When crafting Strategic Plans for destinations, one of the essential strategies to design is the Business Strategy, to depict the portfolio of sectors in which the destination will compete. Nowadays, more than ever before, the tourism market is segmented in an increasing amount of sectors or businesses, each of which has enough specificities to deserve its own competitiveness and attractiveness analysis and assessment.
Moreover, destinations need to diversify their risk, reduce demand seasonality, and renovate their products to sustain their competitive position. The ultimate purpose of this methodology is to establish a scale of priorities in the assignation of the funds to carry out the necessary renovations and investments.
In the case of Tourism 3.0, as explained in other Whitepapers, the Special Interest travel and other minor sectors play a very important role on the success of its development, and so a sound analysis should be carried out on an extensive range of Special Interest sectors.
The methodology based on the McKinsey matrix analyzes for every sector the capacity of the destination to compete and the attractiveness of the sector, considering the market volume and growth potential, seasonality of demand, tourists’ expenditure, multiplying effect, customer loyalty potential, and the 5 competitive forces that shape long term profitability. This 5 forces analysis is the most complex and sound to be carried out, for a specific section is dedicated to it in this Whitepaper.
Then, the challenge is to assess the proportional relevance of every player in relation with its corresponding force, and determine the proportional strength of every force in the sector. To rate the importance or strength of every force in shaping the industry’s long-term profitability, it is necessary to combine both quantitative and qualitative analysis. In this regard, statistical data corresponding to the business volume, the purchasing and sales volumes, prices and price differences between different dealers, margins corresponding to business with different dealers should be obtained for every incumbent.
Furthermore, it is necessary to gather data related to possible barriers to entrance, barriers to exit –it is possible to quantify the switching costs, for instance- and other factors mentioned in the explanation of the framework.
Finally, the assessment of a pool of industry experts is also necessary to find important insights that are specific to every sector, or not properly explained in the available secondary sources. Industry experts may also lead to new secondary sources, for it is convenient to interview them rather at the beginning of the research, so as to help us orientate its process.
An industry experts pool should comprehend many profiles, such as directors of travel agencies –outbound & incoming-, tour operators, hotels, tourism facilities, transportation services; consultants, journalists, government officials, etc.
What other methodologies would you use for the business portfolio strategy?