Tourism And Local Development


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Tourism And Local Development

  1. 1. Tourism and Local Economic DevelopmentTourism and Local Economic DevelopmentHow can businesses in travel and tourism increasethe contribution of the industry to localeconomic development and pro-poor growth? PARTNERS & SPONSORS 1
  2. 2. IntroductionT he 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 PeterNize�e 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 Na�ras of Exodus presented a tour operator’s 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 wereparticipants 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 where you can download South Africa’s 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 isscope to develop guidelines for particular parts of the industry for example hoteliers, tour operators and guides. 2 Tourism and Local Economic Development
  3. 3. Tourism and Local Economic DevelopmentLOCAL ECONOMIC DEVELOPMENTAND POVERTY REDUCTIONThe UN Millennium Development Goals include specific commitments toreduce by one-half the proportion of people living in extreme poverty by 2015. What is Pro-Poor Tourism?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 and Pro-poor tourism is not a specificsanitation, health care and housing. tourism product; it is an approach to tourism development andAt the same time, the World Tourism Organization estimates that tourism management which ensures thataccounts for up to 10% of global gross domestic product, making it the world’s local poor people are able tobiggest industry. The potential for tourism to contribute significantly to secure economic benefits frompoverty alleviation is considerable. Work since 1998 by the Pro-Poor Tourism tourism in a fair and sustainablePartnership (Ashley, Goodwin & Roe) has demonstrated that tourism can manner.contribute to poverty reduction and that for many of the least developedcountries, and in many rural areas, tourism is one of the few current viable Pro-poor tourism may improvestrategies for economic development. the livelihoods of poor people in three main ways:The World Tourism Organization’s report on Tourism and Poverty Alleviationpublished for the World Summit on Sustainable Development in Johannesburg 1. Economic gain throughin 2002 drew substantially on the work of the Pro-Poor Tourism Partnership employment and and there are now a range of initiatives taking enterprise development;place on pro-poor tourism. 2. Infrastructure gains: roads, water, electricity, telecommunications, wasteAn Agenda for Change? treatment;Discussion focussed on what could be done to further the local economicdevelopment agenda at the inception and development phase by investors 3. Empowerment throughand developers, the role of hoteliers and that of tour operators. In each of engagement in decisionthese tourism sectors the significance of Socially Responsible Investment has making.a 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 local community access to the tourism market (comprising tourists and the tourism industry locally) in order to maximise linkages and minimise leakages.• 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 create those opportunities to assist local communities to benefit from them. The language of pro-poor tourism• The importance of measuring and demonstrating impacts on local economic is being used widely and there is development and the reduction of poverty was emphasised, it is time to now an emerging consensus that move beyond statements of general principles and to measure and report it is important to move beyond the impacts of initiatives in specific terms. general talk about “trickledown”• It is time to move from pilot projects and experiments to programmes of and multipliers and to focus on action. measurable impacts on improving• Scalability is the current challenge. How do we take what we know about the livelihoods of poor people. how to enhance the impact of tourism on local economic development and the reduction of poverty and implement it at the destination to make real In summary, traditional views of change? growth in the tourism sector need to be accompanied by a focus on generating economic benefi ts for poor people in destinations. 3
  4. 4. THE ROLE OF THE GOVERNMENTWhilst 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 between departments at national level and between national and local government.• How can other departments of government be engaged in the issues of tourism development? Ministries of Tourism are o�en seen as junior players in government and it can be very difficult to engage ministries of finance, trade and industry in cross government efforts to harness tourism for development.• Tourism is o�en seen as an industry which benefits elites. When people look at the industry they see hoteliers and tour operators, they see wealth. How do we raise awareness in government, and amongst national decision makers in other sectors, about the contribution which tourism makes to local livelihoods and engage them in joint initiatives to increase the local economic development and poverty reduction impacts?• If pro-poor growth and poverty reduction through tourism is to become part of national strategy then it is essential to engage other national government ministries. This requires that the positive impacts on the local and national economy 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 li�le referencing between national tourism policy and the poverty reduction strategies.THE BUSINESS CASE FOR ENGAGEMENT WITH LOCAL ECONOMICDEVELOPMENT AND POVERTY REDUCTIONTo prosper the tourism industry needs to operate in environments which remain a�ractive 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 andverification, they can ensure a relatively level playing field and reduce the risk of legislation and regulatory interventionby national or local authorities.4 Tourism and Local Economic Development
  5. 5. Tourism and Local Economic DevelopmentBenefits of a CR Approach to Stimulating Local Economic DevelopmentMinimising Risk Product Quality and CostBusiness has been using tools to manage In an increasingly differentiated and competitiveenvironmental risk for some time. There is now market there is commercial advantage in operatingincreasing emphasis on the economic and social in, and to, destinations which offer a rich mixtureaspects of the triple bo�om line of business. Brand of experiences and activities. The traditionalimage and value are key elements for an industry provision of resort activities increasingly needs towhere the product is intangible at the point of be supplemented with complementary productspurchase and where the experience is much more than many of which will be locally owned and providedthe directly purchased transport, accommodation by SMEs. Businesses benefit where collectivelyand guide services. Reputational risk is a significant their efforts create a larger range of opportunitiesissue in an industry that is highly competitive and for local sourcing and a larger pool of labour withdifferentiated; and where the product purchased by appropriate skills from which they can recruit. Co-the consumer extends beyond what is owned and operation between businesses makes the strategydirectly managed in the supply chain. easier to achieve, reduces cost and avoids the freeloader problem.Licence to Operate Staff MoraleGood relationships with local communities, positive Changing consumer a�itudes towards whatrecognition of demonstrable concern for the natural constitutes a good holiday experiences and theand cultural environment and the maximisation of relevance of the CR agenda also applies to staff.the contribution which the industry makes to local Adopting a more responsible business agenda canlivelihoods, economic development and the reduction assist with the recruitment, motivation and retentionof poverty are all important to the industry’s licence of quality staff and reduce 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 AdvantageExtending 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. 5
  6. 6. INVESTORS AND DEVELOPERS“The licence to operate, risk management and commercial advantage are key considerations for developers and their funders.”Many leading commercial banks and construction. Hotel and resort levels of youth unemployment. Byhave adopted the Equator Principles management companies o�en engaging with local communitieswhich are intended to provide a have li�le or no influence at that in tourism development projectscommon framework (benchmarked stage and subsequent retrofi�ing to and demonstrating both willingnessagainst World Bank group criteria) for comply with regulatory frameworks, and acumen in maximising the localcommercial lenders. It is intended that insurance requirements and industry economic benefits developers securethe Equator Principles should become best practices, as they develop over their licence to operate and createan important element of lender due the lifecycle of the development, is a be�er business environment fordiligence and borrower compliance expensive. Risk needs to be managed the hotel and resort managementand that the principles will become over the project lifecycle as a whole. companies, with a richer product offerpart of the project management in the neighbourhood.process and extend over the lifecycle The licence to operate, riskof a development. management and commercial Local sourcing and maintenance advantage are key considerations for requires the development of a rangeThe benefits for developers, seeking developers and their funders. The of local enterprises which will benefitcommercial finance, of compliance International Finance Corporation has the development and the localwith the Equator Principles may be developed Tourism and Hospitality economy by providing employment,expected to include more favourable Development guidelines which apply local enterprise opportunities andrepayment terms and less intrusive to developments which it finances. supplies of goods and services whichcovenants in loan agreements as benefit the local community as wellbanks lend more selectively in order to Whilst the agenda has been as the tourism development. Theminimise their risk. For investors and dominated by risk management development of this strategy requiresfinancial institutions the issues of risk there are commercial advantages for that both local sourcing and marketmanagement are no less significant, developers, construction companies access issues are addressed in thethe repayment of, and return on, and banks. In winning licenses design and development phases.their investments is dependent upon and construction contracts there isthe licence to operate, successful risk commercial advantage in being able If the approach is to be credible themanagement and market advantage of to demonstrate not just low levels local economic benefits need to bethe borrower. By adopting a proactive of negative environmental and clearly specified, targets need to beapproach through the Equator socio-cultural impacts but enhanced set and the deliverables monitored.Principles they can manage portfolio positive economic and social impacts.volatility and increase returns. Risk management has focussed primarily on the environment inWhere developers and investors areproactive in minimising negative hotel construction but there are significant social and economicenvironmental, social and economic risks that are increasingly the focus of community, NGO, IGOimpacts and maximising the positive and national and local government concerns.impacts they have a competitiveadvantage in securing planning This can be achieved through the Processes like community labourpermissions or licenses and in bidding creation of additional employment agreements and established economicfor development contracts. and SME opportunities for local impact measurements including the communities by adopting strategies measurement of local sourcing and jobDifferent considerations apply in and development plans maximizing creation can be used for this purpose.the design and construction phases the local economic development andand in the operational phases of poverty impacts whilst minimizing Local communities can o�en, but nota project. Developers are likely to negative livelihood impacts. always, gain from the infrastructurefocus on securing construction and that comes to their area as a resultdevelopment contracts and financial The additional investment and of tourism development. Companiesinstitutions are o�en partners in partnering, mentoring and will increasingly be challenged tothis process. Their joint focus is on transaction costs associated with a report on these benefits – all of whichthe development and construction broader approach to local economic contribute to risk management andphase, but as hoteliers point out, development are likely to be small ensuring the licence to operate.their capacity to adopt a CR approach in comparison to the commercialin the operational phase is, to a advantage which comes fromsignificant degree, dependent upon enhancing the economic impacts,decisions made in siting, design particularly in countries with high6 Tourism and Local Economic Development
  7. 7. Tourism and Local Economic DevelopmentHOTELS AND RESORTSRisk management and the licenceto operate require that hotels andresorts 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 initiativesneed now to be scaled up and appliedmore widely.Hotels and resorts are to a significant management strategies and the sectordegree dependent upon the Complementary Products is very vulnerable to those who whilstmaintenance and development of the they benefit from initiatives do notenvironment in which they operate. • Hotels and resorts can contribute contribute to them. At the destinationHotels and reports have an obvious and and secure commercial level there are benefits fromreal interest in their neighbourhood advantage by working with collaborative action by hotels andfor risk management and product local communities and SMEs resorts working with local authoritiesquality reasons – the hotel or resort is and communities and with the wider to encourage the developmentcommi�ed to the local area, it cannot of the diversity of local tourism local industry.just move on if the environment is services and products.ruined or the neighbourhood becomesuna�ractive. • Hotels and resorts can contribute Local Sourcing to this destination enrichmentThe managers of hotels and resorts Local economic development and by providing market access forhave a long-term interest in the the reduction of poverty is achieved the communities and micro-maintenance and enrichment of where hotels and resorts: enterprises that can provide thesethe locality, to “create be�er places goods and services. Commercialfor people to live in and for people • maximise their employment advantage and risk managementto visit.” If the destination value of local labour and through favour cooperation.declines so, generally, does the value management and trainingand profitability of the property; interventions, by investing • In adopting these approachescontributing to the development of the in people and ensuring that the hotel or resort is encouragingdestination enables the hotel or resort increasingly senior posts go to their clients to spend moneyto manage risk, increase product local employees; in the local economy onquality and secure commercial complementary productsadvantage. There are direct • work with local communities by providing market access.commercial benefits in extending the and micro enterprises to ensure Traditionally hotels and resortsseason, increasing bed occupancy, supplies of food and beverages, have done this by enteringfilling beds out of season through a so� furnishings, maintenance, into contracts with the localfestival and extending length of stay. arts and cra�s and entertainment. formal sector industry. ThereImproving the destination can assist are locally sourced. is commercial advantage to bein achieving all of these commercial gained by widening the range ofobjectives. The development of local linkages of goods and services available to these sorts requires that the challenges guests and in the process a farHotels and resorts can achieve a of quality, quantity and continuity of more significant contribution canconsiderable amount by acting supply at a fair market price are met. be made to the local economy byseparately, however, destinations enhancing market access.are o�en composed by a varietyof properties serving differentmarket segments and with different 7
  8. 8. Tourism and Local Economic DevelopmentTOUR OPERATORSAlthough some tour operatorsspecialise in particular destinations,the majority of operators, includingthe 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 destinationis 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 o�en necessitates closeengagement with local communities and micro enterprises. Increasingnumbers 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.CONTACTSDr Harold Goodwin, Director , International Centre for Responsible Tourism Email: harold@haroldgoodwin.infoDepartment of Earth and Environmental Sciences Website: www.haroldgoodwin.infoUniversity of GreenwichStuart Robson Tel: +44 (0)20 7798 5200Scott Wilson Business Consultancy Email: stuart.robson@scottwilson.comLondon Website: www.scottwilson.comInternational Tourism Partnership Tel: +44 (0)20 7467 3622Prince of Wales International Business Leaders Forum Email: itp@iblf.orgLondon Website:© 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 distributionand use of this document in original format by business organisations, Government and Educational establishments.8 Tourism and Local Economic Development