Category: Intelligence

Tourism trends and other business’ trends influencing or applicable to the tourism industry

StrategyStrategy planning & executionSustainabilityTourism marketingTourism trends

A theoretical approach to cluster development

As introduced in the first point, tourism clusters are created to leverage the unique resources of a location or in some cases to gather artificial resources in the same location. In both cases, they improve the value of the location to end up making the location a key strategic factor.

To make a cluster competitive there are many key success factors that should be considered by the cluster members:

  • Transport infrastructure within, and to access the cluster from the target markets
  • Solidarity and cooperation spirit among players
  • Cooperation between the Government and the private players
  • Creating a welcoming atmosphere to attract international talent
  • Foresee space for attracting new businesses and expanding the cluster

A very specific key success factor is the existence of a governance structure to promote collaboration and joint projects, fostering innovation and promoting the cluster internationally. This governance body should be also responsible for:

  • Attracting new businesses
  • Performance monitoring
  • Intelligence research
  • Identifying needs for improvement and training
  • Representing the cluster players internationally
  • Organizing networking events and conferences
  • Coordinating players to design and implement the cluster development strategy

As mentioned before, there may be many types of players within a cluster, and so the types of cooperation between them may also be different. There are at least two types of cooperation:

  • Value chain cooperation: between players from different sections of the value chain, to gain efficiency or to add new value.
  • Coopetition: competitors sharing resources and costs that are not afordable for each one alone.

Research has shown that tourism development is a venue in which cooperation is often more important than competition (Inman et al. 1998). A cluster based development should try to build the value chain within each cluster in the region. A cluster strategy places all public and private stakeholders in the position of being producers and suppliers to one another, and seeks for constructive ways to define and carry out mutually beneficial action. The value chain is central to the tourism cluster concept, as it demonstrates how tourism can generate benefits to the economy beyond the tourism sector through linked industries (Gollub et al. 2002).

Do you think of other key success factors to make a cluster competitive?

StrategyStrategy planning & executionSustainabilityTourism trends

What is a cluster and why are they created?

One of the key strategies to develop in any Tourism Development Plan consists of structuring the territory in different areas according to the kinds of activities to be carried out in each one. The clustering strategy is essential for the tourism development regardless of the dimension of the territory: clusters exist within countries, regions and even towns.

A cluster may be defined as a concentration of interconnected businesses and institutions in a limited geographical area. In most cases, such businesses and institutions belong to the same sector; but, as we will see in some case studies, sometimes there are new business sectors that flourish in a cluster to take advantage of assets related to other sectors in the cluster.

It may also be defined as an area characterised by a set of distinctive tourism assets which all together create a unique value system capable of attracting tourists and competing with other destinations. Many industry players settle down in the same location to cooperate in the search for synergies that improve their competitiveness:

  • Need for specific infrastructures to be leveraged by many industry players
  • Need for collaboration between industry players to create economies of scale and scope
  • Cooperation in joint marketing

Clusters also arise because they help businesses increase their productivity by sharing many strategic resources, diminishing trading costs between suppliers and clients, and fostering innovation thanks to proximity of a sector’s stakeholders. In the case of tourism destinations, clusters are the result of a concentration of operators exploiting a cultural or natural resource, or a concentration of operators developing artificial and complementary attractions.

Clusters are areas that can be considered as being internally homogeneous with specific traits that differentiate them from others. The goal of the clustering strategy is to structure the location of all tourism activities in accordance with the types of experiences and feelings they offer or the characteristics of the physical environment, and also to define a clear identity for every cluster and communicate it clearly to the visitors.

As Michael Porter says “Clusters are not unique, they are extremely typical –and therein lies the paradox: the enduring competitive advantages in a global economy lie increasingly in local settings which distant rivals cannot compensate. In a cluster, interconnected companies, firms in related industries and associated institutions both compete and cooperate”.

The term cluster may apply to many different destination dimensions: at a national, regional or local level. We may use clusters to distinguish several geographical areas within a country, each of which is specialized in a different type of experience, but also within each of these clusters there may be –and usually there are- sub-clusters according to smaller geographical areas with specific characteristics that are different from the rest, so long as these characteristics are relevant to be leveraged for a distinct tourism experience. At the lower scale, we distinguish clusters within local destinations, so long as these comprehend different areas providing unique or clearly differentiated atmospheres, resources and experiences.

Do you think of other reasons to explain the creation of clusters?

Co-creationMarketing 3.0StrategyTourism marketingTourism trends

Cross-destination competitiveness programs: enhancing marketing

Route partnering with neighbor destinations. Regardless of whether nearby destinations are within the same country or not, for some tourism sectors such as International touring or Fly & drive, marketing an attractive route encompassing a selection of interesting destinations is likely to be far more efficient and effective than marketing these destinations independently. Further, it makes the product far more competitive.

This partnership may be also attractive for some types of Special Interest travel, especially in the case of the long haul markets, whose tourists are more likely to do long routes once they land at the destination. The sum of Special interest attractions of the same kind within a route makes it an attractive product to justify a trip for many of these long-haul travelers. This is also an opportunity to develop new products for many destinations in the same area, making it a win-win development project.

Therefore it is convenient to explore partnership agreements with neighbor destinations which are suitable for adding value to the final product, so as to share marketing costs while creating a more attractive product. Even if many tour operators create these routes themselves, the marketing activities not only directed to tour operators (fam-trips, workshops, etc.), but also to the final client, are likely to increase the results of the marketing efforts.

New flight connections. A key program to develop is connecting the destination with all target markets, by all possible means, but mostly focusing on flight connections. Accessibility is a key factor for competitiveness, and so enhancing the capacity and the competition among transport operators benefits also the destination competitiveness.

Attracting new flight connections is not at all an easy challenge. First, and most importantly, the destination has to arouse sufficient demand to make the airline operator identify a business opportunity. To do so –whenever the destination is also an outbound market for the other- it is convenient to join efforts with the other destination’s DMO and Government in order to boost demand to clearly creating a profitable opportunity.

The Government and DMO should share with the airline operator the Tourism development plan, to build confidence and make them envision the business growth they can take advantage of, highlighting the marketing activities planned for their market. It is important to highlight that the intervention of the Government executives is very recommended, even in the cases when it is not strictly necessary, so as to build trust from the very beginning.

Destination App. Apart from the tourist information offices and guides, modern tourists like to have all or most of the information in their smartphone. Apps provide excellent information services, being able to provide tailored information on demand, high quality pictures and videos, downloadable maps, and many other features.

In the case of Tourism 3.0, Apps may be also a tool to foster tourist contribution to the content marketing system and product co-creation. Apps can operate like a channel through which the tourist provides service reviews and ratings, creative reviews about products, pictures, videos and text based stories, etc. It is important to point out that the destination should count on many free wifi areas to empower the Apps in providing all the possible services and up to date information.

Finally, Apps may also be a sales channel, providing access to the destination branded souvenirs online store, booking service, and also offering special deals near the location of the tourist through the geolocalization technology. Altogether, it is a very powerful tool, which is actually likely to become the main information supplier and the main channel to connect tourists with the destination operators. Closely related to the App services, the new technologies for augmented reality should also be included to provide a higher experiential value to the tourists through their mobile devices.

Which other programs would you consider to enhance the destination marketing?

Intelligence methodsStrategySustainability

Cross-destination competitiveness assessment method

Once the competitiveness of both products and clusters is analyzed, the final assessment is that of the key factors for competitiveness common to the whole destination. This assessment may also include brief strategy recommendations, both to further leverage the strengths and to overcome the weaknesses, as a starting point for the strategy and action plan that usually follows the Competitive analysis.

The cross-destination competitive assessment analyzes the strengths and weaknesses of the destination in the following areas:

Cross-destination resources and attractions: (non-product related)

  • Intangible assets such as history, glamour, traditions, gastronomy, etc.
  • Groups of special clients attracting other clients, providing social networking value
  • Conservation of the natural environment
  • Destination character as a result of the cultural heritage conservation across the destination
  • Cultural life, offering an attractive calendar of events
  • Shopping offer
  • Nightlife and entertainment offer
  • Unexploited resources for tourism
  • Proximity with other destinations with which it is possible to create routes or packages

Infrastructures, facilities and services

  • Signage across the destination
  • Accessibility from the outbound markets (flight connections, railways, roads, harbors, etc.)
  • Public facilities and services (hospitals, public transportation, police, etc.)
  • Experiential value of the transport systems between clusters and attractions
  • Adaptability of facilities for handicapped people

Human resources

  • Locals’ hospitality
  • Adequacy of training for the tourism professionals in skills, know-how, attitudes, etc.
  • Locals’ consciousness about the importance of tourism for the economy
  • Destination knowledge, and language skills of the local population

Destination atmosphere

  • Air and noise pollution
  • Cleanliness
  • Safety
  • Congestion issues
  • Pedestrian streets
  • Urban landscape harmony and attractiveness
  • Destination life bringing opportunity to mingle among the locals social lives

Tourism services and information

  • Character, capacity and quality of the accommodation services
  • Proper segmentation of the accommodation offer
  • Quality and diversity of the restoration offer
  • Restoration and accommodation services adapted to handicapped visitors
  • Availability of food & beverage for groups with special needs
  • Information services available in many languages (at least those of the outbound markets)
  • Information available through different channels: information offices, internet, Apps
  • Precision, clarity and up to date information provided
  • Quality and quantity of the information provided in the Tourism Guides
  • Local Tourist guides services

Organization and management

  • Importance of tourism in the Government Agenda
  • Cooperation culture between public and private agents. Public-private bodies dynamism
  • Professionalism, integrity and proactiveness of the tourism related bodies (Government, DMO)
  • Adequacy of regulations to the tourism development needs
  • Efficiency of the bureaucracy system to attract and develop investments
  • Level of consensus on the destination model to develop

Sustainability

  • Effectiveness of the monitoring system in detecting relevant issues with regards to negative impacts related to the environment and other aspects.
  • Effectiveness of the monitoring system in tracking the evolution of the tourism impacts
  • Participation in the educational programs related to sustainability
  • Effectiveness of new environmental friendly practices in reducing negative impacts
  • Satisfaction of the local community with the tourism development
  • Adequacy of the regulations to the necessary policies to guarantee sustainability
  • Effective enforcement of the regulations related to development constraints & sustainability
  • Conservation of the cultural and natural heritage

Tourism 3.0 approach

  • Defined mission with the support of local stakeholders and community
  • Mission awareness and appeal to the target social networks
  • Participation of the locals and visitors in the product co-creation and storytelling
  • Percentage of tourists attracted by the stories about the life-changing experiences
  • Participation of the micro-entrepreneurs at the base of the pyramid in the tourism business
  • Number of local service suppliers and outside stakeholders partnering with the destination
  • Success in the implementation of the culture change towards collaboration and innovation
  • Satisfaction of the tourists with the life-changing experiences

It is recommendable that the consultant somehow states the priority level or importance of the strengths to be leveraged and the weaknesses to be overcome to orient decision makers in the design of their policies regarding investment priorities. All these cross-destination assessments could also be accompanied with a comprehensive marketing audit, for which you may find the methodology in the Whitepaper “The Marketing Plan 3.0”.

Which other issues should be considered in the cross-destination assessment?

Business model innovationCo-creationCollaborative business modelsEnvironmental sustainabilityInnovation

Story innovation concepts: added value & crowd game driven experiences

Beyond the explained details of the four prototypes, there may be many other added value experiences to support the main one in fostering its popularity and conveying new contributions both in virtual and real world platforms. Some of these story related experiences could be video games (in the case of the prototypes 3 and 4 the video game is an essential component), comic based stories, theater plays, board games, movies, spin-off stories, merchandise products, etc. This is actually what film series such as Harry Potter, Star Wars or Lord of the rings have done to some extent, trying to satisfy the desires of their followers for more story related experiences.

With regards to the crowd game driven experiences, the environmental challenges would be driven by volunteers, usually entailing some kind of field work to achieve a certain goal in relation with the environment protection in the form of a game driven experience to make it more fun and stimulating. In the case of the creativity & cooperation challenge, it would be driven by contributors willing to prove their creative skills, in the form of a game driven experience where participants also have to prove teamwork capacity by solving one or more innovation challenges related with the mission purpose, which also serves as an educational experience in collaborative innovation. Finally, the educational fun experience is for tourists willing to entertain while taking away some significant learning outcomes related to skill development or social consciousness, for instance.

In the case of contributors in creativity & cooperation challenges and also in the case of story making contributors, there should be a system that not only facilitates but also rewards contributors based on a reputation and incentive system, in order to stimulate talented followers to bring in their passion and imagination to build the story world. This is not only crowd sourcing but also providing the audience members an opportunity to live a life-changing experience by exploiting their skills. The Whitepaper “Envisioning Open innovation in destinations” is to further develop the idea of the incentive and reputation system for contributors.

Do you envision other story innovation concepts to enhance the aforementioned ideas or to inspire new story based experiences?

Business model innovationCo-creationInnovationMarketing 3.0Open innovation

Story innovation concepts: story platform

A key idea to understanding the aforementioned prototypes is that of the story platform. In this concept there is one principal author who drafts the main guidelines of the story, like the location, the value proposition, a basic plot, and some of the main characters. This could also be called the story backbone or the story constraints.

 Taking this platform story as a starting point, the free contributors –working individually or in groups- may create their version of the story by filling all the gaps that the backbone leaves to develop the contributors’ imagination, adding new characters and sub-stories that shape its uniqueness. As a result, there end up being many different stories with a common purpose related to the mission for which tourism is being developed in the destination. This is the case of prototype 2.

In the case of prototypes 3 and 4, there would also be a platform story with constraints and pre-determined ingredients. But the difference is that they are game driven experiences applicable to many kinds of missions that are created to draw flows of contributors, volunteers or tourists in taking real action in benefit of the mission purpose.

 Further, in these cases the roles of the participants are all pre-determined and every individual decides what type of role he or she wants to play in the story, with freedom to develop the role with his or her skills, ideas and knowledge.

Do you envision other types of story platform to develop story based experiences?

Marketing 3.0StrategyTourism marketingTourism trends

Key tourism industry players

There are 3 groups of players: first level suppliers, service operators and marketing operators:

1st level suppliers. Human resources, land owners, infrastructure operators, utility operators, government as license supplier and the construction sector are the basic suppliers for the tourism industry operators. As we have seen in the five forces model, they play a key role in defining the industry’s profitability when tourism is not so developed in a territory or we are analyzing the attractiveness of a tourism sector that would require the construction of new facilities and services. We may take into account Governments as active players in the industry whenever they are in charge of marketing the destinations.

Service operators. Food & beverage, accommodation, transport and activities providers are the key operators of the industry, as service providers. Whenever we analyze the attractiveness of tourism business that would be based on existing services and facilities, we will consider them as suppliers, except for the activities’ operators, which could be considered as incumbents in this case.

Marketing operators. Here lies the complexity of the tourism industry, where we define several kinds of operators, which may be either competitors or partners.

  • Booking centers & portals: online and/or telephone based commercial platforms managing bookings for one or more kinds of services operators –mostly focused on accommodation and also activities-, usually gathering the tourism services offered within a local or regional territory. They usually get their profits by keeping a percentage of the business they bring to their local service suppliers. In this concept we can also include new business models like Airbnb, whose service suppliers are local householders marketing their spare rooms.
  • Incoming agencies: operators located in the destination in charge of creating packages including accommodation, transportation and activities. These are the most genuine marketing operators, as they are in charge of product development, combining services and experiences available in the destination for the satisfaction of every target. They may sell their packages to tour operators, travel agencies or directly to the final customer. In many cases, they are also the activity providers.
  • Tour operators: operators located in the outbound market in charge of creating packages, usually marketing several destinations and several kinds of products. However they may be tour operators specialized in one destination and more often in one kind of product (golf, ski, sun & beach, cultural touring, incentive trips, etc.). These may deal directly with the service operators or with the incoming agencies, and then sell their packages to the travel agencies or directly to the final customer. They usually buy service capacity long in advance to the service operators or incoming agencies at a lower price ensuring them business, and then have to sell this capacity to the outbound markets.
  • Travel agencies: service retailers usually located near to the customer, selling either incoming agencies’ or tour operator’s packages, or directly booking to the services’ operators. Many travel agencies sell through the internet. Their value is based on the confidence of the customer, offering packages from different operators and sometimes specialization in certain products.
  • Travel social media sites: even if they are not included in the previous scheme as business players, sites like Tripadvisor and many similar models are key influencers in the decision making process of both the chosen destination and mostly the chosen operators within, therefore they deserve a relevant mention as key players in the tourism industry.

In this table are summarized the main features that define each of the marketing operators:

Marketing operators conceptual features
 

Location

Product development

Dealing with final customer

Marketing focus

Booking center

Destination

No

···

One destination. One or many products
Incoming agency

Destination

Yes

·

One destination. One or many products
Tour operator

Outbound market

Yes

·

Many destinations.  One or many products
Travel agency

Outbound market

No

···

Many destinations.  One or many products
Travel social site

Internet

No

···

All destinations.

All services

 

Being that this conceptual outline is representative for most of the industry operators’ models, we should also note that many operators have developed business models integrating several concepts and functions altogether, in most cases as a result of a forward integration process.

Would you consider other key players when analyzing the tourism industry structure?

Business model innovationCo-creationCollaborative business modelsInnovationMarketing 3.0

Destination story based experience prototypes

Needless to say that many more possibilities for each variable may be envisioned, but these are just some examples to help the reader understand the innovation method. Based on these ideas, we have drafted four story driven prototype experiences to illustrate the type of result that the innovation method may produce.

  1. Personal awareness & Spiritual development journey, in line with pilgrimages and similar experiences. This is usually a journey that is carried out alone as of a process of self-reflection and discovery. The role of the protagonist is that of a tourist, so long as he or she is the only beneficiary of the experience, and may encompass both walking routes and static setting stays. In this case, the tourist is to write the story at the end of the experience, ideally with the support of a training workshop, but the protagonist should work on drafting the story from the beginning of the experience. The goals of writing the story are completing the self-awareness and discovery experience, and to inspire others in living their own transformational experience.
  1. Story driven development of a theme route, as in the cases where some novels or films have inspired the development of tourism routes for the fans of the story. This would consist of a story contest launched by the destination management organization (DMO) based on some constraints or even a story backbone. In any case, the story has to be developed based on the destination as the story platform. The contest should be open to both individual creations and group co-creations. At this point, many formulas could be envisioned to encourage the contribution of as many people as possible. The value proposition of the story driven experience should be in line with the tourism 3.0 principles, which means that it should have at least an educational or cultural transformation goal, without disregarding the fun or entertaining value.
  1. Crowd gaming ongoing experience consists of an ongoing story driven experience that takes place in a certain setting without a time limit. This experience takes the form of a mission driven game or challenge, and so the mission accomplishment is what keeps on driving the development of the story game. There is no foreseen end, as long as the mission is not fully accomplished. Such story would work like an MMO game where everybody is entitled to participate both in the virtual and the real world platform in the destination. The location could be any type of destination and the protagonists could either play the role of tourists, volunteers or contributors, depending on the type of challenge: educational fun for tourists, environmental protection challenge for volunteers, and creativity & cooperation challenge for contributors. In this story driven experience, the story plays the role of drawing tourists, volunteers or contributors to the story making and to visit the destination to participate in the real world experience.
  1. Crowd gaming event consists of a crowd sourced game driven story that is played like an MMO game with some real world experience along the story, but especially at the end of it. The events could take place in almost any type of location, including cities, nature settings, cultural destinations or theme parks –for instance- depending on the ultimate purpose and nature of the real-world experience. Such purpose could be for an environment protection challenge, creativity & cooperation challenge, or an educational fun experience. As in the case of the Crowd gaming ongoing event, the role of the protagonist is related to the purpose of the experience, and so could be a volunteer, contributor or tourist. In this type of story-driven experience, the story also plays the role of drawing attention, participation and contribution of individuals in the co-creation of the story, the contribution related to the purpose and in visiting the destination when the event takes place.

Out of the innovation parameters explained in the previous post, do you envision other story based experiences?

IntelligenceIntelligence methodsStrategyStrategy planning & execution

Attractiveness assessment for the tourism industry

As with any other industry, the development of the tourism businesses requires a prior strategic assessment on the attractiveness of its various sectors to determine the optimum business portfolio to invest in. To do so, the 5 competitive forces framework analyses the structure of every sector through the five forces that shape its long term profitability:

  • The threat of new entrants
  • The suppliers’ negotiation power
  • The buyers’ negotiation power
  • The threat of substitutes
  • The competitive rivalry

These five forces determine how the generated value is to be distributed among the different types of players: how much is retained by incumbents, how much is taken by suppliers and customers using their bargaining power, and also how the profitability is limited by the threat of new entrants and substitutes.

The strength balance between the different forces is to determine the average industry profitability, and a key to formulate the adequate strategy. Hereby, we will analyze the application of the five forces model for the tourism industry.

Apart from the 5 forces analysis, there are some more factors to be considered when assessing the sectors’ attractiveness:

  • Market volume and main segments volume
  • Market growth trends and potential: current and foreseen market growth
  • Seasonality of demand, considering length of high, mid and low seasons.
  • Price elasticity of the demand: price sensitivity of all kinds of buyers, adjusted according to the share of everyone.
  • Expenditure in accommodation, food & beverage, activities and shopping (% of each).
  • Multiplying effect: strategic value of the business in terms of its capacity of fostering the prestige of the destination and marketing it for other businesses.
  • Loyalty potential: capacity of the business in retaining customers (%)

When composing the attractiveness matrix we will adjust the value of every factor according to its impact on the sector attractiveness.

Would you consider other factors when assessing a sector’s attractiveness?

Marketing 3.0Tourism trends

The power of storytelling

Why do we like stories? We like them because they provide answers to our lives and a mechanism to shape our identity by connecting with the story characters. We connect emotionally with the story characters as long as they have similar challenges and values, and thus we regard them as a representation of ourselves.

They respond to the human need to find idols and role models with whom we can identify ourselves. Stories not only help us in building our identity but also work like social glue, as they help us in connecting with others and building relationships. Stories are the most effective way to create an emotional connection between brands and consumers.

When assessing brands, consumers evaluate first the brands with which they have some emotional connection. Then, depending on the importance of the purchase, they search for more or less information to support the final decision. Furthermore, humans process information more efficiently when this is delivered through a story, and therefore this information is more likely to be remembered in the form of a story.

 The travel industry is not an exception to this consumer behavior; rather, the emotions play a more important role than in many other industries. In fact, destinations developing marketing 3.0 hold one of their main competitive advantages in appealing not only to the consumers’ emotions but also to their human spirit, outshining other destinations that have incorporated storytelling in their marketing strategy.

What stories about travel experiences do you remember that were really memorable?