Three words: Tourism Value Chain. The topic may not be as glamorous as space tourism or as captivating as sex tourism, but it’s a novel and (hopefully) effective way to improve the lives of those who need it most.

Tourism value chain analysis and intervention is an emerging approach to poverty-alleviation through tourism. A value chain illustrates the worth a good or service gains at each step of its process from conception to sale (Porter, 1996). This concept is not new; Michael Porter utilized it as a tool for determining strategy and competitive advantage in firms. It’s not new in the tourism world either, where it has been adapted to follow the service-delivery and tourist-spending chain in tourism businesses and destinations respectively. However, it has only recently been adopted by development organizations as a sound way to measure and increase the linkage of tourism activities for the poor. And it’s showing potential.

In much the same way that Tourism Satellite Accounts are proving the legitimacy of tourism as a bastion of economic importance, development organizations are utilizing the value chain approach as a means of quantitatively measuring, and thus legitimizing their actions in poverty-alleviation through tourism. This is vital in accounting for their efforts, increasing effectiveness and efficiency, as well as helping secure further funding and raise awareness of the issues at hand (Mitchell, 2007). Tourism VCA is moving the field of poverty-alleviation through tourism into a hard science of delivering adequate results from investments of time, money and expertise.

One must keep in mind that tourism is not a way to reach the poorest in society. As Ashley and Mitchell rightly state “It is a commercial industry offering opportunities for the economically active, and often supplying a livelihood that keeps families just above the poverty line” (2007). Historically, models of fighting poverty through tourism began with utopian ideals and have steadily evolved into less normative, more pragmatic and strategic methods.

There are two prevailing streams of thought when it comes to poverty alleviation through tourism. The first is to create new products or approaches which have greater benefits for the poor. Such approaches include community-based tourism, rural tourism, responsible tourism, etc. Although this approach does create large benefit for the poor involved, it is relegated small-scale niches and is resource over-intensive (Mitchell, 2007). Efforts to spur this kind of development are too marginal to dent poverty levels.

Today, the focus is on “scaling up the contribution that tourism can make to poverty reduction” (Mitchell, 2007). Instead of creating new systems, organizations are increasingly focusing on how to modify current systems to provide the greatest benefit to the poor (i.e., business value chains). Development organizations have -for better or worse- decided to work with instead of against market forces to achieve their objectives. This is where the second train of thought comes in, which is to make current tourism products and systems, such as mass tourism, more poor-friendly. This has a smaller direct impact, but harbors potential for a much larger scope and is far less resource-intensive. Both approaches have their place and both work towards the ultimate goal of increasing living standards of the world’s poor. However, in a world of finite resources, the second approach is gaining traction.

How does it work? There are two applications for the value chain. The first is Value Chain Analysis (VCA): this entails analyzing the tourism economy value chain and identifying pro-poor linkages in a specific destination (Vignati, n.d.). A good example is this VCA analysis on The Gambia, which shows that there is a leakage of around 63% of tourist expenditures to foreign-owned businesses. The tourism value chain is typically segmented between tour organizations, accommodation, catering, entertainment, handicrafts and transport. In The Gambia the greatest direct pro-poor linkage was through handicrafts, which allowed 50% of the tourist money spent to reach the poor (Mitchell, 2006).  This allows pro-poor organizations to identify opportunities which generate the highest rate of return in terms of impact on poverty relative to their investment (Mitchell, 2007). In this case development organizations would then identify prospects for implementing programs allowing more of the poor to partake in handicraft production.

The consequent use is Value Chain Intervention, where after analyzing and prioritizing actions these organizations actually enact steps which have one of the following impacts: To increase access to the value chain for more poor people, increase the income of existing poor participants and/or increase net-non financial benefits for poor households (Mitchell, 2007). Examples of these actions include creating tourist markets for artisans to sell their wares, or organizing Gambian basket weavers into cooperatives to provide their goods in bulk as furnishings to all-inclusive resorts. The goal is not to reshape the value chain, but to remove obstacles and create opportunities for the poor to engage in it (Mitchell, 2007).

However, as all approaches, it does have its limitations. Since it focuses inherently on quantifiable attributes, it risks sidelining the ‘soft’ issues and externalities as they are more difficult to measure. Also, the intrinsic complexity of the tourism industry coupled with that of poverty-alleviation makes it complicated to accurately measure causes and impacts. Another factor leading into this is that this domain’s information-gathering capacity is insufficient at best, again, due to this complexity and lack of resources.

Employing this resource-intensive value chain analysis based on refutable and incomplete data to carry out projects which may then be inaccurately assessed can be considered a risky proposition. Another more encompassing issue is that this model assumes the current structure of tourism is a satisfactory starting point and instead of trying to create a more beneficial approach or value chain for tourism, it is merely compliant to the current one.

The question is, how effective will this method be in poverty reduction? Will its application soothe businesses, development organizations and government into a false sense of achievement, perhaps ignoring larger, more deeply ingrained issues?

And what will be the new and ’better’ approach to emerge after this one?

References:

Faal, J; Mitchell, J. (2006, December 22). The Gambian Tourist Value Chain and Prospects for Pro-Poor Tourism. Overseas Development Institute.

Mitchell, J; Ashley, C. (2007). Doing the right thing approximately not the wrong thing precisely: Challenges of monitoring impacts of pro-poor interventions in tourism value chains. Workshop on Measuring and Enhancing Impact in Tourism Value Chains, Cambodia

Porter, M. E. (1996). What is strategy? Harvard Business Review, November-December, 61-78.The value chain

Vignati, F; Laumans, Q. (n.d.). Value Chain Analysis as a Kick Off for Tourism Destination Development in Maputo City. International Conference on Sustainable Tourism in Developing Countries