Clara García Parra, Component Lead in Private Sector Development for RisiAlbania
Adrien Rebord, Advisor Vocational Skills Development HELVETAS Swiss Intercooperation
Put yourself in the shoes of a policymaker in Albania — a country of 2.8 Million inhabitants — and think which of these headlines has the potential to grab more media attention: “10 Million Tourists Expected by 2025” or “Sustainable tourism initiatives improve the livelihoods of rural communities”.
While hopefully you as someone who works in development would choose the latter, the likeliest answer is the former.
Albania is not alone. Political opportunism combined with a lack of understanding of the economic benefits of sustainable tourism have led many countries to market themselves as mass tourism destinations. The main metric of success they consider is the number of arrivals, ignoring the negative effects that over tourism can have on the very assets that make them attractive in the first place.
Sustainable tourism requires coordination
In 2018 and 2019, RisiAlbania partnered with the Swiss tourism consulting firm, gutundgut, who shared Switzerland’s model for destination promotion with the project. Drawing a pyramid on a piece of paper, one of their consultants explained that “in Switzerland, public and private sector stakeholders at different levels coordinate for destination promotion – spanning villages, regions and national players”. This results in powerful campaigns that convey compelling messages and translate into increased numbers of visitors.
This advanced coordination tends to be missing in developing destinations. Defining target groups for the promotion of sustainable products, creating value propositions, and articulating attractive messages through various channels require public-private dialogue, an area that development projects can support.
But the question is where to start. From the top, aiming at changing national legislation and supporting trickle-down? Or from the bottom, supporting best practices to make their way to central decision-makers?
RisiAlbania found that while changing national regulations is tempting, it is more feasible to start at local level, where changes take place faster, allowing for the generation of evidence that can then be scaled through advocacy.
This is how the Visit Gjirokastra Association was born. The project gathered businesses from the region to identify a pressing need of developing a promotional website. Once they rallied around that cause, the project supported them to establish an organization where both municipalities and the private sector participate to manage tourism-related needs.
Since its registration in 2019, the Association now has over 50 members. And besides its core services of product development and marketing, it has started a silent revolution in the region by promoting business formalization.
What is formalization?
Whether tourism development projects look at economic growth, conservation or job creation as their primary objectives, one aspect of sustainable tourism development tends to be overlooked: that of its potential effect on business formalization.
Businesses which in one form or another are not fully compliant with local tax, employment, and general business regulations are commonplace in Albania, with 60% of the Albanian workforce working in a grey zone. Although these businesses do offer opportunities to earn a living, work in the informal economy is often associated with low earnings, poverty, and vulnerability. Informality is most common in rural settings.
The effectiveness of threats or punishments to promote formalization is not proven, which is why RisiAlbania opted for identifying incentives that would help address this issue and understand whether formalization of bottom-up approaches to rural development may threaten the innovativeness and flexibility of the process in the local community.
Towards formalization in rural Albania
One of Visit Gjirokastra Association’s main income sources is membership fees paid by its members.
In early discussions about admission requirements, founding members decided that only formalized businesses would be able to join the partnership. While this would mean fewer members to begin with, the Association managers expected it would help address the huge issue of informality in the tourism sector. Indeed, many tour operators struggled with a pattern where they invested in rural businesses such as guesthouses to bring them up the standard expected by tourists, and then were unable to fiscally deduct their contributions given the rural businesses’ informal status.
Following a challenging year marked by a global collapse of the travel industry, small businesses have sought reassurance and support. Mass tourism and sustainable tourism were both impacted by the crisis but showed difference in their response and resilience. Visit Gjirokastra took a very proactive role in providing entrepreneurs in the region with information on what rules to follow in an accessible language, while also making them feel heard. This, combined with a well-defined service offer that is mainly built around product development and marketing, has brought membership to over 50 paying businesses.
In the Association Chairwoman’s words, Kristina Fidhi: “20 small businesses have registered just to become part of the Association”.
So, what’s in it for the public sector?
20 may seem like a small number in the grand scheme of things, but it represents a substantial change in mentality that has the potential to be transformative.
Rural business formalization is not only great news for the companies that are now going to be able to fiscally deduct their investments in these businesses, but also for the local tax authorities. Municipalities understand very well that attracting tourists to a region has positive economic effects, and one of the ways to achieve this is through establishing destination management organizations (DMO), which tend to be mainly funded through bed taxes. But with high informality rates, Albania has very little chance of establishing solid structures unless businesses formalize.
It’s important to note that formal businesses also contribute fairer shares toward public services delivered by municipalities such as waste management, an area on which Helvetas is also working in Albania through its Bashki te Forta project of the SDC.
And what’s next?
Courtesy of the COVID-19 pandemic the future of tourism is unclear. However, this past year the virus has challenged many preconceived ideas about what was beneficial or detrimental to inclusive, sustainable tourism development. It has crucially allowed tourism operators some time to rethink their strategies and gather lessons learned. And while COVID-19 has harmed the tourism in general, Albania has at least seen some growth from domestic tourism, presenting a new opportunity to capitalize on for a post-COVID-19 recovery and to support “building back better”.
In Gjirokastra, the pandemic has increased the level of interest by businesses in the region to be part of the Association. When times are uncertain, businesses turn to partners that can provide them with services and reassurance. The Association has taken up this challenge and by swiftly pivoting to attract regional tourists and support rural business to adapt their offer, is building up a strong presence in the region that is sure to further spur business formalization.
RisiAlbania is gathering evidence highlighting the benefits of this other way of doing tourism – slower, inclusive, and sustainable. With one of the Association members having attended the Global Sustainable Tourism Council (GSTC) training on destination management, the next step will be supporting the Association to take these ideas to the national level.
Whatever the outcome of these efforts, one thing is for certain: showing the effect that the Association has had on business formalization will only strengthen their case.