Small and Medium Tourism Enterprises

Small and Medium Tourism Enterprises

Wanhill, S. (January 01, 2000). Small and medium tourism enterprises. Annals of Tourism Research, 27, 1, 132-147.


Small hotels have a lower startup capital requirement than their large counterparts but have a considerable social return on investment as they create more jobs and market for local materials than their counterparts. Small hotels and craft businesses, therefore, offer a higher return rate for foreign exchange earned by enabling an economy to retain almost all of the revenues that are accrued through the use of local materials and the reduced reliance on importation to serve their demand unlike the case in large international hotels. Governments have come to the realization that they get more value and return on their investments when they invest and create policies that encourage the establishment of local hotels and crafts related businesses. These businesses provide much-needed relief to the supply and demand problem that the increased marketing and investment in big international hotels and marketing strategies create. The number of visitors that the tourism-boosting campaigns create is too much for the big hotels to cater to successfully. Thus, this has led to governments especially in Europe to consider policy changes to encourage local business owners to venture into the tourism business to open up their communities through increased investments by attracting more investors as well as boosting their overall tourism sector by having the infrastructure to cater to the increased demand for tourism-related products.

In the EU, governments are increasing focusing the bulk of their SME funding to the creation of infrastructure in formerly neglected but high tourism potential. These funds are aimed at creating productive investments and encouraging SMEs effectively creating a competitive edge for their tourism sectors by significantly encouraging quality private investment into the sector to cater for the increased supply of tourists. Since locals are more in touch with the needs of their communities on tourism and tourist demands, they are better placed to make more customer targeted investments which will increase customer satisfaction and increase the popularity and demand for their tourism products. However, this is not to say that big international hotels are being neglected as they are already in receipt of significant government support in the form of subsidies and waivers that have increased they’re attracting of quality private international investments. Similarly, it has significantly increased the marketing and promotion of the tourism sector and led to the increased demand for those products by drawing in more clients and increasing the related revenues. Since the big international hotels have a duty to their shareholders to maximize the return on their investments, they use the best talent and invest a lot of money in the development of high-quality content to attract tourists. These marketing campaigns have proven so successful that they attract more visitors than they can cater to.

Governments have had to decentralize the administration and monitoring of their regional development investments and other expert agencies that better understand the economic dynamics of the areas these investments are being carried out. Therefore, this is also the case with government assisted international hotels strategies that result in considerable investor attraction and the significant projects and developments they bring to those regions. The issue between local and international projects has resulted in significant increase in development as players turn to technology and communication to improve their service delivery and reduce their overheads in the hopes of increasing their operational efficiencies and giving them a competitive edge in their industry. SMEs are gaining increasing popularity in attracting government funding since they ensure job creation even at a time when most big companies are cutting costs by substituting their labor requirements with capital investments. SMEs are more flexible and accommodating to their clients’ needs which increase customer satisfaction. These industries also offer better-working conditions for their employees which have helped regulators come up with better standard conditions for the industry effectively enhancing industrial relations. SMEs have also led to increased developments and service delivery by players in the tourism industry by stimulating competition and enhancing the dynamism of the tourism sector by encouraging innovation and creativity.

Since these developments involve the use of considerable amounts of public funds, there is an increased need to enhance transparency and accountability in their administration. Due to the increased study in the leisure industry in recent years, there are more information and algorithms available for assessing the suitability and viability of a venture to address key challenges and shortfalls in the tourism sector. There are also tools to forecast the profitability of a venture which goes to address the issue of whether the venture will be able to repay their loans and other financial aid either in cash or through meeting certain key targets. These bodies are also responsible for the continuous evaluation and assessment of their investment to ensure that they are being utilized and taken care of according to the terms and conditions of their agreements with the grantees. These evaluations also provide crucial data that is necessary for improving research and development and have been instrumental in innovative developments that have resulted in better and more efficient approaches to increasing capacity and quality of service to tourists and increasing the number of job opportunities created. All program key performance indicators showed that the program had achieved significant success especially on jobs creation with most SMEs exceeding their expectations.

Author’s Purpose, Assumptions and Conclusions

The author seeks to drum up support for the government policy of supporting SMEs in tourism by showing the significant impacts that SME industries have on the social development of their communities (Williams and Shaw, 1998). SMEs have an increased understanding of the direct needs of their clients and can quickly adapt to cater to these needs hence increasing their customers’ satisfaction and increasing the effective demand for their products. This increase in demand for their products makes SMEs have increased demand for labor which creates employment opportunities for the community. SMEs also enhance the economies of their communities by bringing in foreign exchange through their visitors and using local products to deliver service to their clients. This results in little or no leakage of foreign exchange by keeping it in the country which grows the economy significantly. The author assumes that the peripheral regions of these countries have significant tourism potential to encourage and sustain investments from the private and more so the government that will allow these SMEs increased ability to service their debts or realize the objectives of their grant or financial aid terms and conditions. He also assumes that his audience is conversant with the topic he is discussing hence he neglects to provide clear definitions for most of the important terms in his paper. He concludes that there is sufficient evidence that these areas do in fact have enough potential to supplement the tourism products supply deficits that international hotels are unable to meet due to capacity constraints and create significant direct and indirect employment to the people in their communities. According to the author, this is justification enough for the need of the government to support SMEs in tourism.

Evidence Does the Author Present to Support His/Her/Their Argument(s)

The author provides clear empirical data that shows the difference between the rate of employment before the intervention and the rates of employment after the intervention which shows a significant reduction in unemployment rates in the areas where investors were encouraged to develop SMEs to support the tourism industry. The author also cites significant research that shows the significant impact SMEs have in ensuring the retention of tourism revenue and increasing the economic development of their communities by reducing leakages through the use of local products for their supply which also results in increased circulation of money.

Document Evaluation

The author provides a logical argument by presenting his facts in chronological order and clearly showing the differences between pre-government intervention and post-government intervention. I, however, found the document poorly organized and hard to read since there is a high concentration of discordant facts coupled with very long citations in between making it hard to follow the author’s train of thought easily. His definitions of important terms want probably because the intended audiences of his paper are supposed to be people who have prior knowledge and experience on this topic. The author makes up for the shortcomings of his approach by ensuring that he provides enough evidence and research to support sufficiently his arguments. The author uses a diversity of evidentiary material including histories, research and tabular research data to clearly bring out the progress that the government interventions have created in terms of enhancing the capacity of the infrastructure to cater for the increased demand for their tourism products and the increased capacity to absorb job seekers and address the unemployment issue facing their communities.

The author also provides sufficient research backgrounds to show the need for increased growth of the tourism industry and the need to move from the more inward flow strategies that encourage huge foreign investments but result in little dollar for dollar impact on the economy since most of the money remains outside the country with the tour companies and travel agencies that plan trips and tourist packages for the visitors. The author is also objective in his presentation of evidence as he makes sure that he presents both the negative and positive aspects of SMEs without bias. His arguments go a long way in supporting the main point by showing sufficient evidence that the government interventions really do work to expand the capacity of the tourism industry and providing social reliefs by creating many employment opportunities through direct employment where people get employed to work in the SMEs and indirectly by providing other businesses with a market for their products. The article has done a good job in helping me understand the subject of government assisting SMEs in the tourism industry.

The Wales Tourism Board (1988) indicated that there was a significant need for enhancing the capacity of their infrastructure to cater for the expected increase in tourist visitors. It indicated the possibility of a policy shift to encourage significant investments by locals to encourage the creation of employment opportunities and stimulate the economic and social development of their communities by increasing circulation of money and encouraging the development of infrastructure. This article further supports Wanhill’s hypothesis that government intervention can lead to the development of significant cost efficiencies and service delivery for the tourism sector, especially in the outlying areas.



Wales Tourist Board. (1988). Tourism in Wales: Developing the potential, a Wales Tourist Board strategy. Cardiff: Wales Tourist Board.

Williams, A. M., & Shaw, G. (1998). Tourism and economic development: European experiences. Chichester: J. Wiley.

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