Scale of hospitality firms and local economic development—evidence from Crete

Abstract

The hospitality industry generates benefits for many host communities including employment generation and foreign exchange earnings. However, the hospitality industry often leads to external dependency contributing to a loss of local control over resources, migrant workforce and leakages outside the local economy, seriously reducing industry's potential for generating net financial advantages and growth for the local economy. Despite the variation of size of hospitality firms, there is still limited research on how well different size hospitality firms contribute to local economic development, something which this paper addresses, taking as a case the island of Crete. The findings suggest that the smaller the size of hospitality firm the larger the benefits to the local economy.

How strong is the linkage between tourism and economic growth in Europe?

“…In particular, it is believed that tourism (i) increases foreign exchange earnings, which in turn can be used to finance imports (McKinnon, 1964), (ii) it encourages investment and drives local firms towards greater efficiency due to the increased competition (Krueger, 1980;Balaguer and Cantavella-Jorda, 2002), (iii) it alleviates unemployment, since tourism activities are heavily based on human capital (Brida and Pulina, 2010) and (iv) it leads to positive economies of scale thus, decreasing production costs for local businesses (Andriotis, 2002;Croes, 2006). Other recent studies which find evidence in favour of the TLEG hypothesis include Sugiyarto et al (2003), Durbarry (2004), Parrilla et al (2007), Croes and Vanegas (2008), Proenca and Soukiazis (2008), Fayissa et al (2011), Pratt (2011), Dritsakis (2012), Eeckels et al (2012), Ivanov and Webster (2013), Surugiu and Surugiu (2013).…”

The Roles of Formal and Informal Institutions in Small Tourism Business Development in Rural Areas of South China

“…Such small-scale tourism services can provide opportunities for local people to generate economic benefits to sustain their livelihoods in tourism destinations [2][3][4][5]. Studying tourism from a livelihood perspective, including studying small tourism businesses, has become popular in recent years [6][7][8].…”

The pattern-matching approach and its application in tourism development

“…In contrast, in areas where the industry is in the form of rented rooms it is controlled by locals. Third, although the tourist multiplier has not been calculated for the island, it is estimated (Andriotis, 2002) that the multiplier effects are low since foreign tour operators keep for their own benefit the highest share of tourist consumption, there is high leakage of money from imports and income repatriation, and, as a result, tourism has been weakly integrated in the local economy. Finally, although the evidence is limited, it is clear that foreign ownership is, and has been, a vital force of the development of Cretan tourism industry.…”

“…Tourism has increasingly been employed as a means of overcoming underdevelopment and as a way for many destinations to move from a position of 'poverty' to a position of 'wealth' (Andriotis, 2002;Tooman, 1997:214). Despite this increasing use of tourism as a development tool, a review of academic papers in the field of tourism development shows limited 'specific' attention being paid to the extent to which the development theories used in relation to tourism-led development are supported by empirical evidence and vice versa.…”