MEASURING EU TOURISM COMPETITIVENESS

Definition

Tourism competitiveness for a destination is about the ability of the place to optimise its attractiveness for residents and non-residents, to deliver quality, innovative, and attractive (e.g. providing good value for money) tourism services to consumers and to gain market shares on the domestic and global market places, while ensuring that the available resources supporting tourism are used efficiently and in a sustainable way.

"For Europe to be competitive and continue attracting both EU and non EU citizens, we first need a defined strategy that will not only take into consideration new global trends, but will also bring together the main institutional actors (the parliament, the commission and the council), as well as the relevant stakeholders in the field (Ana-Claudia Tapardel (S&D, Romania), Co-chair of Parliament's European tourism development, cultural heritage, way of St. James and other European cultural routes Intergroup."

Indicators for Measuring Competitiveness in Tourism (OECD)

1. Tourism Direct Gross Domestic Product: There is a recognised need to gather evidence on tourism contribution to gross domestic product. The focus of this indicator is on direct impacts. Indirect/induced GDP effects are important however it is extremely difficult to obtain evidence of such effects from the application of a consistent approach to measurement. For many economists and policy-makers, growth in GDP has been seen as the ultimate objective of economic development and of all constituent strategies and policies. GDP is Gross Domestic Product: the market value of all (recognized) goods and services produced within a country within a specified period. For most practitioners in economics, seeing a country’s GDP grow faster than its neighbours or competitors is seen as the benchmark of success and a readily communicated statistic that is of great influence in international standing, a statistic parleyed at the very highest levels of international economics and politics. Tourism is one of the world’s most important industries in terms of GDP. As tourism demand continues to rise overall, tourism GDP increases however the competitiveness challenge takes on new features with the growth of emerging economies and the resultant new pressure on the market position of developed economies. The direct contribution of tourism to GDP is calculated to be consistent with the output, as expressed in National Accounting, of tourism-characteristic activities as defined by the Tourism Satellite Account: Recommended Methodological Framework (TSA) (accommodation, food and beverage, passenger transport, transport rental, travel agencies, cultural services, and sports and recreational services) that deal directly with visitors. A core indicator on GDP would reinforce the TSA approach.

2. Inbound tourism revenues per visitor by source market: Measuring the economic activity of visitors allows tourism analysis to be linked with economic analysis, making integration of tourism policy within macroeconomic policy possible. The measure is a more direct indicator of economic returns than other ‘activity’ measures such as visitor numbers. There are significant challenges and complexities in attempting to capture total tourism receipts and identifying the specific level of expenditure per visitor. All countries recognise the value of this measurement but the degree of effort and resource commitment prohibits many countries from being able to provide this level of comprehensive information. Monitoring inbound tourism revenues per visitor by source market over time provides policy makers with a perspective on whether the tourism sector is growing or shrinking in terms of international competitiveness. The difference between one year’s figure and the next is a transparent and easily conveyed way of showing the country’s tourism growth or decline in terms of visitor revenues from international source markets. The range of source markets and change in performance also provides valuable information on strength in growth or declining markets to alert policy makers to relative strengths and weaknesses and future actions.

3. Overnights in all types of accommodation: Measuring visitor numbers is a direct and objective means of assessing success in tourism, with the difference between one year’s figure and the next being a transparent and easily conveyed way of showing growth or decline. However, overnights better reflect the impact of tourism on the economy than other indicators such as visitors’ arrivals. More distant destinations from major markets often benefit most from longer length of stays and overnight expenditure levels but face challenges in attractiveness and accessibility and repeat trips may be less frequent. Much of the focus of tourism initiatives, policy and investment is on attracting longer-stay visitors, including business and leisure. Maintaining a competitive tourism offering that attracts longer overnight stays continues to be an important policy consideration and indicator of international market competitiveness. 

4. Exports of tourism services: Tourism services are a major source of export revenues. They are an important driver in the shift towards a service economy. It is important for policy makers to track the growth of tourism exports and to be informed about the relative performance compared with other export sectors. The positioning of tourism as an export and the ability to bring in payments to a country can change quickly. This pace of change has been accelerated by rapid market globalisation, intensified competition and new technology applications. Policy makers recognise that the long-term growth of tourism services depends not only on being able to satisfy customers' needs and desires, but to develop a global competitiveness position that is supported by evidence in the balance of payments. Strategic vision, support for quality resources and promotion of services become vital for the growth in tourism services. The potential within tourism also requires more detailed review within sub segments and how to develop growth strategies further through different strategies including branding and marketing to attract more revenue. Successful positioning can bring considerable rewards and sustain competitive advantage around tourism services with strong future growth prospects and greater sustainability. Cross sector linkages can strengthen skills and education, information technology, transport and other policy areas essential for accessing global growth prospects.

5. Labour productivity in tourism services: Improving productivity is one of the main drivers for a country’s policies for tourism and improving competitiveness. It is advantageous to a nation's economy to have a high ratio of GDP output to employees, i.e. that each worker produces more GDP compared to other countries. Improving productivity enables enterprises to compete for more global tourism business more efficiently and effectively. Tourism productivity can be compared to national productivity to determine whether the tourism sector is outperforming or under-performing in the context of other industries and the national average productivity.

6. Purchasing Power Parities (PPPs) and tourism prices: Policy makers are interested in PPPs as they can be used to compare GDP in different countries taking away interference from price levels in each country. Analysing tourism sector costs using the PPPs enables comparisons to be made between different countries. Changing costs are among the most important factors influencing the choice of a destination with prices being an essential component in the overall tourism competitiveness of a destination. PPPs enable the analysis of price levels across countries expressing the price level of a given country relative to others. They assist policy makers by giving real price information to assess the effectiveness of policies.

7. Country entry visa requirements: Traveller mobility is critical to trade in tourism services and therefore plays an important role in defining the competitiveness of a destination. Travel facilitation initiatives which enable legitimate travellers to move more freely and efficiently will have a positive impact on the competitiveness and attractiveness of destinations and the ability of destinations to compete in an increasingly global tourism market place, and realise the tourism and economic benefits. A visa is a document which permits the holder to enter, leave or stay in a country for a specific period of time. The requirement for, and granting of, a visa may vary according to a number of factors, including the length of stay, purpose of visit, country of origin and reciprocal visa policy. The additional time, effort and cost associated with visa formalities can influence destination choice, travel behaviour and global patterns of travel flows. By reducing or removing such impediments, destinations can position themselves as more tourist friendly and welcoming relative to competitor countries. Policy makers are seeking to make progress on facilitating travel for these visitors to realise the potential economic benefits. Tourism policy increasingly outlines the approach and initiatives designed to facilitate travel, including visa requirements, reduction in barriers and costs to encourage and facilitate more international tourism.

8. Natural resources and biodiversity: Natural resources are important elements of the tourism product and key drivers of attractiveness for a destination. They are both a private property and a global common. Destinations that are able to offer travellers access to unique experiences including natural resources have a competitive advantage and those with recognised world heritage status or recognition have added power and publicity to attract. Areas of special interest are important parts of country heritage and environment and policy makers want to ensure that the assets and attractions of comparative advantage deliver maximum competitive advantages that support long-term sustainable tourism growth. This requires a delicate balance and recognition of the mix of heritage, natural resources and features that form part of international competitiveness.

9. Cultural and creative resources: Cultural and creative resources are important elements of the tourism product and key drivers of attractiveness for a destination. Destinations that are able to offer travellers access to unique experience through local culture and the creative economy have a competitive advantage and a basis for generating publicity to attract more awareness, interest, visitors or expenditure. Culture and creativity in various forms can create significant competitive advantages that support long-term sustainable tourism growth and spinoff benefits to other policy areas such as skills and talent attraction.

10. Visitor Satisfaction: Visitor satisfaction is an important qualitative indicator from the demand side. Customer demand is determined by a range of factors including the experience and recommendation of others. Social media, blogs and other review sources play an important role in the decision making of many travellers. Obtaining visitor feedback through official surveys is equally important to gain insight on customer satisfaction and the competitiveness of the tourist offering. This can inform future decision making by National Tourism Administrations to improve competitiveness and design promotions that play on strengths and address weaknesses. The stated preferences of visitors are also important in determining the likelihood of repeat visits and thus future competitiveness to generate economic benefits.

11. National Tourism Action Plan: A national strategy and action plan enables policy makers to assess the areas of greatest competitive potential and direct efforts more effectively to capture the economic and wider social benefits from tourism. The process of preparing such a strategy is an important knowledge generation and evidence gathering stage that can draw partners closer to derive greater impacts from their investments. It can also produce a targeted action plan that addresses short and long term opportunities and challenges. In many ways this is a fundamental requirement or every country rather than an optional indicator.

12. Market diversification and growth markets: Global market trends should be considered when measuring competitiveness in tourism. Market trends have an obvious impact on the countries´ competitiveness in tourism as shown by the low rates of growth in mature markets compared to the high rates of growth in major emerging markets. As well as being a source of competitive pressure, such countries are also major markets for tourism exports. It is important that countries monitor trends and show broad appeal to a range of markets and thereby have more sustainable competitive positions that are less dependent on any single or small group of export sources.

13. Employment in tourism by age, education levels and type of contracts: Education is the foundation of all advancement and economic development. As a service industry, tourism relies on quality and high standards as part of an overall visitor experience and it is vital that education standards, transferability and transparency of qualifications are continuously improved. This means working closely with education and skills policy makers and providers to improve partnership working and raise employment and education levels of individuals attracted to the tourism sector. The industry has an important role to play in improving the quality and accessibility of education and training. Provision of courses and training that enables personal progression within the industry and development of the sector can also encourage more entrants and higher levels of education amongst employees. To improve the quality of service and achieve higher levels of value add and job satisfaction the industry needs to continually improve its attractiveness and to offer terms and conditions that develop talent. This will directly influence productivity and competitiveness. Tourism offers excellent access to employment opportunities for individuals at all levels of experience, qualifications and training and status. Retention and development of employees is also important as an essential part of improving performance and capacity of the sector. In reality, awareness of learning opportunities is low in many levels of tourism services, e.g. part-time and seasonal workers. Increased commitment to training and career development routes could benefit the sector by attracting more capable and motivated people, relieve labour shortages and improve customer service functions contributing to overall competitiveness.

14. Consumer price index for tourism: All countries have some form of inflation assessment and real price indices to assess national competitiveness and tourism forms a significant part of this. In order to develop more effective tourism development policies, it will be important to have a consumer price index (CPI) that recognises the travel and tourism contributions and assess the relative attractiveness of the country to consumers. CPI is an important determinant factor for tourism.

15. Air connectivity and inter-modality: Connectivity is a fundamental of international tourism competitiveness. At the most basic level, the unconnected destination will be inaccessible to tourists. The availability of air routes, operators and frequency of flights plus travel time from main markets all affects tourism competitiveness, visitor numbers and economic benefits. Investment in international infrastructure including air transport links, is also important in building and developing competitiveness. International transportation connectivity also benefits all business sectors and enables the flow of goods and people to generate additional economic wealth, social and personal development. This role for tourism is recognised as an important consideration with policy overlaps and areas where investment can be at least partly justified from tourism competitiveness gains and promotion of internationalisation.

16. Better Life Index: The well-being of a nation is an important factor of attractiveness for a destination. There is evidence that the level of justice, governance, security, environment quality and health services, for instance, play a crucial role in terms of attractiveness for a destination. Research indicates that the most competitive destinations are ones which most effectively create sustainable well-being for its residents. Competitiveness is influenced by many factors and increasingly by qualitative considerations including the quality of life within a country rather than a GDP measure of wealth. Finding a balance across policy priorities that also utilises the power of tourism as a sector that creates wealth and well-being is an important issue for policy makers.

17. Government budget appropriations for tourism: Governments recognise the power of tourism to generate significant economic growth. They also identify market failures that induce intervention, directly or indirectly, and public expenditure annually in efforts to improve the economic contribution from the tourism sector. Tourism agencies receive annual appropriations of funding. The funding is increasingly allocated to agencies for delivery of outcomes such as improved economic prosperity, providing advice and programmes to achieve improved productivity, competitiveness, security and sustainability. The funding is a sign of commitment to the tourism sector and to working in partnership by investing for improvements in performance ability and competitiveness. The funding is often linked to a national strategy to be delivered with industry partners as part of a policy that aims to do things such as improve the quality of products and services within the tourism industry, facilitate tourism investment opportunities, and to support the establishment of additional sustainable air services, promote the country as a tourist destination in key markets and conduct research that will inform future government interventions. Policy makers must justify the levels of appropriation by gathering evidence of contribution and impact. An indicator in this topic will facilitate government assessment of appropriations for tourism across countries and to target priority growth markets

18. Company mortality rate: Tourism has become one of the fastest growing economic sectors in the world in terms of jobs, GDP and new firm creation. A dynamic business sector will stimulate more business births than deaths with competitive businesses growing and replacing inefficient ones. Measuring the number of companies in tourism provides a perspective on whether the sector is growing or shrinking. It does not of itself fully inform on the sector’s status, but is another indicator that by comparison with others adds context to the understanding of the country’s tourism competitiveness. Creating the conditions to encourage business start-up, survival and growth is a key policy area. The relative level of business failures in the sector year-on-year will provide a way of showing the change in a country’s stock of business, wealth, job support and competitiveness in the tourism sector.

19. Use of e-tourism and other innovative services: The use of e-tourism services has emerged as an important component in enabling consumers worldwide to access information about travel and tourism. Various studies in mature economies have estimated that over 60% of travel is researched and booked on-line with over 95% of travellers starting their research on-line. Social networking and social media is extremely powerful globally in shaping perceptions and household tourism decisions. Policy makers require a deeper understanding of how these services are being used in accessing information making choices and purchases. The role of social media, specific outlets and platforms such as You Tube, Twitter, Google, LinkedIn and Facebook can have significant influence on tourism competitiveness. Country policy makers must ensure that their presence on social media outlets and blogging sites is positive, that it can be used to market destinations and contributes to their overall tourism competitiveness. Being aware of the influence of e-business is essential for successful competitive positioning by countries in the emerging, globally networked, internet-empowered tourism industry and markets. Expenditure on e-tourism services continues to rise and it is vital for businesses and policy makers to be at the forefront of such developments and innovate to develop a stronger competitive position.

20. Structure of tourism supply chains: The business structure of the tourism sector is an important factor in the relative market power and competitiveness of a country. In all countries, many businesses are small and have limited growth potential which can inhibit national competitiveness. However the growth of businesses of scale and the presence of international operators, including multinational companies, can be an indicator of opportunities and a means of enhancing country competitiveness. Policy makers require to assess the sector structure and balance to optimise economic benefits to the country and develop the competitive position.

21. Branding: Country and destination branding is one of the major tools used to differentiate a country’s tourism offering, especially in ways to maintain or enhance global competitiveness. Significant sums are spent to promote a country destination and the assets of attractiveness. Much of this expenditure is on advertising, marketing and branding. The evaluation of effectiveness of such expenditure is often driven by the advertising industry rather than tourism metrics and analysing the return on investment from branding can be very complex and costly. It is a feature that influences competitive performance but its role in tourism competitiveness per se is difficult to measure. Developing some measure of competitiveness around this is attractive but extremely challenging and will require further discussion and development with members. Some countries have developed individual approaches and there is a starting point to learn from this experience and develop from existing knowledge and practices among members. This would rightly recognise branding as a powerful part of the marketing mix of a country to promote distinctiveness and attract more tourism in line with country objectives of improved competitiveness.

22. Weighting and use of Indices: The use of weightings is a sensitive matter that can form part of the future development agenda. In a weighted data set each unit is assigned a weighting factor where some data are adjusted to contribute more than others. Deriving appropriate weights for variables involves considerable research and evidence and well as making a number of additional assumptions where evidence is not available. These weights can be calibrated with evidence and adjusted with experience. The statistical validation process for this requires considerable effort and data from all countries as well as agreement on the derivation of weighting factors to be applied. The process of weighting applied to survey data is often controversial. The more simple the process, the less controversial but often the most difficult to agree, especially where sampling and response rates are inconsistent, where probabilities are used, when the approach has to cope with bias and meta-analysis. Weighting can become complicated and amplify the problem of variance and bias. It can also be misused to produce subjectively desired, prejudiced results, especially in areas of political interest such as competitiveness. Indices can lead to rankings and comparisons which can be misleading and counterproductive as shown by the uses of a number of existing sources. A number of measures could be suitable for the development of indices that would allow valid competitive positioning measures to be presented for indicators that are not otherwise easily quantifiable or comparable. This could include measures on attractiveness (such as cultural and heritage assets) and accessibility factors as well as customer satisfaction. This could be developed in the future to present information in a way that comparisons could be made between countries. However this could be controversial and misleading, unless the data and measurement protocols are strictly applied in a consistent manner.

23. Quality Considerations: Quality is a key consideration and an inherent factor of competitiveness. Some countries have established quality mark standards for the industry and sub segments such as accommodation and training qualifications. Also there are a number of national tourism quality agencies that promote use of common methodological tools to assess competitiveness of the sector and defined sub sectors. Developing such an approach across all member and partner countries and building it into specific measures is very difficult. Structures and standards vary by country and some systems in place may not be transferable or adaptable to other members. Individual country approaches to quality classification and competitiveness can work well and play an important role in competitiveness as well as attracting further investment. The explicit quality mark or grading for assets and facilities such as accommodation, attractions, beaches, restaurants and travel can drive up standards and performance as well as attract more tourism. It can also be applied to industry training levels and links to assessing growth in productivity. There is future scope to develop common standards for quality in competitiveness and a classification system that uses marks such as ISO 9001 and ISO14001.

24. Investment: Investment levels in the tourism industry covers a wide range of market segments including accommodation of all types and sizes, leisure attractions and facilities, skills and training, transport and tour operations. Some important investment is small scale and local while others can be large multinational investment projects with complex financial structures. Finding indicators that pick up on the investment by the public and private sector and measurement of countries and segments where there are changes in investment trends and patterns are all important in understanding competitiveness and the relative movement in country performance. The drivers and enablers of competitiveness are all affected by investment levels. However considerations including the breadth of investment, variations in scale and ownership patterns within and between countries, makes it difficult to identify a composite measure or indicator. Foreign direct investment (FDI) is often used as an indicator but even here investor patterns and motivations vary for reasons beyond the competitiveness of individual country tourism. There is an important role for considering how levels of tourism investment affect, and reflect, competitiveness and this could form part of the future work agenda.

25. Skills: Factors within skills, training, employment, managerial development and leadership considerations are vital for tourism competitiveness. It is also very difficult to obtain reliable consistent data across countries. Issues such as the high seasonality of employment, share of casual, short-term and fixed-term employment, wage levels and issues around security of employment all make the development of a single indicator very difficult. Skills are closely linked to productivity which is a Core Indicator however further work will be required to pick up on the deeper influences of skills, education and wages on tourism competitiveness. Several supplementary indicators relate directly or indirectly to skills considerations, such as employment by age, education levels and contract type. The next steps can take forward this work as part of the wider understanding of how several indicators could contribute jointly to aid the understanding of country tourism competitiveness.

26. Digital Capability: Tourism information and decision making is increasingly influenced by on-line sources and on-line trading, business to business and business to consumer communications and marketing. Digital connectivity is essential for all countries to reach potential and existing tourists and also affects the ability of businesses in the sector to build and develop their firms to improve competitiveness and generate greater economic and social benefits. Fast and reliable digital connectivity is one tool to enable business expansion, encourage investment and to reach potential markets and opinion formers; countries with comprehensive super-fast broadband connections have a competitive advantage which is becoming more important as social media and internet access takes a prominent role for promoters as well as in generating tourist awareness, branding, influencing decision making and purchases. Finding a single measure to reflect this requires further work and tracking of the influence of digital connectivity from the supply and demand.