Do “all-inclusive” resorts exclude local businesses?

jamaica-holidayA 2015 paper by Gordon and Harris, recently uploaded to the IDEAS database, looks at how successful attempts by the government of Jamaica to link tourism businesses to local suppliers have been.

In the “all-inclusive” model of tourism, guests pay upfront for a holiday inclusive of round-trip airport/hotel transfers and accommodations with unlimited food, drinks and entertainment. It is attractive to guests in that they know in advance what the total cost of the holiday is, rather than having to budget for food and drink, with only souvenirs and any excursions away from the all-inclusive hotel or resort having to be paid for.

But for destinations where all-inclusive holidays are a large part of the tourism business, it means there is less opportunity for local restaurants, bars and other leisure businesses to benefit from tourist spending. There can be greater economic leakage from the destination, there is a reduced multiplier effect of tourist spending as money fails to make it into the wider community, and the model prevents guests from experiencing the culture of the destination since they seldom interact with the community. To counter this, there are initiatives whereby resorts offer excursions operated by local businesses, and attempts to promote use of local suppliers for food and drink.

The all-inclusive model in Jamaica was pioneered by SuperClubs starting with the Couples Hotel in Ocho Rios in 1978. Two Jamaican-controlled businesses, SuperClubs and Sandals, operate many of the all-inclusive hotels, although international and Spanish businesses also have large presences in Jamaica. Tourism is a dominant part of Jamaica’s economy, with the total direct and indirect contribution to GDP and employment estimated to be 27% and 25%, respectively. But the predominance of the all-inclusive hotel model insulates visitors from other local markets, and Jamaica ranks among the lowest countries in the Western hemisphere in terms of standard of living. In 2010, the Jamaican government in collaboration with the tourism industry developed a strategic “Master plan” to move the industry on a path of sustainability and growth. The Master Plan defined five critical objectives: growth based on a sustainable market position, enhancing the visitor experience, community based development, environmental sustainability, and the promotion of an inclusive industry. The paper by Gordon and Harris assesses how successful the plan has been in meeting these objectives.

One of the initiatives aimed to improve the opportunities for local people to conduct business with visitors. However, this paper illustrates that the level of business activity experienced by local craft and informal vendors does not reflect the observed growth in tourist arrivals in Jamaica over the past few years. These entrepreneurs report a reduction in tourism traffic as well as a reduction in the amount of money being spent by the tourists who visit. This may reflect the dominance of all-inclusive tourism, where local vendors are kept away from hotels and private beaches. As fewer tourists venture out, those who do may be targeted more aggressively by vendors desperate for business, thus further discouraging tourists from leaving their resorts in order to avoid being hassled.

Large numbers of visiting tourists should in theory give a large potential market for local farmers to supply their produce to hotels and restaurants. However, the agricultural sector suffers from a nonexistent supply chain management system, and insufficient supply necessary to meet the demand of both the hotel industry and other local markets. As a result, the study found that there has been limited progress made in increasing the amount of goods sold by local farmers to the hotel industry, and especially to larger all-inclusive hotels.

Of the three initiatives outlined to improve tourism linkages, the participation of villas, guest houses, and apartments, has been most consistent. The share of tourism business accounted by this category has neither declined nor increased, but has remained steady over the past decade. Overall, we gather that there are still considerable opportunities of enhancing tourism.

While in most areas the progress has been disappointing, the author suggest that there are still considerable opportunities of enhancing tourism linkages with the broader economy pursuant to the government’s strategic plan. Organizations actively involved in enhancing various linkages should be aware of the value of well-maintained infrastructure in local craft markets, as well as the importance of innovations in the items sold. Investment in cost reducing agricultural technologies is also vital for maintaining high quality products that are globally competitively priced.

Read the original article by David Simpson and download the full paper here.

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