Boosting the Philippine Economy through Sustainable Tourism

By Fernando Martin Roxas, John Paolo Rivera, and Eylla Laire Gutierrez

Sustainability has become a concern in the travel and tourism industry. Stakeholders need to fully understand the issues, identify the root causes of the problem, and create interventions that will involve multiple sectors. However, understanding how sustainable tourism works is complex due to the compounded issues persisting. Hence, we use the systems thinking approach because of its ability to identify the underlying structures that influence sustainable tourism development.

 

Applying Systems Thinking to Sustainable Tourism

More than an industry, tourism is considered a system characterised by complex relationships among interacting actors, stakeholders, environments, as well as the actions done in the past and in the present, and future trends. This includes factors such as government policies, economic competition, and local community participation, among others. Thus, tourism is best understood using a Systems Thinking (ST) approach. By providing a systemic and holistic view of tourism, ST shows how the industry relates with other systems in relation to the whole. Through this approach, the nodes at which intervention is needed, the modes, and the actors to be involved in an intervention are properly identified.

Tourism has emerged as a critical sector generating economic growth and development across countries in the world. According to the World Travel and Tourism Council (WTTC), in 2017, tourism accounted for about 10.4% (USD 8 trillion) of global Gross Domestic Product (GDP), 5% (USD 1 trillion) of total investments, 7% (USD 1.5 trillion) of the world’s exports, and 1 in 10 jobs (313 million jobs) in the global economy. Also, in 2017, the United Nations World Tourism Organisation (UNWTO) World Tourism Barometer reported that international tourist arrivals increased by 7%, which is expected to continue in 2018 at a rate of 4% to 5%. To support this momentum, efforts and initiatives have been made to pursue sustainable tourism. Sustainable tourism here is understood as the triple bottom line framework (i.e., people, planet, profit) defined as the synergy between and among the social, environmental, and economic facets of tourism. This requires concerted and cooperative efforts among stakeholders in the industry.

The global trend is mirrored by the Philippine experience. According to the Department of Tourism (DOT), there was an 11% increase in foreign tourist arrivals in 2017 (i.e., 6.6 million arrivals in 2017 from 5.97 million in 2016). Economically, tourism contributed 21.1% (USD 66.3 billion) to GDP, 2.4% (USD 1.9 billion) to total investments, 8% (USD 7.5 billion) to total exports, and 19.2% (7.8 million jobs) to total employment, as per the 2017 report from the WTTC. Tourist arrivals comprising the said figures were mainly from the Republic of Korea, the People’s Republic of China, the United States of America, Japan, and Australia. The DOT deemed this as a significant milestone despite numerous political controversies, natural calamities, security concerns, and travel advisories that affected the industry in 2017. The DOT is optimistic of a sustained increasing trend given an expanded marketing plan that will promote new and underrated destinations, improved quality of tourism products and services, and enhanced human resource capacity.

 

Causal Relationships Among Tourism Stakeholders

ST approach utilises causal loop diagrams (CLDs) that illustrate the cause-effect relationships among components of the system. Some of these components are considered critical drivers that indicate a threshold wherein the system can experience significant or irreversible changes. See Figure 1 for a full CLD illustrating how sustainable tourism works.

In the context of sustainability-challenged destinations, we can see from Figure 1 that the growth of the travel and tourism industry, say ecotourism, will foster the establishment of profitable businesses that can create local jobs, thereby providing livelihood to communities. This will serve as an incentive for community members to exercise conservation and engage in sustainable practices, further driving ecotourism (see R1).

When local businesses become profitable, they will have the capacity to invest in the training of their employees. Consequently, this will improve the quality of their services, which will be reflected in the enhanced satisfaction of tourists that will entice more tourists to visit (see R2). However, the increase in the number of tourists in the destination can lead to economic development at the expense of sustainability and limits to growth.

Increased tourist arrivals can create environmental stress that will threaten a destination’s sustainability and environmental integrity (see B1). In the same manner, the booming industry in ecotourism destinations will lead to in-migration where individuals seeking employment and profit opportunities move into the destination. This will result to increased local population, which then again leads to increased environmental stress (see B2). The influx of individuals on an ecotourism destination, employment, and business opportunities raise concerns regarding carrying capacity (see B6). Carrying capacity covers both the maximum number of tourists at any time and the activities they engage in, such as nightly parties by the beach, business enterprises built along the shoreline and waterways, destructive water sport activities, among others.

The DOT is optimistic of a sustained increasing trend given an expanded marketing plan that will promote new and underrated destinations, improved quality of tourism products and services, and enhanced human resource capacity.

While the presence of businesses and local jobs become essential to create more economic opportunities, the situation is at risk for elite-capture, wherein wealthier members of the community monopolise profit-generating features of a destination. Without proper regulation, this will lead to destructive commercialism (see B3). Fostering community ownership where local community members take initiative in practicing conservation may reduce elite capture (see B5). The combination of crass commercialism and weak community leadership thus threatens sustainability. It becomes problematic when big businesses dictate the destination’s development path.

Identified threats to sustainability may be mitigated through proper interventions. It is therefore important to set up capacity management (see B6), and community governance (see B5) before a destination hit sustainability thresholds. Likewise, environmental stress may be addressed through capacity management where both the public and private sector collaborate in regulating and managing ecotourism destinations.

 

Sustainable Tourism Generates Economic Activities

We provide empirical evidence for our hypothesis that tourism is good for the Philippine economy. Using Philippine tourism data sourced from the World Data Atlas (from 2000 to 2017), we empirically establish the relationship among the following constructs – tourism performance (measured by tourism contribution to Gross Domestic Product [GDP]); tourism employment (measured by the total number of jobs created by the tourism industry); poverty incidence (measured by the proportion of the population with per capita income less than the per capita poverty threshold); inequality in income distribution (measured by the Gini coefficient). We constructed a simple correlation matrix, as seen from Table 1; and we estimated simple regressions, as seen from Figure 2, indicating the following findings, all of which are statistically significant:

The booming industry in ecotourism destinations will lead to in-migration where individuals seeking employment and profit opportunities move into the destination.

There is a positive relationship between tourism performance and tourism employment (i.e., the growth in tourism creates more job opportunities);

There is a negative relationship between tourism performance and poverty incidence (i.e., the growth in tourism boosts poverty alleviation);

There is a negative relationship between tourism employment and poverty incidence (i.e, the creation of jobs in tourism can reduce poverty);

There is a negative relationship between tourism performance and income distribution (i.e, with Gini coefficient as measure of income distribution, growth in tourism improves income distribution due to the creation of jobs and income-earning opportunities)

There is a negative relationship between tourism employment and income distribution (i.e, with Gini coefficient as measure of income distribution, growth in tourism employment improves income distribution due to income-earning opportunities for the local communities)

These empirical findings are consistent with the CLD presented in Figure 1. Undeniably, tourism has the capacity to improve the lives of the people taking part in its growth. It has become one of the country’s biggest employers. Unlike manufacturing, tourism can provide employment to a wide variety of educational preparation, skill levels or formal training. Tourism can match the revenue potential of Overseas Filipino Worker (OFW) remittances without a single Filipino having to leave the country to look for jobs. By its very nature, tourism is often labour intensive, needing large numbers of people to service rooms, prepare food, and maintain hotel infrastructure. These are jobs that should be relatively secure from the advancement of technology and artificial intelligence. Moreover, the industry can offer employment to Filipinos living in remote places. As the growing trends continue for unexplored destinations, the impact of tourism spreads to more far-flung parts of the country. Of equal importance, tourism has the capacity to replace prohibited jobs with legitimate income sources. It is not just about offering opportunities to people who might otherwise struggle to find work, it is also about providing them avenues to derive decent income streams that will allow them to escape from the chains of poverty. In the long run, such effects can allow for greater poverty alleviation and improvement in the distribution of income in the country.

 

Conclusions

Together with long-existing problems and issues in the travel and tourism industry, sustainability considerations have become a primary concern. Tourism stakeholders need to fully understand the issues, identify the root causes of the problem, and create interventions that will involve multiple sectors. However, understanding how sustainable tourism works is complex due to the compounded issues persisting. As such, conventional solutions are incapable of addressing the structural deficiencies that allow problems to continuously exist.

Hence, we use the ST approach because of its ability to illustrate and deal effectively with the issues critical to sustainable tourism. It identifies the underlying structures that influence sustainable tourism development. Our analysis proposes that tourism stakeholders find solutions that are beneficial to the industry in the long term despite difficulties, myriad interactions, and the shortfalls of straightforward obvious solutions. As such, government agencies, tourism planners and operators, among others, would need to grasp the dynamic and complex nature of the industry. We propose a holistic viewpoint where seemingly isolated and independent issues associated with the industry are streamlined and integrated. Operationally, a successful sustainable tourism program would require coordinated efforts from tourism authorities, peace and order, infrastructure, health and local governments, among others.

As seen from Figure 1, tourism stakeholders are crucial in the feedback loops we have illustrated. They can play a dual role in reinforcing or inhibiting sustainability efforts. Hence, cooperation and coordination with value chain participants in every stage of the experience is necessary to ensure sustainable tourism. Such is the case because unregulated and rapid tourism growth undermines sustainability due to its inadvertent effects. In making sustainable tourism work, we have established that profitable businesses, local jobs, and tourist satisfaction are critical drivers. 

Involving those who are participating and affected by tourism activities can prompt the sense of ownership of community members. Hence, they will instinctively conserve a tourist attraction. Meanwhile, tourist satisfaction leads to more tourist arrivals posing environmental stress and warranting specific and long-term capacity management policies (i.e., limiting tourist arrivals, raising prices, incentivising sustainable practices, among others).

A successful sustainable tourism program would require coordinated efforts from tourism authorities, peace and order, infrastructure, health and local governments, among others.

It is the responsibility of the local government, local communities, and private enterprises to design, and to enforce regulations that will create long-term benefits that will outweigh short-term costs. Therefore, policies must go beyond generating arrivals that disregard carrying capacity limits. Instead, policies must focus on the creation and implementation of strategic plans that emphasise environmental sustainability, profitable enterprises and local community involvement. In the long run, tourism will truly be a vehicle to increase employment, to create more income-generating activities, and to reduce poverty incidence.   

About the Author

Fernando Martin Roxas, D.B.A. is a Full Professor at the Asian Institute of Management (AIM). He teaches Operations Management, Quantitative Analysis, Systems Thinking, Project Management, and other basic modules in the Degree and Executive Learning Programs of the Institute. He is also the Executive Director of the Asian Institute of Management (AIM) – Dr. Andrew L. Tan Center for Tourism. He obtained his Doctor in Business Administration from De La Salle University, Manila, Philippines. Email: [email protected]

John Paolo Rivera, Ph.D. is the Associate Director of the Asian Institute of Management (AIM) – Dr. Andrew L. Tan Center for Tourism. Prior to joining AIM, he was Associate Professor at the School of Economics of De La Salle University, Manila, Philippines, where he also obtained his Doctor of Philosophy in Economics. Email: [email protected]

Eylla Laire Gutierrez is a Research Coordinator of the Asian Institute of Management (AIM) – Dr. Andrew L. Tan Center for Tourism. Prior to joining AIM, she served as intern at the Konrad Adenauer Stiftung (KAS) Philippines. She is currently completing her Master of Arts in Development Policy at De La Salle University, Manila, Philippines. Email: [email protected]

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The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.