1. This note presents the record of a seminar held on 6 and 7 March 2001 in Berlin, aimed at exploring the relationships between economic growth and tourism policy. The Seminar was organised by the OECD in partnership with the Canadian Tourism Commission, the Federal Ministry of Economics and Technology of Germany, the Secretariat of State for Tourism of Mexico and the State Secretariat for Economic Affairs of Switzerland.
To learn more about the role and importance of tourism services as well as their underlying policies in the participating countries and about the determinants of tourism growth.
To deepen mutual understanding in current practices of the industry and strategies of governments aiming at enhancing sustainable growth in tourism; to share the analysis of such strategies/practices among each other; identify problems arising and, if possible, ways and means of solving them.
To exchange views on whether and, if so, how mutual co-operation could be enhanced in order to deepen relations between the OECD Tourism Committee, the industry and selected economies in all aspects of tourism policy and services.
3. The main themes discussed at the Seminar were the tourism growth conditions and policies in selected national economies, the role and implications of economic (e.g. information and communication technologies, innovation, financial issues and corporate governance) and political (e.g. institutional settings, investment and sustainable development policies) factors affecting growth in tourism and the ways to measure and assess performance in tourism.
4. Approximately 80 experts from 27 OECD countries, 11 non-OECD countries and 5 international organisations participated in the Seminar. The Seminar included presentations by a number of leading policy-makers, industry representatives and academics, including Friedrich Homann (Federal Ministry of Economics and Technology of Germany), Peter Keller (State Secretariat for Economic Affairs of Switzerland), Shanzhong Zhu (China National Tourism Administration), Udin Saifuddin (Ministry of Tourism, Arts and Culture of Indonesia), Savas Küce (Ministry of tourism of Turkey), Ignacio Casar (Secretariat of State for tourism of Mexico), Jean-Claude Baumgarten (World Travel and Tourism Council), Hannes Werthner (E-Commerce Competence Centre of Vienna and IFITT), Iain Thorton Christie (World Bank Group) and Klaus Weiermair (University of Innsbruck). The list of participants is available as an annex.
as Chairman of the OECD Tourism Committee chaired the meeting.
5. This paper presents the conclusions from the Chair and suggests recommendations for further action by the OECD Tourism Committee. It then summarises the main points made in the presentations and subsequent discussion. The papers presented at the Seminar reflect the views of the authors and do not necessarily represent the views of the OECD or its Member countries.
6. All suggestions and recommendations emerging from the Seminar will be subject to a review by the members of the OECD Tourism Committee at the next meeting to be held in Paris on 23-24 October 2001. In the meantime, the OECD Secretariat will elaborate one or two project proposals to support the forthcoming discussions. Non-member countries and the tourism industry will be kept informed.
7. Some key factors of success contribute to a more steady growth:
The creative forces of the market are essential in a demand-driven sector. Consumer expectations have to guide the design, the development and the commercialisation of tourism products. This means that tourism policies must be customer and market-oriented.
Innovation and creation of innovation mechanism are necessary for a constant rejuvenating of the existing offer and for endogenous growth.
Development of new products is a must for using the enormous growth potential of globalisation. Quality has to be ensured through a systematic quality approach at the level of service providers and destinations.
The application of information and communication technology opens new markets to tourism firms and destination and, what is even more important, can help to improve the productivity in the sector. It reduces transaction costs and supports co-operation and competition, which is a necessity for the fragmented tourism industry.
Economies of scale and scope are urgently called for to improve the profitability of the tourism related enterprises and reduce therefore the risk for the financing institutions and increase their willingness to finance projects by lowering the capital costs.
8. Tourism policy can strengthen the positive externalities of the visitors' expenditure and thus help to use the potential of growth and employment. This is particularly true under imperfect competition conditions. Nevertheless, the international community has to look ahead to avoid market distortions by too much government support for the development of tourism.
9. The content of strategic tourism policy depends on the level of development of a country:
An important precondition for tourism development is to avoid leakage and adapt the offer to the standards of international tourism.
In developing economies, the relative advantages of backwardness like the low labour costs open the world market for tourism products. However, these advantages are somewhat diminished by the market power of the travel industry. The more peripheral a country is, the higher it depends on the big firms of the travel industry as airlines, tour operators and hotel industry.
In developed OECD countries, the main challenge for the tourism sector is the fragmented structure of the offer and the existence of a large number of small and medium sized enterprises (SMEs). The improvement of production and competition conditions for SMEs is therefore a key task for tourism policy. Better co-operation mechanisms at the level of the destination can create competitive advantages for SMEs. A horizontal tourism policy approach may be of some interest to establish a targeted incentive system where the state supports innovation, research and development, co-operation and destination marketing.
A special problem is the financing of the renewal of the existing tourism offer. Tourism SMEs cannot go on the stock-market. They are heavily in debt. Banks are no longer interested in financing loans for SMEs in tourism resorts. Therefore new forms of financing and a strengthening of the equity of those enterprises is necessary.
Policy making in tourism can only provide a subsidiary and transitional support. The better strategies are always: - To internalise externality in prices. - To create value and earn money with outstanding projects. - To put forward tourism friendly framework conditions. - For the enterprise, to overcome bad framework conditions by new forms of organisation and governance.
10. This Seminar was a first opportunity to exchange views between OECD Member states and new potential partners in emerging countries. This dialogue has to be continued. It is up to each potential partner country to decide whether or not it is interested in making contact and working with the OECD Tourism Committee.
11. The discussion at the Seminar therefore suggested that:
There should be increased efforts to look more closely at cross-linkages between tourism and other activities and at how efficient tourism policies can increase the socio-economic benefits and potential of tourism growth for the benefit of the whole economy.
In co-operation with selected non-member countries and the tourism industry, the Tourism Committee could start work on extending by an informal understanding and agreement its liberalisation rules in the field of tourism for the mutual benefit of all participating countries.
The Tourism Committee could contribute to facilitate access to information on best practices related to innovation mechanisms, internet use and corporate governance in tourism.
Further research should be undertaken on the financing mechanisms and new regimes of corporate governance which can be a good vehicle for rationalisation, growth and profitability in the tourism area.
Additional work should be undertaken at an international level to further understand and analyse tourism development and performance and to explore the role of (new) tourism economic indicators, like the Tourism Satellite Account or the employment indicators, in forming tourism policies.
12. Many of the papers presented at the Seminar highlighted the size and growth of tourism and illustrated the important economic functions played by tourism in the national economies. The Seminar covered notably the tourism growth conditions in Brazil, China, Germany, Indonesia, Israel and Turkey.
Shanzhong Zhu(Deputy Director General of the China National Tourism Administration) stressed that China has defined tourism as an important point of economic growth in the national economy. The reform and opening policy started in 1978 has brought China's tourism to its present track of development. Through the five-year plans and strong support of the government over the past 20 years, China has developed an important tourism industry and is strongly encouraging reforms.
14. In Indonesia, the government is providing strong support for the development of tourism which is seen as a good vehicle for local development and economic growth;
Udin Saifuddin (Deputy Minister at the Ministry of Tourism, Arts and Culture of Indonesia) stressed that an important direction of the policy is to promote "village and community-based tourism" as a means of increasing performance, quality and sustainability of tourism development. Incentives are proposed to facilitate investment in tourism, to diminish administrative formalities at frontiers (e.g. visas agreements with 48 countries) and to improve the accessibility to the country.
15. In the past 20 years, Turkish tourism has experienced the strongest average growth rate among OECD countries. Savas Küce
(Under-Secretary of State of the Ministry of tourism in Turkey) describes the main principles of Turkish tourism policy, which have accompanied this growth with the aim of creating an efficient tourism sector with high international competitiveness. Tourism growth has to be controlled because of the effect it has in changing the traditional social structure and the natural environment. A main priority is to implement a sustainable approach for tourism development through notably an increased diversification of the tourism product throughout the country and during the whole year. Several regulatory reforms are underway to encourage entrepreneurs and investors to invest in tourism.
Friedrich Homann(Director General at the Federal Ministry of Economics and Technology of Germany) mentioned tourism as being in Germany the second most important service area, behind the trading sector. Tourism policy is considered as an important policy in Germany and is conducted in close co-operation with all territorial authorities (Bundestag, Federal Government, State government, and regions) and the industry. The federal government provides support to SMEs, notably hotels and restaurants, travel agencies and small tour operators.
17. The representatives of Israel and Brazil also indicated the important economic and social role played by tourism in these countries.
18. In divergence with other "models" of tourism policy presented at the Seminar,
(Director of Research at the Netherlands Board of Tourism) explained the Dutch experience where State intervention in tourism has been reduced substantially. In the Netherlands, many regions face changes in agriculture that influence their economic structure mostly negatively. This needs to be solved by the creation of other new and sound economic activities, one of which is tourism. Tourism policy has been integrated within spatial economic policy (Ministry of Economic Affairs) and has close links with planning, agriculture, nature and transportation (mobility). The changing policy applying to tourism can be summarised as general instead of sectoral, integrated instead of isolated, more spatial, delegated instead of centralised and financed by those who benefit most.
19. Is it possible to fulfil the potential of tourism without help from the State? An important part of the Seminar was dedicated to the role of tourism policies in supporting tourism growth potential and maintaining the long-term competitiveness of travel and tourism on the global market. Several presentations highlighted the fact that tourism policies can maximise the benefits of tourism, notably in the case of imperfect competition. Drawing from the discussion, there was certain evidence that an important determinant of growth is to establish an appropriate policy and undertake the necessary actions, including sometimes limitations to growth, to preserve and valorise the cultural, natural and human resources as they form the foundation of the country's ability to compete in the market for travel and tourism. There can be a distortion of the market if some countries intervene too much.
20. Human resources continue to attract much attention in the design of tourism policies. Education and vocational training are essential in maintaining the quality of the tourism product, in supporting productivity gains and in improving the overall conditions of the tourism labour market and its attractiveness. Human resources constitute a major variable for the competitiveness and development of tourism enterprises. Participants recognised the importance of education, vocational training and mobility of tourism labour for tourism growth.
21. Is there, however, a "global tourism policy"? Looking at changes occurring in the production, consumption and distribution processes, the evidence is that there is a global market for tourism. Many challenges facing tourism policy-makers are common to different countries. Globalisation forces governments to think about the need for a "global tourism policy". But, the discussion highlighted that tourism policies remain a matter for individual countries or groups of countries to decide. On the other hand, a deeper inter-governmental co-operation is certainly required to tackle specific issues of international concern like sustainable development, liberalisation of tourism-related services, statistical international standards or development and poverty reduction.
22. What are the lessons for tourism policy? An important dimension covered at the seminar is that tourism can certainly be an efficient tool for economic growth but a precondition is a certain level of development and its success depends on a performing public sector and an efficient tourism policy. Institutional settings, human resources, information technology, innovation and financing mechanisms are important elements of performance for the tourism sector and main determinants of a lasting tourism growth.
23. Several speakers at the Seminar mentioned the remarkable growth figures for worldwide tourism and the encouraging forecasts for the future. But other points were made to nuance this position, mentioning the uncertainty regarding the extent to which this growth is sustainable, the lack of appropriate data to measure and assess the tourism phenomenon in its entirety and even the (negative) influence that some emerging risks might have on such as climate change on long-term tourism development.
24. To what extent can these tourism growth rates be expected to continue? In the discussion at the Seminar, it was suggested that, in many cases, exponential tourism growth rates are based on partial and questionable quantitative indicators (mainly arrivals of tourists and receipts and expenditure; covering only international tourism share of the market). Moreover, despite much progress in recent years to improve tourism statistics, data are still difficult to compare on an international basis. A first conclusion that might be drawn from the debate is that indicators used to measure growth and performance in tourism are incomplete and that, in itself, this is a good reason for caution in providing tourism forecasts, notably at the level of individual economies, and in forming tourism policies.
Paul Allin(Chairman of the OECD Statistical Working Party of the Tourism Committee) said that it is therefore important to bring in other evidence and to paint a fuller picture to help assess the sustainability and growth of tourism. Iain Christie (Tourism Advisor, World Bank) emphasised the huge data requirements necessary for assessing sustainability in tourism (e.g. on investment, employment, value added and leakage, linkages to other sectors, conservation of resources).
27. However, for Iain Christie, one needs to take a "modular approach" to the TSA because it is expensive, involves important data requirements and provide only a partial picture for sustainability assessment. It is also crucial to link tourism statistics with the broader statistical framework (e.g. the new international Manual on Statistics of International Trade in Services). More generally, participants agreed that countries should pursue their efforts to better measure and communicate the strategic economic importance of tourism.
28. Several presentations focused on the close relationship between tourism policy and sustainable development and on the role played by sustainability in tourism growth. There was an agreement among participants that environment, culture and the society are the foundations for a sustained tourism development. These assets must be preserved and valorised to maintain tourism international competitiveness over the long term. Tourism can be a proactive instrument contribution to sustainable development.
29. How to ensure a sustainable tourism development? According to
Ignacio Casar(Chief Advisor, Secretariat of State for tourism of Mexico), the process must preserve the natural and cultural environment as the foundation of all tourism activities, benefit the community in each destination; and ensure an adequate rate of return on investment as a condition for economic growth. A long-term goal is that all tourism products become sustainable and not only specific niche-markets such as eco-tourism or cultural tourism. In this regard, under the guidance of a national policy and strategy for sustainable tourism, specific actions are being undertaken in the fields of education, training and culture, certification of sustainable practices for private firms, measurement and evaluation, social participation, preservation and deregulation and credit for sustainability related investments. Instruments have been developed to preserve and manage fragile archeological areas, protect natural areas, to establish legal requirements for evaluating environmental impact for tourism investment projects, and to develop land use plans that seek to rationalize growth and the occupation of specific areas.
(Co-ordinator for the report on sustainable tourism in the Nordic region for the tourism ad hoc working group of the Nordic Council of Ministers) said that, in the Nordic region, the proactive approach to sustainable tourism development is gaining political recognition and that there is a wide range of policy and actions undertaken to promote sustainable tourism. The strategy on sustainable tourism in the Nordic region proposed principles for sustainable tourism development at the trans-national, national, regional and local levels in areas where a regional co-operation can bring added value.
31. The speakers highlighted some of the success factors for a sustainable growth in tourism. The involvement of local actors in projects is critical. For Ian Salter, many barriers exist that prevent this, in particular a lack of communication with/between local communities on such projects. It is important to stress the social and economic advantages of sustainable tourism development at the local level. Improving the environmental performance of tourism companies is important. The main motivation for the enterprise is a win/win situation in which by reducing environmental impacts the company also achieves resource reductions.
32. There was evidence at the Seminar that the quality of public service deliveries is an important precondition for the sustainability of tourism development, for example in the area of transportation, to act on transport congestion, tourism access or local development. The connection between infrastructure and tourist demand is not always adequate. State incentive systems can make sense when there are market failures, which prevent full use being made of the growth potential of tourism.
33. Several speakers emphasised the importance of innovation mechanisms in renewing the organisation and structure of enterprises, in improving their overall performance and profitability through networking and economies of scale and scope. The role of internet is still marginal in overall travel and tourism sales, but E-commerce is growing at a fast pace and its capacity to sell tourism products (e.g. hotel rooms, air seats, meals, etc.) at the last minute is an important element to complement other distribution mechanisms. Given the specificities of some of the tourism products which are e.g. not stockable (e.g. hotel rooms), e-commerce could have far-reaching effects on the profitability of the tourism business and increase profits and growth potential.
34. What policies and actions can be promoted to promote new innovation mechanisms? An interesting view was expressed by
Julio Lopez Astor(Deputy Director General in the Directorate general for tourism in Spain). Quality and innovation are defined as fundamental elements for a new Spanish tourism policy. Innovation and technology are seen as critical points for the future of Spanish tourist development. Tourism has therefore been included in the national research and development plan of Spain. For tourism, specific actions have been planned in the areas of information and reservation systems, electronic data interchange, quality technology, environmental technologies, new products with a high technological content and planing models for tourist destinations and products.
(President of the World Travel and Tourism Council), it is crucial to develop access to capital resources and technological advancement. This is one of the WTTC's four main priorities. How technology, especially internet, influences the nature of travel planning and travel itself? Trends are optimistic for a continued growth in demand and increased use of the internet by the traveller. The industry will have to watch and follow that demand closely. People and information are now able to move more quickly and efficiently around the globe. This has helped boost economies and of course the tourism industry itself, which has been both a driver and a beneficiary of economic growth. Information technology is pushing all segments of the tourism industry to rethink their strategy. Hotels, airlines, travel agents and tour operators must all now have internet strategies.
(E-Commerce Competence Centre of Vienna, Austria) presented his research on issues related to E-Commerce and travel and tourism. Drawing on work undertaken by the International Federation for Information Technology and Tourism, he noted that travel and tourism is a leading application in e-commerce and mentioned some specific characteristics of internet travellers (e.g. shorter length of trips, higher expenditure per night). The situation of tourism enterprises vis-à-vis e-commerce is complex depending on if they are a small business, a new or a traditional player. The main question for policy-makers is how to manage innovation and create awareness for the industry regarding the advantages and problems of information technology in tourism. Information technology will play a major role in tourism growth and accelerate innovation in tourism by, for example, pushing new services focusing on the "end-user". For governments, the challenge is to be able to make a political management of innovation in tourism and to act as a catalyst for alliances and networks in this area.
37. One presentation given by
Elizabeth Carroll Simon (Director Industry Affairs at the International Hotel and Restaurants Association) identified some of the innovation mechanisms in the hospitality industry. Technology emerged as the single greatest source of innovation driving change in the hospitality industry. What is the impact of technology in the hospitality sector? The explosion of e-commerce has occurred in the past five years. Interestingly, the fastest growth in e-business-to-consumer has been in tourism, in the areas of air travel, car rental and hotel accommodation. Internet offers information, which is essential to securing the sale of rooms. The e-commerce network provides also valuable opportunities for establishing a two-way dialogue with the customer.
38. What is the impact of Internet on organisation, competition and performance in the hospitality industry? According to Elizabeth Carroll Simon, these effects include, on the negative side, a high cost of investment, changes in staffing requirements, erosion of inventory control (e.g. allocation of rooms to a growing number of third parties, increasing the potential for pricing conflicts), "commoditisation" of the hotel product (e.g. customers have now access to information previously reserved for travel professionals) and "disintermediation". Internet also creates a "digital divide" within companies. On the positive side, however, internet can optimise the enterprise's internal business processes and enables cost-cutting, in particular via new approaches to e-procurement and the formation of strategic alliances. It improves knowledge and workflow management, both essential to operations.
39. A central issue in studying tourism growth is trade and investment issues. If tourism is today considered as a relatively deregulated sector of the economy, a full understanding of the issues is limited by the lack of available data. Further steps are required, however, to remove the remaining impediments to tourism growth, especially in related services. A notable point in the discussion concerned tourism strategies that can be developed to reduce poverty.
40. Another important point of the discussion was related to the ongoing services negotiations, and especially those developments related to a proposal to add a tourism annex to the General Agreement on Trade in Services (GATS).
Dale Honneck(Counsellor on Trade in Services at the World Trade Organisation - WTO/OMC) informed participants about the preliminary outcome of a World Trade Organisation Symposium on tourism services. He stressed in particular visa-related restrictions, the imperfect nature of both tourism statistics and tourism classification systems, the negative effects of the horizontal restrictions contained within the services commitments scheduled by World Trade Organisation members (e.g. the lack of guaranteed market access for skilled and semi-skilled workers), profit levels of tour operators (which are apparently very low); and anti-competitive practices said to be occurring in developing-country markets, including aviation-related practices.
41. Is the proposed tourism annex the best way to advance and support further tourism liberalisation? It seems that there is not yet an agreed consensus among governments that an annex to the GATS is the best way to deal with the above-mentioned issues. Other possible options might be examined by the World Trade Organisation to ensure that the ongoing services negotiations address all sectors affecting international trade in tourism services. These options include attaching a "reference paper" to the services commitments of individual World Trade Organisation Members or even using the Tourism Satellite Account classifications as a "checklist" for services trade negotiators. According to
David Diaz(Chief, Services section, United Nations Conference on Trade and Development), the proposed annex should serve as a reference framework for commitments in all tourism activities and notably to introduce new disciplines for sustainable development in tourism and to ensure effective access to and use of information.
42. David Diaz stressed the uneven distribution of the benefits of tourism, to the disadvantage of developing countries. The reasons for this are: internal leakages, due to for example, anti-competitive behaviour, external leakages, due to e.g. the control of inbound and outbound operators by integrated suppliers and invisible leakages such as tax evasion, foreign exchange costs, resulting in revenue never reaching the tourist area. For David Diaz, slow growth of revenue per tourist in some developing countries is due to the combination of the following factors: monopolistic practices against developing country hotels, anti-competitive practices, such as vertical integration, predatory pricing, discriminatory access to networks and anti-competitive practices in air transport.
43. For Iain Christie, tourism promotes globalisation rather than the contrary. Tourism is a significant economic activity in 11 out of the 12 poorest countries of the world and in half of all the lowest income economies. Tourism is mainly driven by the private sector but its success depends on a performing public sector and tourism policy. Infrastructure services, both public and private, need to be in place in order to safeguard public health, security, and the rule of law. To promote sustainability and development in tourism, policy-makers should concentrate on its effects on poverty alleviation and thus take into account the interdisciplinary nature of tourism.
44. The Seminar also covered the role played by tourism in public policy. There was general agreement that we should look more closely at the linkages between tourism and other policies (e.g. sectoral policies, regulation and competition, micro-economic issues, institutional framework and financing). Tourism is a fragile industry in terms of the assets that support this industry but a good project can certainly receive financing. A conclusion of that discussion was that tourism is viable but needs to be promoted in a specific context, taking into account its social and environmental effects.
45. A notable dimension of the tourism industry is that its structure is based in most countries on small businesses. One point made in the discussion is that this situation can be a cause for concern in many cases. For example, the companies involved and their scale of operations tend to be too small, and the management tools are often inadequate. The potential for rationalisation and co-operation is in most cases underexploited.
46. Financing instruments are in general available in countries but they are not always appropriate to meet the (specific) needs of the tourism industry. For example, financing is often not available for investing in the necessary upgrades and for the renewal of tourism facilities. This question of the availability of financing is a growing problem. Bank loans are expensive, due to the relatively high risks and small returns associated with this sector and its SMEs. This severely limits the financial possibilities for the companies in question, which are often over-indebted. New forms of financing are therefore necessary.
Natacha Bustros(Industry Issues at the Canadian Tourism Commission-CTC), obtaining financing is a serious challenge for SMEs. In tourism, operators are faced with problems of irregular cash flow, high fixed costs and low profit margins. Among the first steps for SMEs are to improve the management of the organisation in order to save on operating costs, to look at various sources of financing and to provide a comprehensive business plan. The pooling of resources can provide clear advantage for tourism SMEs, notably for marketing budgets. Initiatives taken in Canada include micro-business programs to provide management support and coaching to existing and new businesses; a tourism investment fund, marketing and product development programs. A key for the success of this action is the partnership between governments and industry.
(Head of the Institute of tourism and service economics at the University of Innsbruck) highlighted the importance for tourism SMEs to adopt new forms and regimes of governance in order to regain a competitive edge. How to help tourism SMEs to face consequences of globalisation? The competitive conditions for the tourism industry have changed a lot forcing SMEs to overcome certain competitive disadvantages (e.g. size and organisation, learning and innovation and access to unique factors of production) and to face dramatic changes in customers' preferences, globalisation of markets and technological changes.
49. New forms of governance are seen as a good vehicle for rationalisation, growth, profitability and development. ICT modify the organisation of the firm, change its boundaries and improve knowledge management. The "network organisation" (e.g. as co-operative partnerships, strategic alliance, management contracts, franchising, etc.) allows a better delivery of complex service bundles to a "multi-options" tourist in the context of changing markets. For Klaus Weiermair, organisational transformations in tourism SMEs are still slow. He focuses on the proposal to build new forms of business models like networks and/or tourism clusters to be governed by new governance structures and processes.
50. Several speakers emphasised that the new competitive environment and the new tourism economy require some departure from traditional tourism policies. For example, more attention should be paid to the creation and promotion of sustainable tourism networks, to access to capital markets, to human capital accumulation associated with innovation, product development and cross border activities and above all to the securement and further development of tourism related information and communication technologies.
51. Profitability is a requirement for all businesses. The tourism business has often a low profitability in comparison to other sectors. At the Seminar, there was evidence that national tourism policies can play an active role in making the tourism industry more attractive for entrepreneurs, notably by improving the overall operating conditions through e.g. a diversification of the products, a development all over the territory and an extension of the season.