Characteristics of SIDS

1. Planning for Tourism Development in Small Island Destinations: the need for a new sustainability mindset Larry Dwyer President, International Academy for the Study of Tourism Former President, International Association for Tourism Economics Professor, Australian Business School University of New South Wales

2. 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)

3. 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

4. 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.

5. Global growth forecasts and future market patterns • 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

6. Success? Yes if its only about numbers!!!

7. Challenges to Development of SIDS • Transport Access   • Scarce and fragile natural resources   • Climate Change • Low Multiplier effects (leakages)  • Community Engagement

8. Opportunities for Development of SIDS • Economic Growth • Employment & Women Empowerment  • Promotion and protection of natural resources • Blue & Green Economies  • Investment and Value Chains • Resilience

9. 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

10. 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

11. Three pillars of Sustainability

12. OUR LEADERS’ RESPONSE

13. Environmental Impacts: Negative • pollution (air, water, noise, littering) • loss of natural habitat including agricultural and pastoral lands • destruction of flora and fauna • vandalism • degradation of landscape and of historic sites and monuments • congestion including crowding • effects of conflicts over land use • effects of competition for scarce resources (fresh water, energy) • carbon footprint

14. 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

15. 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)

16. 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 fail

17. 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

18. 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?

19. Accelerated Consumption Climate Change Energy & Fuel Material Resource Scarcity Food scarcity Water Scarcity Ecosystem Decline Disparate Prosperity Government Debt Lack of Global GovernancePolitical InstabilityPandemics THE PERFECT STORM

20. Protest Sign Erected by Young Balinese Source: ABC They Paved Paradise The Queue to Climb EverestSource: Guardian The Island Where Tourist Garbage is Stored in the MaldivesSource: Daily Mail Source: China Daily How will we handle congestion? Can we handle another 400 million tourists globally in just 6 years? 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? How will we protect vulnerable people and cultures?

21. Are we at a ‘tipping point”?

23. Two Mindsets regarding tourism

24. 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

25. 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

26. 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’ visitors • Important 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

27. 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 setell us nothing about the social or environmental costs and benefits associated with different visitor market segments.

28. 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

29. Sustainable Yield • In 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

30. 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

31. 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 - --

32. Size of Multiplier • 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

33. Direct spending by visitors is only the tip of the iceberg Relatively easy to measure: visitor numbers, expenditure Hard to measure: subsequent spend by suppliers, induced effects, investment etc The indirect impact of tourism is much larger Huge Economic Impact

34. 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?

35. 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 - - - - - - -

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

37. 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

38. 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)

39. 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?

40. Study Findings • Promotion 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

41. 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)

42. 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

43. Volatility

44. 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 .

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

46. Cape Verde Study of Tourism Value Chain • 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 • 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 • 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, • 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

47. 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.

48. 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

49. 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

50. 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