Value Chain Analysis as a foundation tool for pro-poor Tourism Destination Development. Some thoughts.

Value Chain Analysis can provide a solid base for establishing Tourism Destination Development. It provides a useful framework to promote knowledge based dialogue and multi-stakeholders collaboration

Typically a Value Chain Analysis will include the following objectives:

  • to identify clusters for pro-poor tourism development
  • to analyze current economic impact from tourism with particular focus on how revenues are distributed through the local economy, and
  • to get the interest of major stakeholders in evidence based discussions on key questions such as:
    • Where in the study area is tourism showing evidence of development?
    • What income does tourism generate for the local economy?
    • Which tourism activities impact most on the poor?
    • How does tourism bring benefits to the poor by creating jobs and business opportunities?
    • What enabling environment is needed to enhance sustainable and pro-poor tourism development?

Generally the approach to pro-poor tourism development in developing countries is based on the understanding of tourism as a labour intensive sector that provides high employment opportunities especially at the bottom of the pyramid, promotes income distribution and is generally supported by a wide range of SME´s that integrates its value chain, in particular at local level.

In order to stimulate tourism capacity to benefit the poor, it is necessary to work in tourism destinations where a critical mass of investments exists, or will shortly exist, to justify interventions that can bring substantial and sustainable work and entrepreneurship opportunities that will benefit the poor.

Bearing the above in mind, the planner works toward the implementation of a destination development model or framework, which can help deliver:

  • a common vision to stakeholders about the challenges to engage in a sustainable destination development process, and
  • a simplified model that can bring a better understanding of the tourism development process, having the local community at the core of this systemic approach.

Value Chain Analysis (VCA) describes the full range of activities which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), to delivery to final consumers, including all process that added value to the production process.

From an analytical point of view, the value chain analysis perspective is useful because of its ability to identify the activities providing higher value and how economic revenues flow within the productive chain. Value chain analysis focuses on the nature of the relationships among the various actors involved in the chain, and on their implications for development such as sustainability and competitively.

Considering this conceptual Framework, VCA can be perceived as an analytical tool that can be used to understand economic trends within a specific productive chain, recognising value added at different stages of the delivery process.

For tourism destination development, the typical value chain is the combination of services that contribute to the delivery of the tourism product / experience (tour operator, accommodation, catering, entertainment and special interest activities, transport), which includes local operations (formal and informal).

Value chain analysis is a tool that permits a deeper look into economic flows and distribution within the tourism destination. Through this understanding, interventions can be planned in order to improve pro-poor benefits and sustainable development through the strength of destination governance and the implementation of economic mechanisms.

Types of value chain interventions at destination level that can enhance benefits for sustainable and pro-poor tourism development may include (Adapted from, Giuliani, 2005):

  • Volume Increase: More demand, more sales of tour packages, bed-nights, food & beverages, crafts, etc.
  • Upgrade processes: Better coordination and communication within, and between stakeholders (e.g. artisans, farmers)
  • Upgrade products: Providing better quality service, products related to market demand.
  • Add value: through the diversification of product and service offers, sustainable development, reduction of transaction costs through technology and cluster development.
  • Reduce barriers to entry: Through micro-credit, entrepreneurship development and facilitating access to technology.
  • Strengthen Innovation: Through public-private partnerships, private cooperation and investments in research.
  • Increase Local Linkages: By fiscal stimulus packages to enhance private sector purchasing from local suppliers and investment in the local workforce.

Value chain analysis aims to provide an understanding of how the tourism economic flows operate, what share of tourism expenditure reaches different groups of people in the destination, and to segment through the analysis, poor people, young people and / or women for example.

Through this segmentation it is possible to identify short, medium and long term potential interventions that could increase the economic benefits of any or all of these target groups, or even contribute to the general competitive development of the tourism destination itself.

Value Chain Analysis has been identified as an effective tool in providing an up-to-date and systemic picture of the tourism economy and its pro-poor linkages in a specific tourism destination.

VCA when conducted in an open and participatory way, has been known to be an effective and efficient tool for capacity strengthening, for helping build a common understanding of destination economic gaps, and for promoting good dialogue based on constant engagement.

References

Giuliani, E., Pietrobelli, C. and Rabelloti, R.(2005) Upgrading in Global Value Chains: Lessons from Latin American Clusters. World Development Vol. 33, No. 4, pp. 549–573.

Wood, A. (2001). Value chains: an economist’s perspective. IDS Bulletin, special issue: The Value of Value Chains, 32(3), 41–45.

With acknowledgement to SNV for the good work they are doing in this field.

Lorton Consulting, together with our specialist associates, has a wealth of experience in tourism destination planning, consultation and participation processes.

Contact Lorton Consulting about tourism planning that will enhance benefits for sustainable and pro-poor tourism development — we would be more than willing to advise you.


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