Planning for Tourism Development in Small Island Destinations: the need for a

new sustainability mindset

Larry DwyerPresident, International Academy for the Study of Tourism

Former President, International Association for Tourism Economics

Professor, Australian Business School University of New South Wales

Characteristics of SIDS• The natural, economic and social systems of SIDS

are very vulnerable to external shocks due to the following shared characteristics:

• small size• Remoteness from major origin markets• narrow resource base• narrow export base• exposure to global challenges (economic, political,

socio-cultural, environmental, technological)

Importance of SIDS• Islands are distinctive places to visit, often with a

unique character and appeal • Islands, overall, are hugely important for global

biodiversity, with many containing unique species on account of their relative isolation

• Similarly, this explains the rich cultural heritage that can be found on many islands

• SIDS provide a significant tourism resource but also a strong responsibility on tourism to support conservation of resources

The importance of tourism to islands• Tourism is a dominant force in the economy of many SIDS and provides

one of only a few sources of foreign exchange earnings for most of them. • In half of the SIDS, tourism expenditure accounts for over 40% of all their

exports of goods and services. • equates to more than 20% of GDP in two fifths of SIDS where data are

available.• demonstrated by the recent graduation of Cape Verde and the Maldives

from Least Developed Country status due to their levels of income from tourism.

• the projected growth of the sector worldwide, with international tourism arrivals forecasted to reach 1.8 billion by 2030. The popularity of islands as destinations and the kinds of experience that they offer should enable them to see at least an equivalent amount of growth.

• Tourism income can support livelihoods in many island communities. • They are also uniquely placed to benefit from, and provide support for, the

special cultural and natural heritage assets which are a feature of so many of the world’s islands.

• Tourism contributes to economic resilience in SIDS.

SIDS should see continuing growth in forthcoming years up to 2030.

The forecast is for global growth in international tourist arrivals to continue but at a more modest pace, from 4.2% per year (1980–2020) to 3.3% (2010–2030) as a result of four factors:

• the higher base volumes; • lower GDP growth as economies mature; • lower elasticity of travel to GDP; • a shift of falling transport costs to increasing ones

Global growth forecasts and future market patterns

Success? Yes if its only about numbers!!!

Challenges to Development of SIDS

• Transport Access • Scarce and fragile natural resources • Climate Change• Low Multiplier effects (leakages) • Community Engagement

Opportunities for Development of SIDS

• Economic Growth• Employment & Women Empowerment • Promotion and protection of natural resources• Blue & Green Economies • Investment and Value Chains• Resilience

Three accepted propositions Tourism as a key driver of sustainable development in islands• For many islands, tourism is the single most important economic

activity, with clear opportunities for future growth • Therefore tourism must feature strongly on the sustainable

development agenda of islands and be given high priority in programmes to support SIDS and other island territories

Natural and cultural heritage as primary assets for island tourism

• Tourism is well placed to generate awareness and support for the unique biodiversity and rich cultural heritage of islands, on which it depends

• Tourism development must be carefully planned and managed so that it has a positive impact on island resources, environments and communities and responds to the challenges of climate change

Importance of Sustainable Tourism Development

3 pillars of sustainable tourism• environmental sustainability: emphasizes the

protection and conservation of the environment • economic sustainability: increasing incomes and

employment, foreign exchange earnings, public revenues, poverty alleviation, business development and investment to stimulate local economies

• socio-cultural sustainability: harmonises with social values and cultural integrity

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Three pillars of Sustainability

OUR LEADERS’ RESPONSE

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Environmental Impacts: Negativepollution (air, water, noise, littering) loss of natural habitat including agricultural and

pastoral landsdestruction of flora and fauna vandalismdegradation of landscape and of historic sites and

monumentscongestion including crowdingeffects of conflicts over land useeffects of competition for scarce resources (fresh

water, energy) carbon footprint

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Socio-cultural Impacts: Negative Create a hectic community and lifestyle; Introducing an immigrant workforce with attendant social

problems; Competition and conflict between tourists and residents

for available services, facilities, and recreational opportunities.

Adverse demonstration effects Change or loss of local identity and values; Loss of traditional crafts and skills; Commercialization of traditional cultural events, arts and

crafts (‘commodification’ of culture) Loss of authenticity; cultural deterioration

The Standard Planning Approach Conduct a SWOT analysis Strengths Weaknesses Opportunities Threats Develop Strategies Exploring Opportunities based on strengths Exploring Opportunities by addressing weaknesses Countering threats by developing strengths Countering threats by addressing weaknesses Applies to tourism planning Geographically: trans nationally, nationally, regionally and locally tourism market segments (Business, VFR, holiday - - -etc.) Special interest markets (cruise tourism, events tourism,

ecotourism - - - etc)15

But will tourism strategies work?

Tourism development strategies are often a mixed bag - -a dogs breakfast

Some support growth, investment, development, more tourist numbers

Others support a slowing down, lower numbers but greater yield inconsistent strategies Tourism development strategies typically ignore fundamental

reasons why tourism growth proceeds in an exploitative, chaotic way

They are often band-aid solutions, which worsen tourism's negative effects

Ultimately, they will fail16

4 Issues for Discussion

• Economic Growth• Leakages and Multipliers• Investment and Value Chains• Resilience

All have relevance for understanding how to cope with vulnerability of SIDS

Economic Growth: Effects of Tourism Tourism is regarded as an economic development lever Destination managers anticipate that tourism can - - - boost business sales and output income, value added government receipts employment foreign exchange reduce poverty etc But - - - Does tourism always offer these benefits? What is the reality?

Accelerated Consumption

Climate Change

Energy & Fuel

Material Resource Scarcity

Food scarcity

Water Scarcity

Ecosystem Decline

Disparate Prosperity

Government Debt

Lack of Global Governance

Political Instability

Pandemics

THE PERFECT STORM

Can we handle another 400 million tourists globally in just 6 years?

The Island Where Tourist Garbage is Stored in the MaldivesSource: Daily Mail

The Queue to Climb EverestSource: Guardian

How will we handle congestion?

How will we handle waste?

How will we handle emissions?

How will we manage our thirst for water and land?

How will avoid residents’ backlash?

Protest Sign Erected by Young BalineseSource: ABC They Paved Paradise

Source: China Daily

How will we protect vulnerable people and cultures?

Are we at a ‘tipping point”?

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Two Mindsets regarding tourism

Standard Mindset Sustainability mindset

Anthropocentric Ethic Environmental Ethic

Profit Benefits

Product People

Destination Place

Price Value

Promotion Pull

Growth/Exploitation Protection

Tourism and the Economy: Four Tools of Analysis Tourism Yield Measures expenditure measures popular but limited Tourism Satellite Accounts measures economic contribution of tourism (eg contribution to

tourism GDP, tourism employment etc) Economic Impact Analysis estimates the effects of shocks (+ or -) to tourism demand and

supply changes in economy wide output, GDP/GSP, employment etc Cost-Benefit Analysis estimates change in economic welfare from a policy or investment

proposal

Tourism Yield

Standard measure is expenditure injected by type of visitor by trip and by visitor night

Often forms basis of destination marketing effort Expenditure is the most commonly used concept of yield. corresponds to the well known concept of ‘marketing

yield’ which is found in the mission statements of many DMOs.

The expenditure ‘yield’ of different markets informs the marketing effort of many destinations world- wide at both national and regional levels.

Tourism Australia, Tourism Victoria, Tourism Western Australia, Kenya, NZ, Hong Kong, Malaysia, UK, Northern Ireland etc

Useful Measure? Measures of economic (expenditure) yield can guide destination stakeholders as to: the origin markets that should be promoted the types of products and services that should be developed to attract ‘high yield’ visitorsImportant for assessing relative importance of both ‘mature’ and ‘emerging’ source markets

Who cares?

Destination Marketers Individual firms (within and outside tourism industry) Tourism industry stakeholders generally

Expenditure Yields - - of limited value !!!

gross expenditure data does not in itself provide information on what products tourists purchase. Give no indication of the business sectors that receive the sales revenues.

tourist expenditure is not an indicator of profitability to firms. Profit is not uniform across industries.

gross tourist expenditure does not inform us about the import content of the goods and services purchased by tourists (leakages)

gross tourist expenditure does not inform us about the contribution to tourism output, tourism gross value added, tourism employment (need a TSA)

Expenditure measures ignore the economic impacts of tourist expenditure (indirect and induced effects) such as contribution to Gross Domestic (or regional) Product, Gross Value Added, and employment. (need an economic model)

Does not provide information on the geographic spread of revenues or impacts to the wider destination

expenditure injections per se tell us nothing about the social or environmental costs and benefits associated with different visitor market segments.

The Ideal Tourist: Two main Perspectives

Economic Perspective Tourist has economic value to destination 4 measures as highlighted Sustainability Perspective Tourist has economic, social and

environmental value to destination Does it matter which perspective is

adopted? YES

Sustainable YieldIn the context of sustainable development, it is impossible

to consider the economic dimension in isolation from the social or environmental and vice versa

This implies a re-examination of the notion of ‘yield’ and its implications for tourism firms

On a broader view, the notion of ‘yield’ includes social and environmental value in addition to economic value

But - - difficulties in measuring social and environmental ‘footprints’ of tourists

Attempts to operationalise this measure (Dwyer) have been unsuccessful

Leakages and Multipliers• The small economic base and the land scarcity of many

SIDS means that they are prone to financial leakages and to shortage of labour and skills.

• The contribution of tourism to GDP diminished by leakages of foreign exchange earnings due to imports of materials and equipment for construction, consumer goods, and repatriation of profits earned by foreign investors.

• Tourism leakages in some SIDS economies can be as high as 56% (UN-OHRLLS, 2011).

• Leakages reduce the multiplier effect of tourism expenditure

Standard View: The Multiplier Effect Direct Spending: Direct spending relates to purchases of goods and

services directly attributable to tourist activity. Indirect spending Firms that sell G&S to tourists purchase inputs

from other firms and these other firms (suppliers) purchase inputs from other firms (suppliers) and so on - -

Induced spending Induced effects arise when the recipients of the direct and indirect expenditure-firm owners and their employees- spend their increased incomes.

This in turn sets off a process of successive rounds of purchases by supplier firms, plus further induced consumption - --

• The stronger are the links between tourism and other sectors within a destination, the greater will be the value of the relevant multiplier

• Thus SIDS at great disadvantage compared to more developed destination

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Size of Multiplier

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Direct spending by visitors is only the tip of the iceberg

The indirect impact of tourism is much larger

Relatively easy to measure: visitor numbers, expenditure

Hard to measure: subsequent spend by suppliers, induced effects, investment etc

Huge Economic ImpactHuge Economic Impact

In the real world - - - Leakages. Additional inputs and final products may be imported due to domestic

shortages reduces the multiplier effect Factor supply constraints economies experiencing an increase in tourism expenditure face labour, land and

capital constraints. tourist expenditure thus results in increased prices rather than increases in

output, income and employment factor constraints lead to interactive industry effects which change the industrial

composition of an economy Real exchange rate appreciation. Increased inbound tourism will strengthen the real exchange rate leading to a

reduction in other exports and/or increase in demand for imports at the expense of the demand for domestic import competing commodities

government fiscal policy expansionary or restrictive?

Increased tourism to Fiji Narayan (2004) used a CGE model to simulate the long-run impact

of a 10 per cent increase in visitor expenditures on Fiji’s economy from its three main source markets - Australia, New Zealand and USA

The projections indicate that the impact on real GDP in Fiji is a relatively large 1.15 per cent

The increasing economic activity increases real wage rates which positively impacts private disposable incomes

This, in turn, leads to an increase in real private consumption helping to increase real GDP

This generates increased government revenue, value added tax and income tax revenues and an improvement in real national welfare.

BUT - - - - - - -

The real outputs of the hotel industry, transportation, commerce and other private sector output are amongst the most positively affected exports

However, due to exchange rate appreciation, the real outputs of the various traditional export sectors decline. These include coconut output, ginger, processed food, textile, clothing and footwear, other manufactures

There is also a rise in domestic prices of goods and services relative to foreign prices, further eroding the competitiveness of the traditional export sectors

These price and exchange rate effects also result in an increase in imports, implying reduced output of various import competing industries

For Fiji these include fruit and vegetables, beverage and tobacco, transport, property services, and business and other private services imports all of which are connected closely with the tourism industry

But - - - adverse effect on traditional exports, together with increased imports

Exports Imports Products/Services % Change Products/Services %Change

Coconuts -1.1229 Fruit and vegetables 38.828 Ginger -0.6693 Dairy 0.6087 Dalo -2.2710 Rice -0.2523 Kava -2,5474 Other crops 0.2876 Fish -2.0406 fish 0.7966 Gold -0.6027 Processed food 2.1658 Sugar -0.4061 Textile, clothing and footwear 0.9138 Processed food -8.3215 Other manufactures 0.9316 Textile, clothing & footwear -1.7104 Transport 5.6522 Other manufactures -2.5963 Insurance 1.7169 Hotels 4.9543 Property services 3.5489 Transport 2.5931 Business services 4.3318 Other private services 0.3916 Other private services 8.1386 Commerce 0.2440 Beverage and tobacco 0.7057

Gainers and Losers study indicates that for an island developing country such

as Fiji, an expansion in inbound tourism can generate growth in real GDP

- - However, effects on the real exchange rate, real wages and the CPI imply that the gains to tourism related sectors are offset to some extent by losses in traditional export and import competing industries

Similar results would apply to other developing economies given an expansion of the tourism industry

Local Prosperity and Poverty Alleviation

This aspect of sustainable tourism is concerned with• maximising the retention of tourism income in the local

economy• the creation of quality employment • equitable distribution of economic benefits within society,

providing opportunities for poor communities. BUT - - Tourism does not necessarily alleviate poverty

• Thailand Study (Wattanakuljarus & Coxhead,2008)

Is an expansion of tourism good for the poor in Thailand?

Tourism expansion in a destination may well create jobs for unskilled workers, and this would have a direct poverty alleviation impact.

But much of the gain from tourism growth accrues to factors other than unskilled labor, so income distribution may actually worsen. In addition, low-skill jobs in other sectors may be destroyed, and returns to agricultural land, from which the poor derive a considerable share of their income, may fall as tourism expands (crowding out effects)

Wattanakuljarus and Coxhead (2008) use a CGE model for Thailand and simulate the effects of tourism growth.

Their stated goal is to answer the question: is tourism growth pro-poor?

Study FindingsPromotion of Thailand as a tourism destination will not

necessarily advantage the poor Distribution of the gains from tourism depends on the

factor ownership. Owners of the factor that gain most from a given shock

will benefit most from tourism growth Increased international visitation particularly to a less

developed country such as Thailand may increase the gap between rich and poor

Thus, additional policy instruments are required in Thailand to correct for the inequalities occasioning tourism growth

Lessons for SIDS?

• Expansion of tourism draws resources from other sector

• There will be gainers and losers within and outside tourism

• There ain’t no such thing as a free lunch (TANSTAAFL)

Risks of Overspecialisation One type of risk relates to a dependency on tourism in general as an export

market. • The global financial crisis has demonstrated the risks involved in tourism

dependency arising from sudden unfavourable changes in demand from world markets

Another type of risk involves too much reliance on tourism from particular origin markets or too much reliance on a particular tourism product (e.g. conventions, health tourism, pilgrimage).

• Given the discretionary nature of tourism expenditure, the industry is extremely sensitive to crises of every type (economic, environmental, political).

• Some diversification of production and exports can be prudent even if it entails a temporary decrease in trade.

• Both of the above types of risk are compounded by the reality that TNCs firms are increasingly 'footloose', with ability to move and change at very short notice creating uncertainty for the host destination

Volatility

Economic Leakages and Local Supply Chains The contribution of tourism to local prosperity and how this reaches

different parts of the economy and society is best understood by considering the structure and performance of the tourism value chain.

A value chain comprises a complex set of components which constitute the visitor experience (travel to and within the destination, sleeping, eating, shopping, visits and activities, and return home) and all the transactions associated with them, including the supply linkages behind each one.

tourism value chain analysis has been carried out in a number of countries and local destinations in order to assess income flows in the tourism sector and the percentage that flows to poorer groups of the society to identify interventions to help poverty reduction

Dwyer and Thomas, Cambodia study different visitor yield measures provide an important basis for the

development of strategies to increase tourism's pro-poor impact

.

Pro poor income effect in Cambodia by origin and length of stay

Cape Verde Study of Tourism Value Chain

1. Direct jobs in the tourist sector – number of jobs in the tourism workforce, including hotel workers; the proportion in non-management grades and, of those, the likely proportion from poor backgrounds

2. Indirect links with the construction sector –the numbers of FTE construction workers actively building tourism assets in Cape Verde, and their average daily wage rates; almost all constructions workers are from poor backgrounds

3. Indirect links with agricultural supplies –the value of local purchases of food and beverages, based on spend by hotels on food and beverages; the proportion of this that is supplied locally,

4. Taxation – This mechanism for transferring resources from tourist to poor workers appears to be supported in Cape Verde through progressive policies relating to poverty reduction

Recommendations• recognising that tourism in Cape Verde does not

currently take place where poor people live;• ensuring the availability of indigenous workers with

the correct skills to participate fully in the tourism sector as it moves forward; (compare Macau)

• working with the construction sector to identify and train Cape Verdean workers to occupy higher skilled positions with attractive wage levels;

• identifying specific agricultural inputs required by the tourist industry which are particularly appropriate for cultivation in Cape Verde;

• reviewing the fiscal incentives awarded to the tourist industry to create a more level playing field between foreign and domestic companies.

Lessons for SIDS? Undertake detailed analysis of the tourism value chain to identify how the local island economy and

communities can gain maximum advantage from tourism to design and implement measures to strengthen local

employment and engagement in the sector, including access to training

Policy makers should integrate tourism in national sustainable development

plans emphasise the linkages of tourism with local economies Promote a foreign investment framework that stimulates

the use of local products and skills

Community Engagement essential that local communities are consulted,

engaged and empowered to influence decisions on tourism development in SIDS (UNWTO)

This dialogue should engage communities in planning and decision taking on tourism at a local level pursuing equitable benefits from tourism within

communities a beneficial interaction between communities and tourists

Four Types of Agents for Sustainable Tourism

The Responsible Government The Responsible Tourist The Responsible Operator The Responsible Host

Each has role to play in reducing vulnerability of small island tourism

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The Responsible Government Employs comprehensive evaluation criteria in its own decision

making in formulating tourism development strategies and policies more use of cost benefit analysis (CBA) in assessing sociocultural,

environmental and economic effects identification of gainers and losers among tourism stakeholders

and wider community employs precautionary principle in decision making takes genuine account of effects on future generations addresses market failures associated with tourism development enacts environmental protection mechanisms with adequate

monitoring and enforcement values community consultation Tourist operators should have no “licence to operate” in the future

unless they act ‘responsibly’51

The Responsible Tourist Has greater social, cultural and environmental awareness regarding

tourism’s impacts. Responsible Travellers; Low impact, high yield, dispersed, engaged Adheres to credo of responsible traveller Wants to learn and grow as a result of travel, to be changed,

transformed by having experiences that help them see the world from a different perspective, or that enrich, challenge and provide more fulfilment

seeks out the different, the authentic, and the ‘real’, more meaningful social encounters,

prefers to deal with environmentally and socially responsible operators

recognises that health, happiness and well being cannot be achieved exclusively through acquisition of material goods

increasingly seeks quality over quantity and experiences over products

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The NEW Consumer

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New Consumers still want MORE, but they are defining that differently.

Now they seek more meaning, more deeply felt connections, more substance, more control and a greater sense of purpose.

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Implications of New Tourist for Destination Marketing: importance of Pull

PULL relates to the biggest challenge most hosts face on a daily basis – attracting the right customer.

Destination marketing should be LESS ‘PUSH’ AND MORE ‘PULL’ Instead of asking: ‘what tourists do we want to target in promotion’,

we should ask ‘what tourists do we want to attract”? These are different questions

Involves creating the type of destination that ‘ideal tourists’ will wish to visit

the challenge is to attract the right customer – the one who truly values what the provider has to offer. (The ideal tourist?)

Attracting the right type of tourist is more important than attracting large numbers

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Implications of New Tourist: importance of ‘place’

• The starting point for all tourism planning is about experiences that are unique to a PLACE

• It is the place that can be valued, celebrated, expressed and experienced

• Emphasis on PLACE provides opportunity to sustain value because every place is unique.

• Respect for Place implies that space and locations are not merely space as real estate to be carved up and enhanced with amenities and infrastructure.

• Sense of Place provides an antidote to the sea of sameness, uniformity and mediocrity that plagues tourism development

• Respect for local identities and cultures benefits not only the host country and its people, but also correspond to the customers‘ desire for authenticity

• reduces market dependency and volatility 56

The Responsible Operator

Understands customer needs

attracts stakeholders who are in alignment with the core purpose and values of firm

Social Responsibility: becomes an agent of change through conscious leadership to make the community a better place

understands that doing good is good for business. Thus introduction of TBL, CSR, shared value not an ‘additional cost’ of doing business

adopts a long term perspective on business outcomes

Strategic alliances and partnerships. Collaboration replaces competition as firms in different sectors work together to deliver the whole experience to visitors

Use of local material and skills whenever possible.

emphasises Relationship marketing, Customer Relationship Management, brand equity

close links with customers makes tourism markets more resilient to changing circumstances in the ‘remote’ environmentattempts to attract Responsible Tourists (Pull)

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The Responsible Host Community

Responsible hosts must ask: What kind of future do we wish to create?

Community members look into the future and imagine what they would like their community to be (visioning)

involves identifying what is really valued by the community

What type of tourism do we want (if any) ? (the ideal tourist?)

What kind of tourist do you wish to attract? Mass tourists vs Responsible tourists DMO think of themselves as HOSTS, assuming a much broader range of responsibilities.

Local residents can to express what it means to them and be involved in extending the invitation to guests to experience the place for themselves

Adopts attitude that destination is a ‘protected landscape wherein the goals for conservation are dramatically expanded from protection of nature and biodiversity to include a broader cultural context and social agenda

Views the products of Mass tourism as ‘out of place’

Conclusion Imagine......Tourism that comprises a network of host communities each exploring how to

deliver net benefits from tourism, a good living for people,Transformative experiences for guests promoting cultural tolerance and peace Environmentally friendly reduces volatility

Do we have this???. Answer =NO

Need change of mindset wherein tourism stakeholders truly adopt the principles and practices of a community based sustainability model

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Thank YouMerci