The Tourism Value Chain in

Concessions

March 20th, 2012

Maximising Local Linkages

Manuel Mutimucuio Economic Development Advisor

Presentation Outline

1. Opening Remarks

2. What is a Value Chain?

3. The Value Chain in Tourism

4. Why Apply a Pro-Poor TVC

5. Arguments for Developing Tourism for Poverty Alleviation

6. Realizing the Pro-Poor Impact of Tourism through VCA

7. Opportunities to Develop TVC in Concessions

8. Challenges in Developing VC in Concessions

2 Title

Opening Remarks

3 Title 4 Title

What is a Value Chain?

The value chain describes the full range of activities which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to final consumers, and final disposal after use (Kaplinsky and Morris, 2001)

Inputs Supplier

Producer Wholesaler Retailer Consumer

Market

The Value Chain in Tourism?

5 Title

For tourism, the value chain is a combination of services (tour organization, accommodation, catering, entertainment, transport), in which commodities play an important role (e.g. agricultural products, craft etc.), many of which can occur simultaneously within the tourist destination (Ashley et al, 2009).

Support

Institutions

Tourists

Direct

Service

Providers

Non-Tourism Sectors

Key:

Why apply pro-poor TVC

• Good way of organising a chaotic reality (tourism is a

composite sector);

• Means something to real people in tourist sector;

• Gives us the tools to engage with real tourist destinations;

• Useful institutional model (governance & power relations);

• Enables comparisons with different products; and

• Useful economic model for development practitioners (to

illustrate opportunities to make pro-poor interventions).

6 Title

Arguments for Developing Tourism for Poverty Alleviation

1. The market comes to the producers;

2. It has the potential to create considerable inter-sectoral

linkages;

3. It is labour intensive;

4. It takes place in marginal areas;

5. It employs a high level of females;

6. It has limited barriers of entry; and

7. The sector is already growing at a high rate in many LEDCs

• BUT make no mistake – Tourism is NOT inherently pro-poor.

The different actors need to work together to make tourism

realize its pro-poor potential.

7 Title

Realizing the pro-poor impact of tourism through VCA

• Map the big picture – enterprises and other actors in the

tourism sector, links between them, demand and supply data,

and the pertinent context.

• Tourism demand

• Arrivals and source markets

• Length of stay

• Expenditure

• Tourism supply

• Number and type of enterprises in various nodes

• Turnover and profitability

• Occupancy in hotels

• Constraints

8 Title

Cont.

• The enabling environment

• Governance: institutions and policies

• Support services (BDS, credit, extension...)

• Support organisations (NGOs, donors...)

• Track revenue flows and pro-poor income

• Estimate how expenditure flows through the chain and how much

accrues to low income

• Consider their returns and factors that enable or inhibit earnings.

• Look at staff wages and tips

• Micro business (e.g. boat man, guide)

• Vendor, producer, processor (fruit seller, artisan)

• Community business or partnership: collective income received

9 Title

Example of Revenue Distribution in a VC

Accommodation 53, 59%

US $ 11.512.695,60

F& B, Restaurants 9, 46%

US $ 2.033.000,00

Excursion & Activities 32,85 %

US $ 7.057.440,00

Local Transport 2, 72%

US $ 583.688,00

Shopping 1, 38%

US $ 293.126,00

16, 49 % PPI or US $ 4,42

per day per person

3, 50 % PPI or US $ 6,88

per day per person

83,30 % PPI or US $ 3,11

per day per person

15, 62 % PPI or US $ 2,67

per day per person

18, 37 % PPI or US $ 4,52

per day per person

TOTAL TOURISM EXPENDITURES 100%

US $ 21.482.949,60

Total Pro-Poor Income

13,29%

US $ 2.856.436,30

Opportunities to develop a TVC in Concessions

• First assure markets, then increase production.

• Focus on private sector as the engine for growth.

• Support HRD to reduce barriers to entry for the poor.

11 Title

VCD in Tourism Led by The Private Sector

Private Sector

(Engine of Growth)

Local Sourcing

Local Employment

Product Development

12 Title

Continued…

• Procurement – source as much as possible from local economy.

• Do a value chain analysis before starting operations. Sometimes,

businesses assume there is no local production of a certain product

because they have no clue of what is happening in the destination.

• Look at your value chain – remember there are supporting

institutions – what can they do for your local potential suppliers

(provide capital, extension work, business skills, etc. )

• Sometimes external (local) suppliers give you the possibility of

increasing production without increasing costs at the same rate.

Take advantage of that (e.g. out growing schemes)

13 Title

Continued…

• Product development should look at opportunities for local

linkages

• Remember that after accommodation/food tourists spend their

budget on activities in the destination.

• Be resourceful at planning which activities, because there are forms

of involving local participation thus increasing the visitors

experience (potential for returning customers)

• Tour guiding offered by local people (invest in some people for

that)

• Village walks that its itinerary includes places with some sort of

local economic activity – opportunities for local people to sell

directly to tourists.

• Etc.

14 Title

Continued…

• Employ local people

• It may seem obvious, but the reality shows that only real menial

jobs remain with local people. Jobs of certain responsibility are

offered to locals that are not very local.

• Apart from investment in training, tourism operators have to look

for people with the right attitude (knowledge and experience they

can acquire with that job opportunity).

15 Title

Challenges in developing TVC in concessions

• Most economic activities in Protected Areas are detrimental to

conservation (e.g. in some cases even farming is prohibited)

• There is not much economic activity supported by tourism

(almost no tourism industry to map)

• Risk of increasing too much supply and not secure demand to

make it viable – e.g. train many hospital workers and then not

have that many operational lodges; support the communities to

grow more vegetables and not get tourists to buy or

alternatives markets.

16 Title

17 Title