Travel &Tourism beyond the downturn - a critical competitiveness driver for developing countries
Following a difficult period that recast much of the travel & tourism (T&T) industry’s landscape, the sector is slowly recovering from the economic downturn, with emerging market economies leading the way and advanced economies, for the most part, lagging behind.
Least developed countries (LDCs) stand to benefit greatly from a rebound in global tourism and an increase in their share of the market. Despite accounting for approximately 12% of the world’s population, according to the most recent data from the United Nations World Tourism Organization (UNWTO), LDCs today account for only about 1% of international tourism receipts and less than 2% of international tourist arrivals.
A growing national tourism sector contributes to employment, raises national income, and can improve the balance of payments. It spills over into much of the rest of the economy through demand for local products and services, and by improving transportation, infrastructure, and utilities, inter alia. The sector has thus become an important driver of growth and prosperity, and it can also play a role in poverty reduction, particularly within developing countries.
Tourism’s potential to encourage economic growth and development led the World Economic Forum, five years ago, to embark on a project of assessing the T&T competitiveness of nations around the world. Although developing the T&T sector provides many benefits, numerous obstacles at the national level continue to hinder its development. The Travel & Tourism Competitiveness Index, first introduced by the World Economic Forum in 2007, aims to measure the many different regulatory and business-related issues that have been identified as levers for improving T&T competitiveness in countries around the world.
The Index aims to measure the factors and policies that make it attractive to develop the T&T sector in different countries, based on 14 pillars of T&T competitiveness:
1. Policy rules and regulations
2. Environmental sustainability
3. Safety and security
4. Health and hygiene
5. Prioritization of travel & tourism
6. Air transport infrastructure
7. Ground transport infrastructure
8. Tourism infrastructure
9. Information and communications technology infrastructure
10. Price competitiveness
11. Human resources
12. Affinity for travel & tourism
13. Natural resources
14. Cultural resources.
Of the 139 countries covered in the most recent Index, a large proportion is from the developing world and 22 have been classified by the United Nations Development Programme (UNDP) as LDCs. What we have seen over the years is that, perhaps not surprisingly, LDCs are ranked low compared with most other economies in line with their small share of international tourism activity mentioned above. Indeed, all of the 22 LDCs place in the bottom half of the ranking and 14 of the bottom 20 overall are LDCs.
As the figure shows, compared with the average of the Organization for Economic Co-operation and Development (OECD) countries, on average LDCs score lower in 12 of the 14 pillars, as well as in the overall Index. On a scale of 1 to 7, where higher scores represent better performance, LDCs attain an average score of just 3.2 in the Index, well behind the OECD average score of 4.3 (and Switzerland’s score of 5.7, as the best performer).
Comparing performances within the individual pillars, some of the largest gaps compared with the OECD are in various aspects of physical infrastructure, particularly tourism and information and communications technology infrastructure, but also ground and air transport infrastructure. Similarly, indicators related to the countries’ human infrastructure are also significantly weaker. Well qualified people are less likely to be available to work in the sector in LDCs, with a score of 3.8 versus the OECD average of 4.9. Related to this issue, poor health and hygiene conditions are also of concern, with the LDC score of 2.0 lagging significantly behind the OECD average of 4.7. All of these issues represent shortcomings with regard to the T&T competitiveness of LDCs, and indeed in terms of their development more generally.
On the other hand, the figure also shows that there are two areas where LDCs actually outperform OECD countries on average: for the price competitiveness of the T&T industry, and the quality and richness of natural resources. By natural resources, we mean the extent to which countries are able to offer travellers access to natural assets, such as natural World Heritage sites, rich fauna, and well protected natural environments. In other words, LDCs have the potential to offer very good value (rich natural resources) for money (price competitiveness). In addition, LDCs perform very close to the OECD average with regard to the affinity for travel and tourism, as well as for the extent to which the sector is being developed in a sustainable way.
Indeed, drilling into the details on the Index, and looking at individual countries, the data show that there are some particularly strong performers in specific areas among LDCs. Eleven of them are in the top half of the ranking for their price competitiveness, with both Gambia and Nepal in the top ten. These are also countries that prioritize the development of the tourism sector. Additionally, many LDCs show a strong affinity for tourism and a welcoming attitude toward foreign travellers, particularly in Cambodia, Gambia and Senegal. A majority of LDCs are in the top half of the ranking for the quality of natural resources, with Tanzania notably ranked 2nd out of 139 economies, Zambia 15th and Uganda 29th.
Moreover, it is important to keep in mind that the underdevelopment of many of the infrastructure aspects measured by the Index represent a significant opportunity for those wishing to invest in the sector, particularly given the natural and cultural endowments in many developing economies. Indeed, the fact that many LDCs rank lower for their cultural resources does not reflect a lack of cultural attributes – many LDCs have rich cultural offerings. Rather, what we see is that these inherent strong attributes are not yet being fully harnessed and preserved to attract tourists.
Finally, while building both physical and human infrastructure require significant time and resources to develop and improve, we have also identified a number of shorter-term measures that developing countries can take to improve the prospects for developing their T&T sector. For example, why does it cost more than three times as much to start a business in these 22 LDCs on average than in OECD countries, as shown by the World Bank’s Doing Business data? Such aspects of the institutional and policy environments can be made more supportive of developing the sector, theoretically with the stroke of a pen, given sufficient political will.
In sum, the Index’s results indicate that given their many inherent strengths and attractions, as long as they carry out the necessary policy reforms, and if they can manage to encourage sufficient investments, LDCs have the potential to become an important force in international tourism in the future. This in turn would enable them to reap the benefits from the related positive spillovers and development opportunities that the sector’s development offers.
Travel & Tourism CompetitivenessReport 2011
For the past five years the World Economic Forum has carried out an in-depth analysis of the travel & tourism competitiveness of economies around the world. The aim is to enhance multi-stakeholder dialogue to promote strong and sustainable national travel & tourism industries and their contribution to international economic development. The Travel & Tourism Competitiveness Report 2011, ‘Beyond the Downturn’, examines the many issue affecting the competitiveness of countries’ travel and tourism industries in light of the cautious optimistic outlook and the many challenges facing the sector.