Advantages and disadvantages of tourism as an engine for propoor

Tourism is not a panacea for economic development. In any context decisions about whether ornot tourism - domestic or international - presents viable opportunities for local economicdevelopment need to be made locally in the context of the other opportunities which exist for propoordevelopment. As with other industrial sectors, economic growth as a result of tourismdevelopment does not necessarily result in poverty reduction. However, tourism does have someadvantages over other sectors for delivering pro-poor growth (Deloitte and Touche, IIED and ODI1999, Ashley, Roe and Goodwin 200l, WTO/OMT 2002, Page 1999):• Tourism delivers consumers to the product rather than the other way round. This opens uphuge opportunities for local access to markets for other goods and services. Developmentstrategies can enhance potential links to local enterprises and poor producers.• Tourism does not face tariff barriers, although taxes on air travel can have a similar effect.• Tourism has considerable potential for linkage with other economic sectors – particularlyagriculture and fisheries. Realising these linkages will increase the proportion of tourismrevenue retained in the host country.• There is a possibility of other types of linkages, for example demand for tourism may addsufficiently to another sector’s demand for the combination to provide a basis forintroducing local provision of goods or services, e.g. transport.• It may create initial demand for a good or service that can then itself become a growthsector. In furniture, both Jamaica and Kenya provide examples where furniture firmswhose first major market was hotels have developed to provide other consumers.• Tourism provides opportunities for off-farm diversification. Tourists are often attracted toremote areas with few other development options because of their high cultural, wildlifeand landscape values.• Tourism provides relatively labour-intensive opportunities. It is more intensive thanmanufacturing and non-agricultural production, although less labour-intensive thanagriculture. Its relation to the economy as a whole therefore depends on the relativeweights of agriculture and manufacturing: this suggests that it is more likely to be amongthe most labour intensive sectors of the economy in more developed countries (see TableA5).• Tourism employs a relatively high proportion of women and can contribute to genderequality. This is, however, less true in developing countries where there is higher maleunemployment than in developed countries.• Tourism can provide poor countries with a significant export opportunity where few otherindustries are viable. The large number of countries for which tourism receipts areimportant is evidence that it is a much less demanding sector in terms of initial conditionsthan many other commodities available to developing countries. In particular it is morewidespread than most agricultural goods, which are its superior in labour intensity. Itappears to be more like manufactures, where comparative advantage can be createdthrough a combination of identifying a possible product and creating a specialiseddemand.• Tourism products can be built on natural resources and culture, which are assets that someof the poor have.13• The infrastructure associated with tourism development (roads, electricity,communications, piped water) can provide essential services for rural communities whichwould otherwise be excluded from general infrastructure provision.• It appears to have relatively few market distortions (either as barriers to entry or tradepolicy rents). It is particularly sensitive to marketing skills, and also to public sector action(or inaction).• It has a high income elasticity, and therefore offers a relatively rapidly growing market.Tourism may be expected to perform ‘better’ than traditional commodities, but notnecessarily better than newer exports such as manufactured products.• It can take different forms, using different inputs, and is therefore available to a widerange of countries (and regions within a country).At the same time, tourism operates in a market economy and it is subject to international marketforces. New destinations emerge and others decline because they are undercut on price or becomeunfashionable. Countries dependent upon undifferentiated products like the traditional beach, sun,sand and sea holiday are particularly vulnerable. It is relatively easy for tour operators to respondto new opportunities and to switch operations when new destinations come in at a morecompetitive price.Political instability and security concerns (both domestic and international) also have an impacton tourism. Countries with significant domestic and regional tourism industries tend to suffer lessbecause these are not affected by declining numbers of air travellers in the face of terrorism fearsbut internal security issues can also pose a threat. Experience suggests that tourism numbersrapidly recover from terrorism and other events, although not uniformly so. Seasonality is also anotable feature of the tourism industry. Whether tourism is seasonal and whether the seasonalityis compatible with agricultural work in particular are likely to affect its pro-poor potential. Risk isreduced if countries (as well as individual households) are not overly dependent on any oneeconomic sector and in the case of tourism, which is vulnerable to changes in consumerpreferences, undercutting from new competitors and recession in originating markets, on any onemarket. The constraints described above are not unique to tourism but affect many otherindustries. Section 4 compares dependence on tourism to dependence on other exports.There are also myths surrounding tourism and the view that tourism is not a worthwhile or‘serious’ local economic development strategy is widely held. To a large extent this view is aresult of a failure to recognise the heterogeneity of the industry, but there is also a view thatservices, and tourism in particular, are not ‘serious’ development drivers, like agriculture andmanufacturing. It is therefore often neglected and subject to policies and priorities designed forother sectors. It is rarely singled out as strategically important, because of either its potentialeffects as a pole of development for other industries, or its poverty effects. Therefore, when itcomes into potential conflict with the interests of industries that are regarded as national prioritiesit is tourism whose interests come second. But this ‘neglect’ is in the context of a much greateracceptance that government has a direct interest in the outcome than would be true for most otherpredominantly private industries. Most countries have a tourism ministry, even if it is ‘tourismand...’, not just tourism; most other sectors do not. This puts tourism in an odd, intermediateposition; the government has an interest, but no clear perception of what that interest should be.In contrast to the view that linkages are an important advantage, there is a widely held view thattourism’s effects are dissipated by ‘leakages’. As Christie and Crompton (2001) argue leakagesare calculated for the tourism industry but less frequently for other sectors. They are used to referto the amount of tourism revenue that accrues outside of the host country – for example throughpayments to foreign-owned hotel chains, imports of food and other goods, or foreign airlines.Unusually high levels of leakage are often cited as one of the major disadvantages of tourism asan economic development sector – for example UNEP (undated) notes levels as high as 70 percent in Thailand and 80 per cent in the Caribbean. Christie and Crompton (2001) however quote14work by Philip English ‘The evidence also suggests that the net foreign exchange earnings fromtourism are significant, ranging from at least 50% of gross expenditures within the country to asmuch as 90% in the most advanced developing countries. Recent preliminary data suggest thatleakage is currently of the order of 23-25% in Kenya.It is clear, however, that the amount of leakage will depend greatly on the form of tourism and thenature of the economy and no standard figure can sensibly be applied across the globe. In smallcountries and islands (for example Mauritius), a share of spending goes on imports, but that isequally true of other industries in small countries and islands. In larger and more developedcountries (for example South Africa and Jamaica), the shares are much smaller. The mostimportant point about ‘leakage’ is that it can be used to identify opportunities to create economiclinkages within the host country - some of which could have the potential to benefit poorproducers.Other criticisms of tourism and the answers include (WTO/OMT 2002, 34-35):• Foreign private interests drive tourism, so it is difficult to maximise local economicbenefit: There is no evidence that levels of foreign ownership are higher than forcomparable sectors. It is clear that many small enterprises and individual traders sustainthemselves around hotels and other tourism facilities and that these SMMEs are notforeign owned. There is often confusion about levels of foreign ownership; localownership is often masked by franchise agreements and management contracts.• Tourism can impose substantial non-economic costs on the poor through loss of accessto resources (particularly beaches), displacement from agricultural land and social andcultural disruption and exploitation: The losses can be substantial for the poor andminimising them is an important PPT approach. However, many forms of developmentbring with them disadvantages of this kind.• Tourism is vulnerable to changes in economic conditions in the originating markets,which cause major swings in the level of tourism in the destinations, and internationalvisitor arrivals are also vulnerable to civil unrest, crime, political instability and naturaldisaster in the destination: It is not clear that the volatility of export markets for tourismis significantly greater than for other commodities. The destination has some control overcivil unrest, crime and political instability.