Professor Jim Deegan Director National Centre for Tourism ... · PDF fileAll Facets Of The...

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Disruptive Change in The Tourism Marketplace: Opportunities and Challenges For Business And Tourism Policy 7 th Annual Tourism Policy Workshop Dromoland Castle November 16 th to 18 th 2016 Professor Jim Deegan Director National Centre for Tourism Policy Studies Department of Economics Kemmy Business School University of Limerick

Transcript of Professor Jim Deegan Director National Centre for Tourism ... · PDF fileAll Facets Of The...

Page 1: Professor Jim Deegan Director National Centre for Tourism ... · PDF fileAll Facets Of The Tourism Product and Service ... innovation has on all aspects of the tourism consumer journey

Disruptive Change in The Tourism Marketplace: Opportunities and Challenges For Business And Tourism Policy

7th Annual Tourism Policy Workshop

Dromoland Castle November 16th to 18th

2016

Professor Jim Deegan

Director

National Centre for Tourism Policy Studies

Department of Economics

Kemmy Business School

University of Limerick

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Some Context: A Time of Economic and Political Uncertainty

• 1.Brexit

• 2. The result of the US Election and

• 3. Seismic changes in ICT and Artificial Intelligence

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We Must Not Forget the Lessons We Have Learned If Tourism Is To Prosper Going Forward

• 1. Competitiveness really matters

• 2. Access Transport To And Within Ireland Really

Matters and

• 3. All Facets Of The Tourism Product and Service Delivery Must be better than our competitors if we are to prosper.

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Annual Percentage (%) Change in Overseas Visitors:

Ireland Does Not Do Normal Growth Rates in Tourism

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

11.5 15.6 15.6 10.4 -1.5 4.0 5.5 9.0 15.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

10.7 6.9 10.5 7.4 4.0 -5.5 1.4 4.4 3.3 5.9

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

9.7 4.3 -3.9 -11.5 -9.6 5.0 0.8 6.3

9.5 13

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A Brief Overview Of Performance and What We Can Learn

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Overseas Tourism Arrivals and Market Share 1970-2015 in Ireland

1970 1980 1985 1990 1995 2000 2007 2010 2014 2015

Total

Overseas

Arrivals

1.45m 1.73m 1.95m 3.09m 4.23m 6.18m 7.73m 5.94m 7.1m 8.03m

British %

Number(m)

73

1.06

62

1.06

58

1.12

58

1.78

54

2.28

56

3.43

49

3.78

46

2.76

42

3.0

42

3.34

North

American%

Number(m)

18

.258

15

.260

22

.423

14

.443

15

.641

17

1.05

14

1.07

15

.864

16

.940

16

1.04

Mainland

Europe%

Number(m)

7

.110

19

.336

17

.336

24

.744

26

1.1

23

1.43

33

2.57

34

2.0

35

2.49

36

2.88

Other

Overseas%

Number(m)

2

.03

4

.067

3

.069

4

.124

5

.204

4

.261

4

.316

5

.311

7

.462

6

.516

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OVERSEAS TOURISM MARKET REVENUE SHARE 1970-2015 IN IRELAND

1970 1980 1985 1990 1995 2000 2007 2010 2014 2015

Total

Overseas

Revenue

(€bn)

2.68

(€bn)

3.95

(€bn)

2.99

(€bn)

3.59

(€bn)

4.27

British %

Number(m)

55 49 38 42 39 40 35 29 26 24

North

American%

Number(m)

33 22 38 21 21 26 21 23 26 28

Mainland

Europe%

Number(m)

9 23 19 31 32 27 36 38 36 36

Other

Overseas%

Number(m)

3

6

5

6

8

7

8

10

12

12

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Overseas Tourism Revenue 201-2015 By Regions: Percentage Share

2010 2011 2012 2013 2014 2015

Dublin 39 38 43 42 38 40

Midlands East 10 8 7 9 8 8

South East 6 6 8 6 6 6

SouthWest 19 20 19 19 22 19

Shannon 8 9 8 8 9 9

West 13 14 11 11 12 13

North West 5 5 4 5 5 5

Overseas Visitor

Revenue(€bn)

2.99

2.92

2.956

3.316

3.59

4.27

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The Revenue Target Established in The Tourism Policy Statement of March 2015 for 2025 of €5Bn For Overseas Revenue WilL be

Achieved or Come Close To Being Achieved in 2016

• Estimate by Deegan is that Overseas Revenue will be €4.7 to €4.8bn in 2016

• The Original Target Was Always Far too Conservative in Ambition (See Deegan, 2014)

• Need Tourism Policy To Account For The New Reality

• Longstanding need to focus more on Mainland Europe must be embraced.

• The Irish Authorities must adopt the standard UN international framework for measuring tourism in the economy which is the Tourism Satellite Account(TSA)-Tourism needs to be in the national accounting framework if it is to be taken seriously by economists.

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The Policy to 2025: People, Place and Policy: Growing Tourism to 2025

• Many positive aspects and action points that must be

acknowledged and focus here is on significant policy actions that need immediate attention.

• 1. Need to establish aggressive revenue targets.

• 2. The major impact that new technology and innovation has on all aspects of the tourism consumer journey needs greater recognition and a serious policy

response-Internet of Things, Big Data, Driverless Cars, Smart Cities and Drones for example.

• 3. A much greater recognition of the relationship between tourism and the environment and a move away from vague aspirational statements to clear actions.

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Focus For Today on 2 Examples Where Technological Change is Having A Major Impact On The Tourism

Marketplace

• 1. The Labour Market and

• 2. The disruptive innovation of Airbnb as an example of what’s coming.

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THE LABOUR MARKET

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Exhibit 3 continued

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Increasingly Jobs in Tourism Will Not Be Dominated By Accommodation and Food

• A TSA helps put a clear focus on the sectors of the economy where tourism creates and sustains jobs.

• Policy needs to adjust in all forms to prepare the labour force for this new eventuality.

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Disruptive Innovation: Clayton Christensen of Harvard University

• A process by which a product or service takes root initially in simple applications at the bottom of the market and then relentlessly moves up market, eventually displacing established competitors.

• Companies tend to innovate faster than their customers’ needs evolve-products too sophisticated, too expensive and too complicated for many customers.

• Sustaining innovations at top tiers of the market because historically this succeeded-highest prices to most demanding and sophisticated customers leading to greatest profits.

• Unwittingly open door to “disruptive innovators” at the bottom of the market-whole new population of customers get access to product/service previously only accessible to consumers with a lot of money(remember old days of Ryanair to Luton) or skill.

• Characteristics in early days: lower gross margins, smaller target markets and simpler products and services.

• Lower gross margins so unattractive to firms wishing to go upmarket creating space at the bottom of the market for other disruptive competitors to emerge.

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Airbnb Is A Disruptive Innovation: Technology is the Key Enabler

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Issues Arising From The Airbnb Example 1. Airbnb to be welcomed: key issue for economic impact is the

level of additionality versus substitution and what impact on the length of stay?

2. Why does Airbnb highlight the “sharing economy” when in fact costs/convenience are the most important factors?

3. A small number of hosts hold a disproportionate number of properties-emerging as core cash cow for Airbnb and a focus on quality here but also regulatory and tax issues and of course the impact on housing supply for locals.

4. Airbnb country Economic Impact reports tend to ignore any mention of substitutability(B+Bs or low budget hotels) and most likely exaggerate the economic impact(recent report on Ireland a case in point).

5. Airbnb satisfaction ratings are good but maybe so high because of the mechanisms employed.

6. Some hotels are responding by offering hotel bedrooms for families with bunk beds/kitchenettes-new innovations.

7. Key issues of regulation but should not stifle innovation.

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Contd:

8. Recent research reported by Concur on company travel expenses reveals a significant increase in spending by SMEs and tech companies are the main users, especially during conferences and events. Little doubt that Airbnb is targeting this segment for growth.

9. Little doubt that Airbnb is here to stay and will soon become a mainstream player.

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Broader Lessons For Innovation and Tourism Policy

1. Technology is now a key driver in tourism and the small micro enterprises that comprise the majority of firms in the sector need significant “supply side” support if new and innovative products and services are to be developed.

2. Much of what is required involves an eclectic mix of participants who use technology as a platform for innovations-where creative industries meet with technology specialists

3. We currently do not have a supportive “ecosystem of innovation” that supports such activity.

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TOURISM DOES NOT FEATURE IN ANY SERIOUS WAY

IN NATIONAL POLICYMAKING FOR INNOVATION IN IRELAND

Do You Need Proof?

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Government Policy: Action Plan For Jobs 14 Areas Identified By Research Prioritisation Report of November 2011

• The 14 priority areas are listed below and form the vital components on which Ireland’s future prosperity is being staked. Research/competence Centres are established and funded following this broad architecture.

• Priority Area A - Future Networks & Communications • Priority Area B - Data Analytics, Management, Security & Privacy • Priority Area C - Digital Platforms, Content & Applications • Priority Area D - Connected Health and Independent Living • Priority Area E - Medical Devices • Priority Area F – Diagnostics • Priority Area G - Therapeutics: Synthesis, Formulation, Processing and Drug Delivery • Priority Area H - Food for Health • Priority Area I - Sustainable Food Production and Processing • Priority Area J – Marine Renewable Energy • Priority Area K - Smart Grids & Smart Cities • Priority Area L - Manufacturing Competitiveness • Priority Area M - Processing Technologies and Novel Materials • Priority Area N-Innovation in Services and Business Processes

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Long Overdue That This Was Corrected

Thanks For Listening