Knowledge Applications for Competitive Destinations: a Visitor Experience Value Chain Approach

Knowledge Applications for Competitive Destinations: A Visitor Experience Value Chain Approach[1]

AbstractThe value chain approach described in this paper holds promise for involving key stakeholders in collaborative planning and execution activities designed to enhance a tourism destination’s competitiveness through effective knowledge management.

A tourism value chain is simply defined as a system which describes how private sector firms in collaboration with government and civil society receive or access resources as inputs, add value through various processes (planning, development, financing, marketing, distribution, pricing, positioning, among others) and sell the resulting products to visitors. The value chain describes the full range of activities that are required to facilitate visitor experiences from conception to actualization and beyond. The value chain should be driven by the passion, pride and confidence of key stakeholders that visitors will experience the best that a destination can offer.

This paper describes the visitor experience value chain approach, cites how it was applied in the case of Jordan and concludes with an identification of knowledge management research issues which need to be addressed in the future.

The Tourism Value Chain

A tourism value chain should be driven by the passion, pride and confidence of key stakeholders that visitors will experience the best that a destination can offer. A tourism value chain is simply defined as a system which describes how private sector firms in collaboration with government and civil society receive or access resources as inputs, add value through various processes (planning, development, financing, marketing, distribution, pricing, positioning, among others) and sell the resulting products to customers. The value chain describes the full range of activities that are required to bring a product from its conception to its end use and beyond.

Assumptions

· The first consumer travel decision focuses on where to go not which product is desired.

· Low-cost web-enabled technology tools are reducing the dependence on antiquated mainframe computer systems and traditional distribution channels.

· In this very fragmented and complex industry, the single universal commonality shared among all public and private stakeholders is the traveller who seeks to navigate seamlessly around the globe from destination to destination, supplier to supplier, and complete multiple transactions in a trustworthy environment.

· Customer partnership means finding mutually satisfactory solutions to shared problems and a dedication to excellence in every sale or service encounter. It also requires commitment to forging long-term relationships that create synergies of knowledge, security, and adaptability for both parties.

· A travel supplier’s inventory is a perishable product. A supplier cannot go backwards and sell yesterday’s unsold hotel room, attraction ticket, or air seat. A supplier’s bottom-line is dependent on distributing this perishable inventory at the lowest possible distribution cost, at the right time.

Transition to knowledge-based economies make establishment of effective employee empowerment mechanisms within companies crucial to their competitiveness. For a tourism value delivery chain to be effective it is essential to:

Make it easy for the consumer to purchase travel to the destination by strengthening the usability of distribution systems worldwide.

Maximize the use of continuously evolving information and communications technologies.

Unite the industry’s public and private sector around the common customer by focusing constantly improving the quality of tourism products and services.

Reduce the cost of distribution for suppliers.

Make tourism measurable on an on going basis.

Provide cooperative funding from the public and private sector to reduce the affects of destination-adverse threat—both real and perceived.

Reduce the effects of destination-adverse threats—both real and perceived.

A tourism value chain focuses on the customer experience

An Experience …

is an event or events in the customers’ lives, resulting from doing what we want them to do, with some end-result consequence for them in comparison to their alternatives, this relative consequence having some value, all expressed in measurably specific terms.

is not a description of us, characteristics of our products, services, processes, resources, functions or general excellence; nor a general mission, vague ambiguous topic or aspiration?

We need to ask “what value proposition (that is, what combination of resulting experiences including price) should be delivered and how exactly should all products, resources and processes be aligned to profitably deliver it, that is, to provide and communicate each resulting experience?”

Michael J. Lanning, Delivering Profitable Value (DPV), Chairman, The DPV Group

The economic value of tourism arises entirely from the expenditures made by domestic and international visitors. A tourism value chain approach can be used as the methodology for

analyzing the process and identifying opportunities to increase value through positive action or the elimination of barriers or constraints.

The tourism value chain is presented here in two ways – the overall tourism experience (Chart 1) and the detailed “on trip” portion being the critical area in which the visitor expenditure inputs occur at the destination level (Chart 2). To ensure consistency with the overall logic of the strategy, this “on trip” portion can be audited to assure the quality of the visitor experience. Here a value chain analysis can pin point with great accuracy those private sector or government actions that will result in value enhancement and increased competitiveness.

Chart 2. On Site Audit Guide

Case Example: Jordan National Tourism Strategy: 2004-2010

Despite current difficulties that have deeply affected Jordan’s economy, tourism is a sector that Jordan should prioritise as a central contributor to its future economic success. To secure this potential it will be necessary to put in place a strategy and action plan, together with the policy instruments which support its implementation. Traditional success in tourism was largely inherited; future success will be created through investment.

The core foundation principle of the strategy is that tourism should deliver the optimum benefit to the economy, people and communities of Jordan, as direct beneficiaries. If successfully implemented, the strategy has the potential to:

· Create increased economic activity, opportunity and wealth for its citizens.

· Create income streams and economic benefits for Government.

· Provide expanded employment in urban and rural areas.

· Play a major role in regional and rural development through investment.

· Build a strong and competitive tourism sector as a pillar of the economy.

Yet, successful implementation will require significant investment. The requisite amount of funding will only be attained if the Government and political leadership establish the economic and social priority of tourism as a sector that should be mandated and resourced.

Successful implementation will also hinge upon a public/private partnership in Jordan that has not only committed to work together, but also has put in place the practical “partnership infrastructures” that will enable and empower this co-operation. Furthermore, the Jordan Tourism Bureau, whose core task is to sustain and manage the Public/Private

Sector Partnership, must facilitate and support the private sector as the tourism driver that can produce sustainable growth, economic benefit, and employment.

Jordan’s unique natural and historic patrimony represents tremendous potential for its tourism industry. Yet, achieving the targets and benefits set out in this strategy will be challenging. Only through a comprehensive and integrated effort will Jordan be able to realize the full potential of tourism as a bankable growth sector for the 21st Century economy of Jordan.

The Jordan National Tourism Strategy 2004 – 2010 provides a guide for returning Jordan’s tourism sector to a period of sustained growth. It contains very clear and defined targets, which can be easily monitored by Jordan’s key stakeholders. The National Tourism Strategy was initially agreed and adopted by the Strategy Retreat held on May 21st 2003. The Delegates approving the Strategy included the combined membership of the National Tourism Council and the Strategy Steering Committee. By decision of the Retreat the National Tourism Council will guide the implementation of the Strategy and monitor its achievement.

The Strategy was augmented in 2004 to follow a value chain approach (described in the following figure) recommended by the private sector in response to the challenge set forth by His Majesty King Abdullah ll:

“I do not set the strategies. In Jordan the economy is private sector led so we challenge the private sector to propose the strategy for their sector and

we respond to and facilitate their requirements.”

This approach is briefly described below in excerpts from the Jordan National Tourism Strategy, 2004-2010:

1. SITUATION ANALYSIS

There is no doubt that the events of 9/11 caused a major interruption to the growth of world tourism. Before 9/11, however, tourism was progressing remarkably well in the Middle East. International tourism arrivals in the Middle East had consistently outpaced the world average until 2001. This trend resumed in 2002. Jordan, at least temporarily, also followed the trend of post-9/11 growth. Actually, arrivals increased from 2000 to 2001 by 1.5 %, but receipts fell 4 % (Table 1). Recovery in both arrivals and receipts followed in 2002. From 2002 to 2003, tourist arrivals decreased 3.1 %, although receipts actually increased by 3.7 %.

Table 1. Jordan Tourism Arrivals and Receipts 2003

Measure / 2000 / 2001 / 2002 / 2003 / % change
03/02
All Arrivals / 2,838,322 / 3,190,027 / 3,559,959 / 3,632,135 / 2.0%
Tourist Arrivals / 1,365,504 / 1,386,810 / 1,505,008 / 1,458,222 / -3.1%
Tourism Receipts (million JD) / 482.7 / 463 / 515 / 534 / 3.7%

Table 2 summarizes Jordan’s current ranking in its competitive country set, here assumed to be the MENA countries as identified by the World Tourism Organisation in its exceptional database.

Table 2. Jordan and MENA* International Visitor/Tourist Arrivals 2002
1. Source Region / 2. MENA International Arrivals (000) / 3. Jordan's Current Share of MENA Int'l. Arrivals / 4. MENA Region's Market Shares / 5. Jordan's Competitive Index# / 6. Jordan's Volume % of Market Leader / 7.Market Leader
From Middle East / 12,629 / 10.7% / 46.6% / 178 / 32.0% / Saudi Arabia
From Europe / 7,028 / 2.6% / 26.0% / 43 / 5.3% / Egypt
From Americas / 1,077 / 2.8% / 4.0% / 47 / 11.1% / UAE
From All Other Regions / 6,345 / 1.0% / 23.4% / 17 / 2.3% / Saudi Arabia
Overall / 27,079 / 6.0% / 100.0% / 100
*Excludes Kuwait, Palestine and Yemen since 2002 data are lacking
#Jordan's proportion of its international visitors from the region divided by its overall share of visitors
to the MENA region.
Source: World Tourism Organization and George Washington University

Collectively, the MENA countries hosted more than 27 million international visitors in 2002 (column 2). Nearly half of Jordan’s visitors came from other MENA countries (column 4). Column 3 indicates Jordan secured nearly eleven per cent of these visitors, even though it attracted only six percent of all international visitors to MENA countries. This indicates Jordan was quite competitive in attracting MENA international travellers. Jordan’s Competitive Index in Column 5 shows that Jordan attracted 78 percent more than its “fair share” of international visitors from MENA countries than would be expected from its overall market share of 6.0 per cent. However, it garnered 43 percent or less of the other source region visitors to the MENA region.

However, Jordan is much less successful attracting visitors from Europe or the Americas than the average MENA destination country. Its competitive index in column 4 indicates it currently attracts only 43 percent of its fair share of European visitors, and 47 percent of its fair share from the Americas. Jordan is currently attracting eleven percent or less than the MENA region’s market leaders for these source areas (columns 6 and 7). In short, Europe and the Americas appear to be lucrative regions for Jordan to target additional international visitors.

2. TOURISM STRATEGY

To succeed as a world class destination, Jordan should adopt a competitive approach focused on sustaining the positive momentum now underway and leveraging its strengths in the future. Essentially this is a strategic decision to seek to market Jordan to customers willing to pay a higher price for quality experiences.

Vision

Tourism is an essential and vibrant growth sector that will sustainably contribute to improving the economic and social well-being of Jordanians.

Mission

Jordan will sustainably develop the tourism economy of Jordan through results- driven partnership of Government, the Jordan Tourism Board, private sector and civil society to expand employment, entrepreneurial opportunity, social benefits, industry profits and state revenue.

Tourism Growth Targets

Goal:

Double Jordan’s tourism economy by 2010

Required Investment:

· 4% of national tourism receipts allocated for international marketing and product development

Results by 2010

· Receipts of JD 1,255 billion (USD $1,773 billion)

· Taxation yield to the government of JD 439 million (US $621 million)

· 88,659 jobs—an increase of 46, 075 from 42,585 in 2004

3. VALUE CHAIN APPROACH

Value Proposition

Jordan will create a public/private sector partnership and the necessary resource allocations to attract and satisfy the needs of high yield customers seeking a perfect travel experience resulting from exposure to a world class patrimony of cultural and natural heritage delivered in a secure, peaceful destination, by friendly and welcoming hosts.

Value Delivery System

Jordan’s value delivery system will be driven by a passion, pride and confidence that visitors will experience the best that Jordan can offer through positive human interactions in a safe and secure destination committed to world peace, cross cultural understanding and sustainable development.

Assumptions

· The first consumer travel decision focuses on where to go not which product.

· The government of Jordan is the largest stakeholder in tourism. The JTB is its marketing representative and principal means of partnering with the private sector.

· Low-cost web-enabled technology tools are reducing the dependence on antiquated mainframe computer systems and traditional distribution channels.