Places and local environments shape the resilience of rural tourism businesses

What does it take for small tourism businesses to thrive over the long term in rural areas? What factors influence their resilience, and why do some businesses find it more difficult to adapt to change than others?

A new study at the University of Iceland seeks to answer these questions. The research forms part of the doctoral project of Íris Hrund Halldórsdóttir, a doctoral student in geography at the University of Iceland’s School of Engineering and Natural Sciences. The initial findings suggest that the resilience of small businesses depends not only on the characteristics of the businesses themselves or their owners. Rather, resilience appears to be shaped by a complex interaction between businesses and the places and environments in which they operate.

“The research looks at how so-called entrepreneurial ecosystems affect the resilience of small and medium-sized tourism businesses in rural areas. Resilience refers to businesses’ ability to cope with uncertainty and change, adapt their operations to changing circumstances and remain viable over the long term,” says Íris.

Examining factors in the business environment

An entrepreneurial ecosystem refers to the environment in which businesses operate and the interactions that take place within it. Businesses and entrepreneurs do not operate in isolation. Their relationships with other businesses can be important, as can their connections with local residents, access to knowledge and finance, public support, infrastructure, the availability of labour and local conditions.

Íris therefore wanted to examine whether, and in what ways, such an ecosystem can help small tourism businesses in rural areas to cope with uncertainty and change. Her research focuses not only on what the business owners themselves do to respond to change, but also on the factors in their surrounding environment that make it easier or more difficult for them to adapt and keep their businesses operating.

“This is particularly interesting in rural areas, where businesses may, for example, be highly dependent on seasonal fluctuations, transport, the labour and housing markets, and relatively small local markets,” she explains.

Interest sparked by research into the impact of the pandemic

Íris’ interest in the subject arose while she was working on research into the resilience of tourism businesses during the COVID-19 pandemic.

“That was when I began to see an overlap between the factors that appeared to help businesses cope with the circumstances created by the pandemic and the factors emphasised in research on entrepreneurship.”

These factors include flexibility, the ability to adapt operations to changing circumstances, relationships with others, access to knowledge and resources, and the ability to identify new opportunities. “As a result, I began to wonder whether an environment that supports entrepreneurship might also contribute to business resilience,” says Íris.

Vestmannaeyjar and Mýrdalshreppur as research areas

As mentioned above, the research forms part of Íris’ doctoral project in geography at the University of Iceland. Her supervisors are Gunnar Þór Jóhannesson, professor of tourism studies at the School of Engineering and Natural Sciences, and Karl Benediktsson, professor of human geography at the same school, along with Andreas Walmsley, associate professor at Plymouth Marjon University in England.

The research is qualitative and is based primarily on interviews. “I have interviewed owners and managers of small and medium-sized tourism businesses, as well as other people connected to the environment in which these businesses operate,” explains Íris and continues: “The research areas are Vestmannaeyjar and Mýrdalshreppur, and comparing these two areas is an important part of the research.”

In analysing the data, Íris draws on an approach known as critical realism. This means that she is not only describing what businesses do but also asking why certain patterns emerge. What circumstances, relationships and underlying factors make it possible for one business to adapt to change while another finds it more difficult?

Some owners may deliberately choose not to grow their businesses

The data analysis is still ongoing, so Íris is cautious about discussing possible results. The data do, however, suggest that the resilience of small businesses is not determined solely by the characteristics of the business or its owner, but is shaped by a more complex interaction.

“Resilience develops through interaction with the place and its environment. Relationships with other businesses and local residents, local knowledge, collaboration, reputation and access to certain resources can all be extremely important,” she explains.

At the same time, weaknesses in the local environment can significantly impact businesses. These include challenges related to the labour and housing markets, transport, financing, regulation and the major seasonal fluctuations that often characterise businesses in rural areas and smaller communities.

“It is also very striking how much adaptation business owners themselves undertake in their day-to-day operations. They change their opening hours, take on more roles themselves, rely on family and their personal networks, expand or reduce the range of services they offer, and in some cases, even deliberately choose not to grow their business,” says Íris.

She also points out that this resilience can involve considerable work and costs for the owners. “A business may appear highly flexible and resilient, but behind that can be a great deal of work by the owner, personal sacrifices or risks that the owner and their family take on.”

Tourism businesses play an important role in smaller communities

Íris hopes that the research will increase understanding of what it takes for small tourism businesses to survive and thrive in rural areas over the long term. This is important because such businesses are a significant part of the economy in smaller communities.

Supporting strong businesses in rural areas requires more than focusing exclusively on the entrepreneur or the business itself. “We also need to understand the environment in which the business operates and where its strengths and weaknesses lie. The findings could therefore be useful for policymaking and for developing support systems that better reflect the actual circumstances of small businesses in rural areas,” explains Íris.

Bringing together two distinct areas of research

The main academic contribution of the research lies in bringing together two fields of study that are rarely examined in combination: research on entrepreneurial ecosystems and research on business resilience. At the same time, the aim is to focus on the everyday operations of small businesses in rural areas, rather than solely on how businesses respond to major shocks such as the COVID-19 pandemic.

This fits well with Íris’ main areas of interest, which lie at the intersection of regional development, tourism and entrepreneurship in rural areas. “I am particularly interested in how businesses operate within the communities and environments of which they are a part; how places create both opportunities and constraints, and how businesses, communities and regional development are interconnected. What particularly fascinates me is the everyday reality of small businesses and how people turn ideas into action, solve problems, make use of relationships and local knowledge, and find ways to keep their businesses operating in circumstances that can be very different from those faced by businesses in larger markets,” she concludes.