When designing the value proposition and the business model architecture, the first step in the strategy formulation is to define the mission. This should be done by listening to all the local stakeholders to identify current and future challenges affecting the local community and the specific constituents of these challenges (disadvantaged persons, minorities, elderly people, etc.), mostly those in the base of the pyramid. Further, it is advisable to identify concerns related to the protection of the environment or the cultural heritage. The local communities are the first ones who have to be engaged with the mission, and so their opinion and will should play a decisive role on the mission definition.
The next stage entails searching for solutions that can be powered through the tourism activities, which involves finding ways to transform the tourists’ lives to satisfy social needs and motivations which may also be understood as another mission focused on the socio-cultural transformation. Participation of communities of creative people should be encouraged from this stage. This process starts in the strategy formulation phase, but continues permanently as the main goal of the open innovation system where all stakeholders are empowered to participate.
Then, another key step in the strategy formulation is to identify the key partners and key resources the destination needs to start the virtuous circle that leads to expand the model. They are the ones that make the destination and the business attractive enough to progressively attract and engage new partners and a growing network of customers, some of whom turn into brand ambassadors. The usual core stakeholders to engage in the first phase are to be:
- Local government, providing infrastructure, long-term shareholding and institutional support
- Investors, so long as there need to be carried out significant investments in tourism infrastructure
- Owners & operators of existing key tourism infrastructures
- Land owners of the areas where the new tourism infrastructures should be built
- Operators for the new key tourism infrastructures
- Community leaders, who should influence and engage the local community
- Channel partners such as Tour-operators and Travel Agents with key market influence
- Opinion leaders such as journalists and bloggers to spread the first stories to their followers
Furthermore, it is necessary to define the partners’ profile for all resources and activities that are to be outsourced, establishing the prioritization criteria for the selection process and negotiation key points.
Moreover, the development of the destination model needs to define a strategy which sets the priorities on the requirements partners should comply with in relation to the value brought and mission commitment. In this regard, we will probably not always find the necessary service suppliers sharing our mission and values –especially at the beginning-, and so we will need to understand their values and expectations in order to build win-win collaboration. Progressively, as the model scales up, the strategy prioritizes partners who share our mission and vision, eventually replacing those who do not.
Would you suggest different roles for the core stakeholders mentioned above?
When focusing on environmental protection and sustainability, in the case of nature-based tourism destinations, there are many roles that the destination model may take:
- Collaboration with research programs (either by universities, corporations, government, etc.) or environmental protection programs (private foundations, NGOs, government, etc.) by lending some of the facilities, programming volunteering activities related with the field work, etc. In some cases, the open innovation system could serve also as crowdsourcing resource for innovative ideas. Alternatively, the destination could also serve as a pre-testing field for new eco-friendly products.
- Creating awareness among stakeholders about the environmental issues and challenges of the destination, by educating them on the threats and the good practices that should guarantee the protection of the destination’s environment, in order to create a network of environmental ambassadors that spread these concerns and good practices.
- Integrating environmental friendly facilities and practices within the main business activity, thus minimizing the impact on the environment. These facilities and practices could also be leveraged for educating and creating awareness about the environmental challenges, thus accomplishing the aforementioned role at the same time.
The indicators to track the environment related mission should be designed by environmental experts according to the established goals aligned with the mission.
Beyond the aforementioned main benefits, there may be other positive impacts such as those related to cultural protection and promotion, socio-cultural change and human development on both the local communities’ side and the visitors’ side. These benefits may be difficult to measure and are most likely to be assessed through the kinds of stories that are created and their popularity.
A series of Whitepapers are to be released featuring case studies to illustrate how the destination model 3.0 approach may be applied in various tourism destinations.
Would you consider other roles to be played by the destination board?
The main objectives when tracking the tourism activity in local destinations are to monitor:
- Evolution of the accommodation offer by type and location
- Demand seasonality by type and location of the accommodation
- Evaluate the satisfaction of local businesses with the tourism activity
- Characterize types of demand, clustering them according to their geographical origin, length of stay, type of services used, seasonality, motivations, trip organization, type of group, activities and places visited, loyalty to the destination and expenditure.
- Satisfaction, intention to recommend, and intention to repeat visit.
These are to be attained through quantitative research methods, resulting in a periodical series of statistical data to be delivered throughout the local and regional industry stakeholders’ network. Hereby it is important to note that these quantitative surveys may work as omnibus surveys, in which business owners may pay for introducing questions related to their business’ information needs.
These data is to be obtained through two different quantitative methods:
- For data on occupancy rates, occupancy satisfaction, origin of demand and length of stay, telephone based survey to the accommodation owners has to be carried out, right after every period of two weeks. This should use a sample representing 20% of the total capacity, to obtain a 98.5% of reliability. The occupancy rate is a weighted average for the number of available beds calculated from the answers of each establishment in the sample.
- For data on characteristics of demand, satisfaction and intention to recommend, an on-site survey has to be carried out either in the tourist areas or in the hotel lobbies. This is designed in many stages: firstly, areas are stratified to ensure that samples are taken from each area. Secondly, primary sample units (towns) with significant tourist accommodation capacity are selected. Then, intermediate units (establishments) are sampled randomly from clusters. Finally, individual units (tourists) are selected in a systematic random way from within each establishment.
The results may be delivered through both web-based updates every two weeks and an Annual Report to be delivered to all regional stakeholders.
Would you consider any other research objective to be monitored?
Storytelling training is the process through which stakeholders develop their storytelling skills to be fully empowered in telling stories about the destination. Creating compelling stories is an art for which special techniques need to be mastered, and special skills have to be developed.
For instance, to be compelling, the stories have to be real and driven by lesser known characters like any community member, so as to be regarded as a community symbol, a symbol of the collective power of consumers leveraged in networks in front of corporate giants. Furthermore, they should use metaphors such as balance, transformation, journey, container, connection, resource or control. Characters, plot and metaphors are the three components necessary to move people.
The destination’s communication platforms (website, Facebook page, etc.) should facilitate, encourage and reward tourists for sharing their experiences in the form of compelling stories. The Whitepaper “Marketing destinations through storytelling” is to explain all the details about this essential training process for successful storytelling.
Do you think that learning how to craft and tell a compelling story is an experience many people would like to live among the values driven individuals?
As already introduced in previous sections, the mission of destination models 3.0 is to address social and environmental challenges that concern the stakeholders. In this section we explain the positive impacts that the tourism development intends to make according to its mission. The two main types of missions are most likely to be poverty alleviation and environmental sustainability, for which we need to define the role of the destination model in addressing these challenges, the goals and the metrics to measure its success.
When focusing on poverty alleviation, this is intended to be attained through fostering entrepreneurship in the base of the pyramid (BOP), favoring local businesses as suppliers, investing in infrastructure, and providing training, coaching and micro-funding to the poorest layers of the community, empowering them to become active players within the destination model. Ultimately, their participation brings along more human capital in the creation of experiences and stories, as well as a surplus of authenticity and variety that will positively impact in the visitor’s experience and the image of the destination.
Moreover, the raise of the bottom of the pyramid in terms of disposable income is likely to create multiple opportunities for the local economy, with all the new services and products that they may afford to buy. There could be many indicators to track the evolution of poverty alleviation:
- Newly created tourism businesses in the poorer layers of the community
- Increased disposable income in the poorer layers of the community
- Newly created “non-tourism” businesses serving the poorer layers of the community
- Increased turnover of old businesses serving the poorer layers of the community
- Increased number of households with access to information technology and computer literacy
- Increased access to primary and secondary education in the poorer layers of the community
Would you consider other relevant indicators?
Even if destination models 3.0 intend to address social and environmental concerns by reducing the negative impacts that the tourism activity usually creates, it may not be possible to eliminate them completely, for it is necessary to foresee and monitor these impacts to obtain a holistic assessment on the mission accomplishment.
Furthermore, this section should also explain to what extent the destination model manages to reduce these kinds of costs in comparison to most conventional models. So long as the mission is not only to create positive impacts, but also to reduce negative impacts, it is necessary to gauge the negative impacts that the model manages to save in the social and environmental spheres.
There should be established a set of goals in relation to this intended impact reduction. For this purpose, a series of performance metrics are to be designed, along with those for measuring the positive social and environmental impacts. Once a year, a social and environmental audit should be carried out to assess the impact reduction in relation to previous years.
Some indicators on environmental negative impacts could be:
- Air pollution
- Acoustic pollution
- Forest land reduction
- River or sea water cleanliness
- Survival status of endangered species
Some indicators on economic, social or cultural negative impacts could be:
- Employment seasonality
- Employment insecurity
- Satisfaction of residents in tourist areas on the cohabitation with tourists
- Rise of the real estate prices due to the tourism activity
- Termination or offshoring of non-tourism local businesses replaced by tourism businesses
Would you consider other relevant indicators in either category?
Beyond researching the outbound markets in search for trends and opportunities, it is also necessary to keep track of the current activity within the destination, as of a continuous internal diagnosis of the local industry performance. Such monitoring system also intends to open a new communication channel with tourists, to complement the information obtained from the trade professionals in the outbound markets.
Even if the primary goals of monitoring systems are to obtain statistical data for the key performance indicators and to observe the evolution of demand characterization through quantitative methods, the new approach hereby proposed intends to expand the scope of the monitoring system to establish a closer and more personalized relationship between the destination and the tourists, especially with the ones who are more creative and socially active, matching with the profile of the Tourists 3.0.
Do you think that destinations usually obtain enough intelligence from the visiting tourists?
In Tourism 3.0, revenue streams are a result of the customer engagement in the mission accomplishment. Depending on every business model, there could be several kinds of revenue streams:
- Sales of merchandising products (through licensing designs to manufacturers)
- Service sales (accommodation, activities, food & beverage) from integrated business units
- License fees to local service providers in some cases
- Brokerage fees for the booking platform service
- Renting fees for renting premises and facilities to local service providers or partners
- Service fees to partners for training or providing technical assistance
- Asset sales (real estate investments)
- Service suppliers’ advertising in the online marketing platform (paid premium advertising space)
When providing services to the local service partners, there could be two main revenue models:
- “Service based fee” model, in which the local partner pays to the platform for the training or technical assistance services used, at an advantageous fee, leveraging the negotiation power of the platform.
- “Flat service fee” model, in which the local service partners have to pay a fix fee to the platform, allowing them to use a portfolio of services without extra charge.
In between these two opposite models, there may be many intermediate ones, in which there is a fix monthly service fee which gives right to service supplies up to a limit, from which services are payable. Further, such service fees may be subsidized by the platform -especially for the micro-entrepreneurs in the poorer layers of the community-, or to be also funded through the micro-loans. All these issues are to be discussed during the business model design phase with the local community leaders, as they are closely related to the local culture.
This section should include a diagram depicting the evolution of the revenue streams along the different stages of development, in contrast with the evolution of costs over these development stages. This diagram would visually depict whether some customer segments subsidize other segments, or some business units subsidize others, especially in the early development stages. The diagram should also include a break-even analysis to show when the platform is expected to generate profits.
Hereby it is important to remark that one of the main goals of the open innovation system –within its business model innovation section- is to create new revenue streams, increase the existing ones, and reduce costs, for this scheme may change over time, if the circumstances advise to do so.
Do you envision other sources of revenue?
As Destination models 3.0 consist of infrastructure platforms, they are rather fixed cost based, though they have some variable costs as well. As with all overhead based structures, they try to leverage the platform structure to the utmost of its potential, attracting partners that ultimately generate economies of scale and also economies of scope.
Destination models 3.0 intend to be value driven platforms, focused in providing value to its customers and partners, rather than on minimizing costs only. The value provided by the platform to its integrated businesses is based on training and facilitation to help them provide an excellent service, inspiration to develop signature experiences, funding and empowerment to start-up a business, a powerful marketing system to drive more tourist flows, and an aesthetically harmonized scenario which provides a feeling of authenticity and uniqueness to the visitor.
The main overheads of a destination platform are to be determined by the need for investments in infrastructures, facilities and urban aesthetic harmonization. These would be:
- Maintenance of the physical platform
- Staff salaries
- Fixed costs related to the integrated business units
- Investments amortization
The main variable costs of a destination platform in most cases would be:
- Marketing expenses
- Rewarding incentives for contributors to the open innovation system
- Training and coaching for employees and service supplier partners (to be internalized once the model becomes established and there is constant demand for such services)
- Debt repayment interests
- Mystery tourist services
- Subsidized capital cost in the micro-loans to the small entrepreneurs (in case there is no direct funding available from financial institutions)
- Mission driven activities powered by volunteers, to be paid for their expenses
In this section the necessary investments with their corresponding amortization periods should be estimated, along with the estimation of fixed and variable costs according to different levels of scale, foreseeing the future development of the destination model.
Would you consider any other aspect to be explained regarding the cost structure?
Especially critical in the initial development phases of the MI unit, the evaluation of the obtained results is necessary both to justify the expenses and investments as well as for the improvement process of the MI practice.
The evaluation may be carried out through a series of qualitative and quantitative indicators:
- Number of projects executed on time (Quantitative)
- User satisfaction (Qualitative & Quantitative)
- Contribution of the MI to the directors decisions (Qualitative)
- Increase of the MI queries by the directors and other users (Quantitative)
- Result of the projects (Qualitative)
- Increase in the company’s results (Quantitative)
- Profits/Expenses ratio (Quantitative)
- Reduction of the future organization costs (Quantitative)
The evaluation of the MI’s economic impact may be carried out by the following steps:
- Specification of the benefits and favorable results (p.e.: entry in a new market)
- Measurement: transformation of the intangible values of the MI and tangible representation (new tour operators programming the destination, new direct flights)
- Accounting: assigning an economic value (new revenue and profits)
Even if there may be difficulties in measuring or evaluating the MI results, not doing it may lead to perceiving the MI unit as a cost more than a profitable practice.
Would you consider any other KPI when assessing MI results?