Tag: triple bottomed line business models

Collaborative business modelsStrategyStrategy planning & executionSustainability

The destination model as a key factor for competitiveness and sustainability

The competitiveness of a tourism destination is not just a matter of tourism operators’ performance. Instead, the potential of a destination for competing in the travel market is determined from the top government policies regarding urban planning, public services, territory planning –protecting natural interest areas-, and tourism development planning, determining tourism related regulations, license policies, investments in facilities and infrastructures and also cross-destination marketing planning and execution.

So long as the tourism activity affects not only the tourism operators, but also the residents’ lives, other business sectors and the image of the territory, it is necessary to elaborate a thorough model attending to the needs and aspirations of all stakeholders. The complexity and challenge of tourism development planning is namely in the need for reaching a balance point, considering all the stakeholders’ interests.

A destination model is to provide answers to three main questions:

  • What can we do to develop tourism in the destination?
  • How can we do it?
  • What vision do we want to strive for?

Finding answers to these questions means choosing among different alternatives related to the tourism to be developed: the development pace, intensity, the limitations to the business growth, etc. Furthermore, a development model works like a guide and reference framework for the activities of both public and private agents, and to articulate cooperation between different public bodies and between public and private ones.

Other advantages and benefits of defining a destination development model are:

  • The territorial structure –cluster definition- of the tourism development is clearly defined.
  • The destination takes advantage of the market opportunities more effectively.
  • The destination’s resources and attractions are leveraged more adequately.
  • Government leaders and local operators have a reference framework to orient their strategy.
  • The need for infrastructures, facilities, financial, technological and human resources are clearly defined according to established goals.
  • Investors have a reference framework that provides them with valuable orientation.
  • Resources are assigned more rationally, effectively and profitably.
  • The tourism management has a reference framework to orient the decision making.
  • The reaction versus certain changes in the market is faster and more effective.

Once the model is defined, if this is brought into practice, there are even more benefits:

  • The destination creates and develops solid and sustainable competitive advantages.
  • The destination positioning and image is stronger.
  • The tourism businesses operating in the destination are more profitable and increase revenue
  • The service quality and tourists’ satisfaction increases.
  • The destination inhabitants perceive the positive impact of the tourism activity more clearly.
  • All stakeholders have more confidence in the future of the destination.

Do you think of other benefits of defining the destination development model?

Marketing 3.0Strategy planning & executionSustainabilityTourism marketing

The Marketing Plan 3.0: Building the vision and the mission

If the Marketing Audit depicts the portrait of the destination’s present situation, the Vision depicts the portrait of what the destination is to become upon accomplishment of the Mission, and the Mission is the ultimate reason for the destination development. To define the Vision, Mission and goals, it is convenient to engage stakeholders through the following steps:

  • Community leaders’ mobilization. The first step is to create awareness of the need for a new destination marketing model, to boost the tourism business in favor of the community in order to address critical issues and concerns, namely poverty and the environment. Community leaders are the first to participate in the discussion as they should also be the first to be engaged with the new marketing system, though in the following phases other community members should also be consulted. These have to be defined:
  • Current and future challenges affecting the local communities to be addressed
  • Specific constituents of these challenges, namely those at the bottom of the pyramid
  • Other concerns related to environmental and cultural issues
  • Voting proposal and opening participation. Once the community leaders agree upon a mission proposal addressing the critical issues they consider as priorities, this should be voted upon by all interested community members, who could also bring up their ideas.
  • Refining and approving mission. In accordance with the votes and suggestions, the mission proposal may be refined and approved without voting if there is consensus.
  • Tourism experience value proposition. Then, there should be the drafting of the part of the mission statement related to the tourism experience value proposition, which is associated with the socio-cultural transformation connected to the life-changing experiences. This step also requires the participation of industry leaders, influencers and stakeholders in general, who are to become key brand ambassadors for the destination’s development. This part of the mission statement intends only to orientate and inspire the life-changing experiences of the product developers, and so does not need the approval of the whole community, though their contribution should be encouraged.

It is necessary to highlight the importance of engaging as many industry leaders, influencers and creative activists as possible from the outset, as long as the new destination marketing development needs to leverage their influential power, especially at the beginning.

Therefore, by engaging them from the outset and giving them the chance to bring in their ideas, and showing them somehow that their contribution has been incorporated into the mission guidelines, they will feel as if they are co-creators of the new project and will establish an emotional connection with the destination, which in turn encourages them to keep on contributing, so long as they are willing to tell a story of success in which they took part. Such engagement should be maintained by inviting them to participate in regular meetings to track the evolution of the destination development and mission accomplishment.

Would you consider any other step in building the vision and the mission statement?

Business model innovationCollaborative business modelsInnovationStrategySustainability

Destination Models 3.0: Comparative performance between different destination models

To better realize how destination models 3.0 outperform other models in creating value, reducing efforts and marketing efficiently, hereby are compared three destination models:

Cultural destinations: based on cultural or natural resources with several business owners operating independently. In some cases these cooperate in partnership with the government for marketing the destination.

Resort destinations: based usually on natural resources with one owner operating or controlling all business units providing service in the destination, being also responsible for the marketing. All business units are therefore integrated within the resort.

Destinations 3.0: based on either cultural or natural resources with business units belonging to many owners, and operators cooperating with different levels of integration on the management and marketing of the destination.

COMPETITIVENESS & MARKETING: KEY DIFFERENCES BETWEEN THE THREE DESTINATION MODELS

  CULTURAL DESTINATIONS RESORT DESTINATIONS DESTINATIONS 3.0
VALUE PROVIDED
Experiences Typically local cultural experiences

Based upon cultural & natural resources, and locals creativity

Standardized experiences

Based on standard products, natural and artificial resources

Life-changing, personalized and imaginative experiences

Based on stakeholders co-creation

Feelings Cultural character and authenticity with heritage protection and hospitality programs Lack of character and authenticity (replicated facility style)

 

Enhanced authenticity through urban aesthetic harmony and locals’ inclusiveness as experience suppliers
Service quality control Some service suppliers have Quality certifications

Ratings for restaurants and accommodations

Comprehensive service quality control

Ratings for accommodation service

Comprehensive and incentivized service quality control
EFFORTS REQUIRED
Discomforts Dependent upon every service supplier and local service standards Fully specified comfort standards, adapted to the needs of tourists Only discomforts associated to cultural environment
Insecurities & risks Dependent upon government regulations and control Full information and safety controls on critical issues Full information.

Safety dependent upon government regulations

MARKETING
Needs satisfied Functional and emotional Mostly functional, but also emotional Functional, emotional and spiritual
Target tourists All kinds of tourists Limited segments All kinds of tourists, but primarily tourists 3.0
Marketing guidelines Differentiation Differentiation or price Mission, vision & values
Tourist relationships Sales transactions and satisfaction monitoring Sales transactions and satisfaction monitoring Experience co-creation, storytelling through communities
Marketing channels TTOO, TTAA and direct sales TTOO, TTAA and direct sales Mission driven agents, communities
COMMUNITY IMPACT Economic prosperity concentrated in local business owners Economic prosperity concentrated in the resort owners Poverty alleviation, socio-cultural change, environment protection
MAIN CHALLENGES Harmonize experience system and quality standards Develop unique experiences to compete upon differentiation Integrate and associate stakeholders

Foster culture change

Would you consider other destination models to compare performance? And other relevant points to be compared?

Business model innovationCollaborative business modelsCulture changeMarketing 3.0Strategy

Destination Models 3.0: Integrating partners (V)

Selling the vision to investors

In many cases the tourism development will require not only to integrate businesses, land and facilities’ owners, but also to invest in developing new infrastructure or renovating heritage and urban aesthetics, for it may be necessary to attract investors beyond the local players. In this regard, the local government should play a decisive role in supporting the development of the destination model, at least in the early stages and until the model is consolidated and profitable. Such support could consist on assuming many investments and integrating within the platform as a stable shareholder, or taking the role of platform’s guarantor to external shareholders and financial institutions.

As destination models 3.0 are mission driven models whose value is ultimately derived from the impact they make on the society and its environment, they require investors who share the same vision and so agree upon prioritizing the long-term profits over the short-term. Shareholders have to assume that the success of their investment will only come as a result of being faithful to the values and the mission, to obtain the engagement of all stakeholders.

Fortunately, there is already a growing concern among investors about sustainability, considering the long-term policies that guarantee the preservation of the environment and social cohesion as key sources of competitive advantage that manage to set destinations apart from their competitors.

Needless to say that many investors are not likely to share this vision or be willing to support the project over a long period of time, for which it would be convenient to create a two-tier shareholding structure whereby long-term shareholders would be given more power than the short-term oriented ones when deciding the corporate strategic direction, to help the long-term oriented votes clearly outweigh the short-term oriented ones.

However, investors want to assess the long-term benefits of sustainability –namely profitability and returnability- through metrics that quantify them financially. In his book “Marketing 3.0”, Philip Kotler suggests three metrics:

  • Improved cost productivity is mainly attained through the lower marketing costs of the experience and story generation & distribution system through the social networks, compared to conventional product development and marketing campaigns. Further, mission driven businesses obtain higher engagement from their employees and partners, which ultimately boost their productivity.
  • Higher revenue from new market opportunities, due to the higher market penetration that mission driven businesses tend to achieve, as they touch not only people’s minds and hearts, but also their human spirit. Further, the government is also more likely to support businesses that intend to address some of the local challenges and improve people’s lives.
  • Higher corporate brand value is the long-term result of sticking to the brand values, pursuing the mission and successfully generating compelling stories which are extensively distributed.

To foster long-term focused shareholding, the destination model should encourage somehow all stakeholders to become shareholders, especially those located in the destination’s community. As mentioned before, the government should also play a key role, at least in the early stages of development, as a key support benefiting the long-term welfare of the community.

Would you consider other strategies when selling the vision to investors?

Business model innovationCollaborative business modelsCollaborative cultureSustainabilityThird sector and social sustainability

Destination Models 3.0: Integrating partners (IV)

Selling the vision to community stakeholders

The challenge of integrating all the community of stakeholders requires its own marketing plan, usually known as internal marketing plan. This plan should encompass the target stakeholders to attract in every phase, the integration formulas, and the communication strategies and actions to achieve these goals. Since the beginning when presenting the first model prototypes to pre-test and design the integration formulas and when eventually marketing the destination model to engage the community stakeholders, it will be necessary to explain them the model vision in a compelling way that connects first with their emotions and human spirit, and ultimately opening their want for a deeper understanding of the destination model rationale.

Stories are the best way to help people imagine how the new model is likely to improve their current status quo, how it creates value and therefore improves the community’s life quality. Stories convey the new model ideas to the people’s minds describing them in a way that overcomes resistance, the most likely reaction to new model propositions challenging the status quo. By capturing people’s attention and curiosity, compelling stories are to pave the way for an in-depth presentation and further discussion about the new destination model, to eventually make the potential stakeholders understand the implications that the new model would have for them: costs, obligations, efforts, and benefits for the individuals and the destination as a whole.

To better convey the idea about how the new model would operate for the local stakeholders, it is convenient to use one main character similar to the audience profiles (service suppliers) to be the protagonist. Such character should have similar problems, needs, concerns, fears and aspirations as most local potential stakeholders, so to make them feel identified with him and connect with the story. Then, the story shows the character finding out how the new model addresses all these needs and concerns, so to help the audience visualize the answers to their questions and fully understand the operation of the model.

Furthermore, it is convenient to provide potential stakeholders with an interactive tool where to “play” with the model simulating how it would be to become an integrated partner within the new platform. So long as the model system is complex, such tool is crucial to help potential partners understand and envision their possible fit. This should be complemented with workshops where platform representatives would attend community stakeholders’ queries.

Such destination’s vision is not only necessary to convince the community members to integrate, but also a guiding force that constantly aligns everyone’s efforts on their contribution to expand the destination mode to the utmost of its potential and to accomplish the mission.

In this stage, when defining the model to be deployed throughout the destination, one of the key points is to decide upon harmonizing the urban aesthetics style to be deployed throughout the destination. This should be quite flexible and should be voted by locals.

Would you consider other strategies when selling the vision to the community stakeholders?

Business model innovationCollaborative business modelsEnvironmental sustainability

Destination Models 3.0: Environmental benefits

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?

Business model innovationCollaborative business modelsSustainabilityThird sector and social sustainability

Destination Models 3.0: Social benefits

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?

Business model innovationCollaborative business modelsEnvironmental sustainabilitySustainabilityThird sector and social sustainability

Destination Models 3.0: Social & environmental costs

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?

Business model innovationCollaborative business models

Destination Models 3.0: Cost structure

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?

 

 

 

Business model innovationCollaborative business modelsCollaborative cultureCulture changeEnvironmental sustainability

Destination Marketing 3.0: Internal marketing strategy

It is necessary to market the vision, mission and values to employees and partners, as they have to become engaged to act as brand ambassadors in the social networks. This starts by executives performing an adequate leadership style according to the stated values. Only by delivering a value-driven leadership experience through everyday behavior will the executives manage to engage employees and partners in the mission and values they preach. The leader’s role here is rather to inspire and empower employees to develop their ideas towards the mission accomplishment.

Furthermore, so long as these values are successfully embedded in the corporate culture, these employees and partners in turn will be brand ambassadors inspiring and engaging other people in a life-changing experience. Such values ultimately deliver several pay-offs, like an increased capacity to attract talented employees, boosting productivity, and eventually improving customer satisfaction and recommendation.

Talented professionals look for employers empowering them to be creative, enabling them to develop their human potential. Furthermore, they are to be far more productive if they sympathize and believe in the mission that the organization is striving for. Outside stakeholders assess the organization’s authenticity according to the experience they have with their employees and closest partners.

Such cultural change may require important sacrifice, as it is necessary to stand by these values even if it hurts the business. Only then, when witnessing the employer’s integrity, will the employees engage in full commitment. Furthermore, such cultural issues are to be regarded when recruiting new employees and selecting partners, to make sure that they are likely to integrate within such culture.

Among the values to be promoted internally, it is important to regard the importance of innovation and collaboration beyond the organization’s boundaries as the main values that make a difference in sustaining the competitiveness and marketing the destination to outperform competitors.

Internal marketing should go beyond employees and service partners, also encompassing other partners such as non-profit organizations with whom the destination may cooperate for the development of mission-driven volunteering programs. These are to become key agents in both the mission accomplishment and the delivery of stories, as they hold reputation among communities of volunteers who may become mission-driven activists and brand ambassadors at the same time. Other partners in this section could be educational institutions, which may nurture the destination with storytellers and content marketing providers, as the mission driven purpose may inspire some educational activities in this direction.

Internal marketing is to be especially critical when the shift towards Marketing 3.0 is promoted by the DMO, as they need the commitment of all the destination’s operators.

In the case of the resorts, a specific internal marketing program has to be prepared for shareholders, to convince them on the new marketing strategy focused on the mission accomplishment and the long term profits rather than short-term. As the new marketing approach entails reformulating the business model to some extent, it is necessary to gain their approval to do so.

What kind of challenges do you envision when deploying Internal Marketing by a DMO in cooperation with the destination’s operators?