Employment and Added Value Effects of Upgrading Hotels Quality

Abstract

While foreign investment in the tourism industry is often considered important in stimulating sustainable development in least developed countries, empirical evidence is still scarce and ambiguous. Focusing on the social (employment) dimension of sustainable development, this paper analyses how foreign firms in the hotel industry influence the quantity of local employment (number of jobs) and its quality (skills). Using interview data with managers of 123 foreign and locally owned hotels in Mozambique, Tanzania and Ethiopia, we find that the simple scale effects of foreign hotels in least developed countries are positive. However, rather than contributing to local human capital via training, foreign firms instead prefer to hire well-trained employees from local hotels. We explore the implications of such reverse knowledge transfer for policy makers in least developed countries.