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Global Assessment Report on Disaster Risk Reduction 2013
From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction |
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Global Assessment Report on Disaster Risk Reduction 2013
From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction |
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tsunami in 2004, many local economies based on tourism and fishing were severely damaged. Yet, in several cases, reconstruction and recovery efforts focused on large-scale investments that bypassed local businesses to accelerate overall tourism revenue (Box 9.1).
SIDS competing to attract investment in the tourism sector are, implicitly or explicitly, accepting ownership over part of the disaster risk generated by business investments in hotels and resorts. Countries that have been most successful in attracting investment in the tourism sector and have consequently increased their hazard exposure have also experienced the highest losses relative to GDP and damages to uninsured public and private infrastructure (Clayton, 2003
Clayton, A. 2003.,Policy Coherence and Sustainable Tourism in the Caribbean., International Journal of Contemporary Hospitality Management. 2003,Volume 15, Number 3 pp. 188-191.. . Investments in tourism infrastructure also attract associated investment (housing for employees; road, water and electricity infrastructure; small businesses) to hazard-exposed areas. Risks to these assets are often not borne by the industry but transferred to households, small entrepreneurs or the public sector—as in the aftermath of major floods in Fiji in 2009 and 2011 (Box 9.2).
Investments in the tourism sector are often accompanied by associated urban and suburban real estate development and land-use change, which can also lead to shared costs and transfer of risk over time and space. For example, although not a part of SIDS, the case of Mui Ne, near Phan Thiet in Viet Nam, highlights the direct causal relationship that tourism investment has in one location and how that can increase disaster risk in another location (Box 9.3).
9.4
Incentives and disincentives for risk-neutral investment in the tourism sector
Incentive structures that address the need for risk-sensitive investment in the tourism industry need to be developed significantly.
Despite recurrent disaster losses in SIDS, there is little disincentive to continued and increased business investment in hazard-prone beachfront locations. Between 2004 and 2007, there were sequential major disasters affecting SIDS as well as a rapid growth in their tourism sector (WTTC, 2012
WTTC (World Travel and Tourism Council). 2012.,Travel and Tourism Economic Impact 2012., London,UK.. . Because beach or waterfront locations represent more profitable business investments, this drives the concentration of investment into highly hazardexposed areas. High profitability and short turnover to recover capital investments may mean that investors over discount the risk posed by intensive events with long return periods. And for SIDS governments, tourism is one of the few sectors where they are competitive.
As with other business sectors, it is unlikely that tourism investments in hazard-exposed locations reflect irrational behaviour by either businesses or governments, but rather a calculated trade-off between returns on and risk to capital. The typical tourism developer on Grenada’s main tourism belt of Grand Anse, for example, will calculate the expected economic return associated with a hazardprone, seafront location and choose this location over one that is located inland and away from the coast and which would produce lower returns (Mahon, 2007
Mahon, R. 2007.,The Role of Physical Planning in Linking Disaster Risk Reduction to the Development Process: Coastal Tourism Reconstruction in Grand Anse, Grenada., Paper presented at the 5th International Coastal and Marine Tourism Congress: Balancing Marine Tourism, Development and Sustainability., Auckland,New Zealand.. .  Mahon et al., 2012 Mahon, R., Backen, S. and Rennie, H. 2012.,Evaluating the Business Case for Investment in the Risk Resilience of the Tourism sector of Small Island Developing States., Background Paper prepared for the 2013 Global Assessment Report on Disaster Risk Reduction., Geneva,Switzerland: UNISDR.. Click here to view this GAR paper. However, multiple layers of investment, decisionmaking and ownership structures in the industry itself mean that responsibility and accountability
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