Sustainable Tourism Isn’t Just Good for the Environment: It’s Good for State Coffers, Too

The impact that sustainable tourism can have on host communities is often hard to measure, and always hard to communicate.

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 Next Year” or “Sustainable Tourism Initiatives Improve the Livelihoods of Rural Communities.”

While hopefully you would choose the second option, the likeliest answer is the first one.

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 overtourism can have on the very assets that make them attractive in the first place.

This is where projects such as RisiAlbania, supported by the Swiss Agency for Development and Cooperation and implemented by Helvetas and Partners Albania, come in.

Sustainable tourism requires coordination

In 2018 and 2019, RisiAlbania had a partnership 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 players 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 level of 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 requires public-private dialogue, an area that development projects can support.

The question is where to start: from the top, aiming at changing national level legislation and supporting the trickle down? Or at the local level, supporting best practices to make their way to central decisionmakers?

RisiAlbania found that while changing national-level regulations is tempting, it is more feasible to start at the 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: the promotion of the region as a tourism destination. Once they rallied around that cause, RisiAlbania supported them in establishing an organization where both municipalities and the private sector participate to manage tourism-related needs.

Since its launch in 2019, the association has gained over 80 members. In addition to its core services of product development, destination promotion and marketing, it has started a silent revolution in the region by promoting business formalization.

What is formalization?

Tourism development projects often look at economic growth, conservation or job creation as their primary objectives. However, one aspect of sustainable tourism development tends to be overlooked: its potential effect on business formalization.

Businesses that are not fully compliant with local tax, employment, licenses and general business regulations are commonplace in Albania, with 57% of the Albanian workforce existing 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 commonplace in rural settings.   

A journey to formalization in rural Albania

One of the Visit Gjirokastra Association’s main income sources is membership fees. In early discussions about admission requirements, founding members decided that only formalized businesses would be able to join the partnership. While this would initially mean lower membership, the association managers expected that it would also 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 to the standard expected by tourists, and then were unable to fiscally deduct their contributions because of the businesses’ informal status.

Following a challenging year marked by a global collapse of the travel industry, small businesses have sought reassurance and support. Visit Gjirokastra took a proactive role in providing entrepreneurs in the region with information and tailored guidance on health and safety measures, adaptation to the changing in regulations, and strategic guidance during tourism restarting phase. This, combined with a well-defined service offering that is mainly built around product development and marketing, has brought membership to over 80 paying businesses.

Association Chairwoman Kristina Fidhi said, “In two years, 45 small and medium businesses have registered, including existing businesses that wanted to become part of the association and new start-up businesses that were inspired from its work.”

Opportunities for the public sector

Forty-five 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 great news for the companies that are now able to fiscally deduct their investments in these businesses, as well as for the local tax authorities. Municipalities understand that attracting tourists to a region has positive economic effects, and one of the ways to achieve this is through the establishment of 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.

Importantly, formal businesses also contribute their fair share toward the public services delivered by municipalities, such as waste management, an area in which Helvetas is also working in Albania through the Bashki te Forta project.

A turning point for tourism

The COVID-19 pandemic created big challenges for small tourism businesses in Albania, as in every other country of the world. But this past year has challenged many preconceived ideas about what was beneficial or detrimental to inclusive, sustainable tourism development – and it has crucially allowed tourism operators some time to rethink their strategies and gather lessons learned.

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 met this challenge by swiftly pivoting to attract regional tourists and support rural business to adapt their offerings, continuing the buildup of a strong presence in the region that will further spur business formalization.

2022 was a turning point for tourism in the Gjirokastra region. The association worked closely with the seven municipalities and the prefecture of the region in establishing a public-private coordination committee for the tourism sector. This was the first time a committee of this kind had been set up in an Albanian region with participation from public and private actors, and with leadership from the association. The actors are coordinating on the regional promotion strategy and activities. In addition to the results of formalization achieved so far, this cooperation is going to be instrumental to the sustainability of formalization processes in the long term.

2022 was a turning point for tourism in Albania, too. The United Nations World Tourism Organization (UNWTO) ranked Albania the second highest performing country in the World Tourism Barometer for 2022, with a 19% increase of international visitors compared to pre-pandemic levels from 2019. However, this brings the risk of overtourism. National and local actors, with support from leading projects like RisiAlbania, are formulating the new direction of the industry towards sustainable tourism standards. In November 2022, the Ministry of Tourism, private sector stakeholders and RisiAlbania organized a conference on sustainable tourism standards with participation of international speakers including the Global Sustainable Tourism Council’s (GSTC) CEO.

Embracing this vision for the region, the Visit Gjirokastra Association also organized a workshop on GSTC standards for businesses and tourism stakeholders of the region. With five of the association’s managerial staff and members having attended the Global Sustainable Tourism Council (GSTC) training on destination management, the next step will be supporting the association to disseminate these standards and facilitate their adoption in the region – taking these ideas to the national level.

About the Authors

Clara García Parra is a freelance consultant specializing in inclusive market systems, private sector development and job creation. She is passionate about the circular economy and regenerative entrepreneurship, and has supported businesses in sectors such as tourism, agribusiness, ICT and finance to pilot innovative business models.

Andi Stefanllari, Ph. D., is the Component Lead in Private Sector Development for the RisiAlbania project and a senior market systems development private expert with more 15 years of experience in designing and implementing interventions to enhance competitiveness in private economic sectors, including ICT, agri-business and tourism. 

Mirtjon Mita is the Intervention Manager for Tourism at RisiAlbania and has worked with the project since 2017. He has extensive experience collaborating with private businesses as a consultant and in top management positions in some of the most important enterprises in Albania.