Learning on Sector Resilience: The Case of Honduran Tourism
In the past decade, the Honduran tourism sector has weathered numerous shocks, from political crises to travel warnings from escalating crime and violence to the twin hurricanes Eta and Iota, and of course, the significant disruption of COVID-19. The case of the Honduran tourism sector and the experiences of the USAID/Honduras Transforming Market Systems (TMS) Activity provides valuable insights into the needed factors and different roles stakeholders can play in building sector resilience.
Sector resilience matters because it allows for managing risk at a higher scale so that individuals, households, enterprises, and value chains are less vulnerable to shocks.
Tourism is an instrument to diversify economies and contribute to sustainable economic growth and employment. Tourism is a significant market for other sectors. In Honduras, every $1 in tourism spending generates 54 cents in sales in the food and agriculture sector. 9.6% of jobs in the Honduran economy are related directly or indirectly to tourism. In a country with one of the highest rates of economically motivated outmigration in Latin America, the resilience and sustainable growth of the tourism sector is critical to creating local economic opportunities and reducing poverty and outmigration.
1. Sectors require a functional framework for decision-making and communications in the fog of a crisis. When a political crisis erupted in Honduras in 2019, nationwide protests disrupted travel routes and exacerbated a troubled reputation for Honduras’s tourism sector. In response, the USAID/Honduras TMS Activity supported government and sector organizations in developing a crisis management framework. Within a week of the first airports in Honduras closing in March of 2020 due to COVID-19, the committee was able to deploy this same crisis management framework to monitor the pandemic, providing transparent messaging to the sector and initiating a planning process for the crisis. This points to the importance of preparedness and having a crisis management framework for sectoral action.
2. Rapid collection and integration of data and evidence into decision-making can improve the efficacy of response. The tourism sector formed the Tourism Emergency Table, the first national public-private working space, responding to the critical need for government support for recovery. Yet, no data was available on how the tourism sector was faring. The TMS Activity was able to redeploy a national enterprise survey effort to directly measure the disproportionate effects of COVID-19 on the tourism sector. Within 30 days, the Tourism Emergency Table then presented to the President of Honduras, and his economic cabinet, the results of this survey, which led to an amendment to the relief package with special provisions for tourism. This initiative has since consolidated into a more permanent MSME observatory function to monitor the Honduran economy, including the tourism sector.
3. The more self-organized the sector the better it is able to coordinate and advocate for relief. There is a pecking order in sectors, in which the preferred sectors of governments and donors are more likely to receive resources for relief and recovery. For example, within tourism, the hotel sub-sector is well-organized with a stronger chamber that is effective in lobbying and exerting power in policy decisions. However, other sub-sectors within tourism, like restaurants, were less organized and less represented in policy processes. While the restaurant sector attempted to organize during the pandemic into a new association, they were generally less effective in securing funding and relief. This points to the importance of proactively building sectoral capacity to organize, advocate, and coordinate themselves.
4. The degree of connectivity to other markets, sectors, and support services is critical to sector recovery. Honduran tourism illustrates the fragility of a sector if it is unconnected and isolated from other sectors. The approved national relief package included provisions for agriculture and tourism relief financing through a second-tier facility with banks. The agriculture sector, through facility Agrocrédito 8.7, received more than $USD 185 million in disbursements through this packing, while banks received a similar facility for tourism but disbursed effectively little. The financial sector in Honduras has long evolved a preference toward specific sectors and biases against others. The tourism sector eventually established its credit union outside the banking sector. Still, it was too late to affect recovery. This points to the importance of proactively building connectivity across sectors before crises to support recovery.
5. There is a critical need for sectors to probe, learn and adapt to the new normal. As the COVID-19 crisis endured, it required the tourism sector to test and evaluate new strategies to reactivate the sector. In the short term, TMS supported its partners at the National Chamber of Tourism (CANATURH) to scale programs that supported enterprises to quickly adopt e-commerce, food delivery, touch-less technologies, and other alternative services to stay in business during the lockdown. In the medium-term, a national employment training was launched to safely reopen attractions for visitors and to certify tourism establishments that had adopted biosecurity protocols. These were new initiatives that the tourism sector had little experience in and had to figure out as they went along. This emphasizes the importance of building sector capacity to innovate, learn and adapt.
6. The more diversified a sector, the better it can weather the crisis and bounce back. The Honduran tourism sector comprises multiple value chains and sub-sectors with different risk profiles. Honduras’s leisure offering for sun and beach, nature, and outdoor activities involved less potential exposure to COVID-19. As a result, this segment recovered more quickly than the business and cruise ship segments, which have higher exposure risks. This points to the need to strengthen multiple sub-sectors and value chains with different risk profiles to ensure sectors can maintain functionality and recover faster.
7. Investing in certain ‘system attractors’ can help to facilitate sector recovery. Before the pandemic, TMS had focused on reputation and low-cost airfare as priority system attractors. Post-pandemic, TMS and its partners re-prioritized tourism experiences as the key attractors to facilitate sector recovery. Through the “Experiences for Tomorrow” program developed with CANATURH, TMS invested in over fifteen experiences and launched a marketing program oriented to COVID-19 safe travel. This had the effect of restimulating domestic tourism as Hondurans considered if and where to travel. It also helped position Honduras in international markets, with Honduras making Conde Nast Traveler’s The 22 Best Places to Go in 2022. This points to the need to invest and protect the critical attractors in the system to help the sector recover and improve from its pre-crisis state.
Disruptions create push market systems to less optimal states. However, so-called ‘system attractors’ generate forces that can move the system back to a more optimal state.
Final Thoughts and Reflections
This month, as we reflect on market systems resilience, we hope that the case of the Honduran tourism sector reminds us of the importance of building sector resilience. Disruptions to sectors are significant sources of vulnerability in enterprise supply chains and for the many individuals and households who depend on those sectors for income to sustain their livelihoods. As practitioners, by broadening the ‘bounds’ of our interventions, we can make important headway to increase market systems resilience to manage risk at a sector level better to absorb, adapt and even transform in the face of the shocks that threaten to rollback development progress.