As Destination models 3.0 consist of infrastructure platforms, they are rather fixed cost based, though they have some variable costs as well. As with all overhead based structures, they try to leverage the platform structure to the utmost of its potential, attracting partners that ultimately generate economies of scale and also economies of scope.

Destination models 3.0 intend to be value driven platforms, focused in providing value to its customers and partners, rather than on minimizing costs only. The value provided by the platform to its integrated businesses is based on training and facilitation to help them provide an excellent service, inspiration to develop signature experiences, funding and empowerment to start-up a business, a powerful marketing system to drive more tourist flows, and an aesthetically harmonized scenario which provides a feeling of authenticity and uniqueness to the visitor.

The main overheads of a destination platform are to be determined by the need for investments in infrastructures, facilities and urban aesthetic harmonization. These would be:

  • Maintenance of the physical platform
  • Staff salaries
  • Fixed costs related to the integrated business units
  • Investments amortization

The main variable costs of a destination platform in most cases would be:

  • Marketing expenses
  • Rewarding incentives for contributors to the open innovation system
  • Training and coaching for employees and service supplier partners (to be internalized once the model becomes established and there is constant demand for such services)
  • Debt repayment interests
  • Mystery tourist services
  • Subsidized capital cost in the micro-loans to the small entrepreneurs (in case there is no direct funding available from financial institutions)
  • Mission driven activities powered by volunteers, to be paid for their expenses

In this section the necessary investments with their corresponding amortization periods should be estimated, along with the estimation of fixed and variable costs according to different levels of scale, foreseeing the future development of the destination model.

Would you consider any other aspect to be explained regarding the cost structure?

 

 

 

Posted by Jordi Pera

Jordi Pera is an economist passionate about tourism, strategy, marketing, sustainability, business modelling and open innovation. He has international experience in marketing, intelligence research, strategy planning, business model innovation and lecturing, having developed most of his career in the tourism industry. Jordi is keen on tackling innovation and strategy challenges that require imagination, entail thoughtful analysis and are to be solved with creative solutions.

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