TOURISM AND ECONOMIC DEVELOPMENT THEORIES
The English classical theory of economic stagnation
Marx’s historical approach
Rostow’s identification of stages of economic growth
Vicious circles of demand/supply and investment
Balanced and unbalanced growth theories
Theories of dependence
ENGLISH CLASSICAL THEORY OF ECONOMIC STAGNATION
Theory grew out of the classical writings of early economists Malthus, Mill
and Ricardo
Influenced by Newtonian physics with its belief that life was never random and
was ordered by some “grand design”
The theory also suggests that the long-term wage rate, the natural
wage rate, was at the subsistence
level
If food production increases, wages rise and the extra food available means that the population
becomes healthier and grows
As the population increases there are
more mouths to feed and more units of
labour with the fixed supply land
MARX’S HISTORICAL APPROACH TO DEVELOPMENT (1)
Framed within a dynamic world rather than based on the static scenario used by the classical
economists
The world, as seen by Marx and Engels,
moved naturally from feudalism to capitalism to socialism and then
to Communism
The economic consequences of the rise to capitalism
include:
Demand expanding more slowly than
producive capacity
Increase in monopolistic
power
Creating a segment of the population
of workers who are without property
MARX’S HISTORICAL APPROACH TO DEVELOPMENT (2)
The dynamics of this result in what Marx referred to as a reserve army of unemployed that acts as a buffer
to absorb the shocks as the economy expands and contracts
during business cycles
The result is a series of crises where the
ownership of productive capacity is repeatedly
challenged by the educated proletariat
Marx’s theory still finds a great deal of support from those either discontented with the distribution of
wealth in their country or worried about the threats of the recent trends towards globalisation and the
dominance of multinational corporations
ROSTOW’S THEORY OF GROWTH AND DEVELOPMENT
The five stages were:
• THE (PRE-INDUSTRIAL) TRADITIONAL SOCIETY1.
• THE PRECONDITIONS FOR ECONOMIC TAKE-OFF2.
• ECONOMIC TAKE-OFF3.
• SELF-SUSTAINED DRIVE TOWARDS MATURITY4.
• THE AGE OF MASS CONSUMPTION5.
VICIOUS CIRCLES OF DEMAND/SUPPLY AND INVESTMENT
This theoretical approach suggests that countries are poor because they always have been
FROM THE DEMAND SIDE
• if a country is poor then the levels of income will be low
• level of demand for goods and services will also be low• there is no incentive for
entrepreneurs to invest in additional productive capacity
• amount od capital per worker remains low
• sustains the link between low income and low demand
With low investment there is low capital per worker and this maintains the low productivity which leads to
low income and savings
A small injection of additional demand would lead to the opportunity to invest in additional capital
per worker
BALANCED AND UNBALANCED GROWTH APPROACHES
Variants of a theme and
relate to whether
development occurs across all sectors or
whether there is development in a few leading
sectors that will act as a catalyst for
development
The balanced growth theory suggests that not possible to overcome the natural inertia in a stagnant
economy by investing in and developing only a few export sectors
As an alternative there is the suggestion that unbalanced growth, where investment occurs in just
a few leading sectors, is far more achievable with resources of developing countries and that these
leading sectors will drag the other sectors up in their wake
DEPENDENCY THEORY OF DEVELOPMENT
Suggests that the ability of an economy to achieve autonomous development is determined by its dependency upon other capitalist countries
The greater the dependency upon
other capitalist economies the
lower the ability to achieve economic
development
Colonialism and dependency did not lead to the
suffocating of indigenous development forces
through:
Migration of workers from rural to colonial organised urban areas
“Cropping” the best workforce members to work in colonial offices
Foreign trade on unfair terms
Opening of local markets to foreign companies
THE DEVELOPMENT THEORIES AND TOURISM’S ROLE
Tourism can speed up the process of change because it
has product characteristics
that enable it to develop quickly
The development of the transport and infrastructure, together with the import of
capital, that is seen as a precondition for take-off is a fundamental part of most tourism
development
Thus tourism can be used as a catalyst to overcome the inertia of developing countries
Tourism could play significant role within the vicious circle theory of development simply by
either injecting additional demand into an economy or providing a stimulus to investment
Tourism can be seen as an excellent driving force for
economic, social and political change
THE ROLE FOR TOURISM IN MAJOR DEVELOPMENT THEORIES
THEORIES A ROLE FOR TOURISM
English classical theory x
Marx’s theory √
Rostow’s theory of growth √
Vicious circle theory √
Balanced/unbalanced √
Dependency theory √
INTEGRATED PLANNING AND DEVELOPMENT (1)
PROACTIVE STANCE
• Develop strategies to secure the desired development path
• Requires deep and thorough understanding of not only the local economy and its structure, limitations and strengths, but also the probable effects of external factors
REACTIVE STANCE OF CHAOS THEORY
• Based upon the premise that there are too many variables, internally and externally, to be able to plan
• These variables cannot be controlled nor can they be predicted with sufficent levels of accuracy
• This latter approach has been likended to training policy makers on flight simulators
INTEGRATED PLANNING AND DEVELOPMENT (2)
SUSTAINABLE TOURISM
The notion that we must look forward to future generations
The term is misnomer and has led to much confusion
In reality, development has to be sustainable to be classified as
development at all, otherwise it is short-term growth
There is a danger in inhibiting
specific forms of tourism activities in order to reduce
the immediate impacts of tourism in the short term
TOURISM PRODUCT CHARACTERISTICS
The tourist product is unique in terms of the range and diversity of activities encompassed
The tourism product must be consumed
within the geographical boundaries
The producers of the tourism product
are not always confined to the local
economy
In growing age of globalisation
tourism may include:
TRANSPORT BUSINESS
ACCOMMODATION OWNERS
TOUR OPEARATORS AND
TRAVEL AGENTS
INFORMATION PROVIDERS
TOURISM AS A MEANS OF WEALTH REDISTIBUTION
Tourism is one of the fastes earners of foreign exchange and one of the most effective income
redistribution factors in many countries
Domestic tourism is a very effective means of
redistributing income between different areas
within a national economy
Tourism tends to take place in the more sparsely
populated scenic areas where there is little in the
way of manufacturin industry
The vast buk of international tourist movement takes place
between industrialised countries
TOURISM AS A LABOUR-INTENSIVE INDUSTRY
Tourism provides an effective means of generating employment
opportunities
At a time when the labour: capital ratio is moving strongly against
labour in most production industries, the importance of the
labour-absorbing qualities of tourism cannot be overlooked
In many countries there are labour shortages and it is not uncommon to find these countries importing labour to work in their tourism
industries
Where there are clear indications that the local
destination would benefit from the employment
created by tourism, this view should be tempered by the characteristics of the labour force generally associated
with tourism-related establishments
TOURISM AND ON-THE-JOB TRAINING
The educational qualifications of those employed in the accommodation sector are heavily weighted in favour of those with only a rudimentary education
There is often an urgent need for training and
educationa at all levels in both the private and
public sectors
Industry often chooses to ignore this need and to enjoy the benefits of a
cheap and plentiful labour market
THE STRUCTURE OF THE TOURISM INDUSTRY
One of the more notable features of the tourism industy
–Proportion of small and
medium-sized enterprises (SMEs)
Small business
ADVANTAGES
- Quick start-ups
- Flexible supply sources that can respond rapidly to
fluctations in demand
DISADVANTAGES
- Inadequate staff training (unstructured informal
training)
- Too high debt/equity ratio leading to business failure (borrowing on the goodwill of the business)
- Inefficiency problems because of a failure to
capitalise on economies of large-scale production
Iako se vedina poduzeda u turizmu odnosti na mala i
srednja poduzeda, velik dio ponude potječe od velikih
nacionalnih i međunarodnih tvrtki
LEVEL OF TRAINING IN TOURISM
LEVEL ACCOMMODATION (%) SUPPLEMENTARY ACTIVITIES (%)
University 1 3
Other higher education 4 5
Higher secondaryeducation
30 45
Lower secondaryeducation
34 40
No qualification 31 7
PROTECTIONISM
The simultaneity of production and consumption of tourism means that
the tourist must travel to the destination to enjoy the product
Tourism is unique as an EXPORT INDUSTRY
The consumers of international tourism (the importing country) often
fail to recognise their tourist spending overseas
as an import
MULTITUDE OF INDUSTRIES
Tourism is a composite industry product, it is composed of:
Travel AccommodationFood and beverage
RetailEntertainment
sectorOther outputs
Economic and development impacts are felt quite widely from the initial
impact onwards
The variety of industries included under umbrella of tourism means that
there are a variety of employment opportunities generated by tourism
activity
PRICE FLEXIBILITY
Tourism provides a source of foreign exchange that is subject
to some degree of control by the host country
Product differentiation can provide some price-setting power
The greater the product differentiation that is either innate or
can be engineered
Product differation can be based on natural factors, ranging from broad aspects such as
climate to specific natural attractions
Differation can also be achieved through socio-cultural
aspects, heritage and even in terms of the quality of the
tourism product itself
PRICE COMPETITIVE
The bulk of the tourism market is extremely price sensitive and, consequently, internationally
competitive
EFFECTS OF CURRENCY FLUCTUATIONS OF THE
NUMBER OF INTERNATIONAL
ARRIVALS
VOLUME OF THE TOURIST EXPENDITURE
Brief examination of the major
battleground is fought not on hotels, the
quality of beaches or the sea, but the price
of the package
Price competition is a fundamental feature of the budget tourism market fot
both destination and operators
SEASONALITY
Seasonality in tourisim
can be caused by:
SUPPLY FACTORS
DEMAND FACTORS
Seasonality in the tourism
industry reflects in:
• Casual/seasonal staff
EMPLOYMENT
• Low annual returns on capital
INVESTMENT
• Discounted off-season prices
PRICING POLICIES
HIGH OPERATING LEVERAGE/FIXED COSTS
Many of the tourism-related industries are subject to high
levels of fixed costs
Large capital element must be commited before any output is
produced
Q1 = break-even output for the non-tourism industry
Q2 = break-even output for the tourism industry
C1 = cost function of a non-tourism industryC2 = cost function of a typical tourism-
related industry
Break-even point for the tourism-related industry (BEP2) is much higher than for the
non-tourism industry
The preoccupation with volume displayed by industries that have high operating leverages can also influence the mindset of the national tourist organisations
DEVELOPMENT PLANNING LAYERS
INTERNATIONAL TOURISM PLANNING
• International level organisations such as the WTO, EU, OECD, Carribbean Tourism Organisation (CTO) and the Tourism Council for the South Pacific (TCSP) all undertake, albeit limited, forms of tourism planning
•This level of planning is often weak in structure, detail and enforcement
• It is generally provided in guideline form in order to assist to member states
NATIONAL TOURISM PLANNING
•The plans manifest themselves in a variety of forms including:
•Tourism policy,
•Marketing strategies,
•Taxation structure,
• Incentive/grant schemes,
•Legislation (e.g. Employment, investment,
repatriation of profits)
• Infrastructure developments,
•External and internal transport systems and
organisations and
•Education/training and manpower programmes
REGIONAL/LOCAL TOURISM PLANNING
•Deals with specific issues that affect a sub-national area
•Traditionally the following media have been used:
•Visitor orientation centres
•Tourist information centres
•Advertising brochures, maps, magazine articles
and broadcasting
•Self-guided tours and trails
•Official guides
•Posters and displays
THE TOURISM DEVELOPMENT PLANNING PROCESS (1)
The concept of planning is concerned with organising some future events in order to achieve pre-specified objectives
STUDY RECOGNITION AND PREPARATION
Really concerned with the recognition by the planning
authorities (normally the government), private industry and the local community that
tourism is desirable development option, together with some awareness of the constraints within which it
must develop
Some major objectives, commonly
found in tourism development plans
To develop a tourism sector
To encourage to use of tourism for both
cultural and economic exchange
To distribute the economic benefits of
tourism
To preserve cultural and natural resources
as part of tourism development
To appeal to a broad cross-section of
international tourists
To maximise foreign exchange earnings to
ensure a sound balance of payments
To attract high-spending “upmarket”
tourists
To increase employment opportunities
To aid peripheral regions by raising
incomes and employment
THE TOURISM DEVELOPMENT PLANNING PROCESS (2)
Data requirements are quite
comprehensive and include
Tourist characteristics/travel patterns
Tourist attractions
Accommodation facilities
Other tourist facilities
Land availability and use
Economic structure – all sectors
Education and training needs and provisions
Environmental indicators
Socio-cultural characteristics
Investment and available capital – all sectors
Public and private sector organisations
Relevant legislation and regulation
SURVEY OF EXISTING DATA
Before setting out on the data collection stage it is vital to undertake an existing
data search
There are many instances where data that are crucial to tourism development
planning are collected and held by government agencies not expressly
concerned with the planning process
ANALYSES
ASSET EVALUATION
•Examines the existing and potential stock of assets, the ways in which they can be developed and the probable constraints on that development
•Should also include an appraisal of the infrastructure in order to determine whether or not further investment is required
MARKET ANALYSIS
•Undertaken during tourism development planning is sometimes to narrow in scope to be of optimum use
•To appraise the development plans, attempts must be made to determine whether or not to proposed developments are appropriate
DEVELOPMENT PLANNING
•A major issue to be studied under this heading is the time phasing of the development plan in order to ensure successful implementation
•The possible sources of funding of the development are examined and the appropriate level of foreign funding is calculated
IMPACT ANALYSIS
•The impact analyses should be all-embracing, covering issues such as the probalbe effects that the development will have on the host community and the environment, the economic implications in terms of key indicators and the probable economic rates of return
POLICY AND PLAN FORMULATING
The alternative plans are evaluated in terms of their potential economic, physical and socio-cultural costs and benefits, together with any possible problem areas that may result from
the implementation of each plan
IMPLEMENTATION OF THE PLAN
During the secondary data survey stage attention will have been paid
to many aspects that relate to implementation
MONOTORING AND FORMULATION
Development plan must be closely monitored in order to detect any
deviations that may occur from the projected path of development
RECOMMENDATIONS
Submission is sent to the authorities, together with
recommendations concerning the optimum methods of developing
tourism in the destination
THE DEVELOPMENT PLAN TEAM
Four groups of
specialists
Specialist skills will
include:
TECHNICAL SERVICES
MARKETING SPECIALISTS
PLANNERS ECONOMISTS
Market analysts
Physical planners
Economists
Environmental scientists
Infrastructure engineers
Transport engineers
Social scientists
Draughtsment and designers
Legal experts
PLANNING PROCESS
1. IDENTIFICATION AND INVENTORY OFTHE EXISTING SITUATION
2. FORECASTS FOR THE TOURISM
3. PLAN FORMULATION
4. SPECIFIC PROJECT DEVELOPMENT
5. IMPLEMENTATION
a) Characteristics and structure of current consumer demand
b) Study of consumerchoice
c) Current land used) Existing natural and
artificial attractionse) Ecosystem factorsf) Economic structures
and the capacity thresholds of industries
g) Labour force skill mix and educational base
h) Accommodation facilities
i) Tourist services facilities
j) Infrastructure facilities
k) Transport facilitiesl) Graphic presentation
• include forecasts of future demand and probalbe tourist movements and needs• this will be complemented by an analysis of the implications of these forecasts
• includes proposed programmes of market organisation and promotion, comprehensive land-use and control planning, detailed infrastructural plans and the economic, environmental and social evaluations associated with the proposed development plan
• includes an analysis of specific policies and projects for marketing and tourism management• cost of the alternative projects and infrastructural schemes will be assessed, along with the economic analysis of the various possible investment projects•Environmental planning actions could be broadly-based
• the implementationprogramme will be set into motion with construction and supervision, technical and magerial assistance in tourism development projects, and financial analysis, an the recommended infrastructure investment programme will commence
TOURISM DEVELOPMENT PLANNING: WHEN IT GOES WRONG
Disaster management is an important element of the modern-day planning
and tourism is subject to a wide range of:
Disasters
Hurricanes
Outbreaks of infectious diseases
Acts of terrorism
Two categories:
a) Failure at the design stage
b) Failure at the implementation
stage
DESIGN STAGE PLAN FAILURE
Many of the tourism development plans at the
design stage, they follow no more than the basic
formulation of tourism development
Often absence of analytical components is a reflection of the planning bodies who carry out the construction of the plan
Objective –must be
achievableUnambiguous
Non-conflicting
Too much emphasis is placed upon
physical development
IMPLEMENTATION STEGE PLAN FAILURE (1)
The type of land difficulties encountered during the
implementation stage include the following:
Those that actually undertake the development
are sometimes more concerned with real estate speculation rather than the
operation of tourist facilities
Development often takes place on the basis of the
basis of a high debt/equity ratio using lang values as
security for the loans
The planning authorities often underestimate the difficulties that can be
encountered when attempting to control the
use of land
Failure to introduce the required planning
legislation quickly enough to implement the development plan
If the specific sites earmarked for development
are “leaked” prior to the implementation of the
development plan
IMPLEMENTATION STEGE PLAN FAILURE (2)
Other problems
• Failure to coordinate intermediaries in the travel trade, private sector development and public sector provision
• Poor communications and infrastructure
• Inadequate procedures to deal with public opposition and representations concerning the proposed development
IMPLEMENTATION STEGE PLAN FAILURE (3)
Under such circumstances the destination may
find some or all of the following indicators
Ecological imbalance through overuse of resources
Outbreaks of diseases through infrastructural failure
Congestion, queues and economic inefficiencies
Deterioration of natural and artificial environment through overuse
Resentment towards tourists
Increases in criminal activities
Destruction of host community’s values
IMPLEMENTATION STEGE PLAN FAILURE (4)
Ecological imbalances can be tackled
by:
APPROPRIATE VISITOR FLOW MANAGEMENT
FENCING-OFF AREAS SUBJECT TO OVERUSE
PROVIDING ALTERNATIVE ROUTES AND FACILITIES FOR
TOURISTS TO RELIEVE OTHERS
DISPERSING TOURISTS OVER WIDER OR TO DIFFERENT AREAS
ZONING TOURISM-RELATED ACTIVITIES
EDUCATING TOURISTS AND HOSTS TO LIMIT
SOCIO-CULTURAL DAMAGE
ENCOURAGING MORE POSITIVE LOCAL
INVOLVEMENT IN TOURISM ACTIVITIES