Support for rural tourism: Does it make a difference?
Introduction
Tourism as a strategy for economic growth has been on the regional development agenda for some time. Peripheral and rural areas have frequently looked to it as a tool for promoting local jobs and raising the level of economic welfare (Eadington and Smith 1992; Echter 1995; Fleischer 1999). Often, this is a result of the lack of any viable alternatives or the self-fulfillment of political rhetoric (Baum and Moore 1966; Oppermann 1996). However, every reason for promoting tourism as a rural growth tool has a counter-reason for opposing this strategy. Thus, while tourism is heralded as job-generating, it is also blamed for creating low wages and only seasonal employment (Fredrick 1993). When proponents claim that tourism is environmentally friendly, opponents counter that it degrades valuable and finite resources (Gibson 1993). The argument that it generates new demand in the local economy is challenged by the assertion that it displaces existing demand (Hoy 1996). Further, the position that it generates new revenue sources for rural authorities is often challenged by assertions to the contrary: tourism development is a fiscal burden for many small, rural governments, exerting a disproportionate drain on the local service base (Fredrick 1993). Even though the suitability of rural tourism as a tool for economic development has not been fully demonstrated, public agencies continue to support it as a growth strategy. Hall and Jenkins (1997), for example, list 18 different policy instruments used by governments for the promotion of rural tourism. They include regulatory instruments, voluntary instruments, expenditures, financial incentives, and non-intervention decisions. Decision-makers and practitioners alike still perceive rural tourism as an appropriate development path to take.
An often-overlooked fact in the debate about economic development via tourism is that, in many rural areas, its promotion is synonymous with small-business promotion and the industry is heavily characterized by small, family-centered enterprises (Fleischer and Pizam 1997; Wales Tourism Board 1994). In the United States, for instance, according to the Small Business Administration, almost 99% of all tourism-related establishments in rural areas qualify as small businesses (Galston and Baehler 1995). Similarly in the United Kingdom, such rural developments are characterized by a large number of small, family-based businesses (Rural Development Commission 1995).
A survey of rural tourism in Israel has found that almost all economic activity in this industry can be classified as small and family-based (Fleischer, Rotem and Banin 1993). In the rural sector, 82% of all establishments employ less than six employees and in the accommodation (bed and breakfast) subsector, 95% employ less than three workers. In addition, most of this laborforce (64%) is female. While tourism is a highly prevalent form of income diversification for farm enterprises, it accounts for less than 30% of the income for 60% of the farms involved in this business. Furthermore, the total value of its output is estimated at $35 million. This represents only 1% of the total tourism output in Israel.
However, despite the market overlap between small-business and rural tourism enterprises, surprisingly little is known about the effects of the former (Slee, Farr and Snowdon 1997), particularly in some important areas. The effectiveness of this type of growth strategy in generating local jobs and incomes has received limited attention. This has important implications for policy formulation. First, there is the issue of neutrality in public policy. Is there any justification for targeting assistance to small-tourism enterprises rather than to the small-firm universe as a whole? Second, is it worth assisting this form of economic activity and what is its cost-effectiveness? Third, even if a rationale for this kind of public support can be established, little knowledge has been acquired as to the welfare impacts of this form of activity. Does it have a redistributive effect, serving those target populations that are most in need? What are the social costs and benefits arising from public support for this activity?
Intuitively, this form of economic development is associated with the generation of local jobs and incomes. The typical enterprise, such as the bed-and-breakfast establishment, is perceived as having low barriers to entry; employing existing, underutilized (fixed and human) capital; and placing modest demands on public assistance (Slee et al 1997). On the other hand, the small-scale character of these operations could perhaps render them marginal in terms of any efforts to improve local welfare. In fact, supporting them may only serve to cannibalize existing enterprises as demand is redivided among more operators. This paper attempts to deal with these issues using empirical evidence from public support for rural tourism establishments in Israel. It analyzes the rationale for supporting small-scale rural businesses and reviews the state of knowledge about the effectiveness of this assistance. This includes a description of the loan and guarantee program that forms the empirical basis for this analysis and the methodology employed to assess the effects of support to such enterprises. The approach taken here involves creating an “employment account” for the program and then deriving a cost–benefit ratio on that basis. In this respect, issues of both efficiency of the program and its distributive effects are dealt with. The paper represents an empirical and methodological contribution due to the current dearth of empirical substance on this subject. It also presents an assessment methodology that can be used by planners and economic development practitioners when grappling with strategy choices.
Section snippets
Support for rural tourism
‘Market failure’ forms the basic rationale for public-sector support programs. In tourism and regional development, the case for intervention arises when private markets fail to provide public goods, when externalities are created, or when information asymmetries occur (Bartik 1990; Hartley and Hooper 1993). The latter is particularly apposite in the case of rural tourism. As noted earlier, most enterprises are small businesses. They can be excluded from the capital market because of the
Conclusion
The empirical evidence presented in this paper makes a case for the public support of small-scale tourism enterprises. On the basis of the particular program and context examined here, it can be seen that support for such firms is more cost-effective than for other ones; although it should be noted that the subsidy-per-job estimates for the whole universe of small firms were generally low. Expanding the analysis into a full-blown cost–benefit account serves to reiterate this point. While both
Acknowledgements
Funding for this research was provided by the Department for Rural and Urban Development of the Jewish Agency.
Aliza Fleischer is Lecturer in the Department of Agricultural Economics and Management at the Hebrew University of Jerusalem (PO Box 12, Rehovot, Israel. Email 〈[email protected]〉). Her research interests involve tourism economics and evaluation of open space and landscape and regional and rural development.
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Aliza Fleischer is Lecturer in the Department of Agricultural Economics and Management at the Hebrew University of Jerusalem (PO Box 12, Rehovot, Israel. Email 〈[email protected]〉). Her research interests involve tourism economics and evaluation of open space and landscape and regional and rural development.
Daniel Felsenstein is Senior Lecturer in the Department of Geography, Hebrew University of Jerusalem. His research interests are in local and regional economic development, impact evaluation methodology and practice.