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THE TRANSITION PATHWAY FOR TOURISM AND THE EUROPEAN AGENDA 2030

Di Vittorio Emanuele Agostinelli - Consulta giovanile del Cortile dei Gentili

IL PERCORSO DI TRANSIZIONE PER IL

TURISMO E L’AGENDA EUROPEA 2030

Il Consiglio Europeo ha adottato conclusioni che definiscono l’agenda europea per il turismo 2030, comprendente un piano di lavoro pluriennale dell’UE destinato ad aiutare gli Stati membri, le autorità pubbliche, la Commissione e i portatori di interessi a rendere il settore del turismo più verde e più sostenibile, resiliente e digitalizzato. L’UE costituisce una delle principali destinazioni sia per i visitatori internazionali che per i suoi residenti. Tuttavia, la pandemia di COVID-19 ha avuto un effetto particolarmente devastante sull’ecosistema del turismo e ha comportato notevoli perdite di reddito e di posti di lavoro in tutta Europa: nel 2020 la pandemia ha colpito circa 11 milioni di posti di lavoro nel settore del turismo dell’UE. Sebbene il settore abbia iniziato a mostrare segni di ripresa, l’aggressione militare russa nei confronti dell’Ucraina ha avuto un impatto negativo sulla fornitura e sull’accessibilità economica dei servizi di viaggio e di ospitalità, sia per le imprese che per i cittadini europei. Anche l’aumento dei prezzi dell’energia, l’inflazione elevata e i costi del carburante rendono i viaggi più costosi. Per questo motivo, l’Agenda europea per il turismo 2030 sottolinea la necessità di proteggere il settore turistico e, al tempo stesso, di sviluppare una visione lungimirante per approfittare della volontà di molti europei di cambiare le proprie abitudini in materia di viaggi e di turismo affinché diventino più sostenibili e responsabili.

Keywords : Tourism, labor market, economic transition,

entrepreneurship, employment and SMEs.

Summary

1 The role of financing in Small Business Management in the Tourism Sector.

2 The transition pathway for tourism.

3 The European Tourism Agenda 2030 and microcredit.

1. The role of financing in Small Business Management in the Tourism Sector1

Tourism, through its content and the forms it takes, is a dynamic and competitive industry. Its main purpose is to provide customer satisfaction, safety, rest and relaxation, which is why a constant adaptation to their needs and desires is necessary. Continuous change in supply and consumer behaviour requires good knowledge of financing methods and tools. Although each of us has been a “tourist” at one point or another, defining the tourism and hospitality industry is difficult, given the diversity of forms and offers today.

Tourism is an economic and social phenomenon that has undergone continuous development and diversification over the decades making the tourism and hospitality industry one of the fastest-growing sectors in the world. The multitude of definitions shows its complexity: from “The totality of the relationships and phenomena resulting from the travel and sojourn of persons outside their place of residence (such as spending holidays or rest leave, attending various events, etc.)”, to “Tourism is the business of providing services for people on holiday, for example hotels, restaurants, and trips” (Cobuild Collins, 2017), “Tourism comprises the activities of persons traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes” (Cobuild Collins, 2017), and there is no consensus on the content and significance of tourism. The tourism and hospitality industry consists of a wide variety of sectors that offer visitors and local residents various products and services. Tourist activity, through its traits, gains the size of an industry, where capital factor costs are very high (infrastructure, equipment), and investment is slowing down, but on the other hand, it is an industry where the labour factor has a high contribution.

Tourism is made up of a chain of SMEs, whose strategic role is in the harmonious development of this sector, and where family units and travel intermediaries that distribute the tourist package to customers have the preponderant. Current trends in development and global forecasts show that: international tourism arrivals have seen a positive development, thus by 2015 the increase was 4.6%, 1.184 million, and by 2030, according to the UNWTO, would reach 1.8 billion.

Tourism, as a cross-cutting sector, represents the third largest economic activity in the European Union, involving a wide range of services and professions that are mainly carried out by SMEs. As the international community, through the UN General Assembly, adopted a new Agenda 2030 and the Sustainable Development Goals (SDG), a confirmation of the role of tourism in the global economy is also the fact that the United Nations (UN) has approved the designation 2017 as the International Year of Sustainable Tourism for Development. Industrial production refers to the output of industrial establishments and covers sectors such as mining, manufacturing, electricity, gas and steam and airconditioning. This indicator is measured in an index based on a reference period that expresses change in the volume of production output.

One of the problems faced, in general, by small businesses is funding to increase economic competitiveness and strengthen the position of investors, entrepreneurs in the business environment. To ensure this, it is necessary to implement in tourism strategies sector-specific funding policies, to create jobs, stimulate and develop the SME sector, alongside legislative measures. At European Union level, various direct and indirect funding instruments of the tourism sector have been created, given its importance, which, “in 2014, belong to one often non-financial enterprises in the European economy. These 2.3 million companies employed around 12.3 million people. Employees of enterprises in tourism related sectors accounted for 9.1% of the persons employed in the total non-financial sectors of the economy and 21.5% of the persons employed in the services sector. Percentages in the tourism sector, in total turnover and value added, were relatively lower, tourism sectors accounting for 3.7% of turnover and 5.6% of value added of non-financial sectors of the economy” (European Commission, 2017). The WTTC estimates that, over the next decade, tourism will record world-class performance with an average increase of 4% per year (Agerpres, 2016). This data is further supported by other factors, income and workers, coming from tourism links with other economic sectors.

Indirect funding involves loans, equity financing, and guarantees provided by financial intermediaries for business initiation and development, especially SMEs. Direct funding is provided through grants to “co-finance projects in relation to EU policy objectives”. It is difficult to improve business, increase flexibility in meeting consumer requirements and wishes, or reduce seasonality, if the entrepreneur does not have the necessary financial means to allow for an assessment of global operations and information to make decisions, identify new opportunities to develop, or restructure the business. A safety measure in the funding process makes possible the formulation of a strategy with a good foundation that will lead the business to good results. Europe has also adopted a new framework policy for tourism, the objectives of which are to make European tourism competitive, modern, sustainable and responsible by: boosting competitiveness in the European tourism sector, promoting the development of sustainable, responsible and high quality tourism, strengthening the image and profile of Europe, maximizing the potential of EU policies and financial instruments for tourism development.

Starting 2013, the Commission has set up a virtual tourism observer to coordinate the collection and storage of information and to ensure greater synergy between the different levels of tourism policies. The objectives of tourism and hospitality industry funding programs cover this wide range and focus on creating and maintaining jobs, increasing added value in tourism activities, creating and improving infrastructure, tourism reception facilities, information and promotion systems, and tourist services, making tourist activity more efficient by increasing the number of tourists and the duration of visits, by making better use of recreational facilities, natural areas of tourist interest, supporting and developing education, research, development and innovation. Good management of financing activity will direct the course of the business in a favourable way.

Most relevant funding programs allocated to the EU tourism sector are presented in the following Table2:

Area MFF

Cohesion Structural funds:

• European Cohesion Fund
• European Social Fund
• European Regional Development Fund
• European Territorial Co-operation

Environment, Agriculture • LIFE

&Marine and Fisheries Policy • European Agriculture Fund for Rural Development

• European Maritime and Fisheries Fund

Research, Innovation • Horizon 2020 (Framework Programme for Research and Innovation

andCompetiti veness • COSME (Programme for the Competi ti veness of Enterprises andSMEs)

Culture and Education • Creati ve Europe Programme

• Erasmus for Ali Programme

Employment • EaSI (EU programme for Employment and Social Innovation)

• PROGRESS (Programme for Employment and Social Solidarity)
• EURES (European Employment Services)
• PROGRESS Microfinance Facility

The European Parliament has adopted new perspectives and challenges for sustainable tourism in Europe, aiming to increase the favourable impact of tourism on regional development and promote tourist destinations, while combating the seasonality of tourism and establishing a “European brand of quality tourism”. It also considers tourism investments to be linked to regional policy. Thus, the EU’s allocations take into account the new policy offering a wide range of opportunities for sustainable investments in tourism.

In order to meet the major challenges faced by the tourism sector, and to make the best possible use of their potential, companies need to assess all the economic aspects that characterize the environment in which they operate and, in particular, the issues surrounding the funding process. Access to finance is vital to foster the development of SMEs and entrepreneurship and to establish a competitive, innovative and sustainable tourism sector. For good business management, funding is of great importance. Virtually every firm and implicit entrepreneur must know the past, present and future of the business from a financial point of view. Tourism and hospitality companies carry out various types of activities, funding acting to support investments or the development of the hotel and restaurant sector, of businesses in general, and of recreational activities. Financial management means the financial management of tourism and hospitality activities, aiming to maximize the current value of the company. Its role and importance is reflected in objectives that strive to: provide the necessary funds to obtain resources to achieve the objectives, control costs, establish and control effectiveness, profitability, substantiate the financial status to make effective decisions. For SMEs in the tourism industry, financing needs are different and they face challenges specific to each stage of their lifecycle.

Issues of funding are at the heart of business management. The existence of errors in the management and control of financial resources can cause a business to falter. Good management enables control of the business and provides entrepreneurs with confidence in strategic decision-making, and the favourable capitalization of opportunities. The needs of tourism companies are funded through various tools. To contribute to regional development, they should be offered under special conditions (lower interest rates, certain facilities), given that tourism SMEs have low capital, have long-term financing needs, and represent an increased risk for the financier. In the tourism sector, access to these funding methods remains lacking.

2. The transition pathway for tourism3

The EU’s tourism ecosystem is highly diverse and complex, covering globalized and interconnected value chains. According to non-official sources, in 2019, tourism generated 9.5% of total EU GDP and provided 22.6 million jobs in the EU. Eurostat data shows that, in 2019, the ratio of international travel receipts relative to GDP was over 12% in some EU Member States (Croatia, Cyprus and Malta). Out of 3.2 million tourism businesses, 99.8% were micro, or small and medium enterprises (SMEs).

The whole tourism ecosystem comprises businesses that work in several sectors, including food and beverage services, on-line information and services providers (tourist offices, digital platforms, travel technology providers), travel agents and tour operators, accommodation suppliers, destination managing organizations, attractions and passenger transport (for example, airlines and airports, trains, and cruises). In 2018, more than three out of four enterprises in tourism industries in the EU-27 operated in accommodation (14%) or food and beverage serving (61%) activities.

In the EU, the majority of service providers in tourist destinations are small local owners. Micro and small enterprises generate about 64% of the value added of the tourism ecosystem and employ 84% of its workers. The proportion of micro and small companies is particularly high in hospitality (hotels, bars and restaurants), with many owners operating independently or under franchise from large groups. This is also true for travel agencies and coaches, though to a lesser extent. Given the fragmentation of these supply chains, a substantial degree of coordination is needed to agree on common objectives and pathways to change.

In the future, local communities could become a key player in the transition towards sustainable tourism through social economy approaches. This could take place, for example, through community cooperatives or other forms of SMEs in which the local actors of the tourism supply chain are involved in the ownership of shared assets (promotion of the destination, coordination between tourist facilities, co- design and governance of online booking systems).

During the process to co-create a tourism transition pathway, stakeholders highlighted that microenterprises and SMEs face several challenges in engaging with the twin transition, including a lack of knowledge of existing good practices and access to tools to implement them.

Based on the results of Eurobarometer 499, 82% of EU citizens are ready to change their behavior in favor of more sustainable practices. One in three is ready to pay more for such changes. However, there are differences between countries, age groups and education levels, so it would be beneficial to organize awareness campaigns on the benefits and opportunities of sustainable tourism.

Data from Eurobarometer survey 499 also revealed that almost third (32%) of respondents with a low education level (they left school at age 15 or younger) stated that they ‘do not know’ if trustworthy information on sustainability related question items is easy or difficult to find. For respondents who completed their education at age 20 or over, this share is 18%, which is lower but still a considerable share. Not knowing whether finding such information is easy or not implies that these respondents have not tried to search for it. This further supports the need to improve awareness raising campaigns about sustainability and about recognizing environmentally friendly tourism services. For example, the new consumer agenda proposes measures to improve uptake and awareness of the EU Ecolabel scheme by running communication campaigns and developing partnerships with stakeholders, to promote the EU Ecolabel also in the online platforms.

Stakeholders highlighted that there may be some resistance from microenterprises and SMEs to change their models which have worked well until the COVID-19 pandemic. For example, 18.9% of SMEs do not consider the use of digital technologies necessary. Action is needed at local and regional level to reach tourism microenterprises and SMEs to inform and guide them on the benefits of shifting towards more environmentally friendly and digitally facilitated services, in response to the changing needs of tourists and residents.

The stakeholder discussion also identified the need to shift mindsets on the role of the local tourism destination organization – whether its key role should only be to market the services of the destination or to also support their development and transition. This is a key question to consider when clarifying approaches and resources for the destination. The national and regional tourism strategies should give guidance on destination management models and on interactions between the destination marketing/management organization, the local authorities and all operators in the tourism ecosystem, including residents.

Since good examples are important to support change and innovation, it could be beneficial to forge links between quality destinations, which have been awarded on aspects relevant to the green and digital transition and resilience in tourism. For example, the winners of the yearly awards of European Capitals of Smart Tourism, European Capitals of Culture, European Green Capital, European Capital of Innovation, EU Access City and European Heritage Awards could have very productive exchanges, which could provide excellent examples and good practices for other cities to follow.

3. The European Tourism Agenda 2030 and microcredit4

Microfinance is a type of financial service geared towards providing small loans, savings, and other financial services to individuals lacking access to traditional banking services. It is acknowledged as a powerful instrument for reducing poverty and fostering economic expansion. Microfinance institutions aim to promote financial inclusion by providing access to financial services to those who are often excluded from the formal financial sector.

The European Council has adopted conclusions setting out a European Agenda for Tourism 2030, which includes a multi-annual EU work plan to help member states, public authorities, the Commission and stakeholders make the tourism sector greener and more sustainable, resilient and digitalized.

The EU is a top destination for both international visitors and its residents. However, the COVID-19 pandemic had a particularly devastating effect on the tourism ecosystem and has led to significant losses of income and jobs across Europe: around 11 million jobs in the EU tourism sector were affected by the pandemic in 2020. Though the sector started to show signs of recovery, Russia’s military aggression against Ukraine has negatively impacted the provision and affordability of travel and hospitality services, for both European businesses and citizens. Increasing energy prices, high inflation and fuel costs also make travel more expensive.

For this reason, the European Agenda for Tourism 2030 emphasises the need to protect the tourism sector and, at the same time, develop a forward-looking vision to take advantage of the willingness of many Europeans to change their travel and tourism habits so as to become more sustainable and responsible.5

The Commission welcomes the adoption of the European Tourism Agenda 2030 by the Council of the European Union. The Agenda is based on the Commission’s Transition Pathway for Tourism and includes a programme with actions to be taken by the EU countries, the Commission, as well as the tourism ecosystem.

The Agenda covers five priority areas: green transition, digital transition, resilience and inclusion, skills and support, and the enabling policy framework and governance. Several actions are defined under each priority, such as diversifying tourism services across seasons and locations, reducing environmental footprint and supporting the accessibility of tourism. Another key objective of the Agenda is to meet the skills demand in the tourism ecosystem by implementing the Pact for skills, a shared engagement model for skills development.

Commissioner for Internal Market, Thierry Breton, said: “The EU Tourism Agenda 2030 is a major milestone for the tourism ecosystem. It will serve as a common compass for Member States, stakeholders and the Commission to work together towards a greener, more digital and resilient tourism ecosystem. The Commission is committed to supporting its successful implementation. For example, our recent proposal to improve data-sharing on short-term accommodation rentals corresponds to a key action of the agenda and will pave the way for the creation of a European data space for tourism”.

The Commission worked closely with Council Presidencies and Member States to ensure synergies between the European Tourism Agenda and the transition pathway for tourism. The Agenda follows the Council Conclusions of May 2021 where EU countries committed to design an agenda for tourism.

The conclusions presented by the European Council are built on several years of work around “Tourism in Europe for the Next Decade”. They inform a new Transition Pathway for Tourism, developed by the European Commission in consultation with key stakeholders, including UNWTO. The Transition Pathway identifies specific intervention areas to boost the tourism eco-system in Europe. Several of the key intervention areas reflect the priorities of UNWTO, most notably a recognition of the importance of building and supporting a skilled and committed workforce.

In a joint statement, UNWTO Secretary-General Zurab Pololikashvili and Commissioner Valean welcomed the restart of international travel across the region. However, they stress that tourism and transport need to “work together” to address the gap in tourism employment by making both sectors more attractive for workers. Additionally, the joint statement notes the importance of investments in tourism as a means of accelerating the shift to greater resilience and sustainability.

UNWTO has made tourism education and training one of the priorities in recent years. Alongside this, UNWTO opened a first department focused on investments, emphasizing that to achieve its wider goals of becoming more resilient and sustainable, tourism first needs the financial and human capital in place.6

NOTE

1 International Journal of Innovative Science and Research Technology, 2023, The location and role of financing in Small Business Management in the Tourism Sector, https://bit.ly/3WPUd24

2 International Journal of Innovative Science and Research Technology, 2023, The location and role of financing in Small Business Management in the Tourism Sector, https://bit.ly/3WPUd24

3 European Commission, 2022, Transition Pathway for Tourism, https://bit.ly/43FeV71

4 European Commission, 2022, European Tourism Agenda 2030: Commission welcomes the commitment of EU countries to make tourism greener, more digital and resilient, https://bit.ly/3MOw9bb

5 Council of the European Union, 2022, New European agenda for tourism, https://bit.ly/3qjFfVM

6 UNWTO, 2022, UNWTO and European Commission share joint vision for tourism’s future, https://bit.ly/43Fiyd6