M Fabricius 3. Assessing Destination Competitiveness World Tourism Organization Manila, 20 – 22...

M Fabricius

3. Assessing Destination Competitiveness

World Tourism Organization Manila, 20 – 22 March 2006

M Fabricius

A FRAMEWORK FOR DESTINATION STRATEGY

Destination competitiveness

Demand/customer patterns and segments

Resources

Supportive industries

Industry structure

& rivalry

Co

mp

etitor p

erform

ance

Key success factors & capabili-

ties

Vision, goals,

objectives and core

strategiesPositio-ning and branding strategy

Target market

strategy

Target Market

Product Place

Price Promotion

Institu

tion

al Man

agem

ent an

d

Mo

nito

ring

Macro environment: Technological Economic Political Socio-cultural Natural

THE STRATEGY PROCESS

Where are we and how well do we compare?

Where would we like to be? How do we get there?

Who are our clients and what are their preferences?

What do we need to do well to comply to their needs?

What should we develop and sell to them, at what price, how and through what mechanisms?

What core image do we wish to project to them?

How do we ensure and measure success?

What are our dreams, goals to achieve and direction?

Stay ahead?

Integrated Implementation Framewor

k

Development programmesSpatial tourism Development plan ProjectsAttractions HR/awarenessInfrastructureSMME /entrepreneurshipSafety

Marketing programmes

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THE IMPORTANCE OF ENVIRONMENTAL ADAPTATION

THE IMPORTANCE OF ENVIRONMENTAL ADAPTATION

ASSESSING THE COMPETITIVE ENVIRONMENT

• 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

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THE MACRO ENVIRONMENTTHE MACRO ENVIRONMENT

THE INDUSTRY ENVIRONMENT

•Suppliers

•Competitors

•Customers

The National/ International

Economy

Technology

Government

The Natural Environment

Demographic Structure

Social Structure

ASSESSING THE MACRO COMPETITIVE ENVIRONMENT

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THE ECONOMIC ENVIRONMENTTHE ECONOMIC ENVIRONMENT

• Exchange rates• Interest rates• Economic stability • Inflation • Fuel prices• Aviation costs • Privatisation• Currency re-evaluations


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THE SOCIO-CULTURAL ENVIRONMENTTHE SOCIO-CULTURAL ENVIRONMENT

• 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


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THE POLITICAL ENVIRONMENTTHE POLITICAL ENVIRONMENT

• 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)


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THE TECHNOLOGICAL ENVIRONMENT THE TECHNOLOGICAL ENVIRONMENT

• Global distribution systems • Internet and CD Rom marketing• Transport innovations• Virtual reality• Video and teleconferencing


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THE ECOLOGICAL ENVIRONMENTTHE ECOLOGICAL ENVIRONMENT

• 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


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MACRO ENVIRONMENT – IMPACTS ON STRATEGYMACRO 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: molding strategy to capitalize 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)


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IDENTIFYING COMPETITORSIDENTIFYING 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.

ASSESSING THE INDUSTRY COMPETITIVE ENVIRONMENT

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ANALYSING INDUSTRY COMPETITIONANALYSING INDUSTRY COMPETITION

SUPPLIERS

POTENTIAL ENTRANTS

BUYERS

SUBSTITUTES

INDUSTRY RIVALRY

RIVALRY AMONG EXISITING FIRMS

Threat of new entrants

Threat of substitute products and services

Bargaining power of buyers

Bargaining power of suppliers


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ANALYSING INDUSTRY COMPETITIONANALYSING INDUSTRY COMPETITION

SUPPLIER POWER

Factors determining power of suppliers relative to producers same as those determining power of

producers relative to buyers

BUYER POWER

Price Sensitivity Bargaining Power

Cost of product relative Size, concentration of

to total cost buyers vs suppliers

Product differentiation Switching costs

Competition among buyers Buyers information

THREAT OF SUBSTITUTES

Buyer propensity to substitute

Relative price performance of substitutes

INDUSTRY RIVALRY

Concentration

Diversity of competitors

Product differentiation

Excess capacity & exit barriers

Cost conditions

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


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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


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A FRAMEWORK FOR DESTINATION STRATEGY

Destination competitiveness

Demand/customer patterns and segments

Resources

Supportive industries

Industry structure

& rivalry

Co

mp

etitor p

erform

ance

Key success factors & capabili-

ties

Vision, goals,

objectives and core

strategiesPositio-ning and branding strategy

Target market

strategy

Target Market

Product Place

Price Promotion

Institu

tion

al Man

agem

ent

and

Mo

nito

ring

Macro environment: Technological Economic Political Socio-cultural Natural

ASSESSING DESTINATION POTENTIAL

Where are we and how well do we compare?

Where would we like to be? How do we get there?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?

What core image do we wish to project to them?

How do we ensure and measure success?

What are our dreams, goals to achieve and direction?

Stay ahead?

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FACTOR CONDITION

S

Our resources

FACTOR CONDITION

S

Our resources

STRATEGY, STRUCTUR

E & RIVALRY

Our industry

STRATEGY, STRUCTUR

E & RIVALRY

Our industry

DEMAND CONDI-TIONS

Our markets

DEMAND CONDI-TIONS

Our markets

RELATED & SUPPORTIN

G INDUSTRIES

Our allies

RELATED & SUPPORTIN

G INDUSTRIES

Our allies

MACRO ENVIRONMENT


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DESTINATION RESOURCESDESTINATION RESOURCES

RESOURCES

TANGIBLE INTANGIBLE HUMAN

Physical Financial Technology Reputation Culture Skills/ Communi- Motiva- Knowledge cation tion

DESTINATION CAPABILITIES

STRATEGY

KEY SUCCESS FACTORSCOMPETITIVE

ADVANTAGE


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RESOURCE STRENGTHS AND WEAKNESSES

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,


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PromotionPromotionReal Estate

Construction

PromotionPromotionInsuranceLegal

Medical

IT ServicesSecurity

PromotionPromotion

PromotionPromotion

PromotionPromotion

PromotionPromotion

PromotionPromotion

PromotionPromotion

Promotion

TrainingCentres

Transportation

Support Industries

Infrastructure

Food Service

Accommodation

HotelsHostels

Campsites

AirlinesRailway Co.

Buses

AirportsRoads

Telecom

BankingLaundry

Outfitting

Hotel Mgm’tGuideCustomer Service

Tour OperatorsTravel Agents

Government

Car Rental Taxis

Rail

Restaurants

BarsCatering

INDIVIDUALSINDIVIDUALSFAMILIESFAMILIES

TOUR GROUPSTOUR GROUPSSTUDY GROUPSSTUDY GROUPSSPORT TEAMSSPORT TEAMS

PATIENTSPATIENTSDELEGATIONSDELEGATIONSPOLITICIANSPOLITICIANS

BUSINESS PEOPLEBUSINESS PEOPLE

BusinessActivities

LeisureAttractions

HistoricalPlaces

Sight Seeing

Holiday Resorts

Cultural Offer

Action HolidayFacilities

Game Parks

Sport Facilities

Shopping

Public Events

Political Events

Business

Congresses

Study

RELATED INDUSTRIES: THE DESTINATION CLUSTER


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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


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INTER-INDUSTRY STRUCTURE, STRATEGY AND RIVALRY

INTER-INDUSTRY STRUCTURE, STRATEGY AND RIVALRY

•Institutional “thickness”

•Price competitiveness

•Diversity of facilities and services

•Quality and standards

•Competitive maturity

•Technological astuteness, etc.


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STRENGTHS

World class attractions

Established tourism economy

High repeat rate

Good infrastructure

World city brand

Value for money

WEAKNESSES

Limited direct air capacity

Limited business tourism mix

Seasonal pattern

Distance factor

Non-representative industry

Brand/budget fragmentation

OPPORTUNITIES

Events development

Conference/business market

Single stop relaxation destination

More direct airline entry

Product growth opportunities

THREATS

Direct flights reducing

Expensive perception

Crime/violence perception

Benefits don’t filter to grass roots

Budget restriction

Continued brand fragmentation

EXAMPLE: SWOT ANALYSIS


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THE COMPETITIVE CONTEXT

WHERE ARE YOU IN THE DESTINATION LYFE CYCLE?WHERE ARE YOU IN THE DESTINATION LYFE CYCLE?

Nu

mb

er

of

To

uri

sts

Involvement

Exploration

Development

Critical stages of capacity management and major rivalry Consolidation

Stagnation

Rejuvenation

Decline

Time

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YOUR ASSIGNMENT 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

ASSESSING DESTINATION COMPETITIVENESS

M Fabricius

Time out !!

ASSESSING DESTINATION COMPETITIVENESS

M Fabricius 3. Assessing Destination Competitiveness World Tourism Organization Manila, 20 – 22...

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