A report (pdf, 56 pages) published by the Harvard Kennedy School in collaboration with the Overseas Development Institute (ODI) and the International Business Leaders Forum (IBLF) provides an overview and critical assessment of the ways in which tourism companies currently participate in expanding economic opportunities in developing countries.
The report notes that, despite growing evidence of the beneficial impacts of tourism in developing countries and good practices by some individual firms, critics still question whether the overall balance of impacts is positive, particularly as regards large holiday complexes and international hotel chains. Moreover, as has been the case in many other industries, tourism companies have thus far focused most of their corporate responsibility efforts on environmental issues and philanthropic contributions to social programs. Much less attention has been paid to managing their economic multipliers and impacts along local and global value chains.
For these reasons, the report argues that there is potential for innovative and inclusive business practices that deliberately expand economic opportunities for the disadvantaged. Indeed, the case studies put forth (see below) suggest that there are additional motivations for action in tourism, relative to other industries, due to the nature of the product. Because customers physically go to the place of production, they encounter suppliers, employees, and communities as part of their vacation experiences. Tourism products and customers’ experiences, therefore, can be enhanced by combining commercial practice and local investment.
Market research demonstrates that consumers are increasingly taking social impact into account when designing their vacations. Growing interest in concepts such as ecotourism, pro-poor tourism and responsible tourism testify to this. Honing in on this trend, leading companies have begun to explore ways in which they can benefit local communities not only through philanthropy, but also by integrating development objectives into core business models and practices. The business benefits for doing so center around the two key issues of mitigating risk and building opportunity.
The study’s examples of leaders in the industry are the following:
The Aga Khan Fund for Economic Development (AKFED) is an international development agency that promotes private sector involvement in local economic development in the developing world. AKFED looks for projects that are commercially sound and have the potential to spur long-term development. It focuses on tourism and leisure as one of the few industries, especially in many rural areas, that currently have both prospects. Tourism Promotion Services (TPS), a subsidiary of AKFED, owns and manages 26 hotels, resorts, lodges and camps – 19 in Africa and seven in Asia – under the Serena brand name. TPS undertakes its investments in close consultation with governments, often helping them to lay out integrated tourism development plans for specific regions.
In a combined effort to preserve Mexico’s cultural heritage and spur development in rural areas, Starwood Hotels entered a joint-venture with Mexican company Grupo Plan to develop a number of historical haciendas in the Yucatan Peninsula. The haciendas had, in the past, supported local communities through large-scale employment. However, their closure in the 50s and 70s resulted in high unemployment and extreme poverty. The Grupo Plan-Starwood Hotels initiative to transform the haciendas into luxury hotels brought economic opportunity back to the region. The project included community housing, health, education, and environmental projects, encouraging people to take active roles in the development process and in the preservation of Mayan cultural identity.
Environmental Quality International (EQI) is a Cairo-based consultancy specializing in natural resource management, governance and policy, and enterprise development services. In 1997, EQI identified Siwa, the largest oasis in Egypt, as an ideal location for a direct investment in sustainable development. The company wanted to demonstrate that sustainable economic development could also conserve the unique and sensitive cultural and natural assets of Siwa. EQI was the primary investor and catalyst, but partnered with local community, local governorate, and international organizations in design and implementation. In 2005 a partnership with the International Finance Corporation (IFC) enabled EQI to expand its activities. The current portfolio of projects includes three lodges, a women’s artisanship development initiative, organic farming and food production, and community art projects.
Another example of best practice, especially when it comes to supply chain management, involves South African company Spier operating hotels, restaurants, vineyards, golf courses, etc. Spier’s objective is to become a model of transparency, accountability, corporate governance, citizenship, and sustainable development within the private sector. Spier’s commitment to social justice reflects the historical context and legacy of Apartheid. Spier’s employment equity goals for new recruits and management positions reflect both Black Economic Empowerment (BEE) legislation and the Fair Trade and Tourism South Africa guidelines. Employee health and wellness efforts are also specific to the local context, with HIV/AIDS awareness receiving particular attention.
Also in South Africa, a number of private operators including Wilderness Safaris have entered into ventures with the Makuleke people - owners of one of the most remote, pristine and diverse areas in Kruger National Park. The Makuleke won legal ownership over the land after 1996 land restitution laws restored lands to groups that had been forcibly relocated during Apartheid rule. The Makuleke chose to commit their ancestral land to conservation as a contract park and initiate a series of ventures in tourism and hunting. Concessions are granted to run lodges on an operate-transfer model, in return for 9% of turnover and a guarantee of employment for local workers. Wilderness Safaris partnered with the Makuleke community in a mutually beneficial 45-year lease. The benefits to the local community are cash, training, skills transfer, jobs, and enterprise development projects.
Sandals Group is one of the largest employers in the Caribbean, with almost 10,000 direct employees. In 1996, Sandals set up a program with the Rural Agricultural Development Authority (RADA) in Jamaica to improve the quality and diversity of produce local farmers could supply to the accommodation sector, develop formal pricing arrangements, and improve communication links between farmers and hotels. Before the program began, hotels were reluctant to source produce locally because of inconsistent volume, quality and price of supply.
In 1995, the Pan Pacific Hotel in Bangkok began a Youth Career Development initiative that today has become an international program sponsored by several hotels from around the world. The Youth Career Initiative (YCI), as it is now known, enables international hotels to provide a five- to six- month education program for high-school graduates from disadvantaged backgrounds. The YCI uses a partnership model that is led by the private sector but facilitates effective collaboration across the private, public and non-profit sectors. The aim is to give participants, typically between 18 and 21 years of age, a chance to improve their employability and thus their long-term social and economic opportunities through vocational training and education.
InterContinental Group’s IHG Academy in China and Global Travel & Tourism Partnership (GTTP) provide two further models for human capital development in the tourism sector. The IHG Academy is a highly intensive, targeted effort by IHG and educational institutions to increase the quality and practical applicability of hotel management and related programs, and to link such programs more closely to the job market – increasing their value to graduates and to the hotel industry. The GTTP is a more broadly-based effort to educate secondary school students about travel and tourism and introduce them to employment opportunities within it. GTTP provides an umbrella for multiple national programs in which a range of companies and national school systems participate.
The United Nations World Tourism Organization (UNWTO) promotes responsible, sustainable and universally accessible tourism, particularly for developing countries, in support of the UN Millennium Development Goals on poverty alleviation and sustainable development. The organization also implements the Global Code of Ethics for Tourism to minimize the negative social and environmental impacts of tourism and increase the positive benefits for businesses, destination, and countries. The organization has set up a framework that allows companies and institutions representing all aspects of the tourism industry, ranging from industry associations to airlines, travel agencies to consultants, trade unions to universities and non-governmental organizations, to participate as Affiliate Members. Affiliate Members help shape the codes of behavior and business practice in the industry.
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