3. Assessing Destination Competitiveness

1. 3. Assessing Destination Competitiveness World Tourism Organization Manila, 20 – 22 March 2006

2. THE STRATEGY PROCESS A FRAMEWORK FOR DESTINATION STRATEGY Where are we and how well do we compare? Where would we like to be? How do we get there? Stay ahead? What should we develop and sell to them, at what price, how and through what mechanisms? Who are our clients and what are their preferences? What do we need to do well to comply to their needs? What are our dreams, goals to achieve and direction? How do we ensure and measure success? Destination competitiveness Demand/customer patterns and segments Resources Supportive industries Industry structure & rivalry • Development programmes • Spatial tourism Development plan • Projects • Attractions • HR/awareness • Infrastructure • SMME /entrepreneurship • Safety Target market strategy Vision, goals, objectives and core strategies Key success factors & capabili-ties Competitor performance Integrated Implementation Framework Positio-ning and branding strategy Institutional Management and Monitoring Marketing programmes Product Place Target Market What core image do we wish to project to them? Price Promotion Macro environment: Technological Economic Political Socio-cultural Natural

3. THERE ARE TWO REALITIES The environment is changing at an escalating rate. This change is largely outside the control of the destination marketer The KEY CHALLENGE IS TO SCAN AND RESPOND What are the trends, possible implications and what can the response be? THE ENVIRONMENT NEEDS TO BE EVALUATED AT THE MACRO AND INDUSTRY LEVELS ASSESSING THE COMPETITIVE ENVIRONMENT THE IMPORTANCE OF ENVIRONMENTAL ADAPTATION

4. ASSESSING THE MACRO COMPETITIVE ENVIRONMENT THE MACRO ENVIRONMENT The National/ International Economy The Natural Environment THE INDUSTRY ENVIRONMENT • Suppliers Demographic Structure Technology • Competitors • Customers Government Social Structure

5. Exchange rates Interest rates Economic stability Inflation Fuel prices Aviation costs Privatisation Currency re-evaluations ASSESSING THE MACRO COMPETITIVE ENVIRONMENT THE ECONOMIC ENVIRONMENT

6. Population trends (e.g. aging) Lifestyle and value trends New tastes and social trends Leisure orientation rather than work Sport, health and fitness orientation Emergence of global village Increasing impact of the media Quality of life focus ASSESSING THE MACRO COMPETITIVE ENVIRONMENT THE SOCIO-CULTURAL ENVIRONMENT

7. Global/regional conflicts (e.g. Post 9/11) Boycotts/sanctions Regional relations Changes in power structures Occurrence of extreme events (e.g. terrorist attacks) Legal restrictions Positive political developments (e.g. South Africa and the Berlin Wall) ASSESSING THE MACRO COMPETITIVE ENVIRONMENT THE POLITICAL ENVIRONMENT

8. Global distribution systems Internet and CD Rom marketing Transport innovations Virtual reality Video and teleconferencing ASSESSING THE MACRO COMPETITIVE ENVIRONMENT THE TECHNOLOGICAL ENVIRONMENT

9. Tourism impacts on and is increasingly being impacted by the environment Increasing strain on the environment in popular destinations Greater awareness of and concern for responsible management of the environment Responsible travel (triple bottom line) Species awareness Increasingly destinations will be confronted with issues such as value, sustainability and ethics ASSESSING THE MACRO COMPETITIVE ENVIRONMENT THE ECOLOGICAL ENVIRONMENT

10. ASSESSING THE MACRO COMPETITIVE ENVIRONMENT MACRO ENVIRONMENT – IMPACTS ON STRATEGY • Destination positioning: Taking a short, medium & long term view on where and how to position the destination in the face of macro trends (e.g. currency gains, global conflicts, etc.) • Timing: moldingstrategy tocapitalize on immediate environmental opportunities, riding out or counteracting threats, when and what to communicate, etc. (e.g. safety incidents) • Tactics: shifting the marketing plan – target markets, promotional spend, distribution channels, product highlights to best capitalize on/counteract macro movements (e.g. global warfare) • Internal marketing: working with government and business community to soften, counteract or capitalize on macro environment (e.g. regional events)

11. ASSESSING THE INDUSTRY COMPETITIVE ENVIRONMENT IDENTIFYING COMPETITORS • Comparing apples with apples – benchmarking the most relevant destinations • Competitors in • International • Long haul markets • Short haul markets • Local (domestic market) • Type of product • Main tourism seasons • Size of tourism industry and level of development • Competitors and Complementors.

12. ASSESSING THE INDUSTRY COMPETITIVE ENVIRONMENT ANALYSING INDUSTRY COMPETITION SUPPLIERS Bargaining power of suppliers INDUSTRY RIVALRY RIVALRY AMONG EXISITING FIRMS POTENTIAL ENTRANTS Threat of substitute products and services Threat of new entrants SUBSTITUTES Bargaining power of buyers BUYERS

13. ASSESSING THE INDUSTRY COMPETITIVE ENVIRONMENT ANALYSING INDUSTRY COMPETITION SUPPLIER POWER Factors determining power of suppliers relative to producers same as those determining power of producers relative to buyers THREAT OF ENTRY Economies of scale Absolute cost advantages Capital requirements Product differentiation Access to distribution channels Governmental and legal barriers Retaliation by established producers INDUSTRY RIVALRY Concentration Diversity of competitors Product differentiation Excess capacity & exit barriers Cost conditions THREAT OF SUBSTITUTES Buyer propensity to substitute Relative price performance of substitutes BUYER POWER Price SensitivityBargaining Power Cost of product relative Size, concentration of to total cost buyers vs suppliers Product differentiation Switching costs Competition among buyers Buyers information

14. ASSESSING THE INDUSTRY COMPETITIVE ENVIRONMENT STRATEGY, STRUCTURE & RIVALRY • Current competitors: who are they, their resources, cost structures, positioning strategies • Power of suppliers and buyers: influence on destination competitiveness (e.g. cost structures, quality, diversity and innovation) of major hotel groups, airlines, tour operators, internet services • New entrants and substitutes: emerging destinations and products on offer, cost and quality comparison with ourselves, options to differentiate • Complementors: regional and local joint marketing agreements with other destinations, economic sectors and suppliers so as to expand the length and depth of our product

15. ASSESSING DESTINATION POTENTIAL A FRAMEWORK FOR DESTINATION STRATEGY Where are we and how well do we compare? Where would we like to be? How do we get there? Stay ahead? What are our dreams, goals to achieve and direction? Who are our clients and what are their preferences? What do we need to do well to comply to their needs? What should we sell to them, at what price, how and through what mechanisms? How do we ensure and measure success? Destination competitiveness Demand/customer patterns and segments Resources Supportive industries Industry structure & rivalry Target market strategy Vision, goals, objectives and core strategies Key success factors & capabili-ties Product Place Institutional Management and Monitoring Target Market Competitor performance Positio-ning and branding strategy Price Promotion What core image do we wish to project to them? Macro environment: Technological Economic Political Socio-cultural Natural

16. ASSESSING DESTINATION POTENTIAL FACTOR CONDITIONS Our resources MACRO ENVIRONMENT DEMAND CONDI-TIONS Our markets RELATED & SUPPORTING INDUSTRIES Our allies STRATEGY, STRUCTURE & RIVALRY Our industry

17. ASSESSING DESTINATION POTENTIAL

18. ASSESSING DESTINATION POTENTIAL DESTINATION RESOURCES KEY SUCCESS FACTORS COMPETITIVE ADVANTAGE STRATEGY DESTINATION CAPABILITIES RESOURCES TANGIBLE INTANGIBLE HUMAN Physical Financial Technology Reputation Culture Skills/ Communi- Motiva- Knowledge cation tion

19. ASSESSING DESTINATION POTENTIAL RESOURCE STRENGTHS AND WEAKNESSES • Tangible resources • Unique natural, cultural and man made attractions, activities and facilities • Quality of hospitality, meeting, transport, catering services, etc. • Intangible resources • Reputation: safety, value for money, lifestyle appeal, culture of excellence • Brand appeal: values, emotional appeal, cultural appeal, innovation • Technological advancement • Human resources • Levels of service skills and customer knowledge • Communication and interaction abilities – language, cultural interaction, etc. • Extent of entrepreneurship, innovation, passion,

20. Leisure Attractions Holiday Accommodation Transportation Resorts Infrastructure Historical Hotels Airlines Promotion Places Airports Promotion Hostels Railway Co. Promotion Roads Promotion Campsites Sight Seeing Buses Telecom Car Rental Rail Action Holiday Taxis Security Facilities INDIVIDUALS INDIVIDUALS IT Services FAMILIES FAMILIES Game Parks TOUR GROUPS TOUR GROUPS STUDY GROUPS Cultural Offer STUDY GROUPS SPORT TEAMS SPORT TEAMS Promotion PATIENTS PATIENTS Sport Facilities DELEGATIONS DELEGATIONS Tour Operators Promotion POLITICIANS POLITICIANS Shopping Promotion Travel Agents BUSINESS PEOPLE BUSINESS PEOPLE Government Public Events Support Training Food Service Business Industries Centres Activities Business Banking Restaurants Hotel Mgm’t Promotion Promotion Promotion Laundry Catering Promotion Guide Promotion Promotion Study Outfitting Customer Service Bars Insurance Promotion Legal Congresses Promotion Promotion Medical Real Estate Promotion Political Events Construction ASSESSING DESTINATION POTENTIAL RELATED INDUSTRIES: THE DESTINATION CLUSTER

21. ASSESSING DESTINATION POTENTIAL DEMAND CONDITIONS: MONITOR THE MARKETPLACE • Markets of origin: • Profile - who, how many, from where, how, when, how long • Potential – current performance, expansion potential, emerging markets, future opportunities • Yield: length of stay, local spend, return visitation • Local (domestic) market performance • Trends: global movements, demand consistency, seasonal variations, price sensitivity, sales and reservation channels, market preferences,etc. • Gaps: where/when/in which segments do we not get our rightful share and what are the reasons • Impacts: job creation, investment, aviation, environment, social, etc. • Often too little investment in market analysis, forecasting & segmentation

22. ASSESSING DESTINATION POTENTIAL INTER-INDUSTRY STRUCTURE, STRATEGY AND RIVALRY • Institutional “thickness” • Price competitiveness • Diversity of facilities and services • Quality and standards • Competitive maturity • Technological astuteness, etc.

23. ASSESSING DESTINATION POTENTIAL EXAMPLE: SWOT ANALYSIS

24. THE COMPETITIVE CONTEXT WHERE ARE YOU IN THE DESTINATION LYFE CYCLE? Rejuvenation Stagnation Critical stages of capacity management and major rivalry Consolidation Number of Tourists Decline Development Involvement Exploration Time

25. ASSESSING DESTINATION COMPETITIVENESS YOUR ASSIGNMENT • Identify your 3 main competitors in the international market • Use the diamond framework to conduct a SWOT analysis and highlight maximum three (3) most important • Macro environmental issues, • Destination levers (Strengths, Weaknesses, Opportunities and Threats) • Facing your destination

26. ASSESSING DESTINATION COMPETITIVENESS Time out !!