Public & Private Sector

Lecture 2

INTRO
Developers in the tourism industry fall into
three categories, public sector, private
businesses and non-profit
Tourism is a special industry in the sense that
several decision-makers are involved in
delivering the tourism product.
The public sector owns and managers the
destinations infrastructure and is concerned
with the overall countrys well being.

Public sector
Public sector defined by Lane (1995) as the
governmental activity and it consequences
Role of public sector in tourism has changed
over last 40 years.
In early stage public sector played a
pioneering role
Huge investment were required to provide
basic facilities and infrastructure
Create destinations and attract growth

Public sector
The purpose of public sector is to establish
the framework by which a country can
develop and foster the good of all its citizens,
while protecting the rights of the individual
(Doswell, 1997 )
Political party in power has to develop a
tourism policy in respect to the countrys
institution.
After developing tourism policy, public sector
is also responsible to implement those
policies and plan.

Areas of Public Sector

There are five main areas of public sector
involvement in tourism:
- Coordination
- Planning
- Legislation & regulation
- Entrepreneur
- Stimulation

Coordination
Coordination is one of the most important role
The implementation of all other roles is dependent
on the ability of the public sector to coordinate and
balance its various roles
Avoid duplications of resources between public and
private sector
Develop effective tourism strategies Tourism is an
industry involving many decision makers
Crucial for public sector to participate by
coordinating all this process of tourism development

Planning
Planning goes hand in hand with tourism policy;
Tourism planning reflects the economic, environmental
and social goals of government (public sector)
Without public sectors involvement in tourism planning:
- Development of industry would lack cohesion and
direction
- Short term initiatives might jeopardise long term
potential
Public sector is the conciliator between the competing
interest of tourism planning process

Legislative & regulative

Legislative and regulative powers of public
sector directly/indirectly on the tourism industry.
Involvement ranges from policies on passports
and visas
Environmental protection
Taxation policy & Collecting revenues
Administrating the laws & allocating funds
Operating social services

Entrepreneur
Public sector as entrepreneur equals to the concept
of devalorisation of capital
Process in which government subsidises part of cost
of production e.g. by investing in a tourism project
Public sector could contribute in marketing the
destination
Both rural and mountainous areas can be promoted
unlike in private sector
Public sector is the mean of equal distribution

Stimulation
Tourism development could be stimulated from
public sector.
- Financial incentives (low interest loans &
subsidies)
- Sponsoring research for general benefits of
tourism industry
These two elements are important to give boost
to tourism development in a destination.

Social Tourism
Another role of the public sector is the social tourism
support.
Social tourism involves the extension of the benefits
of the holidays to the economically marginal groups
such the unemployed, low income households, single
parent families, pensioners and the handicap
Social tourism is a crucial element of today postmodern western society.
Social tourism is also a form of tourism development
in a region.

Contd
Only public sector can develop this concept.
Countries who have have been fully active in
social tourism are: Switzerland, Germany &
Greece.
Social tourism is one more reason why tourism
development could not be let entirely to the
hands of private sector.

Private Sector
Private sector is defined as the part of a
countrys economy that is not owned by the
government or public corporations but
independent companies and individuals.

Private businesses provide most services that

the tourist needs to get to the destination and
products consumed while on site.

Private sector
Most travel and tourism businesses belong to
the private sector.
Most private sectors mostly concerned about
profit and not the social goods.
Tourism is said to be worlds largest employer
10% in AUS (908,434 persons)
Private sector in AUS GDP 5.9% ($87.3 billion)
Examples of private sector in tourism?

Contd
Private sector - the tourism planning are mostly:
Hotels
Airlines and travel agencies and
Restaurants.
The tourism activity is mainly sustained by
the private initiative, but the government
plays a key role in developing the tourism
industry.

Contd
Private sector is involved in tourism planning
by offering support services, such as:
- Guiding services
- Travel insurance and finance services,
- Travel trade press
- Marketing support services,
- Private education and training establishments

Contd
As tourism started to grow the private sector
became increasingly interested in the
business opportunities offered.
Resulting in the development of hotel industry
Rapid expansion of tour operators and travel
agents
Private sector is important in tourism
planning.

Contd
The Tourism Policy of the Government should
lay special emphasis on maximum
participation of the private sector in making
investments in tourism projects.
It provides tangible livelihood options to local
people such as:
- Hotel personnel, guides, porters, watchmen,
maintenance workers and other service
providers.

Contd
The local community members are also
involved in managing small business
enterprises like:
- Cafeteria
- Souvenir shops
- Craft shops
- Travel and transport services

Implementations
Private sector would be better implementers
of tourism policies
Can lay down long-term plans that provide
continuity amid changes in the
administration.
The private sector can implement policies
while the government agencies can
collaborate with one another and provide
support.

Partnership
In some instances the public and nonprofit
sector partners are asked to finance the
capital costs associated with both the tourist
amenity and related facilities
Examples:
- Hotels
- Restaurants
- Bars & Pubs

High Risks
Private investors initiate efforts to form
partnerships between private investors if there
is high risk
To partially pay the costs of building an
amenity.
The investments by the public or nonprofit
partners reduce the risks for the private sector
Help to insure profitability of the project and
market-rate returns to private capital

Summary
Tourism is a diversified industry
Requires cooperation, and very good relations
between public and private sector in order to
survive and flourish.
Relations between the two sectors need to be
close, incessant and well balanced.
A flexible tourism policy is vital
Respond to the needs of market and the
industry overall.

Summary
The ideal relationship of public and private sector is
based on partnership and exchange.
This relationship should be dynamic and not static
Strong public/private sector partnerships are
essential
Provide tourism industry with the opportunity to
influence tourism policy and planning
Provide the certainty needed to encourage
investment.

Case Study
Discus the public and private sector
participation and tourism development in the
upcoming seven star hotel project in Mauritius.