Dr Paul Collits on ED


Funding Tourism Promotion

A tourist in Ireland once asked a local, “How do I get to Dublin?”  The Irishman answered, “Well I wouldn’t start from here.”

The debate over funding support for tourism promotion in Hawke’s Bay is a bit like that.  The Regional Council’s recent announcement that it is reconsidering its previous ample-bordering-on-generous financial support for Hawke’s Bay Tourism’s marketing of the region has caused quite a stir.

As is often the case in matters relating to economic development, and especially in relation to the funding of it, the wrong questions get asked and the right ones don’t.  One of the greatest repeat errors made in deciding how and how much to support economic development in regions is that so often funding leads strategy, rather than the reverse.

The wrong question to ask here is – should we continue to fund tourism promotion at or near recent levels?  The right question to ask is – what are our economic development priorities in Hawke’s Bay, and how should we fund these?

There is an existing development strategy for Hawke’s Bay.  It is called Matariki.  It contains a number of high level strategic actions relating to infrastructure, governance, business support and capacity development.  It generally avoids commitment to particular sectors and rather offers support to capacity building.  This approach has much to commend it.

The funding of tourism promotion supports one sector that accounts for around five per cent of the regional economy.  It does not, by and large, fund capacity building in the sector nor entrepreneurship and innovation in the sector.  It funds marketing only, and, on the face of it, does this very, very well.  Visitor number are growing, as it the visitor spend, and this bodes well for many tourist-facing businesses in the region.

But all this is really beside the point.  Are visitor numbers growing because of the efforts of Tourism Hawke’s Bay?  Well, they might be.  Causation in economic development is notoriously hard to determine since the drivers of success are many, complex and interdependent.  Tourism numbers and spend might be growing well in other regions too, and because of local, national and international factors.  Would tourism numbers decline if the funding of tourism promotion were reduced?  Who would know?  They might, or might not.

Could the money spent on tourism promotion be better spent on tourism product development, or indeed on other equally deserving, successful, growing sectors like digital or agri-business?  I don’t know the answer, and nor does anyone else for that matter, but the question of opportunity cost – what we as a region miss out on by spending so much on tourism promotion – is a good one to be asking.  Currently we are not.  We have not as a region yet developed the criteria for judging where to place our economic development dollar, nor used the tools that are available to do this.  We should.

Could the money we (institutions) all variously spend on economic development be more strategically deployed to support the development of entrepreneurial talent, of innovation systems across all sectors and silos, of growing the next generation of start-ups and high growing companies, of building and resourcing entrepreneurship networks?  Maybe it could.  At least for some of those dollars, it most assuredly should.  Our investment logo proclaims that “great things grow here”.  We should ensure that we water all of the garden, and nurture or region’s capacity for growth across the breadth of our emerging strategic opportunities.

Such an approach starts with the notion, sadly not more widely recognized, that “engines” of economic development – sectors such as tourism – actually do not “drive” local economies.  It is, rather, regional capacity that drives economies – the twenty-first century infrastructure; the business culture; the regional leadership; the connected, active networks of innovation; the spirit (or not) of collaboration; the willingness to set aside turf battles; and in short, the “ecosystem”.  Many regions are onto this, and they are prospering as a result.  They fund incubation, the acceleration of high growth companies, entrepreneurship events, joining the dots between sources of capital and the creation of new businesses, peer learning among entrepreneurs and start-ups, and the like.

Successful regions recognise, too, that all economic development activity must be future facing.  It is the next job, and the next investment dollar, that we want to unlock, not the last. Even large and currently successful industry sectors offer no guarantees about future jobs and investment.  The size of a sector, of itself, means nothing in terms of future growth potential.  Future growth will come from capability plus opportunity.

Until we in this region start asking, and more importantly, answering the right questions, the debates will remain mired in dead end areas and fights over diminishing funding pies, which will help no one in the long run.

Just like the tourist intent on getting to Dublin, I wouldn’t be starting from here.

 

Paul Collits is an Adjunct Associate Professor in the Business School at EIT and an economic development consultant in New Zealand and Australia