputation, particularly forthose companies that establish a leadership role. Themarket is changing to reflect socially, environmentallyand culturally aware holidaymakers. These markettrends require a richer experience, generally beyondthe confines of the hotel or resort. There is marketadvantage and repeat business to be secured byenabling clients to enrich their experience and thiswill increase the local economic benefit.

Product Quality and Cost

In an increasingly differentiated and competitivemarket there is commercial advantage in operatingin, and to, destinations which offer a rich mixtureof experiences and activities. The traditionalprovision of resort activities increasingly needs tobe supplemented with complementary productsmany of which will be locally owned and providedby SMEs. Businesses benefit where collectivelytheir efforts create a larger range of opportunitiesfor local sourcing and a larger pool of labour withappropriate skills from which they can recruit. Co-operation between businesses makes the strategyeasier to achieve, reduces cost and avoids thefreeloader problem.

Staff Morale

Changing consumer aitudes towards whatconstitutes a good holiday experiences and therelevance of the CR agenda also applies to staff.Adopting a more responsible business agenda canassist with the recruitment, motivation and retention

of quality staff and reduce costs.

Benefits of a CR Approach to Stimulating Local Economic Development


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Risk management and the licenceto operate require that hotels and

resorts maintain good relationshipswith their neighbourhood andreturn a profit to the owners. Thehotel sector moved earlier than othertravel and tourism industry sectors toadopt and implement environmentalmanagement principles and there aremany examples of local initiativesaround hotels and resorts thatare designed to address issues ofeconomic and social sustainability.The experiments and local initiatives

need now to be scaled up and appliedmore widely.

Hotels and resorts are to a significantdegree dependent upon themaintenance and development of theenvironment in which they operate.Hotels and reports have an obvious andreal interest in their neighbourhoodfor risk management and productquality reasons the hotel or resort iscommied to the local area, it cannotjust move on if the environment isruined or the neighbourhood becomesunaractive.

The managers of hotels and resortshave a long-term interest in themaintenance and enrichment ofthe locality, to create beer placesfor people to live in and for peopleto visit. If the destination valuedeclines so, generally, does the valueand profitability of the property;contributing to the development of the

destination enables the hotel or resortto manage risk, increase productquality and secure commercialadvantage. There are directcommercial benefits in extending theseason, increasing bed occupancy,filling beds out of season through afestival and extending length of stay.Improving the destination can assistin achieving all of these commercialobjectives.

Hotels and resorts can achieve aconsiderable amount by actingseparately, however, destinationsare oen composed by a varietyof properties serving differentmarket segments and with different

management strategies and the sectoris very vulnerable to those who whilstthey benefit from initiatives do notcontribute to them. At the destinationlevel there are benefits fromcollaborative action by hotels andresorts working with local authoritiesand communities and with the widerlocal industry.

Local SourcingLocal economic development andthe reduction of poverty is achievedwhere hotels and resorts:

maximise their employmentof local labour and throughmanagement and traininginterventions, by investingin people and ensuring that

increasingly senior posts go tolocal employees;

work with local communitiesand micro enterprises to ensuresupplies of food and beverages,so furnishings, maintenance,arts and cras and entertainment.are locally sourced.

The development of local linkages ofthese sorts requires that the challengesof quality, quantity and continuity ofsupply at a fair market price are met.

Complementary Products Hotels and resorts can contribute

and secure commercialadvantage by working withlocal communities and SMEsto encourage the developmentof the diversity of local tourism

services and products. Hotels and resorts can contribute

to this destination enrichmentby providing market access forthe communities and micro-enterprises that can provide thesegoods and services. Commercialadvantage and risk managementfavour cooperation.

In adopting these approachesthe hotel or resort is encouraging

their clients to spend moneyin the local economy oncomplementary productsby providing market access.Traditionally hotels and resortshave done this by enteringinto contracts with the localformal sector industry. Thereis commercial advantage to begained by widening the range ofgoods and services available toguests and in the process a far

more significant contribution canbe made to the local economy byenhancing market access.

HOTELS AND RESORTS



TOUR OPERATORS

Although some tour operatorsspecialise in particular destinations,the majority of operators, including

the specialists, are multi-destination.Tour operators have establishedrelationships with local suppliers;particularly their inbound operatorin the destination. Their ability to selltrips is very reliant upon the perceived,and actual quality, of the destination.

Tour operators are reliant on thequality and safety of the destination,they also play a significant role inshaping the way the destination

is perceived by the way that theymarket the location. Many operatorsare responding to changing markettrends in the UK by placing increasingemphasis on locally sourced services,food and drinks, richer excursion andactivity programmes.

Tour operators seek market advantage through the quality of theexperiences which they offer and that oen necessitates closeengagement with local communities and micro enterprises. Increasing

numbers of operators are seeking to secure repeat business byenhancing the quality of the holiday experience in these ways andsecuring both increased levels of repeat business and referrals.

Where investors and developers, hotel and resort managementcompanies and managers and tour operators can identify ways ofworking together to enhance the quality of the destination, they andthe local community gain.

The International Centre for Responsible Tourism (Dr Harold Goodwin) and Scott Wilson Business Consultancy (Stuart Robson and Sam Higton), August 2004.

All rights reserved. No part of this publication may be reproduced without the written permission of the copyright owners. Authors welcome the distribution

and use of this document in original format by business organisations, Government and Educational establishments.


CONTACTS

Dr Harold Goodwin, Director , International Centre for Responsible Tourism

Department of Earth and Environmental Sciences

University of Greenwich

Stuart Robson

Scott Wilson Business Consultancy

London

International Tourism Partnership

Prince of Wales International Business Leaders Forum

London

Email: [email protected]: www.haroldgoodwin.info

Tel: +44 (0)20 7798 5200

Email: [email protected]

Website: www.scottwilson.com

Tel: +44 (0)20 7467 3622

Email: [email protected]

Website: www.internationaltourismpartnership.com

Tourism and Local Economic Development

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