There is some debate whether tourism is the right fit for the public-private partnership (PPP) model. After all, where is the public good? Where is the public service? In this column we will put down our strawberry margarita with the little umbrella and ludicrously large pieces of fruit sticking out, brush the sand off our keyboard, and discuss.
Tourism is a huge industry that provides growth and jobs for developed, as well as developing, countries. As the middle class grows, so does tourism expenditure. This is already reflected in numbers: international tourist arrivals increased by 4 percent in 2012, reaching 1.035 billion. In 2011, international tourism generated $1.2 trillion in export earnings. Even in a tough global economy, the UN’s World Tourism Organization forecasts growth in international tourist arrivals of between 3 to 4 percent in 2013. Tourism PPPs can fulfill a variety of needs for the fast-growing sector, including:
Managing scarce resources
When managing areas of natural beauty or with particular resources, governments need to restrict development and access to avoid degradation. PPP models provide competitive and transparent mechanisms to help identify the most capable, most experienced, and best value investors for a given site.
Benefitting the locals
Many countries offering great tourist destinations struggle with low economic development and poor governance. In such countries, tourism tends to develop chaotically, based on who has the best contacts and the most money. For example, water and power may be obtained on a per-resort basis; liquid and solid waste are managed just enough to get them away from the resort. This is inefficient and often creates a particular burden on the local community. Yet if managed on a coordinated basis, communities can benefit substantially from such services, and the resorts can access less expensive services. PPPs can help governments think about the larger context, and make it easier to scale up infrastructure to benefit tourism and the local community.
Sri Lanka is using PPPs to ensure that tourism developments are coordinated and fit with national planning. By using the competitive PPP structure (rather than the less competitive and coordinated licensing process), this approach leverages innovation from the private sector on planning, facilities, local community development, and resource management.
Linking to local commerce
In 2000, the World Tourism organization’s Business Council published a survey of the tourism industry, which found that out of 234 respondents from 90 different countries, 81 percent rated PPPs as “very effective” and 98 percent as “effective” or “very effective,” pointing in particular to the importance of linkages with local commerce. In Italy, which already has 30 years of experience with partnerships that develop small hotels and their links to local communities, this is yesterday’s news. This coordination can be critical to the success of tourism development.
India is trying to use PPPs to support a single window for granting permits and government approvals for tourism development. Large tourism developments are often plagued by the number and variety of approvals that must be obtained from government bodies, much like infrastructure projects. Just as this risk can be managed through PPPs for infrastructure, so tourism can benefit from the same models.
There are some assets in the tourism sector that are clearly public goods. Museums, opera houses, auditoriums, and convention centers are the first that come to mind. These may be better developed and managed under PPPs, allowing the private innovation and commercial dynamism needed to ensure funding to preserve and protect these assets, while maintaining the essential public role. We’ve seen positive results with the convention center in Dublin and the arts palace in Saint Petersburg, along with many others that have been developed through the partnership model.
Even museums have turned to private involvement to leverage revenues. Picture the gift shops of London’s Science Museum or its Natural History Museum, which boast some of the more interesting and creative shopping in the world.
To recap, tourism PPPs can: improve foreign investment; help ensure responsible, sustainable, and community oriented investment; and provide infrastructure and other improvements for local communities.
But these aren’t the only benefits. At the end of negotiation sessions, suntan lotion is de rigeur. Now, where did I put that strawberry margarita?