Tourism management

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The Importance of Tourism

The increasing significance of tourism is due to different economic, social and environmental factors that influence travel habits. Growing incomes, more free time as well as higher life expectancy, mobility and progress in communication technology are some of the reasons why travel has become an important part of almost everybody's life. Since 1991 the World Travel and Tourism Council (WTTC) has been measuring the economic impact of travel and tourism for the world, regions and OECD (Organisation for Economic Co-operation and Development) countries.

In 1992 they already stated that Tourism is one of the world's largest industries and a generator of quality jobs. Four years ago the tourism sector was estimated to generate $4.7 trillion of economic activity and over 221 million jobs (direct and indirect). By the year 2015 tourism is projected to grow to $7.8 trillion of economic activity and over 269 million jobs. As shown in the figure below tourism has become a major economic as well as social force in the world. (Goeldner, 2006, p. 26) Unfortunately, these figures do not inform us about how much of the benefits of tourism are actually benefiting the country where the holiday is spent. The economic benefits of tourism development to developing countries are limited.

Purpose of the assignment

In relation to the shown importance of tourism further issues and new strategies of tourism and tourism development have emerged during the last few years. For instance one of the key issues in the twenty-first century will be what strategies can be used to tackle poverty (Cooper et al, 2008, p. 22). According to the World Development Report (2001) almost half of the world's 6 billion inhabitans live on less than US$2 a day and a fifth live below the international poverty line - less than US$1 a day.

(World Development Report 2000a, p. 4) At the same time many developing countries have experienced considerable growth in international tourist arrivals and receipts. During the last twenty years tourism was either an important sector of the economy (accounting for more than 2% of GDP or 5% exports), or growing rapidly (aggregate growth greater than 50%) in almost half of the low income counries and in almost all of the lower-middle income countries. (Deloitte and Touche, International Institute for Environment and Development, 1999, pp. 5-6) This demonstrates that toursim can play a huge role regarding social and economical development. The WTTC's (World Travel and Tourism Council) vision in the twenty-first century states:

"New Tourism is a force capeable of dramatically improving economic and social well- being right across the globe, waiting to be unleashed."

(WTTC, 2003)

Because of the author's pre-research to this assignment he found Indonesia as a suitable model for implementation of tourism into a developing country with concern of poverty alleviation. Apart from the author's interest, he will put Bali into his main concern because this island plays a major role regarding tourism in Indonesia. There he will explain and evaluate certain aspect in relation to Bali. He will evaluate the impacts of tourism for this destination, explain pro-poor tourism and identify how effectively pro-poor tourism is catered for within the planning of tourism, to see how tourism can be an agent of poverty reduction.

Basic Definitions

Definition of Tourism

Tourism is a term that is subject to diverse interpretation with quite a variety of definitions and descriptions found in the literature. This reflects the multidisciplinary nature of the topic and abstract nature of the term tourism. To complicate the matter even further there is no such single or only valid definition. As R. Sharpley and D. Telfer state in their book "Tourism and Development" there are two approaches of defining tourism. They differentiate between technical and conceptual definitions. The technical one basically describes types of tourists and different tourism activities. Such as that a tourist is someone who travels for 24 hours or more outside his or her normal country of residence for no matter what reason (business, pleasure, health or other purposes). The excursionist however is someone who stays in a destination for less than 24 hours. (R. Sharpley, 2002, p. 21)

The conceptual definition on the other hand describes tourism to be seen from an essentially anthropological view, which means the role of tourism itself.

Definition of Poverty

Development agencies have realised that poverty is multidimensional and can be seen as depriving individuals of capability. The word bank though describes poverty as a word for hunger, lack of shelter, sickness and powerlessness. There are also more ways of measure poverty rather than only by income, such as health, education or housing. (Cooper, 2008, p. 22) Anyhow the most obvious kind to measuring poverty is by using income. Therefore a person is to be seen as poor if the income falls below a level of necessary to meet basic needs. As already mentioned in the earlier paragraph the World Bank's definition of poverty is anyone living on less than one US dollar per day, the measure of US$2 is also commonly used. (Cooper, 2008, p. 22) In order to describe the tourism in developing countries, it is necessary to clarify, which countries hold this status.

Definition of Developing Countries

The term "developing country" was formed at the beginning of the 1950's. It stands for a group of countries, whose level of development is small compared with the developed nations. The criteria for the developing countries would be: economical, ecological, demographic, socio-cultural and political status. (translated by author, Brockhaus PLC, 2009, homepage)

The Organisation for Economic Co-operation and Development (OECD) divides the developing countries into the following categories:

  1. LICs (Low Income Countries, per capita GDP (Gross Domestic Product) < $935 in 2007),
  2. LMICs (Lower Middle Income Countries, per capita GDP $936-$3,705 in 2007),
  3. UMICs (Upper Middle Income Countries, per capita GDP $3,706-$11,455 in 2007)


General Information

Indonesia consists of 13,000 islands, from which 6,000 are uninhabited and which extend to over 5,150 km. The total area of Indonesia is over 1,900,000 km². Bali covers only 0.3% of this stated surface and is neighboring with the island Java to the west and Nusa to the right (Lonely Planet, 1997, p.31) The official language is Bahasa Indonesia, whereby each ethnical group has its own language. Altogether this accounts to approximately 200 different languages.

Due to the ideal of Indonesia between the Indian and the Pacific ocean, many different cultural, religious, political and economic influences can be found on the islands. Thus European colonialists, Arab and Indian sea traders, as well as members of the Chinese kingdoms have left their mark in Indonesia. Indian trades people have spread the Buddhism and Hinduism religion. Starting from the 13th century A.D. the Islamic influence increased by Arab dealers. Today 88% of the Indonesian population are Muslims, 8% Christians, 2% Hindus and 1% Buddhist. (Translated by the author from Federal Foreign Office, 2009, Homepage).

In 1966 Soeherto took over the leadership of Indonesia. Soeherto's most important legacy was political and economic stability. This appears to be when the modernization theory was realized. The Indonesian Government began to strive to promote the economy. They reached a rapid economic growth in Indonesia in the 1980's. (Lonely Planet, 1997, p.30)

Tourism Development in Indonesia (Bali)

At the end of the 1960's the Indonesian government began to promote Bali as the island for international tourism. Therefore they consulted French tourism experts, in order to develop a master plan. In 1971 "The Master Plan for the Development of tourism in Bali" was terminated. (Picard, 1993, p.79)

The United Nation Development Program (UNDP) and the International Bank for Reconstruction and Development promoted this plan. (McCarthy, 1994, p.14) When in 1963 the first multilevel hotel was built and at the 01.08.1969 the large international airport was opened, the final way to mass tourism was smoothed. Picard indicates that in 1969 11,000 tourists came directly to Bali, 120,000 in 1979 and 436,000 in 1989. (Wall, 1995, p.60) In 2007 tourism had a share of 16.7% on the total GDP of Indonesia. Statistics of BPS which supply statistics for Indonesia show, that 232,164 tourists came to Bali (Ngurah Rai Airport) in 2009. With the entire number of visitors in Indonesia of 482,763 foreign tourists, almost 50% of the Tourists spend their vacation in Bali. (BPS Statistics Indonesia, 2009, homepage, Attachment 2) Without the promotion of tourism on Bali by the government, the island probably would not have been to adjust so fast and so comprehensively to tourism.

General travel motives

The next question is the travel motive of the guests. What are the characteristics of Bali and what attracts the travelers? On one hand the natural-space potential of the island plays a large role. Apart from the scenic characteristics also the culture, the religion and their customs attract travelers. Terms arose like "Garden of Eden" or "Last Paradise", which was established by early travelers into the 1930's. (Picard, 1993, p.77) Bali is often called "living museum". (Picard, 1993, pp.74-77) „Thus is that culture - in the case in point, mostly narrowed down to artistic and ceremonial manifestations - became Bali's defining feature, providing the common ground on which Dutch orientalists and American anthropologists, artists and tourists could encounter each other and the Balinese." (Picard, 1993, p.76)

With the rising number of visitors the "Last Paradise" Bali was threatened to become the "Paradise Lost". (Picard, 1993, p.77) On one hand Bali had become a "living museum" to promote the tourism on the island.

On the other hand the Balinese culture needs to be protected and a possibility should be found to protect the culture against the influences of the modern world brought to the island by the presence of the foreign visitors. (Picard, 1993, p.77)

Pro-poor Tourism


Pro-poor tourism is defined as tourism that generates net benefits for the poor. Net benefits means benefits outweigh costs. This covers economic as well as environmental social and cultural dimensions. PPT arises from a belief that tourism can and should contribute to pro-poor economic growth. Pro-poor is growth that enables the poor to actively participate in and benefit from economic activity. (Hall, 2007, p. 32)

Another way of dircibing pro-poor tourism can be found on

The author from this page also states that

"...PPT is tourism that results in increased net benefits for poor people." (PPT Partnership, 2009, homepage)

PPT has to be seen as an approach to tourism development and management. It strengthens the linkages between tourism businesses and poor people. The contribution of tourism to reduce poverty makes people able to participate more effectively in product development. Pro-poor tourism will only be an appropriate intervention in some countries, so selectivity is needed. It is most likely to be appropriate and feasible where there is (Deloitte and Touche, International Institute for Environment and Development, 2009, p.27:)

  • "an existing and growing tourism product (but not so well-established that the status quo is entrenched)
  • government commitment to pro-poor growth, or specifically to pro-poor tourism (or at least passive acceptance of efforts by others within a destination)
  • a large number of poor people, in areas with tourism assets;
  • an opportunity for intervention which would complement not duplicate activities of others."

Leakages and Linkages in Tourism

Financial leakages in tourism occur when revenues arising from tourism-related economic activities in destination countries are not available for (re-)investment or consumption of goods and services in the same countries. Financial resources 'leak away' from the destination country to another country, particularly when the tourism company is based abroad and when tourism-related goods and services are being imported to the destination country. (Hematti, 1999, p. 30)

Financial leakages occur in many economic sectors, not only in tourism. However, the issue should be addressed as tourism development is being portrayed as one of the few profitable economic sectors for developing countries. A significant percentage of the revenues arising from tourism - common estimates suggest approximately 60 to 75% (e.g. Wheat, 1998, pp. 8-9) leaks away from developing countries because of foreign ownership of the industry, imported resources, foreign tour operators and airlines and other reasons. And: 'The poorer a developing country, the higher the probability that the gross expenditures for tourism are greater than the earnings out of it' (Scherrer, 1986, p. 160, translated by the author). 'Furthermore, the more a developing country relies on luxury tourism, the greater is the danger of high expenditures for imported luxury goods' (Maurer et al., 1992, p. 58, translation by the author). It is also stated that the more established a country becomes as a tourism destination, the greater the proportion of revenue which leaks away (Wheat, 1998, p. 27). According to Wheat (1998), 35% of tourism earnings are lost due to investment in imported goods in countries which are big and economically developed, whereas especially in small island developing states, the leakage is about 40% to 60%. The leakage can even be up to 90% in remote and scarcely developed countries.

Finding linkages between the tourism industry and other sectors of local economies is still an under-researched area. Issues like package tourism, imported food or linkages to agriculture are more frequently being addressed than foreign direct investment or education and training of local and indigenous communities. Comparable statistics are rare as there are various units based on which tourism's contribution to the economy can be measured. Different countries have different ways of estimating GDP, export expenditures, and so on.

Measuring leakages is another problem. For many countries, there are no such data. Travel receipts are commonly used as a proxy for tourism earnings (Sinclair 1991) but it is sometimes unclear if only direct earnings from the tourism sector are taken into account or if earnings from indirectly related sectors are being included.

PPT Key Prinicples

Pro-poor tourism is guided by underlying principles, which can be seen in the chart below. These principles recognize that poverty is multi-dimensional. It is much more than only considering income to include a range of livelihood impacts from tourism.

PPT Strategies

There are various types of pro poor tourism strategies, e.g. increasing local employment to develop mechanisms for consultation. Almost every type of company can be incolved in pro-poor tourism. Nevertheless the main idea of concern and also the main issue is not really the type of enterprise or type of tourism but that there is an increase of net benefits that actually go to the poor people.

Hall mentiones in his book "Pro-poor tourism: Who benefits?" that Roe and Urquhart (2004) summerise the focus areas of PPT into three specific but overlapping strategies that include economic benefits, non-economic impacts and reforming the policy process. This includes for example reforming decision-making processes so that needs of the poor are prioritised and recognised. The strategies need to be pursued across levels and involve a variety of stakeholders (government, international donors and investors, tour operators, tourists and the poor). (Hall, 2007, p.38)

On the webpage of the PPT-Partership one will find the strategies more detailed:

Strategies focused on economic benefits include:

  • High employment of locals and payment of fair and high wages
  • More business opportunities for the poor: For example businesses that sell inputs like fuel or materials to tourism operations as well as businesses that offer products directly to tourists (tea, crafts, etc..)
  • Development of collective community income which are usually estabilshed in cooperations with tourism operators (e.g.donations)

Strategies to enhance other livelihood benefits focus on:

  • Training and staff-development
  • Decrease of mad environmental impacts of tourism on the poor
  • Increase of positive social and cultural impacts of tourism
  • Better access to sevices and infrastructure (health care, security, water supplies, transport)

Strategies considering policy, process and participation can build:

  • A highly supportive policy and planing framwork that enables participation by the poor
  • Stronger participation by the poor in decision making (to play an important role and have a say)
  • PPT-Partnerships also in the private sector
  • Laying a basis of communication by involvement, sharing news and having meetings

These PPT strategies aim to unlock opportunites and potential for economic gain. Reducing poverty requires pro-poor growth. Case studies show applying PPT strategies can tilt tourism at the margin and generate new opportunities and benefits for the poor.