Presentation on theme: "Tourism Value Chain Analysis Dr. Frederic Thomas A framework for tourism stakeholders to assess and maximize the development impact."— Presentation transcript:
Tourism Value Chain Analysis Dr. Frederic Thomas A framework for tourism stakeholders to assess and maximize the development impact of public/private investments in the tourism sector, especially the pro poor impact The data in this presentation come from a research’s project co-funded by the IFC/MPDF and the Prosperity initiative in Cambodia and Lao PDR
Objectives A major objective of the IFC/PI project was to develop a framework for tourism stakeholders to assess and maximize the development impact of public/private investments in the tourism sector, especially the pro poor impact The objectives of a value chain analysis are first and foremost to better understand: How a specific economic sector impacts on a local economy (range of activities, phases of production, number of hired people (direct, indirect, induced))? Which opportunities exist for increasing the linkages and benefits between this economic sector and the local economy? What is the feasibility or plausibility of each potential interventions for having an economic, local or pro-poor impact? Finally, what would be the best strategies to increase either the global economic impact, Local Expenditures Impact or the Pro-poor Impact*? (*This implies to take into account the return on investment!)
Introduction to Cambodian and Lao Tourism The 2007 Travel and tourism economic research - WTTC world market share of tourism GDP growth 2007/2006 Travel and tourism industry contribution to GDP Travel and tourism contribution to the economy Travel and tourism economy employment (direct/ indirect / induced) Travel and tourism industry employment (direct/indirect) Cambodia0.0%6.5%9.3%20.3%1,108,235500,103 Vietnam0.2%10.5%3.1%11.2%3,519,630932,110 Lao PDR0.0%7.1%4.2%8.5%148,53272,248 Malaysia0.5%4.5%4.4%13.3%1,217,080476,438 Indonesia0.6%3.6%2.4%7.5%6,056,1561,980,658 Thailand0.7%3.3%6.7%14.9%4,109,5021,945,544 Philippines0.2%7.0%4.1%9.1%3,542,9081,388,229
Introduction to Cambodian and Lao Tourism International Arrivals in Lao PDR (2007) # arrivals (LNTA) # arrivals (- day tripper) % GIT Thailand949,452508, Vietnam290,584248, China54,92033, USA45, France34, UK31, Japan29, Australia24, Total top 8 (90%)1,460,845956,51066,605 Total visitors in Laos1,623,9434.1% International Arrivals in Cambodia (2007) # arrivals (MoT) % GIT Korea 329, % Japan 161, % USA 137, % Vietnam 125, % China 118, % Taiwan 118, % Thailand 101, % France 90, % UK 84, % Malaysia 84, % Total top 10 (67%) 1,351,350589,490 Total ,015, %
The IFC/PI Approach Cambodia and Lao PDR The data collected (demand and supply side surveys) allow the following expenditure measures of yield to be estimated: Total trip expenditure, nationally and in destinations Average expenditure per night (total tourism) nationally and by destination Expenditure per night by market (by origin, demographic, travel motive) nationally and by destination Expenditure in each tourism supply chain (accommodation, F+B, shopping, transportation), nationally, by destination and by type of tourist Employment in tourism, nationally and by destination, by type of tourist and by tourism sub-sector/supply chain
Review of different methodological issues observed in Cambodia and Lao PDR Expenditures per person vs. per interviewee FIT vs. GIT Definition of poverty: Unskilled workers (ODI/SNV) vs. poor background’s workers Expenditures per day and expenditures for the last 24h Are products bought at the local market obviously locals?
Step one (Larry Dwyer: Tourism Yield definition) 1. Total in-country expenditures 2. Converting Expenditure Measures of Yield into local expenditure yield measures (Local Expenditure Impact) 3. Estimating pro-poor employee income (PPEDI) yield measures 4. Estimating tourism supplier pro-poor impact: Pro- poor Indirect employment income (PPEII) 5. Estimating direct seller pro-poor impact 6. Estimating Employment Measures of Yield (direct, indirect)
Tourism Yield Analysis - Approach Due to a lack of maturity of the market (difficulties in getting sensitive data), the approach did not include profitability measures and particularly the analysis of the yield as rate on return of capital.
There is no consistent definition of Tourism Yield. We have essentially looked at 4 dimensions: Economic Local Economic Impact Pro-poor Impact Pro-poor employee direct incomes $ LEI PPI PPEDI $ Economic $ (Expenditure / Revenues) Jobs LEI Local Economic Impact (what stays in Cambodia?) PPI Pro-Poor Impact PPEDI Pro-Poor Employee direct Incomes Tourism Yield Analysis - Approach
Economic impact of tourism Total in country trip expenditure = (ALOS * ADE * Number of tourists) ALOS = Average Length of Stay ADE = Average Daily expenditures per person (and not per interviewee) Tourism Yield Analysis - Approach
Expenditure - IVA / trip LAO PDR Opportunities for increasing the number of GIT and the amount of GIT itself are limited (low average number of rooms per hotel). Therefore the analysis focused mainly on FIT.
Local Economic Impact (defined as Local Expenditures Impact) Identified leakagesFrom the top to the bottomFrom bottom to the top The example of the hotel ’ s sector Depreciation cost or profit leaving the region for foreign owners % of foreign staff salary (repatriation of a % of salary) Importation for running costs (electricity, F&B, Furniture and equipment replacement … ) Profit repatriation: Estimated as 10 to 15% of turn-over for high-end hotels Salary repatriation: 80% of 15% of the salary bill for high-end hotel Leakages from power operating costs (80%) Leakages from F&B Salary of local staff Local impact from F&B Share of profit staying in the country Local expenditures by the business as operating costs Tourism Yield Analysis - Approach * Our LEI approach doesn’t take into account the leakages from the starting costs (Around 90% for a high-end hotel).
Tourism Yield Analysis - LEI The total contribution by nationality is extremely influenced by the number of visitors in Lao PDR. The breakdown of expenditures and the LEI in each category varies from one nationality to another and also between the two categories of visitors (FIT/GIT). The tourism industry public and private sectors should not particularly target an increase in tourism arrivals on the top of the trend but more the High yield markets.
Pro Poor Impact Pro-Poor Employee Direct Income (looking at employee from poor background) + Pro-Poor Employee Indirect income (Indirect salary to suppliers from poor background) + Remittances of Tourism workers from a poor background Tourism Yield Analysis - Approach
Tourism Yield Analysis - PPI The total contribution by nationality is extremely influenced by the number of visitors in Lao PDR. In Cambodia, the level or importance of the Pro poor impact for each nationality is relatively different than their LEI
Summary for Cambodia ($) In country expenditures % market share ($) Local Economic Impact % Local Economic Impact ($) Pro-Poor income yield % Pro-Poor income yield Siem Reap $457,810,841 58% $283,842,721 62% $26,095, % Phnom Penh $213,118,840 27% $132,133,681 62% $18,434, % Sihanoukville $55,253,033 7% $39,229,653 71% $5,912, % Kratie $2,771, % $1,779, % $321, % Other $60,374, % $38,760, % $7,003, % TOTAL $789,329, % $495,698, % $52,016, %
Summary for Lao PDR ($) In country expenditures % market share ($) Local Economic Impact % Local Economic Impact ($) Pro-Poor income yield % Pro-Poor income yield Vientiane $88,340,566 57% $59,099, % $10,070, % Luang Prabang $13,947,794 9% $10,795, % $585, % Champasak $12,217,849 8% $7,074, % $671, % Other $40,988,985 26% TOTAL $155,495, % $108,069, % $12,284, % In Cambodia and Lao PDR, we observe that the level of PPI is higher in the capital than in the main tourist destination. An explanation could be the high number and variety of potential jobs in all sectors in Phnom Penh and Vientiane which finally attract more people from a poor background. In both countries, the difficulty of access to training for poorer persons doesn’t help them to become a strong workforce in the hospitality service industry.
Major interventions to increase the % of LEI and /or PPI Major interventions on changing the % of PPI should be based on - Main leakages by supply chain and feasibility to fill the gap/increase linkages and particularly with projects having a high LEI/PPI - Main sectors able to highly contribute to the global LEI/PPI - Main markets able to highly contribute to the global LEI/PPI - Making jobs more accessible for the poor Main areas usually targeted to help the poor - Importation (F&B, handicrafts, miscellaneous products…) Main opportunities become: - Substitution to importation strategies are often considered as the only area where an increase of LEI/PPI is feasible. Now, these strategies should be - Able to differentiate between absolute value and percentage of LEI/PPI; - Able to compete with existing products in terms of costs, quality and just-in- time production/distribution all the year long (With a ROI concern) and not only job creation and/or increase of incomes; - Marketing strategies to attract high-yield market, to increase ALOS, to increase # of high yield visitors in low season
Marketing strategies 1. Target high yield markets 1. Increase ALOS 2. Increase number / change the mix 3. Reduce seasonality 4. Increase average daily expenditures
Substitution to importations 1. Looking at opportunities/feasibilities/plausibility 1. Compare % and economic value of LEI 2. Determine feasible increase of LEI by sector and opportunities 3. Look at competitiveness for interesting sector 4. Look at domestic demand as an additional factor (ex: can organic products be bought by locals in developing countries..)
Step two – Study the feasibility/plausibility of interventions 1. Breaking down the value chain 2. Looking at supply chain’s specificities (competitiveness, opportunities, linkages and leakages) 3. Studying the feasibility of interventions based on understanding of context 4. Breaking down the supply chain for any plausible intervention 5. Studying the Return on investment for each plausible intervention
Feasibility / potential to change the LEI/PPI by supply chain: The example of the accommodation sector (1)
Feasibility / potential to change the LEI by sector
Changing the % of LEI Example: encourage the production of fruits by local farmers Cambodia Average Daily expenditures per person Share of expenditures on food and beverages % Fruits over F&B % LEI for fruits US$ final LEI for fruits per person HotelUS$ %5%60%$0.082 RestaurantsUS$ %5%60%$0.122 Opportunities exist but they remains limited in terms of yields.
Feasibility / potential to change the PPI by sector
Changing the % of PPI Main identified areas for substitution to importation Target products% of the sector’s bill Feasibility and constraints Potential gains (based on 2007) Food - Fruits - Vegetables - Meats (importation concerned high-end products) - Around 5% of food’s bill - Around 8-10% - Around 20% - Competitiveness - Yearly production - very few opportunities for meat (need to develop traceability system) Calculated by breaking down the supply chain Beverages - Alcoholic beverages - Non alcoholic beverages - Around 12% of beverages bill - Around 5% - No real opportunities (consumption based on brands) None Handicrafts Sectors with high levels of importation (clothing, scarves, handbags) >60% - 10% for clothing of the products bill - 6% for scarves - 8% for handbags - Competitiveness - QualityCalculated by breaking down the supply chain Operating products - Hygiene products - Cleaning products -Towels, napkins, bed sheets…(replaced every 6 months) - Min. evaluation at US$ 4 millions leakages per year (FIAS -2006) - Not calculated -Competitiveness -Quality and quantityPotential Pro poor impact if project linked with poverty reduction Construction and equipment materials All items currently imported No surveyNeed for the development of an industrial base To be defined
Conclusion As an example, out of one US dollar spent in a restaurant, $ have a pro-poor impact on the local vegetables sector $ have a pro-poor impact on the local fruits sector Opportunities exist to substitute imported fruits and vegetables Up to $2.4m for the vegetables sector Up to $2.1m for the fruits sector $ 2.4m Veggies$2.1m Fruits $1m potential Not all Fruits and vegetables grown in Cambodia How easy? Cost of production (competitiveness)? Supply the market all year long? $1m Assumption of realistic opportunities $100k Share to the poor? -Lack of skills -Cost of training -How easy? -ROI
Summary Can’t assume, details matters Evidence based conclusion (potential) With good understanding of context to maximize ROI and development