The travel and tourism industry is growing, and all indications suggest that it will continue to do so. Key factors include increasing wealth, the aging of the population, liberalization of air transport, and rapid advancements in technology that affect transport systems, passenger handling, sales and distribution, reservations, and inventory management. Global travel last year grew faster than the global economy—and it is growing fastest in the transitional economies. Much of the future growth is going to come from and will happen in these economies.
The developing world is well-positioned to take advantage of the fast-growing travel and tourism industries. Many emerging nations have attractive tourism assets with an increasingly high level of recognition and exposure among consumers. The challenge for governments in the developing world is clear: how can they capture a share of this growth and manage it so that it can drive prosperity?
Government officials know that the right answer to that question is key to transforming their economy. But they also know that competition is fierce. For developing countries to flourish in this environment there must be good underlying tourism assets, both natural and man-made, on which to build an attractive offer. Then the public and private sectors must work together to convert those assets into productive income earning businesses which generate jobs.
A clear direction
To succeed in this competitive climate, governments must set clear direction for their tourism and travel industry. Unfortunately, too many governments treat the industry as a short term cash generator, levying taxes and applying regulations which result in high transaction costs and which discourage participation and limit growth. They make poor decisions based on inadequate sector analysis and short term political gains. Others fail to see investment as the driver of growth. They don’t manage their own assets to deliver a satisfactory return on investment—or there is an absence of a commercial framework to facilitate private sector investment. Others turn visitors away by hanging on to outdated visa regimes.
In addition to attractive assets and sound policies, there must be a capacity to mobilize the private sector and facilitate the investment that will commercialize the underlying assets. This process translates assets into attractive tourism products, supported by efficient infrastructure and an effective environment for doing business.
It is now well recognized that the overall investment climate is key. If a destination does not offer an attractive investment environment, it will not attract foreign investment. Nor will it mobilize local investment. Both are required for tourism to transform an economy.
While it is true that many needed reforms can take a long time to implement, it is also true that countries don’t need to wait until every business indicator has improved in order to generate investment. Many government tourism officials ask, “We have implemented a lot of reforms but we still don’t attract the level and type of investment to enable us to compete effectively—what else can we do?”
In short, they have discovered that reforms alone don’t generate investment—at least not at a speed that allows them to stay in the race.
A Targeted Approach
A targeted approach to competition recognizes that reforms need to be bundled into a more integrated program, with a clear focus on generating investment. There are three components:
Defining Market Position and Growth Opportunities
This helps countries understand their competitive position and develop rapid responses to foster growth. While longer-term thinking is essential, and policy settings need to be right, all governments want results quickly. This approach helps them by providing a targeted and commercially realistic analysis of their destination and a rapid assessment of the steps needed to effectively organize for short, medium, and long-term investment results.
Fostering Market Development
This unlocks investment opportunities and converts them into completed transactions that will generate incomes and jobs. Governments must mobilize capital for tourism business with high potential. This can involve commercializing key assets, accessing new and emerging sectors such as health, sports, or religious tourism, and strengthening core tourism products in more mature markets where reinvestment or rejuvenation is warranted.
Building Market Improvement
Removing regulatory constraints to visitor access and economic growth is the first step toward success. The most urgent work toward this goal typically involves building investor access and smart incentives, visa reform and opening visitor access to destinations and key sites, and sector licensing and inspections that support brand standards and encourage inclusion. It is also important to look at reforms, which impact access to labor, and other key inputs which build competitiveness. Environmental and economic sustainability are also key areas to focus on.
By taking a more commercial approach, governments can focus on building a pipeline of transactions that generate jobs while better understanding the drivers of growth and the impacts of negative policies, procedures, and business conditions.
This market-driven orientation also helps governments connect more effectively with private sector partners, allowing them to demonstrate leadership and build the confidence necessary to attract the investment community. Investors stress time and again that these relationships are critical to building a positive climate for tourism investment.