Pinoy Online Socio-economics and Agri-tourism Support Blog: July 2011

Development in the Supply Chain of the

Philippine Agri-tourism Industry: An Assessment

Elmer R. Esplana

Socio-economist and Interdisciplinary Researcher
National Secretariat Coordinator,

Price and Volume Watch, Bureau of Animal Industry

Department of Agriculture

Presented at the

1st International Agriculture and Tourism Expo,

World Trade Center, Pasay City, Philippines

July 1, 2011

EXECUTIVE SUMMARY

The main objective of the study is to document and assess the developments in the Philippine agri-tourism industry supply chain.

Specifically, the study aims to: 1) provide a situation on the tourism industry both in local and international situation; 2) provide a baseline information on the developments in the Philippine agri-tourism industry from input supply, production, processing, marketing and demand/consumption; 3) identify the best practices along the supply chain approach; 4) provide the baseline tourism competitiveness of agri-tourism with some Association of Southeast Asian Nation (ASEAN) countries; 5) suggest solutions for the gaps and problems encountered by the industry along the supply chain; and 6) recommend strategic directions for the Philippine agri-tourism industry.

The assessment used the agri-tourism industry supply chain framework in the conduct of this study. This framework was first developed in 2007 by Esplana, Abao and Vasquez in the study conducted for the goat industry which won the Grand Prize Award in Socio-economic Research category at the National Research Symposium of the Bureau of Agricultural Research in October 2007.

In 2010, international tourism receipts are estimated at $919 billion worldwide higher than the $851 billion in 2009 (UNWTO, May 2011). The no. of tourist worldwide was recorded at 880 million in 2009. Top three international tourist destinations in 2010 are France (79 M), China (56 M) and United States (61 M).

In general, during the last five years, the no. of arrivals and total receipts of tourist industry in the Philippines has been in decreasing trends. The average contribution of the tourism industry in the last five years was posted at two percent of the gross domestic product.

South Korea is the country with the highest no. of tourist arrivals (740,622 or 21%) or source of market, followed by United States 600,165 or 17%, Japan (12%), China (7%) and Australia (3%). The top five tourist destinations in 2010 include: Metro Manila with 21-percent growth, Camarines Sur, 53%; Cebu, 6.42%; Boracay Island, 19.85%; and Davao City (-24%). The Standard Room (67.35%) accommodations had the highest occupancy rate while the De Luxe Room (2.63) had highest length of stay for guests.

Agri-tourism is a form of niche tourism that is considered a growth industry in many parts of the world, including Australia, Canada, US, and the Philippines (Wikipedia). It is sometimes called as “farm or rural tourism” which is a fast expanding tourism product that acts as a supplemental activity to the main activity of farming. This is characterized by a link between travel and products, services and experiences of the agriculture and food systems (http://www.gov.nf.ca).

Agri-tourism concept in the Philippines involve activities which maximizes the potential of income generation of existing farms in the country through tourism related activities. This on-farm diversification scheme aims to open opportunities for livelihood, business and employment generation, and education of non-farming public about farm and farm products and the preservation of rural landscape. It is a kind of tourism where the working environment forms as part of the tourist product. It likewise covers attractions, activities, services, and amenities as well as cultural resources of the area. It is intended to promote an appreciation of local culture, heritage and traditions through personal contact with local people (Department of Tourism (DOT), Philippine Agri-tourism Concept Paper, 1999).

Agri-tourism industry is considered as an emerging industry developed as a niche market both of the agriculture and tourism sectors. There are some agribusiness establishments that offer agri-tourism products and services as a valued-added from their core business in the farms, to increase their profitability or competitiveness as a business entity. While some agri-tourism sites had intentionally developed business models which basically made tourism as their core business, but only few are doing this at the moment, among the new entrants to the industry due to availability of enough capital investment.

In the input supply subsystem, it is observed that among the agri-tourism sites, the purchasing of raw materials requirement for their operations are either supplied through their existing farm input operation, while some have been purchasing through their regular suppliers.

Some of the players in the input supply subsystem include: breeders and feeds supplier for livestock, seeds and seedlings supplier, fertilizer and pesticide supplier for crops, agricultural/processing machinery suppliers, food and beverages suppliers and other agricultural inputs. Most of the labor employed in the agri-tourism establishments are sourced from within the area where the agri-tourism sites are located.

In agri-tourism business, the distribution of production load in the operations of agri-tourism sites include: 70% of production is goods while 30 % of production is services or vice versa depending on the business model. The production subsystem activities in agri-tourism industry include: production of farm and processed products, conduct or participate in trade fairs, exhibit, farm direct marketing, acceptance of farm tours and conducting of training. Only few have farm stay or overnight accommodation capability. Some have regular farm tours organized by them or through their network tour guide operators, travel agencies or travel association.

Others have value-added products such as consultancy services for their farm commodity expertise. Among the selected agri-tourism sites, aside from the farm tour, only few or 6 out of 17 have the capability to handle an overnight stay for their clients. Facilities for overnight stay include Sonya’s Garden, Bohol Bee Farm, Mindanao Baptist Rural Life Center, Don Mariano Marcos Memorial State University-National Apiculture Research and Development Institute, University of the Philippines Los Banos and Central Luzon State University.

When it comes to mode of reservation for farm tour, phone calls (landline/mobile) and email communications are the most widely used means of communication tools. Among the identified 17 selected agri-tourism sites, only Bohol Bee Farm and Ilog Maria Honeybee Farm had the online reservation facility/could purchase their product/service for sale through an e-commerce facility.

Bohol Bee Farm which is an organic bee farm with hotel resort and restaurant. They have 17 products from honey and honeybee by-products that are currently offering to their clients. Some of these products include: pure honey, honey spread, bee pollen, honeyed salabat, bee propolis, honeyed muffins. Bohol Bee Farm is promoting organic farming.

Ilog Maria Honeybee Farm is an integrated bee farm operator with a website shopping cart as their main mode of purchasing their product. Being an integrated operator in the honeybee industry, they are the most number of processed products and by-product produced from honey and bee products. Some of their products include: honey, natural bee pollen pellets, raw propolis, fresh Royal Jelly, scented beewax candles, beewax, propolis soap and shampoos, honey cedar vinegar, bee venom, to name a few. Based on their website there are two means of payment for Ilog Maria products such as: 1) the usual way, by making a deposit to their account and faxing the deposit slip to them; and 2) a newer way by GCash and Smart money. As part of their value-added services, they host field trips or conduct tours within the bee farm for a minimum of 50 people. Tour in Ilog Maria is designed for walking through along the fresh cool air and walk around their garden. They have established their own museum which they call “Museo sa Ilog Maria.” There are other value-added services that they are doing that include bee seminar, contract pollination services and bee project consultancy.

Mindanao Baptist Rural Life Center (MBRLC) is a private volunteer organization whose main objective is to help all people, especially upland farmers. MBRLC has developed into a 19-ha demonstration farm with seven satellite projects throughout Mindanao. They are involved in local village development programs. Over 20,000 visitors come to the Center per year with about 2,000 of those being one-week trainees per year. They are primarily promoting sustainable development for the uplands utilizing agriculture, health care, literacy, and community organizing, among others with tie-ups in over 12 Asian countries. "People who come to the farm don't only see what we do but also learn something“ – Roy Alimoane, MBRLC, Director.

As to the commodities, MBRLC is into livestock and aquaculture production, organic fertilizer, seed production, training and agricultural and agroforestry technology promotion. Almost daily, group tour arrives to see their “Disneyland of sustainable farming systems” which according to them, they have developed through the years of experimentations and consultations. Most of their visitors, came from Asia such as Afghanistan, Bangladesh, Bhutan, Brunei, Burma (Myanmar), Cambodia, China, East Timor, India, Indonesia, Japan, Laos, Malaysia, Mongolia, Nepal, Pakistan, Papua New Guinea, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, and Vietnam. There are also some who came from Australia and Zimbabwe. MBRLC is promoting organic farming and agroforestry technology.

Lao Integrated Farm, Inc., is located in Brgy. Eman, Bansalan, Davao del Sur has an integrated multi-commodities/crops such as goat farm under coconut trees, pig production, organic fertilizer, fruits, vegetables and value-added products. Around 700 people visit the farm per month. Lao Integrated Farms, Inc. is also promoting organic farming and an integrated-farm commodity operation.

Compared to other five ASEAN member countries such as Singapore,Malaysia, Indonesia, Thailand and Vietnam, the Philippines competitiveness is second to the last in terms of overall tourism competitiveness index. Among the six ASEAN countries, Vietnam had the lowest tourism competitiveness.

In the Philippines, marketing of agri-tourism products is lower compared with ASEAN countries. Tourism product in agricultural operation serves as a value-added service.

Among the five ASEAN countries, identified in the study, the Philippines had a price competitiveness of 7, lower than Singapore (26) and Vietnam (10) but higher than Malaysia (2) , Indonesia (1) and Thailand (4).

There are 17.18 million regional travellers recorded in 2009. Of this total, 13.84 million or 81% are domestic travellers; 3.14 million (18%) are foreign travellers and only one percent (202,940) are Overseas Filipino travellers. Most of the payment of products/services in the agri-tourism business are in cash basis while those who have the credit card facility accept credit card payment.

An agri-tourism products had a quality, if it had been repeatedly being ordered by their customers who are satisfied with their products/services.

Consuming or patronizing agri-tourism product is the process of using them in order to satisfy desires and real or imagined needs which had to be either used up, transformed, or deteriorated/consumed, in such a manner as not to be either reusable or recognizable in their original form.

When it comes to the volume of tourists who visited the country in 2010, the volume of Koreans who travelled in the Philippines which was recorded at 435,701, was the biggest foreign travelers in the country. The second highest volume of tourists were Americans at 309,493; Japanese ranked no. 3 at 291,385; Chinese ranked no. 4 at 164,728; and the fifth biggest foreign travellers were Australian at 79,552.

In terms of the type of occupation for the tourists who are visiting the Philippines, as of 2008 with a total of 3.084 million, professional had the highest volume which contributed 29% (903,880), followed by students at 11% (348,697); and those in the clerical/sales jobs ranked no. 3 at 162,617 tourists or 5 percent of the total tourist visitor arrivals.

According to DOT insider, currently they are waiting for the release of the new masterplan for the tourism industry which they are preparing during this time. It is assumed that agri-tourism should also be given the higher priority in terms of crafting a program for implementation in the next five years or more, particularly that the strengths of the Philippine basically covers both agriculture and tourism. It is also important to have a complementary support from the Department of Agriculture by providing an agri-tourism-related program in collaboration with DOT and other agencies supporting the tourism development in the country which will help in improving the industry’s performance in the succeeding 5 to 20 years. It will also help improve the tourism competitiveness of the country, in general and the agri-tourism, in particular. It is observed that except in 2010, the volume of tourist arrivals had been in the decreasing trends at an average of three percent per year.

The projected impact to agri-tourism industry with the conduct of 1^st IATE organized by Alinks Events International, Inc. include: 1) Provision of local employment; 2) Support local and national development; 3) Support the growth of both agriculture and tourism sector; 4) Create awareness and advocacy campaigns, learning seminars, product exhibits and cultural performances; 5) Promote agri-tourism sites; 6) Support the development and establishment of more agri-tourism sites in the country and other Asian countries, as well; 7) Develop more economic activities among the participating LGUs in different parts of the country, particularly, the potential new local and foreign investments.

There are some developments in the supply chain of agri-tourism industry from input supply, to production-processing, to marketing and demand/consumption. The gaps in each segment of the supply chain could be improved by strengthening the supply chain management of the agri-tourism industry stakeholders.

In terms of production of agri-tourism products/services, the convergence effort of DA and DOT through their program support and improvement in the regulatory and standards in the agri-tourism industry is a must. Based on my interview with a DOT insider, there is no current clear registration mechanism in accrediting/policing the agri-tourism establishments.

The best practices are demonstrated by selected successful players such as Mindanao Baptist and Rural Life Center (MBRLC), Bohol Bee Farm, Ilog Maria Honey Bee Farm, and Lao Integrated Farm, Inc and the initially developed best practices among some state colleges and universities in promoting agri-tourism in their respective institutions. Some of notable best practices and characteristics/success factors which could be learned from them include: a) a doable business model, b) inclusion of value-added products and services, c) effective supply chain management and d) either integration or diversification from their core business, e) application of agribusiness approach, and f) effective and efficient use of resources in their respective company or agri-tourism farm have contributed for the success of some players.

In terms of tourism competitiveness, it is also important to note that the priority support of the government and the industry players should fall within these areas: policy rules & regulation on agri-tourism, air transportation regulation and support programs, ground transport infrastructure, agri-tourism infrastructure, ICT infrastructure and national & cultural resources, including the participation of local and foreign investors, to further develop the agri-tourism industry in the next 5 to 20 years.

Below are the recommended strategic directions for the Philippine Agri-tourism Industry.

1. Extensive application of agribusiness management approach and supply chain management in the

agri-tourism industry to improve the efficiency and effectiveness of operation of each stakeholder; 2)
Organizing and unifying the concerted advocacy work through the establishment of an agri-tourism industry
association to get bigger bargaining power to demand support from the government, particularly the
Department of Tourism and Department of Agriculture, other departments and agencies, LGUs and including
policy makers; 3) Conduct trainings that would help agri-tourism players to improve their supply chain
management capabilities and capability in doing competitive strategy; 4) Additional budgetary support from
Philippine government is needed to support the agri-tourism industry in the country, so they can further
strengthen/or expand their services being provided to the industry stakeholders; 5) It is also important to
develop a specific loan facility or scheme that will support the agri-tourism industry agribusiness stakeholders
in improving their agri-tourism infrastructure through the Food Supply Chain Program of the Department of
Agriculture which is currently lodged at the Landbank of the Philippines, and 6) Develop and implement air
transport infrastructure, agri-tourism infrastructure, ICT infrastructure, national & cultural resources, national
tourism perception, human resources, environmental regulation, air transportation infrastructure
programs/projects and relevant policy rules & regulations for the institutional strengthening among the different
government agencies and local government units, and further development and improvement of agri-tourism
industry competitiveness, in particular, and tourism sector competitiveness, in general in the next 5 to 20
years.

References:

Department of Agriculture, supported by Japan International Cooperation Agency, SADP TEAM. (2009). Strategic Agribusiness Development Plan. First and Second Draft. February & October 2009. Quezon City, Philippines.
Esplana, Elmer, R. Abao, Lary Nel B. and Rolando M. Vasquez. (2007). Development in the Supply Chain of the Philippine Goat Industry: An assessment. Grand Prize Winner. Socio-economic Research Category. 19th DA-BAR National Research Symposium. Bureau of Agricultural Research and Club of Professional Researchers. October 2007.
Esplana, Elmer R. (2009). Development in the Supply Chain of the Philippine Honey Industry: An Assessment. Bureau of Animal Industry. Proceedings. 8th National Beekeeping Convention cum Symposium with the theme Livelihood Opportunities and Environmental Conservation through Beekeeping. December 8-10, 2009. Documentation Committee. Don Mariano Marcos Memorial State University. North La Union Campus. Bacnotan, La Union.
National Statistical Coordination Board. (2009 and 2010). Philippines Statistical Yearbook.
National Statistical Coordinator Board. (January 2011). Economic Indicators.
Department of Tourism. Tourism Masterplan. 1991-2010.
Department of Tourism and Department of Agriculture in coordination with Asian Institute of Tourism. (October 2002). Manual: A Guidelines for Developing Agri-tourism in the Philippines.
Department of Tourism. (June 2011). Materials provided by the DOT-Public Information Office and Research and Statistics Division. Manila.
Durano, Ace. Secretary. Department of Tourism. Philippine Tourism:Stimulating Tourist Growth and Capacity Expansion in Key Destinations.
Gutierrez, Elsie C. (2008). House of Representatives. Congressional Planning and Budget Department. Maximizing the Potential of Philippine Tourism. Policy Advisory. 2008-03.
World Tourism Organization (UNWTO). (May 11, 2011). International Tourism: First Results of 2011 confirm consolidation of growth. Madrid.

http://media.unwto.org/en/press-release/2011-05-11/international-tourism-first-results-2011-confirm-consolidation-growth Accessed: June 2011

World Tourism Rankings. Wikepedia. http://en.wikipedia.org/wiki/World_Tourism_rankings. Accessed: June 2011.
Other selected websites of some agri-tourism sites in the Philippines.
Key informant interviews and focus group discussions to selected industry players.

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Development in the Supply Chain of the Philippine Agri-tourism Industry: An Assessment