Category: Strategy

Strategy planning, strategy execution and business model design focused on collaborative modelling

Environmental sustainabilityStrategySustainabilityThird sector and social sustainability

Typical challenges in mature destinations (I)

Conviviality between locals and tourists. The most tourist crowded areas are sometimes also residential, and so there are usually many issues related to difficult conviviality between the local residents and the visitors, such as nightlife noise, tourists’ inappropriate behavior, or just a certain invasion of the public spaces and facilities, which are designed for the residents’ use only.

This may be solved with the development of other clusters to spread the tourism flows, and more specifically by regulating nightlife schedules in a way that from a certain time on nightlife entertainment is only allowed in specific areas with no residents, fully dedicated to leisure and entertainment. Further these and other rules concerning the tourists’ behavior should be well communicated through the tourist establishments and agents, and also enforced by local policemen controlling the problematic areas.

Finally, it is essential to control the concentration of accommodation facilities in the most demanded areas, not only by limiting the licenses for hotels and hostels, but also by limiting the allowance of Airbnb offers to a minimum, like 1 room per apartment and 1 apartment by owner, avoiding the proliferation of tourist apartments in the residential buildings. In accordance with the new clusters’ development, the demand for accommodation should be directed to the new clusters, also to help them grow and create demand for their businesses.

Congestion issues in popular areas. Closely related to the previous point, congestion issues are not only affecting the resident’s life, but also the tourists’ experience. Solving the issue for the tourist entails spreading the tourist interest hot spots and constraining visitors’ flows according to carrying capacity and bottle necks’ capacity.

First, the cluster development strategy should create new attractions in clusters other than the most crowded, even changing the location of some attractions from the crowded areas to the new cluster, as long as it is possible. This may be the case of museums or other cultural entertainment facilities. This may be done either through new cluster development or through reconverting existing clusters. Also the new accommodation facilities should be concentrated in the new tourism clusters, both to give them life and discharge the most popular areas from some of the tourism flows.

This new cluster development or reconversion should be complemented with the creation of tourism itineraries encouraging visitors to discover the destination off the beaten track, and the creation of charming transportation systems to move visitors from one place to another, encouraging them somehow to visit the new tourism clusters.

Excessive dominance of tourism businesses in the residential areas. Some residential areas popular among tourists have seen an increase in the percentage of tourism related businesses over the commercial mix, up to an extent that they lack some of the services they used to have close to their homes and many traditional businesses have had to close.

Being more profitable, some tourism businesses take the premises traditionally dedicated to services or products for the residents, up to the point where they barely exist or are too scarce according to the residents demand. The tourism business profitability allows them to pay higher rents than many residents’ oriented businesses and therefore it’s hard for these ones to keep their location. Such kind of business cannibalism obviously goes against the residents’ interest and so it is likely to put those residents against the tourism development.

Many solutions may be implemented to tackle this issue. A special tax for the tourism businesses could be fixed, so as to diminish their profitability after taxes and eventually lower the premises rental prices. The revenues from these taxes should be invested in helping the affected businesses to reconvert or start-up in another location. Another solution, combined with this one, could be the creation of micro-clusters for tourism businesses, allowing them to settle down in certain areas, but preventing them to settle in other areas reserved for the residents’ oriented businesses.

What other challenges are usual in mature destinations?

StrategyStrategy planning & execution

How cluster development applies to mature destinations

Most of the aforementioned challenges faced by mature destinations may be solved, at least partly, through an adequate cluster development strategy. Furthermore, cluster development strategies may have many other benefits for the destination. The following strategies summarize most of the approaches to cluster based developments in destinations:

New cluster development. Many destinations use undeveloped areas without any relevant resource, to build new tourism infrastructures which all together are to create a new tourism cluster. This is usually related to Theme Parks, Congress & Convention facilities or other modern buildings hosting all kinds of entertainment experiences. This is the case of the “Arts and Sciences City” in Valencia, an outstanding collection of innovative architecture facilities designed by the architect Santiago Calatrava encompassing an Opera House, a Science Museum, an Imax Cinema, an Aquarium and a Venue for various types of events.

Reconverting or relaunching existing clusters. Some destinations have unexploited natural or cultural resources, which are not leveraged as tourism attractions namely due to lack of vision or imagination. These type of developments should always be a priority, so long as they enhance the identity and uniqueness of the destination. This is the case of Shanghai’s Xintiandi and Tianzifang, two areas within the downtown’s French district with old houses and unique atmospheres, which have been reconverted as charming shopping and entertainment clusters, with many types of stores and restaurants.

Re-clustering the destination. Some destinations are perceived rather as homogeneous, or they do not have a defined characterization throughout its areas. However, the reality is that in most cases there are some distinct features in the different areas that may be leveraged to build a cluster identity. In this case, the cluster development strategy consists of enhancing and marketing the differentiated character of each cluster, providing a sense of variety to the visitor. This is what some Ski resorts do, “Theme-Parking” themselves to some extent, with distinct urban aesthetics, music, etc. to build a different atmosphere in every zone.

Cluster enhancement. As it is explained in the Whitepaper “Competitiveness Planning 3.0”, clusters should be reference units when assessing the destination’s competitiveness, and also when planning competitiveness programs. So long as each cluster may be considered as a sub-destination, with its own strengths and weaknesses, every cluster should follow its own development in accordance with its intended identity, adding more value, reducing risks and discomforts and marketing itself according to its distinct value proposition. This is the very minimum that a mature destination should do to not pass from maturity to decadence.

Based on these standard strategies, cluster development may contribute to solve some of the aforementioned challenges that are usual in mature destinations, so long as they are combined with the appropriate competitiveness programs and marketing strategies and activities. All tourism development strategies are interrelated, and so they need to be coherently weaved to be successfully implemented.

Do you think of other cluster development based strategies?

StrategyStrategy planning & executionSustainability

Clustering strategy for mature destinations

Destinations operating since decades ago reach a stage of maturity sooner or later, in which they stop growing and lose the strength and vibrancy that made them grow. At this point, depending on the conditions of the environment and will of the local inhabitants, many destinations prefer to manage this situation without growing anymore, so long as they are not willing to receive more tourists or they don’t want to extend the destination’s urban area with accommodation facilities or second residences, and keep the destination as it is to preserve its original charm, and avoid the risk of spoiling it with tourism overflows.

Other destinations, however, due to the need or will for the tourism business growth, try to find other solutions to satisfy a higher demand trying not to spoil the charm that attracts the tourism flows. Further, these destinations face many challenges such as:

  • Congestion issues in the most popular areas
  • Difficult conviviality between locals and tourists
  • Excessive dominance of tourism related businesses in residential areas
  • Lack of infrastructure renovation, which may give an image of decadence
  • Tourism expenditure stagnation
  • Seasonality stagnation due to incapacity to overcome seasonal occupancy gaps
  • Poor branding, lost reputation, low brand awareness, lack of well-defined identity, etc.
  • Lack of new tourism businesses creation

These and many other issues may be resolved through adequate tourism development planning, in which a good cluster development strategy is to have a key role in overcoming them successfully.

Which other issues affect mature destinations?

StrategyStrategy planning & execution

How do Theme Park clusters develop?

The case of Theme Park clusters is probably the most different from all other types of tourism clusters, as they have little or no relationship with natural or cultural resources, and so their development is rather similar to other industries’ clusters. They have unique dynamics and therefore require a separated analysis. Both the key success factors and the development stages of Theme Park clusters are hereby explained and illustrated through a few well known case studies.

Beyond the traditional Amusement Parks, usually targeting the local markets, Theme Parks were created to become a destination themselves, offering a more or less unique value proposition, bringing the visitor to an imaginary world or to somewhere far away, either in terms of distance or time, like those reproducing ancient civilisations. The experience of immersion within another world is what set Theme Parks apart from Amusement Parks, even if they have many attractions in common. Then, however, the ability to recreate a different world to make it also entertaining for visitors is something that few operators have.

Walt Disney was in fact the first company to leverage the imaginary world of their film stories to develop Theme Parks. Then, other film producers such as Universal Studios followed their example by leveraging their own story worlds, also in many locations worldwide. Apart from them, there have been other Theme Parks based on toy brands such as Lego, comic series such as Asterix, Smurfs or Tintin, and car brands such as Ferrari.

When analyzing the internationally competitive clusters, there may be found many things in common, related to their cluster development key success factors and phases. In this regard, there are four key success factors for the development of Theme Park clusters, of which at least three should be well accomplished:

  • Internationally competitive destination with important tourism flows and accommodation capacity, usually a city.
  • Good accessibility to the main targeted markets
  • Location with good weather conditions all year round.
  • Internationally reputable Theme Park brand (at least one).

Beyond these key success factors, there are about four typical phases in the Theme Park cluster development process:

  1. The base for the cluster development is an attractive location and compliance of at least two of the aforementioned key success factors.
  2. Development of a Theme Park
  3. Good results stimulate expansion with new facilities. These may be themed hotels, Water amusement parks, new attractions, facilities to offer new products such as MICE or Golf.
  4. New smaller Theme Parks settle down in the area to take advantage of the increasing tourism flows in the cluster.

In the Whitepaper on Clustering Strategy you may find several case studies that illustrate this theoretical approach.

Do you think of other key success factors for Theme Park clusters development?

StrategyStrategy planning & executionTourism marketing

Clustering benefits for marketing

So long as every type of environment is more or less adequate for certain types of activities, the correct matching between the location and the activities developed is a key factor for competitiveness and also for effective marketing, as it helps to build a cluster’s consistent identity, enhancing the character of the experience and also helping the tourists to envision what kind of feelings they are likely to experience.

Closely related to competitiveness and productivity, business concentration may also accelerate innovation in product development and process efficiency. Having a pool of competitors in the same geographical area facilitates benchmarking and stimulates innovation, so long as proximity leads to constant comparison and competition.

Furthermore, attractions concentration in a cluster makes it possible to design more attractive packages in the travel market, as well as to attract more transport operators –namely flights and bus regular lines-, which eventually open new markets. Competitive clusters attract also internationally branded operators –like reputable hotel chains-, which eventually contribute to the reputation and attractiveness of the cluster.

Other marketing benefits may come from the cooperation in marketing activities by the cluster’s operators. This includes market intelligence collection and management through a local “Tourism Observatory”, but also from sharing efforts and information for the cluster’s marketing planning, and operational marketing activities.

Through cluster based collaboration, all these benefits can be enhanced, due to the multiplier effects of more productivity, innovation and business growth in a cluster influences many other industries within the region.

Do you think of other clustering benefits for marketing?

StrategySustainability

Clustering benefits for sustainability

Cluster based destinations may also have many benefits for sustainability. First, adequate cluster development planning makes it also easier to prevent the tourist flows from overflowing the carrying capacity of the environmentally fragile areas, or having negative impacts on the residents’ lives. The cluster based development plans assess the carrying capacity of all areas to avoid congestion and protect the environmentally fragile points. Then, as long as possible, the Plans should locate the attractions in a way that spreads out the visitors’ flows within the cluster, through controlled itineraries where the flow dimension is monitored and may be constrained. So long as the flows are predictable, it is also easier for the transport and other service operators to offer the adequate services that the tourists need.

Regarding environment sustainability, so long as this is not homogeneous throughout the destination territory, dividing it into clusters is necessary as a part of the process of identification of the critical issues to be managed to ensure sustainability, as these issues are to be different in each destination cluster. Therefore, clustering is a key strategy to manage the destination’s sustainability.

Furthermore, the concentration of activities in specific areas fosters a more efficient development of infrastructures for accessibility (roads, railways, airports, etc.), reducing the negative impacts in the environment to the minimum possible. This also makes the tourism development more cost-efficient for the government, and in some cases, this cost-efficiency affects directly or indirectly the local operators and the visitors.

Cluster based destinations are also more likely to be targeted for research purposes and are easy to study, so long as  they are clearly defined areas. This facilitates gaining knowledge about the key issues that affect the destination’s sustainability. Further, as a part of the cluster infrastructure, it is quite likely that the cluster attracts educational centers, and these attract researchers at the same time, so a virtuous circle is developed in this regard.

Finally, so long as the resources are taken care of, and the activity concentration reinforces competitiveness, this also enhances the economic viability of the tourism development over the long term, ensuring the economic sustainability of the destination.

Do you think of other clustering benefits for sustainability?

StrategyStrategy planning & execution

Clustering benefits for profitability and growth

The concentration of many attractions and related services within an area, specialized in a certain type of activities is likely to attract other operators dealing with this type of activity, as this is where their potential clients go and so as to profit from the existing tourism flows and necessary services available in that area. This saves them many marketing costs, and also results in a much lower risk investment. Therefore, consolidated and competitive clusters are more likely to attract investors.

Further, as it happens in all industries’ clusters, business’ concentration reduces trading costs, thus enhancing profitability. As in all types of clusters, there are also common infrastructures and key resources, which shared among many operators, reduces its cost per operator, through creating economies of scale.

Moreover, concentration helps to boost cooperation, and by joining efforts, partners not only accelerate innovation and develop economies of scale by sharing strategic resources, but also cooperate in lobbying to gain negotiation power against common suppliers and clients, as well as to counter or neutralize other competitive forces that shape the long term industry’s profitability. The Whitepaper “The 5 Competitive forces and business strategy” depicts how these 5 forces shape the long term profitability in the tourism industry.

In many cases, companies in a specialized cluster have a better access to skilled employees and specialized suppliers, also located within the cluster influence area. Institutions or Universities can be used mutually and capital expenditures in regional marketing, infrastructure or education programs can be employed and shared together (Müller and Lanz 1998). Finally, cluster based tourism attractions’ concentration is also beneficial to profitability as long as it contributes to extending the average tourist length of stay.

Beyond profitability, consolidated clusters are also likely to foster more new business creation. First, a concentrated clients’ base lowers the risks for new suppliers to settle in, and as a result of the cluster based boosted innovation, also more spin-offs and start-ups are likely to be created. Further, financial institutions have a good knowledge about the industry, and so they are more likely to provide financial support to new ventures.

Do you think of other clustering benefits for profitability and growth?

StrategyStrategy planning & execution

Clustering benefits for competitiveness

The cluster structuring and development in a destination offers four main types of benefits: enhancing competitiveness, boosting profitability and growth, ensuring sustainability and increasing marketing effectiveness.

As the Competitiveness Planning 3.0 Whitepaper explains in detail, destination competitiveness is based on the relation between value offered to the visitors and efforts demanded, considering experiences, feelings, service quality, and positive impacts of tourism development in the destination as the sources of value; and discomforts, risks, price and negative impacts of the tourism development in the destination as the sources of efforts demanded, or factors diminishing value.

Among all these key factors that determine the destination’s competitiveness, the tourist experience is probably the most important. In this regard, having a higher concentration of experiences –related to the same motivational profile- available within a short distance (not needing to change accommodation in many cases, nor consuming much time in transfers) clearly optimizes the whole destination experience. Cluster development also entails an increasing variety of experiences available, beyond the experience efficiency due to the reduced distances within the cluster.

A good cluster planning should consider a strategy to prevent congestion issues by spreading the tourism flows right from the conception of the cluster layout. This may be achieved by creating many itineraries throughout the cluster to diversify the visitor’s flows –avoiding “backbone itineraries” which tend to concentrate the flows-, and preventing bottlenecks.

Furthermore, by creating themed itineraries and charming transportation systems which may eventually become iconic experiences themselves, not only are the tourist flows spread out but also the experience is enhanced. Charming transportation systems may be traditional transportation means –gondolas, tramways, etc.- made tourist friendly in terms of comfort, or just innovative transport means which are a new experience for the visitors.

Business concentration makes it also more feasible to invest in key resources, which eventually influence positively the cluster’s competitiveness. This may be the case of educational facilities, R&D centers, and cross-destination infrastructures related to accessibility, environmental management & protection, etc.

Do you think of other clustering benefits for the destination competitiveness?

StrategyStrategy planning & execution

Cluster based competitive advantages

In line with the origins of cluster development, the combination and cooperation of many resources and operators may result in many types of competitive advantages:

Resource uniqueness: many clusters feature a unique collection of natural or cultural resources. Cases of cultural resources could be the Egyptian Pyramid cluster along the Nile River, or the Maya Pyramid cluster in Yucatan Peninsula. Examples of unique clusters based on natural heritage could be Iceland with its unique combination of volcanos, glaciers and northern lights, or the Tanzanian cluster with Mount Kilimanjaro and the Masai mara safaris.

Experience innovation: some clusters have, beyond competitive natural or cultural resources, a special deed for innovating experiences. Such is the case of Queenstown in New Zealand’s Southern Island, the most innovative destination for adventure tourism activities, where bungee jumping was invented, among many other crazy experiences. Developing unique experiences without unique resources requires building a culture of innovation.

Operators’ cooperation: the good coordination and cooperation among the cluster operators may also be the source of competitive advantage. The case of the Trois Vallées ski area, the largest ski-lift connected ski area in Europe illustrates this type of advantage. This dominion has no unique resources like other areas in the Alps –namely Zermatt-, but the connection between the three valleys offers the best mobility efficiency for skiers who want to enjoy the whole ski dominion, allowing them to enjoy all the ski areas spending the least possible time.

Differentiated product experience: clusters featuring one main product may develop their competitive advantage by creating a unique signature experience, adding an extra value that other cluster rivals do not offer. This is the case, for instance, of the Austrian Tirol for ski holidays, offering a unique “après-ski experience” consisting with traditional Tirolean pubs with local atmosphere and also a world class network of Wellness & Spa facilities. The Ski Resorts’ accommodation facilities are all in old villages, which also give character to the experience.

Dimension: some clusters base their competitiveness in offering the largest amount of facilities or resources for a specific kind of tourism activity. Such is the case of the Golf Cluster in Costa del Sol as a Winter Golf destination in Europe. On the other side of the world, the Australian Great Barrier Reef is the largest coral reef on earth, a paradise for divers. Another example could be Macau, featuring the largest offer of Casinos in Asia.

Variety: many tourists are not only motivated for one type of activity but prefer to enjoy many different experiences during their holidays. Clusters offering a large number of different attractions appeal to an increasing number of tourists. Such is the case of the Costa Brava, offering not only attractive beaches, but also first class gastronomy, unique cultural heritage sites, a Golf cluster, a protected area for diving, Casinos, facilities for skydiving, Wellness, etc.

Price: for certain products, price is sometimes a decisive factor to gain competitiveness, especially in the case of the most standardized ones. As it happens with clusters in other industries, the competition of many operators may result in a price advantage for the tourist, though this is not usually the main reason. This could be the case of Tunisian coast cluster competing with European beach destinations, the Red Sea cluster for diving, etc.

Do you think of other cluster based competitive advantages?

Strategy

Types of tourism clusters

The term cluster is used nowadays in many different fields, always to refer to a group of elements that have something in common or do something together. It may be either used to define a large area with many attractions which all together make a competitive destination, or to define an area within a destination with clearly differentiated characteristics compared to the other destination areas. The term cluster may be used as well for conceptual grouping not related to territory, in the fields of marketing and some others.

There may be established an almost endless number of cluster categories in the field of tourism, according to many different criteria, but only a few are considered relevant enough, also to illustrate the different realities in terms of cluster development for destinations.

First of all, depending on the cluster’s resources, regardless of the aforementioned distinctions, there may be three types of clusters:

  • Natural heritage: clusters based on distinguished natural resources for sporting activities or sightseeing such as mountains, marshland areas, etc.
  • Cultural heritage: clusters based on unique or differentiated tangible –monuments- or intangible –traditions, gastronomy- cultural heritage.
  • New developments: clusters based on newly built facilities which attract tourism flows by themselves, such as Theme Parks, Casinos, Museums, Golf, etc.

Second, when referring to clusters that are to define areas with different characteristics within a local destination, there may be:

  • Urban clusters: those differentiated areas within city tourism destinations, either by the architecture style, atmosphere, natural resources like parks, cultural resources such as temples, palaces, museums, etc. Some well-known examples could be Paris with distinct districts and areas such as Montmartre, La Defense, Champs Elysees, Bois de Boulogne, Quartier Latin, etc. where outer connected clusters such as Versailles and Disneyland Paris could also be considered.
  • Mono-product destination clusters: some destinations focused in one main product offer however different areas with distinct atmospheres, based on natural or urban landscape, a different amount of tourism flows, different prices, and even different characteristics directly related with the tourism product. This could be the case of a Theme Park, a Ski resort with ski areas in many valleys or mountains, or National Parks with several areas with different types of landscape and even different animal species to be watched.

Third, when referring to clusters as areas grouping several attractions which all together make a competitive destination, there are also some types of clusters:

  • Touring clusters: these are groups of resources –usually natural or cultural heritage- which are to be discovered by following an itinerary that makes a touring experience. Some of these resources taken individually are not likely to attract many visitors, but as a part of a route they all gain a substantial amount of tourism flows and become a competitive destination. These may be of similar characteristics or quite different. Examples are the Loire Castles cluster in France, the “Norway in a nutshell” route, or the Rhin Castles cluster in Germany.
  • Agglomeration clusters: closely related with the dimension competitive advantage, some destinations become competitive due to the concentration of many attractions of the same kind within a limited area. This usually refers to new development attractions, but may also apply to natural or cultural resources. Such is the case of Theme Park clusters, Golf clusters, Ski clusters, Diving clusters, hiking clusters, etc. Many special interest tourists like to have the chance of experiencing many sites for the same activity during the same holiday period.
  • Multi-product clusters: unlike the agglomeration ones, some clusters base their competitiveness on the variety of products available, attracting those visitors who are interested in living different types of experiences. Some famous cases may be the Hawaii Islands, which are outstanding destination for sun & beach, Congresses & Conventions, but also for Nature tourism –National Parks with active volcanos- and surfing; Eastern Andalucia –in the South of Spain- boasts some of the most popular Sun & beach destinations, plenty of Golf courses, along with hiking & skiing in Sierra Nevada and cultural tourism in Granada.

Do you think of other tourism cluster categories?