How government can boost the local economic impacts of tourism. The fifth in this series of posts.
The poor can participate in the tourism industry in many ways – as workers, entrepreneurs, and neighbours. They gain new opportunities but also face constraints. They earn incomes, but also suffer costs of tourism. These impacts vary enormously from destination to destination. Enhancing the opportunities and impacts for the poor is the concern of this series of posts.
OPPORTUNITY FIVE: BRINGING LOCAL PRODUCERS INTO THE SUPPLY CHAIN
Participation in the supply chain is less visible than participation in other parts of the tourism chain economy, and its benefits are more dispersed. It is easy to see where the poor are selling tea or crafts to tourists, working in hotels, or getting guide training. But their role in supplying goods and services to hotels and other established businesses is less evident. Nevertheless, it can be vitally important to boosting local economic linkages.
In some economies, the supply chain can provide the largest cash flow to poor people. Even if local supply chain inputs are currently insignificant, boosting local inputs into the supply chain may well be the change that could lead to the largest boost in poor people’s incomes.
Put simply, the issues are:
- How can hotels and other tourism product providers buy more locally-produced products and services?
- What is the potential to buy more soft furnishings (e.g. arts, crafts, table mats, candles), operational supplies (e.g. uniforms, bed linen), guest amenities (e.g. recycled paper, handmade soaps), services (e.g. floristry, entertainment) or food items from the local economy?
CONSIDER THE OPPORTUNITIES
For hotels, buying from local producers creates opportunities through:
- Utilising more distinctive products that differentiate the hotel environment and enhance the brand.
- Increasing the range of local activities increases motivation to stay and contributes to extended length of stay
- Enabling cost-savings, if local goods or services are less expensive.
- Building networks of local collaboration
For small and micro businesses, selling products to hotels can provide an invaluable market and the opportunities to expand and improve their product quality, range and business.
WHAT LOCAL GOVERNMENT CAN DO: HELP TO LINK THE BUYERS AND SUPPLIERS
There may be local producers with goods or services to sell; and hotels or resorts with substantial demand. But if they do not know of each other, of there is not a well functioning market to link them, the hotels will buy from distant suppliers.
The most important first step is to get suppliers and buyers talking together. Government can:
- Bring them together in the hotels, farms, workshops or at an event.
- Stimulate regular communication, such as through monthly newsletters, meetings, radio programmes.
- Encourage established businesses to mentor small suppliers: recognise their mentoring inputs, perhaps in the same way as training investment is accredited.
- Ensure there is a functioning market – ways in which suppliers and buyers can agree contracts, negotiate prices, adjust quantities and prices over time, deal with transport and insurance.
WHAT HOTELS NEED TO DO
Change the payment period: micro businesses must be paid cash on delivery or within 15 days or they cannot operate.
- Think laterally rather than repeat past procurement: if new uniforms are needed, could local sewing and local design be used? If new buildings are being added, what local carvings and arts could be used for decoration?
- Change contract specifications: consider establishing a number of smaller contracts on a scale that local producers can handle; this spreads benefits and risks.
- Appoint a champion/facilitator to work on identifying and mentoring new suppliers: over time ensure they are integrated into daily operations and the normal supply chain.
- Prioritise which local products to introduce into the supply chain according to company strategy and market segment: consider also feasibility, cost, potential for quick wins, etc.
SUPPORT AGENCIES AND NGOS CAN HELP HOTELS TO SOURCE LOCALLY
- Research local skills and products, and how they can be adapted to suit hotel requirements.
- Stimulate communication between hoteliers, local entrepreneurs, and market intermediaries. Create an environment that encourages sharing of information and experiences. Increase opportunities for mentoring relationships through establishing mechanisms such as monthly newsletters, meetings, radio programmes, websites, etc.
- Support small businesses in product development, business planning, and quality standards (e.g. purchaser expectations, health and safety or other legal requirements, tourist preferences, seasonality of demand, etc). Business advice may also include simple items such as how to invoice or do stock control.
- Support credit systems that enable micro-entrepreneurs to invest in their business against the surety of a hotel contract. Encourage financial institutions to innovate to support investment by rural business people.
- Promote agro-processing and light manufacturing by the local community to supply hotels and visitors through gifts or souvenir items.
- Encourage creative collateral assessments made by financing agencies to encourage investment by locals, particularly in rural communities.
AS ALWAYS, THERE ARE SOME CHALLENGES
Opportunities to purchase goods and services locally are often not exploited because:
- Local people produce goods that could be used in hotels, but the quality, quantity and reliability of supply are often inadequate.
- Local producers are not sufficiently aware of hotel requirements, health and safety regulations, and how to match tourist preferences to the required quality.
- Local producers often cannot access credit to invest in upgrading production for the tourism sector unless they have secure contracts to show banks.
- Skills are lost as cheap imports devalue local craftsmanship.
- Hotel managers and purchasing officers have grown used to securing products from longstanding existing suppliers, and rarely consider new local options.
- Hotels pay for goods received typically after 30 or 90 days. Local producers cannot operate to this timetable, as they lack working capital, and therefore cannot afford to sell to hotels.
- Local producers can supply goods and hotels want to buy goods, but there is no operating ‘market’ between them that would put them in touch with each other, share information and negotiate contracts and delivery.
- The seasonality of local goods often does not coincide with the tourist season.
- In some countries, changes in government policy are required to encourage farmers to facilitate the development of local economic linkages and to maximise national revenues from tourism.
Future posts will deal with ‘Stimulating micro and small tourism enterprises’, ‘Employing local staff’ and more.
Contact Lorton Consulting about diversifying your village, town or region’s tourism offering to generate benefits to the poor — we would be more than willing to advise you.