(Eco)Tourism: Support Follows Perception. Evidence from Indonesia (Lake Toba)

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(Eco)Tourism: Support Follows Perception.

Evidence from Indonesia

(Lake Toba)

Final Version Master Thesis

July 6

th

2015

Faculty of Economics and Business Groningen

University of Groningen

The Netherlands

Student: Sabrina Herold

Student number: S2525968

Email: s.a.herold@student.rug.nl

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(Eco)Tourism: Support Follows Perception.

Evidence from Indonesia

(Lake Toba)

Locals’ perceived impacts of two types of tourism businesses on local, economic and social development were investigated and compared within this study. The tourism industry, as other parts of the private sector, was found to have positive impacts on economic development. Research on its ecological and social impacts had mixed results. This study confirms positive contributions of tourism to local economic, ecological and social development at Lake Toba, links them to community support and shows ways to further improve the sustainability of the sector. Differing degrees of positive impacts between the two types of tourism businesses; conventional and eco-tourism, were observed for economy and society. Evidences of positive impacts are to be treated with caution due to the relatively low prevalence of tourism businesses on site. Social benefits were perceived to be most important among citizens according to social exchange theory. Within the economic pillar, eco-tourism was perceived most innovative. Combining both, the positive perception of eco-tourism suggests higher support by its residents. The quick-scan, a qualitative, interview based tool to depict economic development, was the instrument of this research. It was edited to incorporate ecological and social impacts.

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Acknowledgements

Travelling, cultures, elephants and tourism are some of my greatest passions. Having had the chance to combine them in my master thesis was the very best thing that could happen to me and the best way to end my master. Most and foremost I owe a big thanks to my

supervisor Dr. Bartjan Pennink who not only encouraged me to pursue this topic and

introduced me to a university on site, but also helped me to grow a lot during the time of our collaboration. Many thanks also to Del University of Technology in Sumatra, its staff and students who were always very helpful and friendly. Specifically I would like to thank my contact persons Dr. Yosef Manik and Ricardo Situmeang very much for their time, effort and great help during my stay and for this research.

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1. Introduction

“It’s all in the mind” (George Harrison). George Harrison’s reference to the relation between reality and perception applies very much to the business world, too. Recent economic activities in real estate proved us that perception can matter more than reality. In line with the Thomas-Theorem, behavior is triggered by our subjective perception of reality: “If men define situations as real, they are real in their consequences” (Thomas and Thomas, 1928). Thus, positive perceptions of an economic activity such as tourism by locals, including business owners can as well exhilarate its growth in reality.

Social Exchange Theory weights positive and negative perceptions of reality against each other. It prospects that when perceived benefits of an activity outweigh its costs, the activity is supported by its stakeholders (Mensah, 2012). Thus, if felt beneficial impacts of tourism outweigh its perceived negative impacts, tourism is more likely to trigger locals’ support for future development. In the same vein, evidences were found that the development of tourism is contingent to its residents support (Deery, Jago & Fredline, 2012).

Henceforth, this research focuses on perceived influences conventional and eco-tourism businesses have on local economic, social and environmental development (LESED) as estimated by their locals. It therewith sheds light on the acceptance and support of tourism businesses by its residents to determine future growth.

Among others, tourism forms one of the most important pillars for economic development, above all in developing nations (Chavez-Cortes and Maya, 2010). Here it is particularly useful to increase wealth of low income groups with tourism as an economic activity due to low investments necessary (Deery et. al, 2012). Tourists are attracted to certain sites for manifold reasons. A booming city can serve as much as a touristic location as a natural and cultural site. Touristic activities in cultural embedded ecosystems are the topic of this study.

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6 conventional tourism sector causes environmental pressures including pollution and ecological damage (Tang, 2015).

Eco-tourism as a subsector of the tourism industry aims on environmental conservation and social wellbeing of the local population (International Eco-Tourism Society, 2012). Different from tourism as usual, eco-tourism also utilizes income as a motivation to maintain an ecosystem (Wunder, 2000). It represents the fastest growing sector of the tourism industry with an increase of 20 percent a year, which is six times the growth rate of the total tourism industry (Mathew, 2005).

Deery et. al (2012) examine the richness of quantitative research completed and pinpoint to a lack of in-depth information about perceived impacts in tourism. This study contributes to close the gap by firstly quantifying locals’ perception of tourism impacts and gaining qualitative insights into the specifics of those perceptions for future development. In doing so, it unfolds the perception of residents towards tourism and towards their support of the very same. It therewith also addresses the call to not only describe perceived impacts made but also shows ways to change them (Deery et. al, 2012). To date, and to the author’s best knowledge, an attempt to compare perceived LESED impacts of conventional touristic businesses with those of eco-touristic businesses with the endeavor to find tourism business with the highest local support does not exist.

The aim of this study is thus to investigate perceived impacts of conventional and eco-touristic businesses on LESED and find ways to elevate their positive impacts in order to exhilarate locals‘ support for future tourism development.

Therefore, the research question of this study is:

How are tourism businesses perceived to contribute to local economic, social and environmental development (LESED) within a developing country and how can they

trigger locals’ support?

The triple bottom line serves as the theoretical concept to define economic, ecologic and social aspects of businesses and builds the guiding frameworks of this study together with social exchange theory.

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7 rates and with the smallness of the tourism industry compared to other economic sectors. Perceived impacts are quantified with the aid of the quick-scan tool (Mulder and Pennink, 2014). Recommendations for future tourism development as supported by its residents are provided in order to make this research accessible for policy development, implementation and monitoring. Besides top-down policy making, conservation project management, businesses and communities can use my outcomes for future improvements in tourism.

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2. Literature review

The following research will first highlight the importance of tourism as an economic sector. It will then introduce social exchange theory and the triple bottom line as the guiding frameworks of this study. After introducing both, the two classifications of tourism businesses under comparison are made according to their respective conceptual models. It follows a brief examination of the role of the private sector in the development of a country. Finally, the hypotheses and sub questions are derived leading to an answer of the research question.

2.1. Tourism as an important economic sector in the developing world

At first glance one may have different industries than tourism in mind when thinking about sectors contributing to LESED development. Yet, data proves that tourism has become one of the major industries of this world’s economy and thus has main contributions to economic development, above all in the developing world (Aziz, Abdul, Aziz, & Rahman, 2013). Its total contribution to world GDP was 9,5 percent in 2013 and is expected to yield 10,5 percent in 2024 (WTTC, 2014). Due to the potential to expose tourists to authentic experiences, the developing world became a highly sought for tourist destination. Particularly in rural environments, tourism is perceived as a great potential for economic development with the existence of few alternative options (Briedenhann and Wickens, 2014). However, the growth of tourism as an economic sector has always had positive and negative impacts on social, economic and environmental development. So is the foreign direct investment for tourism business as much a blessing as a curse with increasing social welfare on the one hand and increasing dependency on foreign capital on the other hand (Yoon, Gursoy, & Chen, 2001).

2.2. Tourism impact measurements and social exchange theory

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9 impacts. Perceived impacts of tourism businesses are this study’s focus by reasons of the following:

As mentioned before, the success of tourism as an economic sector is many times dependent on the support of its local community (Deery et. al, 2012). Thus, the perceptions of the same community towards tourism are important in order to develop tourism further (Deery et. al, 2012; Smith, 1995). The underlying cause for this can be found in the social exchange theory. It states that human interaction is built on expected reciprocity (Mensah, 2012; Gouldner, 1960). Subjective cost-benefit calculations determine if a person engages or disengages with another person and in a certain activity (Mensah, 2012). If subjectively perceived benefits outweigh costs, humans will support an activity. The same can be applied to the relation between local communities and tourism as an economic activity. Accordingly, if perceived tourism benefits outweigh its costs, locals will give their support towards its development (Mensah, 2012). Conversely, when costs exceed benefits, residents will refrain from supporting tourism (Sharpley, 2014). The link between Social Exchange Theory and George Harrison’s phrase is unmistakable.

2.3. Factors influencing perception towards tourism

Individual and environmental factors affect someone’s perception towards tourism. The former are for instance the length of residence, knowledge, demographics and degree of interaction of locals with tourists (Lundberg, 2011). The latter are stage of tourism development in the area with the associated level of economic activity of and dependency on tourism. As Brougham and Butler’s (1981) area life cycle for tourism suggests, low levels of tourism show positive perceptions towards impacts of tourism. With increasing tourism activity, higher tourism development and thus higher economic dependency on tourism, attitudes towards tourism become negative once a certain threshold is reached.

2.4. The triple bottom line

After having clarified that this study is investigating perceived impacts of locals, the following paragraph elaborates which tourism impacts are under examination.

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10 profit, social and ecological sustainability are not mutually exclusive (Willard, 2012). It is aimed at industries, such as tourism, to shift their prevailing profit oriented paradigm towards a perspective where environmental and social impacts of businesses are equally important (Reuther, 2011). As mentioned before, the triple bottom line is manifested in three distinct pillars of economic, ecologic and social aspects also called profit, planet and people (Reuther, 2011). Willard (2012) divided them further into concrete indicators of sustainability for a society. Economic sustainability comprises good jobs, infrastructure, fair wages and fair trade. The environmental factors entail absence of pollution and waste, sufficient water and energy, conservation and restoration. The social aspects include education, health care, social justice and community, good working conditions, and culture.

An alternative measurement of economic development provides the quick scan (Mulder and Pennink, 2014). It is employable on a local, regional and national level and entails different indicators depicting the economic situation of a community, region or country (Mulder and Pennink, 2014).

So far the three pillars of the triple bottom line were treated identically in this literature review. Yet and logically, for any industry to have an impact on environment and society, economic activity needs to be in place first. Economic development is the driver of economic growth. It goes hand in hand with poverty eradication as one of the goals of the triple bottom line. This research focuses on local developments. Whenever the ‘local’ of this study is defined later, prevailing interdependencies between local, regional and national economic (social and ecological) development upstream as well as downstream are unmistakable (Pennink, 2014). Consequently, whatever happens on a local level will have an impact on the national economy, too.

Influential for the spread of business models matching the triple bottom line are various factors. Vredegoor and Pennink (2013) highlight existing resource endowments and market fit, leadership, entrepreneurship and institutions as influencers of regional economic development, which account as much for LESED. Moreover, local communities, specifically their knowledge and skills in terms of own leadership and entrepreneurial capabilities, as well as human coordination manifested in co-management, cooperation and cooperatives will have an influence on LESED (Vredegoor and Pennink, 2013). In the case of tourism in particular, knowledge of locals may foster touristic development (Sebele, 2010).

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11 realization of the triple bottom line (Elkington, 2004). Thus, also for tourism to serve the triple bottom line, an integrated development strategy supported by multiple stakeholders is inevitable (Siti-Nabiha, Wahid,. Amran, Haat, & Abustan, 2009).

2.5. Tourism businesses impact on the triple bottom line: conventional & eco-tourism

At the start of conventional tourism development, the common mindset was that tourists will come to admire the environment rather than consuming it, so that tourism was thought of as a naturally sustainable industry (Murphy, 2013). However, with the growth of its scale and scope, this industry, like others, found itself competing for scarce resources and capital. Also, the initial assumption of its non-consumptive nature proved unrealistic as it eventually caused alteration or erosion of attractions (Murphy, 2013).

Due to the few available research on perceived economic and ecological impacts and the munificence of direct impact research, the following paragraphs will describe both, direct and indirect (perceived) impacts studies for the two types of tourism businesses under investigation: conventional and eco- tourism.

2.5.1. Conventional tourism businesses

As stated by the World Tourism Organization (1997) conventional tourism creates revenue, employment, improves infrastructure and fosters the growth of the private sector (Sebele, 2010). Also in the case of La Réunion, having relied mostly on the agricultural sector in past times, the government used tourism as a tool for economic development by creating additional sources of revenue (Picard, 2011). In the same vain, a study by Kim and Chen (2006) found reinforcing effects of economic development and tourism in Taiwan. Scholars largely agree on the positive economic impact of conventional tourism (Yoon, Gursoy, & Chen, 2001). Picard (2011) also observed that locals are motivated to support tourism when it delivers visible economic returns in line with the previously explained social exchange theory.

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2.5.2. Eco-tourism businesses

Eco-tourism on the other hand as a subcategory of tourism is guided by the principles of sustainable tourism defined by the World Tourism Organization (Liu, 2003). Sustainable tourism is defined by the UNWTO (2005) as "Tourism that takes full account of its current

and future economic, social and environmental impacts, addressing the needs of visitors, the industry, the environment and host communities". It thus aims at catering the three pillars of

the triple bottom line described above.

Eco-tourism is defined as cultural and environmental tourism with an advantage for the local population (Scheyvens, 1999). The International Eco-Tourism Society (2015) describes it as "responsible travel to natural areas that conserves the environment, sustains the well-being of the local people, and involves interpretation and education. Education is meant to be inclusive of both staff and guests. ” Comparing both definitions, it is feasible to use sustainable and eco-tourism as synonyms for each other in this study, since both definitions highlight the same sought for impacts on people, planet and profit. Eco-tourism only specifies one of its social impacts specifically; its educational endeavor. In light of the popularity and visibility of eco-tourism to date, it will be used as the guiding term of this research.

The current literature offers several names for eco-tourism including natural, responsible, green, alternative and soft tourism (Hernández and Picón, 2015). Terminological distinctions are made based on differing focuses of touristic activities, which are however not relevant for this study (Hernández and Picón, 2015). Marzouki, Froger, & Ballet (2012) stressed to also consider the global impact of ecotourism not only on the local ecosystem, but on the planet as a whole. As this study is concerned with proximate effects and their spillovers, it will leave the latter definition for future exploration.

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13 growth (Wunder, 2000). Other authors found that social impacts were perceived higher when the business was more embedded into the local community (Koski, 2014; Shaw and Williams, 1998). Kiss (2004) concluded in her meta-analysis that ecotourism has limited positive impacts on the environment and the society when long term investments for development are made.

2.6. A note on the role of the private sector in developing countries

Surely, after reading the impacts businesses can have on their surroundings, the question of the positions of private and public sector within a country may have appeared in the reader’s mind. Whilst studies on the positive relation between government spending and economic development in developing countries give contradicting results, scholars widely agree that economic development cannot exist without government support (Gupta, 2014; Mudaki and Masaviru, 2012; Razmi, 2012). However, and as demonstrated above, also the private sector has an important stake in local, regional and national developments. The UNDP (2015) recognizes that the private sector has a vital role as a driver for sustainable economic growth through its providence of goods and services, tax revenue generation, the invention of innovative solutions to prevailing local problems and its ecological impacts. Consequently, it contributes to the eradication of poverty, inequalities, exclusion and the preservation of the environment.

The UNDP emphasizes seven categories within which the private sector of tourism can aid in poverty eradication (Luke and Riva, 2011). Those are providing jobs for the poor, getting supplies for tourism from the poor, ownership and management of tourism businesses by the poor, voluntary support in form of sponsorships to the poor and the stimulation of infrastructure investments. The acceptance of an economic sector such as the tourism industry depends on its relationship with the local community. Thus, a good relationship among the two proceeds sustainable contributions from tourism (Shaw and Williams, 1998; Koski, 2014).

2.7. Research question, hypotheses and sub question

In light of the above literature, this study poses the following research question, hypotheses and sub question:

How are tourism businesses perceived to contribute to local economic, social and environmental development (LESED) within a developing country and how can they

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14 H1: Conventional tourism will be perceived to have higher positive contributions to the profit

pillar of the triple bottom line than ecotourism.

The literature shows that both tourism businesses are expected to have positive impacts on the local economy. It also became evident that the profit pillar is comparably stronger emphasized by conventional tourism business than by eco-tourism, which is expected to reflect in higher perceived impacts in economic development.

H2: Ecotourism will be perceived to contribute higher to the people pillar of the triple bottom

line than conventional tourism.

Due to the emphasis of ecotourism on society, it is expected that perceived positive impacts will be higher for those tourism businesses than for conventional tourism businesses.

H3: Ecotourism will be perceived to contribute higher to the planet pillar of the triple bottom

line than conventional tourism.

The higher emphasis of ecotourism on the environment leaves to conclude that it will evidence higher perceived positive contributions than conventional tourism.

H4: The tourism business with perceived higher contributions to the triple bottom line will

find higher support by locals.

In line with social exchange theory, it is expected that higher perceived benefits stemming from the business, that is higher positive impacts on the triple bottom line, will also lead to a higher acceptance and support of the same.

Q1: What are the recommendations for conventional and eco-touristic businesses to improve their capacity to serve the triple bottom line and thus achieve higher support for its development from the community?

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2.8. The case under examination

Sumatra was chosen for this case study; specifically Lake Toba basin will be the area under investigation. Lake Toba is not only the largest volcanic lake of the world, but also home to numerous endemic species of flora and fauna (Zhao, Peng, Jiang, Tian, Lei, & Zhou, 2006). Due to human-induced changes of land use, the lake’s ecosystem has been significantly negatively affected (Zhao et. al, 2006). Also the economic and social situation of the region is problematic. Looking at the triple bottom line for the region of Lake Toba basin, the following points of attention become relevant to this research.

2.8.1. Economic and social aspects of Lake Toba with a focus on tourism

With regards to the economic and social aspect of this particular region, the majority of Lake Toba’s population (63 percent) is classified as poor and the negative impact of lake pollution and water reduction significantly influence the region’s social and economic situation (Moedjodo, Simanjuntak, Hehanussa, Lufiandi, 2003).

The most important economic sectors at Lake Toba are agriculture, fishery, industry for electricity and cloth and lastly tourism (Moedjodo et. al, 2003). Respectively, different institutions have interest in the area and own authority to approve (foreign) investment. The relevant economic departments are forestry, finance, agriculture, marine and fishery, tourism and culture and the agency for studies and application of technologies (Moedjodo et. al, 2003). In this research, I will focus my attention on the economic sector of tourism which contributes below 10 percent of GDP to the Lake Toba basin area (Statistics, Samosir Regency). It is thus classified as an area with low touristic activity according to Brougham and Butler (1981).

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16 The little tourists that come to North Sumatra evaluate quality of tourism services as low and suggest improvements on tourism innovation to make this region more attractive (Lumbanraja, 2012). Lumbanraja (2012) showed that the different regencies within the Lake Toba basin are in different development stages, whereas Karo and Toba Samosir regencies evidence slightly higher touristic developments than other regions. There, local tourists dominate the industry which require less touristic facilities for their stay (Lumbanraja, 2012).

Recovering Lake Toba as a touristic area is problematic due to the presence of manifold stakeholder groups with diverging interests. The region of Lake Toba basin is divided into seven different regencies (Samosir, Toba Samosir, Simalungun, North Tapanuli, Humban Hasundutan, Karo, Dairi) and six different cultural groups (Angkola-Mandailing, Pakpak Dairi, Toba, Simalungun and Karo) (Lumbanraja, 2012). The differences between those groups are reflected in independent and differing policy developments for tourism created by each local authority. As a consequence, partial developments with counterproductive and conflicting activities arise (Lubanraja, 2012). So do governments simultaneously support tourism and the floating fish pond industry as the main economic sector of the area. Lumbanraja (2012) concluded that the integration of both industries will be unproductive as tourists will shy away to visit an unhealthy ecosystem or in other words an eroded ‘attraction’.

2.8.2. Ecological aspects of Lake Toba

Looking at ecological aspects, Lake Toba encounters severe problems in water, land and air pollution management which together have a negative effect on tourism. In 2003, the Coordination Board for Lake Toba Basin Ecosystem Conservation highlighted three critical problem zones for Lake Toba, which pinpoint to the potential effectiveness of several direct conservation activities. Those are (1) water quality related to waste management activities, (2) land use and tenure related to sustainable farming support and (3) air pollution from industries’ toxic gas emissions related to air pollution technologies (Moedjodo et. al, 2003).

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17 Governmental institutions responsible for preserving Lake Toba basin are represented on a national, provincial and local level (Moedjodo et. al, 2003). On the national level, Asahan River Authority and the State Ministry for Environmental Affairs have a stake in the region (Moedjodo et. al, 2003). On the provincial level, the responsibility lies within the North Sumatran Government of the Environmental Impact Management Agency (BAPEDALDA). On the local level, it lies within the five local district BAPEDALDA’s of Lake Toba region (Moedjodo et. al, 2003).

Three NGOs supported by UNESCCO were reported to be present within the Lake Toba region, which are YAPIDI (Pijer Podi Foundation), GKPS (Simalungun Protestant Church Organization) and YES (Sumatra Eco-tourism Foundation) (Moedjodo et. al, 2003). All NGO activities however, similar to those of other institutions are largely unaligned (Moedjodo et. al, 2003).

Besides NGOs and governments, a third overarching pillar was formed in 2002. It is named the Coordinating Board for Lake Toba Basin Ecosystem Conservation (CBLTEC) and attempts to bring governmental institutions on both levels as well as NGOs together (Moedjodo et. al, 2003). The responsibility of the board is the formulation of holistic policy and coordination initiatives, monitoring environmental impacts, efforts for rehabilitation and community participation (Moedjodo et. al, 2003). A Technical Advisory Committee consisting of technical agencies on a provincial level, universities, research bodies and the River Authority of Asahan was formed to facilitate the board in their duties. Whereas board initiatives to improve the Conservation of Lake Toba Basin Ecosystem are yet lacking, the formation of the board and the development of a general policy towards conservation were considered a first step into the right direction (Moedjodo et. al, 2003).

2.8.3. Relevancy of this research to the region

Lumbanraja (2012) gives two major suggestions to facilitate tourism in the Lake Toba area. Firstly, government policies need to unite, and become legitimate in an overarching and consistent framework including tourism-management regulations. Secondly, local communities need to be involved in the creation of plans and tourism management in general (Moedjodo et. al, 2003).

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18 recognizes that it is difficult to determine how and where to create awareness about various sustainability aspects and ultimately translate this awareness into action. In response, this research firstly depicts the current perceived sustainability status of the prevailing tourism industry by the ones who have the capacity to change it: the locals. Secondly, it shows future paths of sustainable development with the support of its residents. The involvement of stakeholders from different levels and regencies (representatives from businesses, communities, research bodies and governments) within the Lake Toba basin is key for this study in order to satisfy the research question. Thus, by integrating various stakeholders into the evaluation and recommendation process of the triple bottom line, a step is made towards Lumbanraja’s suggestion of a unified tourism planning with the involvement of most important stakeholders. More importantly, businesses, NGOs and communities can conclude direct actions from this study.

3. Conceptual model

According to the theory outlined above my conceptual model takes the following form:

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4. Methodology

4.1. Measurement of concepts

This qualitative case study involves the comparison of two different categories of tourism businesses in light of their perceived contributions to LESED and thus the triple bottom line within the Lake Toba basin ecosystem (Pennink and van Veen,2014). It further elaborates upon how tourism development will find residents’ support. Yin (2009) states that a case study “investigates a contemporary phenomenon in depth and within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident “.

The phenomenon under investigation here is the tourism business. For the case study it proved to be difficult to assign restaurants clearly to the tourism industry; travel agents and recreation facilities are rather sparse and cannot always be classified as business entities. Therefore, only businesses offering accommodation for visitors form the units of analysis in this research. They are distinguished within one of the two categories of tourism businesses of conventional and eco-tourism as conceptually defined within the literature review. The decision regarding which category a business should be assigned to was made according to the opinions of myself, the business owners, the community, government bodies and/or researchers.

Due to the limited timeframe of this work, I was only able to get a solid insight into two of the seven Lake Toba regencies. These two are namely Toba Samosir and Samosir, which were assessed to serve as good representatives of the overall situation in the Lake Toba area by a local research professor. Toba Samosir represents the typical case of one of the six regencies which prioritizes other economic sectors above tourism. The regency Samosir however comprises the touristic hotspots of Lake Toba basin and has thus a higher, although no major, emphasis on tourism as an economic sector. One of the eco-tourism businesses under examination in this study lies outside the Toba Samosir regency in Humban Hasundutan.

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20 employable in the absence of hard data as it is based on a questionnaire to be asked to various stakeholders. The persistence of heterogeneity in perception among and within communities explains the necessity to ask stakeholders with multiple backgrounds in order to gain a holistic picture of the situation at hand (Deery et. al, 2012). Hence, the impact of businesses as perceived by different respondents is measured. The tool provides a quantitative scale per economic indicator from 1 (no or negative impact) to 10 (highest possible positive impact) and leaves space for qualitative information.

In this study I only use the local level indicators of the quick scan and adopt the instrument to include all aspects of the triple bottom line. Comparing this measurement tool with the original quick-scan, it becomes evident that many of the indicators remained. However, the variables are split up into businesses, social and ecological indicators. For the last two groups some variables are added due to their relevancy to the case according to the Coordination Board for Lake Toba Basin Ecosystem Conservation (2003) and as recommended by Willard (2012) in the literature review. Hence, the indicators of the quick-scan are segregated into social, ecologic and economic aspects to represent the three pillars of the triple bottom line (people, planet, profit) representing LESED. Each indicator measures the perceived contribution of the type of tourism accommodation business (eco and conventional) on the various indicators depicted below:

Economic Indicators:

- Businesses contribution to economic development as in business and entrepreneurship (Mulder and Pennink, 2014)

o Prevalence of accommodation businesses in the local area

o Accommodation businesses sufficiency as the only source of income o Growth of accommodation businesses

o Professionalism of accommodation businesses

- Businesses contribution to employment (Mulder and Pennink, 2014) o Accommodation businesses contribution to local employment

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21 o Current state and perceived ability of diversification for accommodation

business

o The possibilities and usage of micro financing for accommodation businesses o Perceived general innovativeness of accommodation businesses

Social Indicators:

- Businesses overall impact on society (derived from Luke and Ria, 2011) - Businesses contribution to education (Mulder and Pennink, 2014)

- Businesses contribution to the accessibility of basic goods (Mulder and Pennink, 2014)

- Businesses contribution to fair income distribution and fair wages (Willard, 2012) - Businesses contribution to cultural preservation (Willard, 2012)

- Businesses cultural integration (Willard, 2012)

Ecological Indicators:

- Businesses energy efficiency (Mulder and Pennink, 2014)

- Businesses impact on waste management (Willard, 2012; Moedjodo et. al, 2006) - Businesses impact on air pollution (Moedjodo et. al, 2003)

- Businesses impact on deforestation (Moedjodo et. al, 2003) - Businesses impact on erosion (Moedjodo et. al, 2003) - Businesses impact on active conservation (Willard, 2012)

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22 Since previous research proved the workability of using the questionnaire as the basis to conduct interviews, the survey-based interview technique was also applied here (Mulder and Pennink,2014; Yin,2009). In order to obtain some additional information, the interview had some semi-structured elements which proved to deliver insightful results and give answers to Q1 regarding future recommendations for tourism. Some of the interviewees could be interviewed in English whilst for some others it was necessary to have a translator present during the interview. As recommended by Pennink (2013), the translators had insights into the study before conducting the interviews which proved to be very helpful for all involved parties to translate and understand interview questions.

4.2. Sample

The sample of this study was based on segmentation in order to gain a holistic picture of the situation at hand. Further, it can be classified as a convenience sample as respondents were selected according to their existence within my network. The ideal number of respondents per indicators and variables of the quick scan lies between four and eight (Mulder and Pennink, 2014). The 17 indicators had a range of 9 to 21 respondents with a median of 18 and an average of 17 respondents per indicator. The number of respondents per variable is displayed below:

Perceived impact indicators Number of

respondents Economic Indicators:

1. Businesses contribution to economic development (Mulder and Pennink, 2014) ₁₉ o Prevalence of Accommodation Businesses in the local area ₁₉ o Accommodation businesses sufficiency as the only source of income ₁₉

o Growth of accommodation businesses ₂₀

o Professionalism of accommodation businesses ₁₆

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23 3. Businesses contribution to infrastructure development (Mulder and Pennink, 2014) ₁₇

4. Businesses contribution to a monetized trade (Mulder and Pennink, 2014) ₂₀ 5. Innovation Capacity of the businesses (Mulder and Pennink, 2014) ₁₉ o Current state and perceived ability for diversification for accommodation business ₁₉ o The possibilities and usage of micro financing for accommodation businesses ₁₅ o Perceived general innovativeness of accommodation businesses ₁₈ Social Indicators:

1. Businesses overall impact on society ₁₈

2. Businesses contribution to fair income distribution and fair wages (Willard, 2012) ₉ 3. Businesses contribution to the accessibility of basic goods (Mulder and Pennink,

2014) 21

4. Businesses contribution to education (Mulder and Pennink, 2014) ₁₅ 5. Businesses contribution to cultural preservation (Willard, 2012) ₁₆ 6. Businesses contribution to cultural integration (Willard, 2012) ₁₈ Ecological Indicators:

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24 In total this research has 21 respondents with various backgrounds. They are segregated as follows among the various fields and business types:

Stakeholder Category Total Of which conventional tourism Of which eco-tourism

Locals 9 6 3

Business Owners 8 4 4

Government Representatives 5 5 0

Researchers 3 2 1

Although the possibility existed, none of the respondents was classified as NGO representative since the organizations I was in touch with were inactive.

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5. Results and discussion

5.1. Detailed results on the impact of touristic businesses on the triple bottom line

The results indicated below reflect a summary of answers given to the interview questions. Respondents’ answers are noted by words such as ‘reported’, ‘mentioned’ or ‘perceived’. Whenever my own observations are included, active voice is used.

5.1.1. Economic indicators

Business and Entrepreneurship

1. Prevalence of Accommodation Businesses in the local area

Accommodation business represents a less important economic sector at Lake Toba. Prevailing sectors of agriculture, fish farming and manufacturing contribute most to the local GDP. Also in the region of Samosir, which is most popular for tourism at Lake Toba, its contributions to GDP did not reach 10 percent within the last six years (Statistics, Samosir Regency). This number is equivalent to the respondents’ estimate of about 10 percent of accommodation businesses existing within the region. 20 percent of those are estimated to be big sized, 60 percent medium and 40 percent small sized accommodation businesses.

Eco businesses are very scarce, so that only 1 percent of the total accommodation businesses were reported to be of ecological nature.

2. Accommodation businesses sufficiency as the only source of income

Big hotels were reported to usually be standalone hotels without other business on the side. However in the case of the region Toba Samosir it was stated that many hotels are owned by emigrants who then have different other businesses abroad. Smaller hotels were said to engage in retail or agricultural activities. As reported by several interviewees, to date, only big hotels are able to provide enough returns to be sufficient for owners as only economic activities. Since tourism at Lake Toba has high fluctuations with peak seasons in weekends and during Indonesian national bank holidays, other sources of income are necessary in off season times for smaller lodging facilities.

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26 of income and uses eco-tourism to promote its product throughout the world with the aid of the government and his network. The same person said that the increasing awareness of coffee throughout the world leads to a corresponding demand increase in the lodging business. I classify this case henceforth as agro-tourism.

3. The growth of accommodation businesses

Conventional tourism businesses involving Western people evidence higher growth than others as described by a few interviewees. One business was reported to be growing too fast; a business with a presuming Western sponsor and a local manager and owner.

Generally, tourism activity is growing and so does the hospitality industry slowly but steady during the last three years as described by locals, governments and business owners alike. Within existing businesses, it is reported that around 20 to 30 percent are developing whilst 50 percent are degrading due to (perceived) bad maintenance and management since the tourism boom in the 1980s. A reason for the latter could be the one-generation phenomenon which was explained to me by multiple locals. Businesses usually only survive one generation. The next one aspires to try its own luck in another field of interest. Observable in multiple economic sectors, the same situation can be observed within the family of famous Medan economist Tjong A Fie.

The growth of accommodation businesses was also attributed to infrastructure improvements by respondents. So does the opening of the new airport in Toba Samosir brings better direct flight connections nationally with possibilities of international air traffic according to several interviewees. The government also reported that the amount of visitors fluctuated according to the economic situation in the foreign country and the availability of direct or indirect flight connections to Lake Toba.

Eco-tourism does not evidence higher perceived growths; business owners however see high future potentials in it. Whilst one may presume that the interest towards quick and high returns is greater within the conventional tourism, one conventional accommodation business also reported not having interest in higher returns as long as their business pays the bills.

4. Professionalism of accommodation businesses

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27 however not presuppose tax payment. Many of the hotels were said to not pay taxes, which also can be attributed to the frequently named distrust of the population in the government in general due to corruption. Some interviewees mentioned that a license for tourism businesses exists and is issued by the government. High yearly fees and a difficult issuing process hinder most people in obtaining it.

Some of the small eco businesses were reported to be registered, others were not. The agro business is registered at the government with its coffee production only.

Employment

1. Accommodation businesses contribution to local employment

Generally, conventional and eco-touristic accommodation businesses were said to create local employment equivalent to their prevalence rates. Most respondents stated that accommodation business owners are typically locals. However, some big conventional hotels in Toba Samosir and Samosir were said to be owned by emigrants or Western people. The latter are mostly married with an Indonesian partner, partnerships without these bonds are almost nonexistent according to own observations and one respondent.

I observed eco businesses not having more than four employees. One eco business employer noted that he allows his employees to work some days of the month on their own field for extra income. In case the business involves lodging at local families, it was reported that the hosting family gets additional income from the guests’ stay on top of what they earn in other sectors such as agriculture.

2. Accommodation businesses contribution to local welfare: wages paid

Some businesses were perceived to pay minimum wage, some below and others above that with minimal difference between eco and conventional accommodation businesses. Whilst respondents frequently reported below average incomes for hospitality workers, they yet perceive that in relation to the worker’s skills, nature of work and the living costs at Lake Toba, the relative salaries are sometimes higher than those in Medan. One local reported that she feels that hotel wages are higher than the average when working for big hotels.

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28

3. Accommodation businesses contribution to cover up hidden unemployment

Many people reported that there is no infrastructure for hidden unemployment as none of the workers in any sector is actually registered in the area of Lake Toba. An explanation could be the lack of government structure in rural areas such as Lake Toba. Others said that businesses in general, among them also lodging facilities cover up hidden unemployment.

Accommodation businesses contribution to infrastructure development

Differences in contributions to infrastructure development in conventional and ecotourism were observed by myself to mostly arise from higher prevalence rates. The most important infrastructure for accommodation businesses and tourism were reported and observed to be roads, boats and air traffic. Generally, I perceived infrastructure being in a bad state at Lake Toba which worsens with growing distance to the capital. Whilst the task of infrastructure development lies primarily at the regional government of each of the seven districts, I found accommodation businesses frequently having indirect and some direct contributions. Besides, also district governments reported to be waiting for the realization of promises from their next higher authority on infrastructure development. Indirect contributions of accommodation businesses were said to come from tax payments, lobbying and/or the existence or opening of lodging facilities.

One research representative reported that infrastructure development is indirectly supported by touristic activity, either conventional or eco-touristic. As with every tourist the government should get VAT, providing that businesses pay it. Therefore, he said that it is in the government’s self-interest to support tourism with infrastructure development. A conventional business owner says that accommodation businesses lobby at the government for better infrastructure to facilitate their business and that their advice is taken into consideration when investment decisions are made.

For direct contributions, accommodation businesses were reported to legally need the permit of the local government to develop infrastructure. However in some cases this was mentioned to be not necessary by business owners or locals. Direct contributions exist for instance at locations where boat ways are relevant. Some accommodation businesses were said to have their own boats on which they transport locals too.

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29 people in these villages was mentioned to be low, a respondent noted that they are used on a daily basis for their daily needs.

Accommodation businesses contribution to monetized trade All trade in all accommodation businesses is monetized.

Innovation Capacity of the Businesses

1. Current state and perceived ability for diversification for accommodation business

Conventional accommodation businesses were described to usually only offer rooms and sometimes food and beverage amenities. One interviewee reported to provide massage service too. One business owner noted that many local owners also do not have much experience in tourism outside of their own business, providing them with a limited frame of reference for diversification possibilities. Mostly I observed the few Western businesses to be more diversified with offering tours or wellness packages. However, the lack of diversification of conventional hotels drives the prosperity of other businesses offering touristic activities such as motorbike rentals, canoeing, eating facilities or souvenir shops. The possibilities for diversification were reported to be big for the accommodation businesses themselves too to cater different target groups. Whilst individual travel prevails, there are travelling groups for incentives, school holidays and Asian travel groups. The majority of individual travelers were said to be from Holland, who found the place due to their historical connections to it. Poor promotion was frequently mentioned to be limiting popularity of the lake.

Eco businesses were said to offer a larger variety of activities around food, lodging, tours, farming activities and cooking classes than conventional businesses. In contrast to most conventional accommodation business owners mentioned concrete aspirations for future abilities to develop their companies. They reported to aim to develop lodging facilities, to build a coffee-training center, a shop, or to develop cultural programs and agro tourism, travel networks as well as to process agricultural products for sale.

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30

2. The possibilities and usage of micro financing for accommodations businesses

I observed micro financing possibilities to yet only being patchy with no difference in usage between the two types of touristic businesses. In line with that, the awareness of micro financing possibilities are higher in the area of Samosir than in Toba Samosir. However also in Samosir some people said to not be aware of this option. It is reported that all sorts of accommodation businesses do not take advantage of micro financing yet at Lake Toba. Government parties acknowledge the high potential of micro financing whilst a business owner has doubts if micro financing does not offer too less money for bigger investments in accommodation businesses.

Financing through the bank was reported by some to be less attractive, either due to high interest rates or due to a negative personal attitude towards the banking sector. One eco-business said to have won a grant via a sustainability competition with the Bank of the Republic Indonesia for best social responsibility business in the area.

Usually, all accommodation businesses were reported to finance themselves through their own capital. Frequently this involves starting on small scale and growing over time and within one generation. Big hotels are mentioned to also borrow money from banks or use memorandums of understanding for investments in collaboration with partners.

3. Perceived general innovativeness of accommodation businesses

Conventional accommodation businesses were perceived more innovative when Westerners were involved. People often reported that locals are good in business and making money but only when it comes to copying ideas from the neighbor. A concept with which they may also kill each other’s business, so one interviewee.

Eco-business owners and locals described a much more innovative image with conserving nature, using a bottom up approach to grow their business together with the local community and/or preserving culture.

5.1.2. Social indicators

Businesses overall impact on society

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31 Some businesses also were said to provide voluntary contribution in form of small amounts of money and/or facilities to the local society. One hotel business described to sponsor a photo competition to encourage locals to seek out for tourism spots. Also the clean environment surrounding hotels was claimed to be beneficial for the society according to one respondent.

Eco-tourism businesses in general had a perceived higher social impact than conventional businesses. They were perceived to contribute more to the closer community network with an attitude of helping each other. The agro tourism business reported that there is a mutual support within the coffee network, which includes farmers, Luak-coffee collectors, a medical school and locals. Besides that, tourists themselves occasionally offer aid in economic development and education.

Businesses contribution to fair income distribution: wages paid

One researcher reported a gap between people so that only the owners of tourism businesses such as accommodations and travel agencies benefit from tourism in Samosir. On the contrary, others reported that locals benefit from the opening of accommodation businesses too by being able to open their own business. The payment of employees was reported to be fair among different employment levels. Also, accommodation businesses were said to give uneducated people a new chance. By hiring locals from nearby villages the welfare is distributed locally. No discrimination on background or gender for employment in the hospitality industry was perceived.

Some accommodation businesses mentioned to employ 50 percent foreigners and 50 percent locals. The reasoning was perceived to lie in the attitude of locals not to follow orders which is connected to their cultural rooting. Few people of the local Batak culture were reported to still view themselves as son of kings, which makes it hard for them to suddenly serve others. In some cases, lack of discipline and a reactive problem solving attitude were mentioned to be problematic. SOPs (Standard Operating Procedures) and trainings were provided by one business owner to counter these problems. Another business owner also reported a lack of loyalty causing frequent fluctuation of employees which is however not uncommon for the hospitality industry in any country. On the upside, locals are perceived as trustworthy in matters of property and promises.

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32 Businesses contribution to the accessibility of basic goods

Whilst conventional businesses did not have any perceived impact on the accessibility of basic goods, eco businesses contributed occasionally in one way or the other, or they have plans to contribute.

One eco business had a perceived direct contribution to clean drinking water in the past by supplying nearby villages with drinking water from the spring on its own property. Through pipes sponsored by a foreign government this drinking water was mentioned to be used to supply the surrounding local people with clean drinking water for a short time. Now, the locals said to only profit from water used for rice field irrigation. The eco business owner also reported that in his forest medical plants are growing which the locals use for health care. Another eco business said to be eager to develop solid internet access for the accommodation and the whole area. One business, the agro tourism, reported that it sometimes provides loans to farmers in return for guarantees in forms of coffee. It also said to launch free health care checks for old people twice a year in collaboration his network of the medical school. One eco-business run by a cooperative offers micro-financing itself.

Businesses contribution to education

Conventional tourism accommodations were not perceived to contribute much to the education of the external local community, however some businesses provide internal, yet informal education on hospitality. According to respondents, this education is also useful in daily life when it comes to cleanliness or hospitality and can be spread to relatives and friends. One business owner reported that trainings for hospitality are offered by the government. These trainings seem not to be communicated well since other business owners within the same village did not have any knowledge about them.

Respondents also frequently report an indirect contribution of tourism to motivate people in learning English and going to hotel schools. Further, it was mentioned that some schools from different provinces send groups of students to the tourism hotspot of Samosir to practice their English with foreigners. The execution was perceived to be yet ineffective as the ratio of students to foreign tourists is too high so that it becomes less fruitful for the kids and less pleasant for the tourists.

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33 guests into educational programmes. Also foreigners were mentioned to offer support for education. One of the medical school students was partly sponsored by the agro tourism business to study in Japan.

Businesses contribution to cultural preservation

According to some respondents, tourism needs the culture to attract guests. Whilst most people acknowledge the importance of culture, I could not evidence accommodation businesses active search for the cultural heritage of the region. Only some businesses reported to help the preservation in building museums. One respondent states that Indonesian and Batak people have very little information about their history. Thus cultural investigations would also aid the people themselves in finding their origins of identity. One of the controversial cases is for instance the question if Batak people really ate their enemies in the past. To date, a site where these rituals ought to have happened exists. According to another respondent and to own observations, many accommodation businesses do not know cultural places in further distance to their location. As some businesses use the cultural dance as a guest attraction, it is in that way aided to maintain the culture. Whereas one states that the quality of that dance is doubtful.

For ecotourism businesses in particular, one business undergoes active investigation of old practices to show them to the guests. The ecotourism perceives that locals will also see the practices and cooking techniques and start to remember and imitate. The eco business owner hopes to bring back old traditions to the people too in that way. Another eco business started its own club of traditional Batak dancing. The agro tourism uses a traditional Batak way for coffee grinding.

Businesses contribution to cultural integration

Most conventional tourism accommodation businesses, and especially the bigger ones were reported to not integrate with local customs or culture by many respondents. Also, according to some interviewees, when hotels are build or planned to be build there is no direct connection with the community. When businesses are owned by locals than their lived culture is perceived to automatically transfer to the business. However, this lived culture was said to usually not reflect the old traditional Batak/ Parmalim culture.

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34 businesses were said to employ locals and therefore report to be culturally integrated in this way.

5.1.3. Ecological indicators

Respondents often compared the impact of tourism on the environment with that of other industry sectors. A government party said that the impact of tourism is minimal in comparison to fish farming. It has to be taken into consideration though that the economic sector of tourism is also relatively much smaller in comparison to agriculture, fish farming and manufacturing.

Businesses impact on energy efficiency

The energy efficiency levels were reported to vary between conventional and eco-touristic businesses. Their practices for energy saving do not. The reason for the higher energy efficiency of eco businesses was ascribed to differences in amount and size rather than to differences in their practices as such. Western respondents reported that Indonesians do not have a sense for effective use of energy and leave on light or water running whether at home, on vacation or in business. Interviewees mentioned, that smaller businesses naturally use less energy; they were also claimed to be more efficient in energy usage.

Medium and big sized hotels were reported and observed to use relatively a lot of outdoor lighting for promotion. However, there is also one eco business which uses lightning for the beach at night. It was mentioned by a few respondents that the local staff often forgets to switch off lights or leaves water running. A Western business owner said to try to train them to save more energy. Also the guests themselves are reported to be less energy efficient due to the vacation feeling. However this was also described to be dependent on the nationality, Indonesians being less efficient, and on the type of traveler.

One eco business reported to use solar energy for lightning and the water pump. Another two conventional businesses mentioned to use solar energy for creating warm water. Two businesses reported on planning to have a biogas plant. Interviewees said that most businesses yet use conventional energy sources.

Businesses impact on waste management

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35 separated in non-organics and organics. The latter becomes compost. Cans, bottles and papers were reported to be collected from individual garbage collectors to re-sell it in cities. This system appears to make good returns according to one respondent.

Garbage from hotels was mentioned to be collected by the local government every week for which the businesses pay a fee. However this service is unreliable and the garbage is only transported into a garbage depot and not recycled. Government plans for a recycling plant are ongoing since 2 years without any results. Some businesses also were reported to burn all non-organics, another one says it burns only papers and part of the plastics.

For liquid waste some businesses said to have water treatment in place whilst others were reported to partly treat it or release it directly back into the lake. Many interviewees note that businesses in Samosir usually have septic tanks in place. According to several respondents, there is no government service to empty septic tanks so that they function as a liquid waste filter which does not capture all pollutants. Thus leakage in the ground water and lake were mentioned. The existence of a law to treat liquid waste has difficulties of enforcement due to the prevailing governmental and cultural situation. One eco business reported to treat waste water with the Eceng Gondok plant which absorbs pollutants. Businesses also report not being able to afford waste water treatment. The possibilities of reducing liquid waste through proper septic tanks are recognized, yet costly for businesses and would only be effective in collaboration with corresponding government disposal services according to own observations.

Businesses impact on air pollution

Conventional and eco-touristic accommodation businesses were reported on having a very low contribution to air pollution in general. Although some businesses mentioned to burn their rubbish. Also one of the eco businesses reported that it burns its rubbish. The same eco business also was observed to contribute positively to clean air through its adjacent forest of 40 hectares.

Businesses impact on deforestation

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36 to be in the shadow. An old technique which he said makes the coffee trees survive longer. The same business promotes this behavior to other coffee farmers too.

Businesses impact on land loss

None of the respondents could give examples of how accommodation businesses would contribute to land loss.

Businesses impact on active natural conservation

Respondents stated that in order to attract tourism the area needs to be clean, however accommodation businesses to date usually only clean in front of their own doorstep and locals are not valuing nature much. A continuous destruction of nature will eliminate tourism business according to one respondent.

Some conventional tourism accommodation businesses reported to be involved in lobbying and petitions against aqua farming as it contributes to heavy lake pollutions. In response to that, one fish farm was moved from the shore of a tourism hotspot to another location in further distance. One conventional accommodation business said to engage in active waste management by creating events to collect Eceng Gondok plants from the lake’s surface in collaboration with guests and local farmers. The locals can use the plants for compost or handicrafts. According to the respondent, as they realized their benefit from the plant they continued harvesting them from the lake. One conventional accommodation business also reported to sponsor trash bins to local schools to promote a cleaner environment. Some hotel guests were said to plant trees in collaboration with one travel agency and the government. . In general the hotels’ awareness to protect the lake was observed to be low, as is the general awareness of locals regarding their biosphere. Hotels were reported to disrespect the 10m to shore non-building regulation, therewith leaving no space for beaches in the coastal area.

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37 and eco-businesses, I conclude that eco-tourism is generally more involved in active natural preservation.

Businesses, locals and researchers recognize that there is a lot of potential for accommodation businesses in general to engage themselves and/or with their guests into environmental conservation. Tourism and environmental conservation go hand in hand according to one business owner.

5.2. Consequences for the hypotheses and theoretical implications

The accumulated economic impact of eco-tourism was perceived slightly higher than that of conventional tourism. Conventional businesses scored up to twenty-time higher prevalence rates (10 to 20 percent versus 1 percent), and higher scores on perceived professionalism and ‘only source of income’ within the indicator of business and entrepreneurship. However, when it comes to innovation capacity, eco-touristic businesses mostly were not only estimated to be more innovative to date by owners and locals, but had themselves also more passionate and clearer aspirations for further development explaining the high discrepancy to conventional tourism businesses (3,3 points). Especially eco-business owners are truly passionate and believe in the success of their businesses. The findings of this research are in so far in line with the literature that both business types evidence positive contributions to economic development (Kim and Chen, 2006; Hernandez and Picon, 2015; Sebele, 2010; Yoon et. al, 2001). However, my assumption that conventional tourism would have higher perceived economic contributions (H1) could not be supported. Ecotourism is perceived much more innovative by locals and eco-business owners. Thus, the Thomas-Theorem may apply: “If men define situations as real, they are real in their consequences” (Thomas and Thomas, 1928). Applying its positive interpretation (albeit in a weaker form), it implies that since eco-businesses and locals believe in a bright future of eco-business, it is more likely to become reality.

(Eco)Tourism: Support Follows Perception. Evidence from Indonesia (Lake Toba)

(Eco)Tourism: Support Follows Perception.

Evidence from Indonesia

(Lake Toba)

Final Version Master Thesis

July 6

2015

Faculty of Economics and Business Groningen

University of Groningen

The Netherlands

Student: Sabrina Herold

Student number: S2525968

Email: s.a.herold@student.rug.nl

(Eco)Tourism: Support Follows Perception.

Evidence from Indonesia

(Lake Toba)

Acknowledgements

Contents

1. Introduction

2. Literature review

3. Conceptual model

4. Methodology

5. Results and discussion