Business Features:

PPP to boost Sri Lankan Tourism - MTI

MTI Consulting shares insights in Business Strategy and Legal and Governance perspective in Tourism based Public-Private Partnerships (PPPs)

As the WTO recognised in the 2000 report, two key forces, globalisation and technology, are transforming the tourism sector into a dynamic economic force that has never been possible before. The industry is in transition.

Sector customers, both business and leisure travellers, have become more sophisticated and are looking for customised experiences. In response, distribution networks are creating flexible bundles of travel experiences, and destinations are forming wider networks of alliances to deliver a credible, exciting guest experience.

Where previously segments of the tourism sector had clear-cut boundaries, now key players, airlines, hotels, attractions and tour operators for example have discovered that they must get together to market, book and sell the destination in order to get their fair share of a growing market segment.

“Where previously segments of the tourism sector had clear-cut boundaries, now key players are converging to get their fair share of a growing market segment”.

The tourism sector, perhaps because it encompasses so many sectors of the economy, is susceptible to fragmentation. Travellers are becoming more sophisticated and wanting customised experiences, creating tendencies for the sector to develop micro-segments, niche brands and customised products which are all valid strategies.

But building partnerships is about trying to find where the commonalities lie, breaking down the barriers in order to leverage what each can bring to the table.

The tourism sector presents any number of opportunities to partner. It is characterised by a growing set of small and medium sized businesses that have the entrepreneurship and flexibility to take advantage of new opportunities.

On a global scale, the public sector is looking for new ways to partner with the private sector to strategically develop and market tourism and to leverage available assets for growth “Building partnerships is about trying to find where the commonalities lie, breaking down the barriers in order to leverage what each can bring to the table” Co-operation and partnerships are increasingly being used in the tourism sector to achieve impressive business and community goals.

What is surprising is that these partnerships are forming in a sector that has traditionally been viewed as fragmented. More surprising is that the tourism sector has begun venturing beyond its own sector to form partnerships.

This is a commendable initiative as partnership is important to the further development of the sector and of the communities that support, or are looking to support, a vibrant, dynamic tourism sector.

The underlying impetus to partner, or the key motivator to co-operate, is that all partners, whether from the private or the public sector, will benefit from the alignment of resources and objectives.

Partnerships can be formed to create new products or services, to achieve higher levels of efficiency or economies of scale, to open markets that were previously inaccessible or to simply pool resources, financial or human.

“PPP is a business relationship wherein the partners share the risks, rewards and responsibility for the success or failure of the initiative”. Based on the industry diagnosis conducted by MTI Consulting, the PPP objectives should centre on products, marketing and sales, infrastructure, human resources, research and technology and financing.

While focusing on these objectives the stakeholders of this partnership also need to remember that a partnership is not a sponsorship, grant, acquisition, one-off contribution or merger - the basis of a partnership lies in the partners sharing both risk and return.

Thus, the stakeholders need to appreciate the fact that the partnership is a business relationship wherein the partners share the risks, rewards and responsibility for the success or failure of the initiative.

This will be the fundamental based on which such an industry partnership can help expand the tourism sector “Partnerships must be proactive instead of reactive by being brutally honest about capabilities and by assessing risk continuously”.

But how can the tourism sector remain agile? PPPs must be proactive instead of reactive by being brutally honest about capabilities and by assessing risk continuously. Those companies that can withstand the pressure are those that assess the risks and opportunities and create alternative action plans.

For example, the Nepal Tourism Board’s original mandate was extensive, but in the time of crisis that followed its initiation, many of the strategies and actions that were planned could not be implemented.

Therefore, Nepal turned to the potential of collaborative marketing and found that where one country could not do it alone, a consortium of countries could potentially leverage their marketing budgets and product experiences to attract more visitors to the region.

This is a classic example of PPP in the Tourism sector expanding beyond the traditional country borders into a regional collaboration. Such collaborations need to venture into formulating crisis plans to deal with external shocks, just as large companies have a risk management plan in place to deal with large, negative occurrences legal and governance perspective “Developing a sustainable tourism sector through PPPs require a legal and governance framework which meets the demands of the international environment”.

In the present international and national context Public - Private Partnerships (PPPs) are imperative in promoting economic development in a country. The concept of PPPs has manifested itself to the tourism sector in Sri Lanka. In this manifestation an integral aspect concerns the legal and governance framework surrounding PPPs in tourism.

The forces of globalisation in emerging markets and the requirement for good economic governance are pillars in promoting PPPs. Empirical evidence and secondary literature points that developing a sustainable tourism sector through PPPs require a legal and governance framework which meets the demands of the international environment.

For example, in unifying and re-organising the governance structure of public bodies, developing administrative capabilities, defining the roles and boundaries of local governments and environment policy.

Furthermore, the legal framework stems to issues involving infrastructure, conservation of historic and cultural building zones, controlling pressures for development, overcrowding, the quality of employment, understanding new technologies and sophisticated business forms.

Therefore, PPPs could not be viewed in isolation from the aforementioned areas. “Sri Lanka should capitalise on the available international experiences on PPPs to maximise their potential in developing the tourism industry in the country”.

In certain European destinations, respective governments have not only entered into PPPs, but established coherent legal and governance frameworks to promote sustainable tourism. This approach has been highly successful, that new members of the European Union (EU) are adopting such legal and governance models from the older member nations.

As a result, Sri Lanka should capitalise on the available international experiences on PPPs to maximise their potential in developing the tourism industry in the country.

For example, establishing separate bodies specialising in handling PPPs These bodies should comprise individuals from numerous specialised educational disciplines and experience.

“In the process of establishing a successful PPP, both sectors should seek expert assistance in identifying the tourism related projects, formation of a transparent negotiation framework and the final agreement” from a legal perspective PPPs would bring about a paradigm manifestation when scrutinising the relationship between the public and private sectors in the process of establishing a successful PPP, both sectors should seek expert assistance in identifying the tourism related projects, formation of a transparent negotiation framework and the final agreement.

If the above areas are neglected accountability, efficiency and objective analysis will be compromised. As a result, one of the sectors would be at an added advantage. Therefore, public policy makers and private players intending to form partnerships should seriously keep such issues in mind.

Additionally, vital and influential public bodies dealing in tourism should combine in formulating a Code of Conduct for Governance with special focus on the PPPs in the Tourism Sector.

Introduction of a Code of Conduct would establish a coherent platform from the inception of PPPs to conduct affairs related with the tourism sector and provide an unhindered, transparent, accountable and healthy relationship between the two sectors.

Finally, from a holistic point of view the move to form PPPs in the tourism and other sectors is extremely important for sustainable socio-economic development in Sri Lanka.

- Sahan Kulatunga, Yatila Wijemanne