Category: Strategy planning & execution

Strategy planning and implementation methods

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?

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?

StrategyStrategy planning & execution

Enforcing strategy execution

As mentioned in previous sections, implementation entails describing all tasks to carry out for every program, assigning accountabilities, prioritizing and time planning, along with the KPI monitoring and evolution assessment. However, it is important to explain the type of recommended organizational chart for the DMO in charge of implementing the programs. The main executives responsible for the competitiveness program implementation could be:

  • Managing director: in charge of leading the executive team, the corporate strategy direction, and institutional relationships. He or she would be the leader of the implementation process, and so ultimately responsible for assigning accountabilities, prioritizing, time planning and deciding whether it is convenient to reorient strategy. He or she should lead special programs such as the new flight connections.
  • Experience development director: in charge of programs related to heritage conservation, urban aesthetic harmony, DMC incubator, signage system, congestion & pollution, etc.
  • Business intelligence director: responsible for the monitoring system, and so in charge of collecting, analyzing and communicating the intelligence data following the KPIs.
  • Quality director: in charge of implementing the service quality related programs, such as the Quality label certification, Eco-label certification, and related issues.
  • Human Resources director: in charge of all professional training programs related to service quality for professionals, and also co-responsible for Hospitality programs
  • Marketing director: in charge of the product related programs such as the Product Clubs, Product labels, Benchmarking trips, Destination APP, Tourist offices & call center and partnership with nearby destinations.

In the case of programs entitling mandatory changes on private properties such as buildings or businesses, implementation would be more difficult and therefore more complex strategies would be needed. These strategy guidelines could support these programs enforcement:

  • Changing regulations establishing a reasonable deadline for making the necessary changes. Such deadlines should be negotiated with the affected stakeholders to ensure the feasibility of the implementation.
  • Establishing an incentive system to stimulate early adoption of the new policies consisting of fiscal incentives, privileged marketing, etc.
  • Offering funding facilities such as soft credits, partial subsidies, and searching for imaginative formulas like those described in the Whitepaper “Envisioning destination models 3.0”.

How would you enforce execution related to private properties?

StrategyStrategy planning & execution

Competitiveness clubs

Beyond the DMO’s Board of directors, who are accountable for the implementation of the Tourism Development Plans –along with other stakeholders-, there can be created a sort of Think Tank usually called a Competitiveness Club, with representatives of both the private and the public sector, to work as a consultation body that gives support and advice in the elaboration and implementation of the Tourism development Plans.

This is a volunteer driven organization, where members participate driven by their professional interest in exchanging opinions and visions on the challenges of the local and global tourism industry. Particularly, when elaborating the competitiveness assessments and improvement programs, the Competitiveness club is due to provide support in the assessment of the conditions of the destinations’ operators, products, facilities, infrastructures and related supporting sectors.

Furthermore, the Competitiveness club should provide advisory support to the local Government and DMO both in the destination strategies design and implementation. This would entail a close cooperation with the monitoring system and the open innovation system. To be effective, there should be appointed a formal leader and a secretary.

Finally, as a representative body of the tourism private sector, it could also play the role of lobby, to defend the interest of the local industry in the design of the Government policies, given their important influence in many issues affecting the tourism business.

What other functions do you think that Competitiveness Clubs could be in charge of?

StrategyStrategy planning & execution

Tracking destination performance for the Competitiveness Plan

At the end of the Plan the key performance indicators are defined. As done in any Strategic Plan, every KPI is assigned with an accountable person in charge of its tracking and interpretation, a priority level to determine its relative importance compared to other indicators, and a frequency determining how often the indicator has to be measured.

The Observatory in charge of the monitoring service is likely to be the most appropriate agent to carry out the tracking of the KPI, in close collaboration with the Competitiveness Club, the DMO and representatives of the Government. For most of the programs, the only way is to carry out a survey on satisfaction asking the tourists about all the correspondent issues. The best moment to do so is when they are about to leave the destination, while at the check-in queue or waiting hall at the airport, for instance. Airports provide us with an excellent opportunity to target specific segments for geographical markets. Another good option is to do it in the hotel halls. The survey should ask about their satisfaction on every issue object of study, their assessment about it on a scale of 1-5, and the importance given also from 1 to 5.

However, there are some competitiveness programs for which specific KPIs can be designed. With regards to the cross-destination programs, this is the case of the following programs:

New flight connections: considering not only the connections themselves, but also the overall capacity (number of flights x airplane capacity). Consider also the capacity increase in the current connections.

Congestion, noise & air pollution: there are specific sensors to measure both noise and air pollution, and also to measure the number of vehicles transiting through a certain point. To count people, there have to be “counters” –persons- in the critical bottlenecks or hot points.

Human resources training: the attendance and successful compliance of the learning goals assessed through skill and knowledge examinations is the main way to measure the effectiveness of this program.

Accommodation upgrade & development: the number of new accommodation facilities built, as well as the number of facilities having been certified with a quality certification or a higher star rating should be the main indicator.

Eco-label system: the number of eco-labels certified for each kind of operator, as well as the number of certifications for each eco-label category for every type of operator, to measure both the environmental friendliness of every type of operator in percentage and intensity.

DMC incubator: both the number of micro-entrepreneurs working in the incubator and their business growth should be measured. Besides, also the time needed for them to be self-sufficient and abandon the incubator, as well as the training assessment should be considered.

Tourist offices & call center: in both cases the service demand should be measured, paying attention to what kinds of information are most demanded. Ideally, also the service demand concentration in certain hours should be measured to provide the adequate resources.

Destination APP: not only the number of downloads, but also other facts such as the number of content uploads by the users (photos, stories, etc.), creative reviews, map downloads, geo-localized deals received and accepted, etc.

With regards to the cluster competitiveness improvements assessment, the indicators to be measured other than by the tourists’ assessment survey are mostly those related to spiritual value, and so on the benefits for the local population and heritage:

Local inhabitants’ survey asking about their satisfaction on several issues such as:

·   Street & public spaces cleanliness

·   Employment & income

·   Pride about the destination

·   Destination model

·   Cultural heritage preservation

·   Noise & Air pollution

·   Congestion issues

·   Tourists’ behavior

·   Cultural life (events calendar)

·   Natural heritage preservation

Further, many other aspects related to the benefits for the destination should already be measured by the Government such as the unemployment rate and the average salary, or by the destination management such as the level of contribution to the open innovation system, the growth of the collaborative model, etc.

With regards to the aforementioned product programs, the correspondent KPIs could be:

Product clubs: number of created clubs, active participants in each club, and the product operators’ satisfaction with the activities carried out.

Product Quality labels: number of operators certified with every label created, product operators’ satisfaction, tourists’ satisfaction, and outbound operators assessment.

Benchmarking trips: number of trips organized, number of participants, and product operators’ satisfaction with the results.

How else would you measure the success of these programs?

Co-creationInnovationOpen innovationStrategyStrategy planning & execution

Enhancing competitiveness through open innovation

As explained in many previous blogposts, the Open innovation system is one of the key features that set destinations 3.0 apart from competitors. One of the outcomes of the innovation system is the generation of ideas for improving competitiveness at all levels: product, cluster and cross-destination.

Product

  • Ideation bank for developing new products
  • Product development contests
  • Forum discussions to detect weaknesses and new ideas
  • Professional advisory on improving product competitiveness

Cluster

  • Forum discussions to detect weaknesses and new ideas
  • Professional advisory on improving cluster competitiveness
  • Mission driven innovation challenges to tackle cluster competitiveness issues

Cross-destination

  • Forum discussions to detect weaknesses and new ideas
  • Professional advisory on improving cross-destination competitiveness
  • Mission driven innovation challenges to tackle cross-destination competitiveness issues

Further, it is important to remember that the Monitoring system is to gather information that eventually should help in determining competitiveness improvement priorities and orientating improvement direction. This information is obtained as a result of the following research goals:

  • Tourists’ needs, problems, and concerns in view of identifying insecurities and discomforts to be addressed through improvement or development of new services and facilities.
  • Tourists’ motivations and concerns to sense the convenience of developing new products or mission driven tourism activities.
  • Tourists’ opinions to pre-test ideas on new products or marketing initiatives, to ensure their viability and adequate development.

Beyond these outcomes, both the open innovation and monitoring system are flexible and so permanently open to add new features and activities to tackle new challenges in the most appropriate way, and so the variety of outcomes may increase constantly. The Whitepaper “Envisioning Open Innovation in destinations” is to explain further details on these issues.

How else do you think that the Open Innovation could contribute to enhance competitiveness?

StrategyStrategy planning & executionTourism marketing

Product competitiveness programs

Beyond the aforementioned recommendations for specific products or sites, these competitiveness programs should also be taken into account, as they apply to the whole product category:

Product clubs are voluntary associations of stakeholders related to the product category, working like a forum or think tank, and led by the DMO Product Manager responsible for the product category, with the following goals and functions:

  • Carrying out market intelligence research
  • Analyzing competitiveness gaps, marketing KPIs and weaknesses to overcome
  • Planning, funding and coordinating the marketing activities
  • Developing new products and improving product competitiveness
  • Monitoring the result of the marketing activities and product operations
  • Lobbying to solve problems affecting the product business
  • Training the local operators in marketing and management

Product Quality labels facilitate the identification of key attributes by the tourists to help them prioritize their visits. Obtaining a label entails complying with certain quality requirements that eventually encourage operators to improve product competitiveness. For instance, there could be labels such as “Gourmet restaurant”, “Charming village”, “Historical site”, “Boutique hotel”, etc.

The method to develop the Product Quality labels should be the following:

  1. Selecting the special labels to create
  2. Defining the requirements in cooperation with the Product Clubs
  3. Labels graphic designing
  4. Carry out communication campaign targeting local operators to adhere to the label
  5. Assessing interested operators on the requirement compliance
  6. Introducing the Product Quality Labels in the marketing materials

Benchmarking trips are organized by the Product Club for the destination product operators with three main goals oriented to improve product competitiveness:

  • Learn best practices from the best performing destinations and operators
  • Learn about the destination model key success factors and competitive advantages
  • Inspire operators with ideas on developing products, providing more value with less efforts

The benchmarking trip organization should consider the following steps:

  1. Identifying possible benchmarks: destinations and operators
  2. Studying every benchmark to figure out what can be learn from each one
  3. Choosing the benchmarks with the most applicable know-how to the destination

Which other product competitiveness programs would you consider?

StrategyStrategy planning & executionTourism marketing

Product competitiveness strategy: marketing & management

The product or site improvement program may regard some standard strategies to leverage its potential, increase the tourism flows and generate new revenue streams, such as:

Connection with other sites: arranging public transportation and sightseeing services to connect sites between them helps the visitor to have time to see more attractions.

Venue for events: some sites may be offered to hold special events such as weddings, concerts, cultural performances, exhibitions, etc. bringing in an extra source of revenue.

Accommodation: some sites offer an excellent condition to operate accommodation services, adapting an old building as a boutique hotel, for instance, to obtain a new source of revenue.

Price: depending on the improvements made, the price may be revised accordingly. It is also convenient to make a deal with the aforementioned smart card, discounts for groups, etc.

The priority need for one or another improvement is to be assessed by the consultants, though a survey to the tourists about their satisfaction on many issues and the suggested improvement needs is highly recommended.

What other type of generic marketing strategies would you consider to make it more profitable?