Increasing the local economic impact of
tourism through supply and value chains
Dr Anna Spenceley
Spenceley Tourism And Development cc (STAND)
annaspenceley@gmail.com
Sustainable Tourism Network Southern Africa AGM
6 May 2010, Durban, South Africa
Presentation outline
1. Ways the poor benefit
from tourism
2. Tourism supply chains
3. Tourism value chains
2
1. Seven ways the poor benefit from
tourism
1. Employment of the poor in tourism enterprises
2. Supply of goods and services to tourism enterprises by the
poor or by enterprises employing the poor
3. Direct sales of goods and services to visitors by the poor
(informal economy)
4. Establishment and running of tourism enterprises by the
poor - e.g. micro, small and medium sized enterprises (MSMEs),
or community based enterprises (formal economy)
5. Tax or levy on tourism income or profits with proceeds
benefiting the poor
6. Voluntary giving/support by tourism enterprises and tourists
7. Investment in infrastructure stimulated by tourism also
benefiting the poor in the locality, directly or through support to
other sectors
3
WTO, 2004
1. Seven ways the poor benefit from
tourism
1. Employment of the poor in tourism enterprises
2. Supply of goods and services to tourism enterprises by the
poor or by enterprises employing the poor
3. Direct sales of goods and services to visitors by the poor
(informal economy)
4. Establishment and running of tourism enterprises by the
poor - e.g. micro, small and medium sized enterprises (MSMEs),
or community based enterprises (formal economy)
5. Tax or levy on tourism income or profits with proceeds
Supply and value chains
benefiting the poor
addressenterprises
both of these
6. Voluntary giving/support by tourism
and tourists
7. Investment in infrastructure stimulated by tourism also
benefiting the poor in the locality, directly or through support to
other sectors
4
WTO, 2004
2. Tourism supply chains
System of organizations (e.g. people, technology, activities,
information and resources) involved in
moving a product or service from supplier to customer
Tourism product as combination of services
Advising
tourist on
product,
contract
Travel
agent
Provide
accomodation,
food etc.
Transport
to site
Bus
company
Hotel
organize
experience,
event
Site operator,
Cultural group
Transport
from site
Bus
company
Coordination of services:
a)
Tour operator
b)
Local tourism board
17.12.2006
6
5
Andreas Springer-Heinze (2006-2) cited in Mitchell and Phuc, 2007
Supply chain interventions
Objective of interventions on
tourism supply chain is to
enhance the positive impacts
of tourism on poor people by:
– removing barriers that prevent
poor people entering the industry
– enhancing the terms on which they
work
– improving the knock-on affects
that tourism operations have on
surrounding communities
6
Ashley, Mitchell and Spenceley, 2009
Traditional restaurant supply chain
Input providers
BOAT
OWNER
Primary
producers
FISHERMAN
Transformation
(clasify, process,
package)
Trade (Transport,
distribute, sell)
Final
product
Consumer
TRADITIONAL
MEAL
MEAL
TOURIST
MARKET
DISTRIBUTOR
LAND
OWNER
VEGETABLE
FARMER
Transformation
+ Final sale
RESTAURANT
MARKET
SUPPIER
FERTILISER
AND SEED
7
Traditional restaurant supply chain
Input providers
BOAT
OWNER
Primary
producers
FISHERMAN
Transformation
(clasify, process,
package)
Trade (Transport,
distribute, sell)
LAND
OWNER
SUPPIER
FERTILISER
AND SEED
Final
product
Consumer
TRADITIONAL
MEAL
MEAL
TOURIST
MARKET
DISTRIBUTOR
VEGETABLE
FARMER
Transformation
+ Final sale
RESTAURANT
MARKET
Typical problems for small scale farmers:
•Poor linkages with end users: reliance on intermediaries
•Private sector not serving ‘traditional’ foods
•Transport, storage and processing difficulties
•Variable quality and quantity of stock
•Lack of information on products private sector want
8
Traditional restaurant supply chain
Input providers
BOAT
OWNER
Primary
producers
FISHERMAN
Transformation
(clasify, process,
package)
Trade (Transport,
distribute, sell)
LAND
OWNER
SUPPIER
FERTILISER
AND SEED
Final
product
Consumer
TRADITIONAL
MEAL
MEAL
TOURIST
MARKET
DISTRIBUTOR
VEGETABLE
FARMER
Transformation
+ Final sale
RESTAURANT
MARKET
Typical problems for small scale farmers:
•Poor linkages with end users: reliance on intermediaries
•Private sector not serving ‘traditional’ foods
•Transport, storage and processing difficulties
•Variable quality and quantity of stock
•Lack of information on products private sector want
9
Option to adapt the supply chain
Input providers
BOAT
OWNER
Transformation
+ Final sale
Primary
producers
FISHERMAN
Consumer
TRADITIONAL
MEAL
MEAL
TOURIST
MARKET
DISTRIBUTOR
RESTAURANT
LAND
OWNER
VEGETABLE
FARMER
Final
product
MARKET
SUPPIER
FERTILISER
AND SEED
If the intermediaries are ‘unfair’
10
Traditional restaurant supply chain
Input providers
BOAT
OWNER
Primary
producers
FISHERMAN
Transformation
(clasify, process,
package)
Trade (Transport,
distribute, sell)
LAND
OWNER
SUPPIER
FERTILISER
AND SEED
Final
product
Consumer
TRADITIONAL
MEAL
MEAL
TOURIST
MARKET
DISTRIBUTOR
VEGETABLE
FARMER
Transformation
+ Final sale
RESTAURANT
MARKET
Typical problems for small scale farmers:
•Poor linkages with end users: reliance on intermediaries
•Private sector not serving ‘traditional’ foods
•Transport, storage and processing difficulties
•Variable quality and quantity of stock
11
•Lack of information on products private sector want
Option to adapt the supply chain
Input providers
BOAT
OWNER
Primary
producers
FISHERMAN
Transformation
(clasify, process,
package)
Trade (Transport,
distribute, sell)
Final
product
Consumer
TRADITIONAL
TRADITIONAL
MEAL
MEAL
TOURIST
MARKET
DISTRIBUTOR
LAND
OWNER
VEGETABLE
FARMER
Transformation
+ Final sale
RESTAURANT
MARKET
SUPPIER
FERTILISER
AND SEED
Restaurants serving more traditional meals
12
buy more local, traditional produce
Options to adapt the supply chain
Input providers
BOAT
OWNER
Primary
producers
FISHERMAN
Transformation
(clasify, process,
package)
Trade (Transport,
distribute, sell)
LAND
OWNER
SUPPIER
FERTILISER
AND SEED
Final
product
Consumer
TRADITIONAL
MEAL
MEAL
TOURIST
MARKET
DISTRIBUTOR
VEGETABLE
FARMER
Transformation
+ Final sale
RESTAURANT
MARKET
Typical problems for small scale farmers:
•Poor linkages with end users: reliance on intermediaries
•Private sector not serving ‘traditional’ foods
•Transport, storage and processing difficulties
•Variable quality and quantity of stock
13
•Lack of information on products private sector want
Traditional restaurant supply chain
Input providers
BOAT
OWNER
Primary
producers
FISHERMAN
Transformation
(clasify, process,
package)
Trade (Transport,
distribute, sell)
LAND
OWNER
SUPPIER
FERTILISER
AND SEED
Final
product
Consumer
TRADITIONAL
MEAL
MEAL
TOURIST
MARKET
DISTRIBUTOR
VEGETABLE
FARMER
Transformation
+ Final sale
RESTAURANT
MARKET
Typical problems for small scale farmers:
•Poor linkages with end users: reliance on intermediaries
•Private sector not serving ‘traditional’ foods
•Transport, storage and processing difficulties
•Variable quality and quantity of stock
14
•Lack of information on products private sector want
Traditional restaurant supply chain
Input providers
BOAT
OWNER
Primary
producers
FISHERMAN
Transformation
(clasify, process,
package)
Trade (Transport,
distribute, sell)
LAND
OWNER
SUPPIER
FERTILISER
AND SEED
Final
product
Consumer
TRADITIONAL
MEAL
MEAL
TOURIST
MARKET
DISTRIBUTOR
VEGETABLE
FARMER
Transformation
+ Final sale
RESTAURANT
MARKET
Typical problems for small scale farmers:
•Poor linkages with end users: reliance on intermediaries
•Private sector not serving ‘traditional’ foods
•Transport, storage and processing difficulties
•Variable quality and quantity of stock
•Lack of information on products private sector
15
Example analysis and intervention:
Spier leisure, Western Cape
• Strategic shift away from philanthropy towards
responsibilities as corporate citizen
– Survey of existing suppliers in relation to corporate values
(e.g. local, previously disadvantaged, environmentally aware)
– Investigation of new suppliers
• Identification of opportunities
for change
– Stimulating change among
existing suppliers
– Development of new suppliers
• Monitoring and evaluation
16
Ashley and Haysom, 2008
Survey of suppliers
•
•
•
•
•
•
•
•
•
•
•
Broad-based black economic employment
Employment equity
Procurement practice
Human resource practice
Basic conditions of employment
Labour law compliance
Corporate social investment
Health and safety
Environmental action
Number of employees
Location
17
Ashley and Haysom, 2008
Spier laundry development
Initial
Laundry
Company
Enterprise
Development
Laundry
Saving to
Spier in
Year 1
US$ @
R 7.5/$1
R472 000
R270 000
R202 000
$ 26 933
R117 000
$ 15 600
Costs and savings to Spier in Year 1
Annual Spend by Spier
Set Up cost
R 75 000
Sundry costs
R 10 000
Total Year 1 Cost
R472 000
R355 000
Earnings into the community per year
Jobs
2
7
Salary average p.p. p month
R 1 700
R2 000
Earnings into local community
R40 800
R168 000
$ 22 400
$5 440
$22 400
$ 16 960
Community flow, US$
• New alien vegetation clearing business, brick
making business, staff restaurant business
18
Ashley and Haysom, 2008
2. Tourism value chains
•Products pass through all activities of the chain in order and at
each activity the product gains some value.
•The chain of activities gives the products more added value than
the sum of added values of all activities.
19
Foreign Investment Advisory Service, 2006
2. Tourism value chains
•Products pass through all activities of the chain in order and at
each activity the product gains some value.
•The chain of activities gives the products more added value than
the sum of added values of all activities.
Tourism Itinerary: Lisbon – Maputo – Vilankulos - Bazaruto
Typical Package: 3 Nights Maputo+ 4 Nights Bazaruto
Total Tourist Expenditure on Travel Experience = € 2,000
Published Price of Travel Package = €1,490
Cost of Inputs for Travel Package = €1,180
€ 210
€ 310
€0
€ 600
€ 200
€0
€ 380
€ 300
10.5%
15.5%
0%
30.0%
10.0%
0%
19.0%
15.0%
Negotiated Costs With Service Providers
Fees/Taxes
Commissions
Portuguese
Tourist
Frontier
Services
Foreign
Intermediaries
Out of Pocket
Expenses
Commissions
Domestic
Intermediaries
Int.
Air
Transport
Domestic
Air
Transport
Ground/Other
Domestic
Transport
Logistics
Accommod
ation
Ancillary
Service
Providers
20
Foreign Investment Advisory Service, 2006
4. Value chains
•Products pass through all activities of the chain in order and at
each activity the product gains some value.
•The chain of activities gives the products more added value than
the sum of added values of all activities.
Tourism Itinerary: Lisbon – Maputo – Vilankulos - Bazaruto
Typical Package: 3 Nights Maputo+ 4 Nights Bazaruto
Total Tourist Expenditure on Travel Experience = € 2,000
Published Price of Travel Package = €1,490
Cost of Inputs for Travel Package = €1,180
€ 210
€ 310
€0
€ 600
€ 200
€0
€ 380
€ 300
10.5%
15.5%
0%
30.0%
10.0%
0%
19.0%
15.0%
Increasing the
amount and
proportion of
money that is
earned locally
Fees/Taxes
Commissions
Portuguese
Tourist
Frontier
Services
Foreign
Intermediaries
Negotiated Costs With Service Providers
Out of Pocket
Expenses
Commissions
Domestic
Intermediaries
Int.
Air
Transport
Domestic
Air
Transport
Ground/Other
Domestic
Transport
Logistics
Accommod
ation
Ancillary
Service
Providers
21
Foreign Investment Advisory Service, 2006
Business/Conference Tourism Itinerary
Europe/USA – Maputo
Typical Package: 7 Nights
Total Tourist Expenditure on Travel Experience = $2,690
Cost of Inputs for Travel to Destination= $1,910
$ 170
$1,210
$100
$600
$610
6.3%
45.0%
3.7%
22.3%
22.7%
Negotiated Costs With Service Providers
Out of Pocket
Expenses
Fees/Taxes
European,
American or
African
Business
Tourist
Frontier
Services
and
Airport
Charges
Average International Air
Transport Fare Per
Participant
Portuguese
Participant
US$726
S. African
Participant
US$300
UK
Participant
US$1,319
Mauritian
Participant
US$1,153
French
Participant
US$1,146
Kenyan
Participant
US$939
American
Participant
US$1,575
Nigerian
Participant
US$2,547
Ground/Other
Domestic Transport
Logistics
Accommodation
Shopping
US$100
Ancillary
Service
Providers
(Shops, Tours,
Restaurants)
Inhaca/
Kruger Tour
US$300
Restaurants
US$210
22
Foreign Investment Advisory Service, 2006
Business/Conference Tourism Itinerary
Europe/USA – Maputo
Typical Package: 7 Nights
Total Tourist Expenditure on Travel Experience = $2,690
Cost of Inputs for Travel to Destination= $1,910
$ 170
$1,210
$100
$600
$610
6.3%
45.0%
3.7%
22.3%
22.7%
Negotiated Costs With Service Providers
Out of Pocket
Expenses
Fees/Taxes
European,
American or
African
Business
Tourist
Frontier
Services
and
Airport
Charges
Increasing the
amount and
proportion of
money that is
earned locally
Average International Air
Transport Fare Per
Participant
Portuguese
Participant
US$726
S. African
Participant
US$300
UK
Participant
US$1,319
Mauritian
Participant
US$1,153
French
Participant
US$1,146
Kenyan
Participant
US$939
American
Participant
US$1,575
Nigerian
Participant
US$2,547
Ground/Other
Domestic Transport
Logistics
Accommodation
Shopping
US$100
Ancillary
Service
Providers
(Shops, Tours,
Restaurants)
Inhaca/
Kruger Tour
US$300
Restaurants
US$210
23
Foreign Investment Advisory Service, 2006
Comparing tourism revenue to the
poor in different destinations
Northern Tanzania: mountain climbing
Destination: type of tourism
Ethiopia: cultural outside Addis
Luang Prabang, Laos: cultural
Central Vietnam: business tourism
South Africa: game viewing
Northern Tanzania: safari
Cape Verde: beach package
Namibia: protected areas
Ethiopia: business in Addis
The Gambia: beach package
Ghana: business in Accra
Cambodia: cultural
0%
5%
10%
15%
20%
25%
30%
Pro-poor income (PPI) as % of destination spending
24
ITC/ODI, 2009
Phase
Phase 1:
Diagnosis
Value chain analysis and
development approach
Phase 2:
Opportunities
Step
Step 1
What to do?
Step 2
Map the big picture: enterprises and other actors in the tourism sector,
links between them, demand and supply data, and the pertinent context
Step 3
Map where the poor participate
Step 4
Conduct fieldwork interviews in each node of the chain, with tourists
and service providers
Step 5
Track revenue flows and pro-poor income
Estimate how expenditure flows through the chain and how much
accrues to the poor. Consider their returns and factors that enable or
inhibit earnings
Identify where in the tourism value chain to seek change: which node or
nodes?
Step 6
Preparation
Step 7
Analyse blockages, options, and partners in the nodes selected, to
generate a long list of possible interventions
Step 8
Prioritise projects on the basis of their impact and feasibility
Phase 3: Planning Step 9
Project planning
25
Ashley, Mitchell and Spenceley, 2009
Types of value chain interventions
• Greater volume: Sell more fruit/craft/beds to customers
• Upgrade processes: Better coordination and communication
within, and between stakeholders (e.g. artisans, farmers)
• Upgrade products: better quality service, products related to
market demand
• Add value: take on new functions and to increase revenues (e.g.
processing, delivery)
• Reduce barriers to entry: improve access the poor have to
markets (e.g. linkages between producers and buyers)
• Contracts: for members of associations; between producers and
tourism enterprises
• Diversify markets: sales locally, nationally and export – and
outside the tourism industry
26
Adapted from ITC/ODI, 2009
1. Seven ways the poor benefit from
tourism
1. Employment of the poor in tourism enterprises
2. Supply of goods and services to tourism enterprises by the
poor or by enterprises employing the poor
3. Direct sales of goods and services to visitors by the poor
(informal economy)
4. Establishment and running of tourism enterprises by the
poor - e.g. micro, small and medium sized enterprises (MSMEs),
or community based enterprises (formal economy)
5. Tax or levy on tourism income or profits with proceeds
benefiting the poor
6. Voluntary giving/support by tourism enterprises and tourists
7. Investment in infrastructure stimulated by tourism also
benefiting the poor in the locality, directly or through support to
other sectors
27
WTO, 2004
Thank you!
Dr Anna Spenceley
Spenceley Tourism And Development cc (STAND)
annaspenceley@gmail.com
www.anna.spenceley.co.uk
+27 (0)72 311 5700
28