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VI. TOURISM AND DEVELOPMENT PLANNING

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

THE LAW OF DIMINISHING RETURNS

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

TYPICAL HOTEL EMPLOYMENT STRUCTURE

6%

8%

22%

64%

MANAGERIAL

SUPERVISIORY

CRAFT

OPERATIVE

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

THE EFFECT OF FIXED COSTS ON THE BREAK-EVEN POINT OF PRODUCTION

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

THE KEY STAGES OF 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

BASIC TOURISM DEVELOPMENT PLAN

MODIFIED BASIC DEVELOPMENT PLAN

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