Destination Competitiveness: Determinants and Indicators

Destination Competitiveness:
Determinants and Indicators

Larry Dwyer
Qantas Professor of Travel and Tourism Economics, University of New South
Wales, NSW, 2052, Sydney, Australia
Chulwon Kim
Professor, College of Hotel and Tourism Management, KyungHee University,
Soeul, Korea
The paper develops a model of destination competitiveness that will enable compari-
sons between countries and between tourism sector industries. The model seeks to
capture the main elements of competitiveness highlighted in the general literature,
while appreciating the special issues involved in exploring the notion of destination
competitiveness as emphasisedby tourismresearchers. Associatedwith the model is a
set of indicators that can be used to measure the competitiveness of any given destina-
tion. These indicators, comprising both objective and subjective measures, were iden-
tified from the major elements comprising the generic destination competitiveness
model and alsofromdiscussions at workshops heldin Korea and Australia. This paper
has four major objectives: to develop a model of destinationcompetitivenessthat iden-
tifies key success factors in determining destination competitiveness; to develop an
appropriate set of indicators of destination competitiveness; to highlight the advan-
tages and limitations of the model; and to identify areas for further conceptual and
empirical research. The development of a model of destinationcompetitivenessandan
associated set of indicators allows identification of the relative strengths and weak-
nesses of different tourismdestinations, and canbe usedby industry and governments
toincreasetourismnumbers andexpenditure, andenhancesocioeconomic prosperity.
Keywords: Tourism industry, destination competitiveness, competitiveness
indicators
Introduction
To achieve competitive advantage for its tourism industry, any destination
must ensure that its overall appeal, and the tourist experience offered, must be
superior to that of the alternative destinations open to potential visitors. Existing
and potential visitation to any destination is inextricably linked to that destina-
tions overall competitiveness, however that is defined or measured.
A major aim of the paper is to develop a model and indicators of destination
competitiveness that will enable comparison between countries and between
tourism-sector industries. Since a range of factors influence destinationcompeti-
tiveness, including price and non-price factors, there is a need to develop indica-
tors which reflect this. The development of a set of competitiveness indicators
would serve as a valuable tool in identifying what aspects or factors influence
tourists in their decision to visit other countries. The development of an associ-
atedset of indicators will allowidentification of the relative strengths and weak-
nesses of different tourism destinations, and can be used by industry and
1368-3500/03/05 0369-46 $20/0 2003 L. Dwyer & C. Kim
Current Issues in Tourism Vol. 6, No 5, 2003
369
Destination Competitiveness: Determinants and Indicators
governments to increase tourismnumbers, expenditure, economic impacts, and
quality of life for residents.
This paper has four major objectives:
to develop a model of destination competitiveness that identifies key
success factors in determining destination competitiveness;
todevelopanappropriateset of indicators of destinationcompetitiveness;
to highlight the advantages and limitations of the model; and
to identify areas for further research.
The paper proceeds as follows: first, a review of the literature on competitive-
ness is undertaken. While the frameworks of competitiveness appearing in the
wider literature are useful in highlighting the various determinants of firm or
national competitiveness they do not address the special considerations rele-
vant to determining destination competitiveness.
Second, a review of the literature on tourism destination competitiveness is
undertaken. It is argued that none of the models of destination competitiveness
that have been proposed to date are entirely satisfactory. In particular, they do
not provide a comprehensive treatment of the various issues surrounding the
notion of competitiveness that are being explored in the wider literature and
that must be taken into account in developing a comprehensive framework of
destination competitiveness.
Third, a model of destination competitiveness is developed. The model seeks
tocapturethe mainelements of competitiveness highlighted in the general litera-
ture, while appreciating the special issues involved in exploring the notion of
destination competitiveness as emphasised by tourism researchers.
Fourth, a set of indicators is developed to measure the competitiveness of any
given destination. These indicators comprise both objective and subjective
measures and are identified from the major elements comprising the generic
destinationcompetitiveness model and also fromdiscussions at workshops held
in Korea and Australia.
Fifth, the advantages and limitations of the model are highlighted, and issues
for further research are explored.
Perspectives on International Competitiveness
The notion of destination competitiveness should be consistent with the
notion of competitiveness in the international economics and international
business literature. Accordingly, the literature on international competitiveness
was critically reviewed with a view to developing a framework suitable for
tourism research.
Although it is widely acknowledged that economic growth and competitive-
ness involve a complex interactive process of social, political, and institutional
change, no one general theory supports this phenomenon. Rather, various
explanations have been offered from different disciplines. The literature reveals
a variation in perspective in defining, understanding, and measuring competi-
tiveness. Perspectives from various disciplines reveal that competitiveness is a
multi-facetedconcept. We canregardthe notionof competitiveness as associated
with three major groups of thought. These are:
370 Current Issues in Tourism
(1) Comparative advantage and/or price competitiveness perspective (Bellak,
1993; Cartwright, 1993; Durand & Giorno, 1987; Fagerberg, 1988; Fakiolas,
1985; Hilke & Nelson, 1988; Hodgetts, 1993; Porter, 1990; Rugman, 1991;
Rugman & DCruz, 1993).
(2) A strategy and management perspective (Day & Wensley, 1988; DCruz &
Rugman, 1993; Ghoshal &Kim, 1986; Grant, 1991; Kogut, 1985; Mahmoud et
al., 1992; Mahoney & Pandian, 1992; Mathur, 1992; Parsons, 1983; Peters,
1988; Porter, 1985, 1990, 1999; Porter & Millar, 1985; Powell, 1992a, 1992b;
Yip, 1989).
(3) A historical and socio-cultural perspective (Aaker, 1989; Franke et al., 1991;
Hofstede, 1980, 1983; Hofstede&Bond, 1988; Kennedy, 1987; Porter et al., 2001)
While economists have placed emphasis on price and the country-specific
economic characteristics of competitiveness, the management and strategy
researchers have focused on the firm-specific characteristics, while the focus of
sociologists and political theorists has been on various social, political and
cultural characteristics underlying the notion of competitiveness. Moreover,
eachgrouphas suggesteddifferent indicators toexplainor measurecompetitive-
ness (Moon & Peery, 1995; Waheeduzzaman & Ryans, 1996).
The definitions offered in the literature provide both a micro and a macro
connotation of competitiveness.
Froma macro perspective, competitiveness is a national concern and the ulti-
mate goal is to improve the real income of the community. On this perspective,
competitiveness is a very broad construct encompassing all social, cultural, and
economic variables affecting the performance of a nation in international
markets. Reflecting this macro perspective, competitiveness may be defined as
the degree to which a country can, under free and fair market conditions,
produce goods and services which meet the tests of international markets
while simultaneously maintaining and expanding the real incomes of its
people over the longer term(Global Competition: The New Reality. Report on
the Presidents Commission on Industrial Competitiveness, 1985).
Onthe other hand, froma microperspective it is seen as a firm-level phenome-
non: firm-specific behaviours determine competitiveness. Porters competitive
analysis framework (Porter, 1980) emphasises industry attractiveness and its
characteristics, such as the potential to enhance the firms power vis vis buyers
and suppliers, thwart potential entrants and outposition competitors, as being
the key determinants of competitive advantage and long-term profitability. By
contrast, the resource-based approach emphasises that the roots of competitive
advantage reside in the acquisitionand maintenance of the core competencies of
an organisation. Resource-based theorists have emphasised inimitable firm
resources and the distinctive capabilities and competencies resulting from
combining these resources as being central to obtaining a sustainable competi-
tive advantage (Barney, 1991; Grant, 1991; Prahalad & Hamel, 1990). Barney
(1991) defines a firms sustainedcompetitiveadvantageas the implementationof
a value-creating strategy not simultaneously being implemented by any current
or potential competitors andwhen these competitors are alsounable toduplicate
the advantages based on such a strategy. Core competence provides potential
Destination Competitiveness: Determinants and Indicators 371
access to a wide variety of markets, makes a significant contribution to the
perceived customer benefits of the end products, and is difficult for others to
imitate. Core competencies are sustainedthroughsomekindof isolatingmecha-
nisms maintained by firms (Prahalad & Hamel, 1990; Rumelt, 1984).
On the micro perspective, in order to be competitive, any organisation must
provide products and services for which customers or clients are willing to pay a
fair returnor price. In the long run, in a free enterprise system, competitiveness is
measured by the ability of the organisationto stay in business and to protect the
organisations investments, to earn a return on those investments, and to ensure
jobs for the future.
Thus, despite the extensive literature on competitiveness, no clear definition
or model has yet been developed. It is a complex concept because a whole range
of factors account for it. Competitiveness is both a relative concept (i.e. compared
to what?) and is multi-dimensional (i.e. what are the salient attributes or qualities
of competitiveness?) (Spence & Hazard, 1988). On both the micro and macro
perspectives there is recognition that firms and nations face very different chal-
lenges and priorities as they move from resource-based to knowledge-based
economies. Thus, the principal factors that contribute to global competitiveness,
and thereby improve living standards, will differ for economies at different
levels of development (Porter et al., 2001).
Regardless of the specific definitions offered, the notion of competitiveness
does, however, appear to be centred on human development, growth and
improved quality of life (Newall, 1992). For a company, competitiveness means
the creation of new growth options that create value for shareholders. For a
society, improved competitiveness translates into new jobs and better living
conditions (World Economic Forum, 2001). Wealth creation is the engine of
economic growth and a mainspring of innovation. The ultimate goal of competi-
tiveness is to maintain and increase the real income of its citizens, usually
reflected in the standard of living of the country. From this perspective, the
competitiveness of a nationis not an end but a means to an end; its ultimate goal
is to increase the standardof living of a nation under free and fair market condi-
tions (through trade, production, and investment) (Cho, 1998).
Lessons from the wider literature
While the discussions of competitiveness in the general literature are useful in
highlighting the various determinants of firm or national competitiveness,
they do not address the special considerations relevant to determining tourism
destination competitiveness. The discussion of competitiveness in the general
literature has tendedto stress competitive advantage(resulting fromvalue-added
activities by firms and organisations), while de-emphasising comparative advan-
tage as a source of international competitiveness. For a tourism destination,
comparative advantage would relate to inherited or endowed resources such as
climate, scenery, flora, fauna, etc., while competitive advantage would relate to
such created items as the tourism infrastructure (hotels, attractions, transport
network), festivals and events, the quality of management, skills of workers,
government policy and so on. Since the core attractive resources that a destina-
tion possesses do not necessarily suffer depletion, despite the fact that people
have paid for their use, the tourism phenomenon represents a fundamentally
different form of economic exchange than does the sale of physical resources
(Ritchie & Crouch, 1993: 356). In the context of tourism, both comparative
advantage and competitive advantage are important and a model of destination
competitiveness must recognise this.
A major reason for attempting to develop a model of competitiveness that
focuses specifically on the tourismsector is that there appears to be a fundamental
difference between the nature of the tourism product and the more traditional
goods and services for which the above models were developed. In contrast to a
specific manufactured product, for example, a tourism destination may be
regarded as an amalgam of individual products and experience opportunities
that combine toforma total experience of the areavisited (Murphy et al., 2000: 44).
It is appropriate to inquire, however, as to the lessons that canbe learned from
the competitiveness literature in developing a frameworkof destinationcompet-
itiveness.
Price competitiveness
From the literature on comparative advantage and price competitiveness
comes recognition of the potential importance of destination price competitive-
ness in influencing visitor flows. Studies by tourism researchers indicate the
price sensitivityof travellers is high in certainmarkets (Lee et al., 1996). Empirical
studies highlight the importance of levels of technology, exchange rates, govern-
ment policies, industry competition, and the influence of multinational enter-
prises as factors influencing the price competitiveness of tourismfirms (Dwyer,
Forsyth & Rao, 2000a,b, 2002).
Firm-specific factors
From the strategy and management perspective comes a recognition of the
importance of the firms resources in influencing the achievement and mainte-
nance of sustainable competitive advantage. The basic premise is that the
competitiveness of a nation stems from companies within that nation, so
firm-specific factors that lead to competitiveness should be identified. In order to
achieve competitive advantage, the focus should be on the development and
maintenance of meaningful assets and skills, the selection of strategies and
competitive arenas to exploit such assets and skills and neutralising of competi-
tors assets and skills (Aaker, 1989: 105). Resources of the firm that are consid-
ered to offer competitive advantage include: the skills of the employees, assets,
cash-flow, capital/investment (human, non-human and strategic), structure of
the organisation (flexibility, balance, and dynamic aspects), organisation-
environmental interface (source and positional advantage, organisational align-
ment, generic strategy, strategic planning, and customer-oriented offering), and
many firm-specific variables (core competencies, imitability of products, infor-
mation, intelligence system, value added by the firm, and quality). Day and
Wensley (1988) have argued that competitive superiority results from the
possessionof source and positional advantage. Source advantage refers to the
basic ability of the organisation that may come from superior skill (human
resources), superior non-human resources or a combination of the two. Posi-
tional advantageis a more market-orientedphenomenon. Inorder to be competi-
tive a firm needs to manoeuvre both source and positional advantage. Since the
competitiveness of a destination must somehow be essentially linked to the
competitiveness of its constituent firms, these variables must be recognised in a
model of destination competitiveness.
Cultural and related factors
From the literature on history, politics and culture comes a recognition that,
just as the competitiveness of nations can be influenced by climate, morals,
power of the state, cultural values and moral discipline, so too may destination
competitiveness be influenced by such variables (Franke et al., 1991; World
Economic Forum, 2001).
Subjective factors
From the attempts to develop indicators of national competitiveness such as
those developed by the World Economic Forum (2001) comes a recognition of
resident prosperity as the end result of competitiveness and the importance of
consumer perceptions of competitiveness. That is to say, not all the influences on
competitiveness are objectively quantifiable. In the tourismcontext animportant
distinction will involve the reality of the situation, as indicated in objective
measures of competitiveness (e.g. measures of price competitiveness, crime
statistics involving tourists as victims), and travellers perceptions (e.g. percep-
tions of relative price levels, perceptions of safety/security, views about comfort
levels and the aesthetic appeal of different types of tourism resources). Indeed,
the importance of tourists perceptions is suchas to warrant separate recognition
in a model of destination competitiveness.
Perspectives on Destination Competitiveness
Destination competitiveness would appear to be linked to the ability of a
destinationto deliver goods and services that perform better than other destina-
tions on those aspects of the tourism experience considered to be important by
tourists. Dwyer, Forsyth and Rao (2000a) state that tourismcompetitiveness is a
general concept that encompasses price differentials coupledwith exchange rate
movements, productivity levels of various components of the tourist industry
and qualitative factors affecting the attractiveness or otherwise of a destination
(Dwyer et al., 2000a: 9).
Recently, two international tourismjournals have devoted entire issues to the
theme of destination competitiveness. The journal Tourism in a special issue,
Competitiveness in Tourism and Hospitality (Volume 47 (4), 1999), featured articles
which addressed price competitiveness by journey purpose (Dwyer et al.), the
international competitiveness of Croatias hotel sector (Cizmar & Seric;
Osmagic-Bedenik); the role of public administration in the competitiveness of
Spains tourism industry (Bueno); and the competitiveness of Alpine destina-
tions (Pechlaner). The journal Tourism Management, in its special issue The
Competitive Destination (Volume 21 (1), February 2000), included articles that
address destination price competitiveness (Dwyer et al.), competitiveness vari-
ables in the area of destination policy, planning and management (Crouch &
Ritchie), overall destination competitiveness (Buhalis; dHauteserre; Go &
Govers), competitiveness andtransport (Prideaux), andcompetitiveness andthe
environment (Mihalic).
A large number of variables appear to be linked to the notion of destination
competitiveness. These include objectively measured variables such as visitor
numbers, market share, tourist expenditure, employment, value added by the
tourismindustry, as well as subjectively measured variables such as richness of
culture and heritage, quality of the tourismexperience etc. Thus, for example,
competitiveness has been defined as the ability of a destination to maintain its
market position and share and/or to improve upon them through time
(dHartserre, 2000: 23). Hassan defines competitiveness as the destinations
ability to create and integrate value-added products that sustain its resources
while maintaining market position relative to competitors (Hassan, 2000: 239).
According to other researchers, destination competitiveness is associated
with the economic prosperity of residents of a country (Buhalis, 2000; Crouch &
Ritchie, 1999). This is consistent with the view espoused by the World Economic
Forum(Porter et al., 2001). Development designed toattract international visitors
may have a range of purposes. Ultimately, however, it seems reasonable to focus
attention on economic prosperity. That is, nations (or destinations) compete in
the international tourism market primarily to foster the economic prosperity of
residents. Other objectives may hold, of course the opportunity to promote the
country as a place to live, trade with, invest in, do business with, play sport
against, etc. Tourism may foster international understanding, peace, and good-
will. But, in long term, the economic well-being of residents is of central concern
to the notion of destination competitiveness.
Although the end result of achieving destination competitiveness might well
be enhanced economic prosperity for residents, it should be emphasised that the
link between tourism market share and economic contribution is not always
obvious. Thus recent studies of tourisms economic contribution to an area using
Computable General Equilibrium modelling reveals that the expansion of
tourismwill oftencrowdout other economic sectors, resultingin a change in the
compositionof industryrather thananexpansionof economic activity(Adams &
Parmenter, 1992; Dwyer & Forsyth, 1998; Dwyer, Forsyth, Madden & Spurr,
2000; Dwyer, Forsyth & Spurr, 2003). More specifically, the economic impact of
tourism will depend upon variables over and above market share, including an
economys situational conditions such as factor constraints, industry structure,
profile of traditional exports and import-competing industry, exchange rate
regime and current government macroeconomic policy stance (fiscal, monetary,
labour market) (Dwyer et al., 2000).
Poon (1993) suggests four key principles which destinations must follow if
they are to be competitive: put the environment first; make tourism a leading
sector; strengthen the distribution channels in the market place, and build a
dynamic private sector. Clearly these principles are too broad and general to be
meaningful to tourismstakeholders andpolicy makers. GoandGovers (1999), in
a studyof conference site selection, measure a destinations competitive position
relative to other destinations along seven attributes: facilities, accessibility,
quality of service, overall affordability, location image, climate and environ-
ment, and attractiveness. The selected attributes appear not to be based on any
model of competitiveness and, in any case, apply specifically to the conventions
sector of tourism.
Dwyer et al. (2000a,b; 2002) have provided the most detailed study of tourism
price competitiveness published to date. Measures of price competitiveness may
be expected to play an important part in any framework of overall price and
non-price tourism competitiveness. Hassan has recently introduced a new
model of competitiveness that focuses on environmental sustainability factors
associated with travel destinations (Hassan, 2000). Hassan posits four determi-
nants of market competitiveness. These are: comparative advantage (includes those
factors associated with both the macro and micro environments that are critical
to market competitiveness); demand orientation (the destinations ability to
respond to the changing nature of the market demand); industry structure (exis-
tence or absence of an organised tourism-related industry); and environmental
commitment (the destinations commitment to the environment). Underlying his
model is a conviction that a global perspective to understand key determinants
of market competitiveness is critical for the tourism industry to sustain its
growth and vitality (Hassan, 2000: 239).
The most detailedworkundertaken bytourismresearchers onoverall tourism
competitiveness is that of Crouch and Ritchie (1995, 1999) and Ritchie and
Crouch (1993, 2000). They examined the applicability to tourismdestinations of
competitiveness research and models in other contexts spanning companies and
products, national industries, and national economies, as well as competitive-
ness related to service industries. They claim that, in absolute terms, the most
competitive destination is one which brings about the greatest success; that is,
the most well-being for its residents on a sustainable basis. And that competi-
tiveness is illusorywithout sustainability (Ritchie &Crouch, 2000: 5). They claim
that to be competitive, a destinations development of tourismmust be sustain-
able, not just economically and not just ecologically, but socially, culturally and
politicallyas well (5). Ritchie and Crouch focus on long-termeconomic prosper-
ity as the yardstick by which destinations can be assessed competitively. Thus
the most competitive destination is that which most effectively creates sustain-
able well-being for its residents.
A model of destination competitiveness has been developed by Ernie Heath
who claims that:
existing models do not appear to adequately provide an integrated treat-
ment of the various issues surrounding the concept of competitiveness
and do not place sufficient emphasis on the key success drivers (people)
and the vital linkages (e.g. communication and information management)
that need to be considered when developing a comprehensive framework
of sustainable destination competitiveness (Heath, 2003).
Heaths model is presented in the form of a house with foundations, cement,
building blocks and roof:
The Foundations provide an essential base for competitiveness. These
include: Providing and Managing the Key Attractors (e.g. history, culture,
climate, events, entertainment, etc.); Optimising the Comparative and Compet-
itive Advantages; Addressing the Fundamental Non-negotiables (e.g. personal,
safety and health issues); Providing the Enablers (e.g. infrastructure
(airports, roads, signage, etc.), managingcapacity); Capitalisingon the Value
Adders (e.g. location, value, anddestinationlinkages); Ensuring Appropriate
Facilitators (e.g. appropriate airline capacity, accommodation, distribution
channels, etc.); Focusing on the Experience Enhancers (e.g. hospitality, service
excellence, authentic experiences).
The Cement binds and links the respective facets of competitiveness. These
include continuous and transparent communication channels; balancing
direct andindirect stakeholder involvement andbeneficiation; information
management, research and forecasting; managing competitive indicators
and benchmarks.
The Building Blocks are essential to make tourismhappen in a destination.
These include a Sustainable Development Policy and Framework (policy and
legislative framework, organisational and financing framework, resources
and capabilities, investment climate, sustainable environmental princi-
ples) and a Strategic and Holistic Destination Marketing Framework and Strat-
egy (destination image and branding, competitive positioning, target
marketing/demand management, innovative marketing strategies, visitor
satisfaction management).
The Roof (the key success drivers) comprises the people part of destination
competitiveness. These include a shared tourism vision and leadership,
guiding values and principles, placing strategic priority on the people
factor (political will, entrepreneurship, community focus and human
resources development).
A model of destination competitiveness has been developed by the present
authors. This model is displayed schematically in Figure 1. The model brings
together the main elements of national and firm competitiveness as proposed in
the wider literature and the main elements of destination competitiveness as
proposed by various tourismresearchers, Crouch and Ritchie in particular. The
integrative model proposed here contains many of the variables and category
headings identified by Crouch and Ritchie (1995, 1999) and Ritchie and Crouch
(1993, 2000) in their comprehensive framework of destination competitiveness,
but differs some important respects. The present model explicitly recognises
demand conditions as an important determinant of destinationcompetitiveness. It
also explicitly recognises that destinationcompetitiveness is not an ultimate end
of policy making but is an intermediate goal towards the objective of regional or
national economic prosperity.
In Figure 1, the Resources category is divided into two types: Endowed (inher-
ited) and Created. Endowed Resources, in turn, can be classified as Natural
(mountains, lakes, beaches, rivers, climate etc.) andHeritage or Cultural (cuisine,
handicrafts, language, customs, belief systems etc.). Created Resources include
tourisminfrastructure, special events, the range of available activities, entertain-
ment and shopping. In the model presented here, Supporting Resources (or
enabling factors) include general infrastructure, quality of service, accessibility
of destination, hospitality and market ties. Endowed and Created Resources are
each allocatedtheir own box, as is Supporting Factors and Resources. As Crouch
and Ritchie state, Whereas the core resources and attractors of a destination
constitute the primary motivations for inbound tourism, supporting factors and
resources exert more of a secondary effect by providing a foundation upon
which a successful tourism industry can be established (1999: 148). These
include general infrastructure, quality of service, accessibility of destination,
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hospitality and market ties. In the integrated model presented here, these three
boxes are, in turn, grouped within a larger box, indicating that destination
competitiveness depends on the value added to core resources by these other
factors.
Situational Conditions are forces in the wider external environment that impact
upon destination competitiveness. Situational conditions relate to economic,
social, cultural, demographic, environmental, political, legal, governmental,
regulatory, technological, and competitive trends and events that impact on the
way firms and other organisations in the destination do business, and present
both opportunities and threats to their operations (David, 2001). These condi-
tions correspondtothe Qualifying andAmplifying determinants as identifiedby
Crouch and Ritchie (1999). For present purposes it is useful to regard the situa-
tional conditions as falling within one of two interactive and interrelated
contexts of organisations operating in the destination the operating environ-
ment and the remote environment. The operating environments of the different
private- and public-sector institutions in a destination are important because, to
a large extent, the conduct and performance of these institutions depends on the
overall structure of the industry in which they are situated(McGee, 1988; Porter,
1980, 1990). The remote environment comprises those forces and events outside
the destination that constrain the strategic options of organisationmanagers but
over which management have no control (Johnson & Scholes, 1997: 89; Tribe,
1999: 158).
Destination Management factors are those that can enhance the appeal of the
core resources and attractors, strengthen the quality and effectiveness of the
supporting factors and resources and best adapt to the constraints imposed by
the [situational conditions] (Crouch &Ritchie, 1999: 149). The category includes
the activities of destination management organisations, destination marketing
management, destination policy, planning and development, human resource
development and environmental management (Ritchie & Crouch, 2000). In the
model presented here, a distinction is made between destination management
activities undertaken by the public sector and Destination Management under-
taken by the private sector. Included among the activities of the public sector we
would find the development of national tourism strategies, marketing by the
NTO, national and regional manpower programmes, environmental protection
legislation etc. Included among the activities of the private sector we would find
those of tourism/hospitality industry associations, industry involvement in and
funding of destination marketing programs, industry training programmes,
industry adoption of green tourism operations and so on.
The model contains a separate box for Demand Conditions. This category
comprises three main elements of tourism demand-awareness, perception and
preferences. Awareness can be generated by various means including destina-
tion marketing activities. The image projected can influence perceptions and
hence affect visitation. Actual visitation will depend on the match between
tourist preferences and perceived destination product offerings. A destinations
product must develop in a way that matches the evolving consumer prefer-
ences, if the destination is to enhance or even maintain competitiveness.
The single direction arrows from Supporting Resources to Endowed
Resources and Created Resources indicates that the mere existence of such
resources is insufficient to generate visitation to a destination in the absence of
tourisminfrastructure (accommodation, transportation, restaurants), organised
activities, entertainment, shopping and so, on which enable or facilitate visita-
tion. Such attributes represent value added by organisations in the destination
to the overall tourism product.
There are two-directional arrows linking both Created Resources and
Supporting Resources to Demand and to Destination Management. These
arrows indicate a two-way causal link. Thus, specific features of Created
Resources and Supporting Resources influence Demand, whilst the nature of
Demand Conditions, specifically tourist preferences and motives for travel,
influence the types of products and services developed within a destination. In
similar vein, specific features of Created Resources and Supporting Resources
influence DestinationManagement toachieve andmaintainsustainabilitywhilst
the activities of public- and private-sector tourismorganisations influence types
of products and services developed.
The box representing Destination Competitiveness is linked backwards to the
various determinants of competitiveness and forwards to one representing
Socioeconomic Prosperity, indicating that destination competitiveness is itself an
intermediate goal towardsa more fundamental aimof socioeconomic well-being
for residents. Eachof these objectives is associatedwitha set of indicators. Indica-
tors of destination competitiveness are many and varied and comprise both
subjective attributes (destination appeal, scenic beauty) as well as those that
are more objectively determined (destination market share, foreign exchange
earnings from tourism). Indicators of Socioeconomic Prosperity relate to key
macroeconomic variables including productivity levels in the economy, aggre-
gateemployment levels, per capitaincomes, rate of economicgrowthandsoon.
We now discuss the various elements of the integrative model.
Core Resources
Included under this heading are various characteristics of a destination that
make it attractive to visit. Crouch and Ritchie regard core resources and attrac-
tors as the primary motivation for destination appeal (Crouch & Ritchie, 1999:
146). Of course, different resources have different appeal to different tourists.
Tourist motivations canbe classifiedin several ways, andcore resources are only
a pull factor for some types of tourism.
Resources can be divided into two types: endowed (inherited) resources and
created resources.
Endowed resources
Natural resources
The natural resources of a destination define the environmental framework
within which the visitor enjoys the destination. They include physiography,
climate, flora and fauna, scenery and other physical assets.
While Porter and others have emphasised factor creation as a source of
competitive advantage, a destinations endowment of natural resources is
crucial for manyforms of tourismandvisitor satisfaction(Buckley, 1994; Dunn &
Iso-Ahola, 1991). While in the context of manufacturing competitiveness
emphasised by management theorists resource disadvantages can be overcome
by adding value to the goods and services produced, in the tourism context
natural resources have a substantial capacity to attract visitors, regardless of any
value added by human providers.
Heritage and Culture
The heritage and culture of a destination, its history, institutions, customs,
architectural features, cuisine, traditions, artwork, music, handicrafts, dance etc.,
provides a basic andpowerful attractingforce for the prospective visitor (Cohen,
1988; Murphy et al., 2000; Prentice, 1993). Past research has examined the great
number of dimensions of culture that enhance the attractiveness of a tourism
destination (Ritchie & Zins, 1978).
We know that individuals may disagree in their perceptions of the same
objective reality (Carroll & Chang, 1970; Wish, 1971). Similarly, there may be
differences between the way in which industry views the richness of culture as
opposed to how consumers perceive it. As Ritchie, Crouch and Hudson (2000)
point out in an example, merely counting of museums and historic sites, while of
some help in measuring a destinations heritage endowment, may well mask the
quality of these attractions.
Created resources
Porter (1990) andothers note that strengths in other parts of the diamond can
overcome factor disadvantages. The literature search undertaken in the present
study revealed the importance of created resources in determining firm or
national competitiveness. There would seem to be at least five types of created
or built resources that influence destination competitiveness: tourism infra-
structure, special events, range of available activities, entertainment and shop-
ping. Of course, many cultural/heritage attractions of a destination may be
created or built (e.g. the Great Wall of China, the Taj Mahal), but these historic
sites are more appropriately regarded as comprising elements of destination
(inherited) culture and heritage.
Tourism infrastructure
Tourism infrastructure includes features such as accommodation facilities,
food services, transportation facilities, themed attractions, fast food outlets,
taverns/bars and receptive tourism plant, tour wholesalers, tour operators,
travel agents, car rental firms, local conventionandvisitor bureaux. Tourismalso
relies on the provision of numerous ancillary services. Related services infra-
structure includes retail shopping facilities, food stores, garages (car mainte-
nance, petrol stations), pharmacies, bookstores/newsagents/kiosks, laundries,
hairdressers, administrationoffices (police, courts etc.). In the eyes of manytour-
ists, and certainly for so-called mass tourism, destinations function more effec-
tively when these services are abundant. Mo et al. (1993) have argued that
destination service infrastructure is, after destination environment, the most
important factor in an international tourists experience of the destination
product. Murphy et al. (2000) found that the level or lack of infrastructure affects
tourist experiences and that tourisminfrastructure is an important predictor of
both destination quality and perceived trip value. This does not, of course,
deny the existence of those forms of tourism (nature-based, cultural/heritage,
adventure tourismetc.), in which the tourismexperience is enhanced by the lack
of created tourisminfrastructure. This reinforces the importance of the demand
side as a determinant of destination competitiveness (see below).
Special events
This categoryis intendedtocapturethosehappenings where thevisitortends to
be highlyinvolvedas a participant (e.g. a Mardi Gras, a WorldFair) or thoseevents
where simply being there is significant (royal weddings, papal coronations, the
investiture of a worldleader, Wimbledon tennis). The capacity of special events to
generate tourismexpenditure is well documentedalthough the economic impacts
and net benefits are often exaggerated (Dwyer, Forsyth, Spurr & Ho, 2003). Festi-
vals and events are recognised internationally as making a valuable economic
contributionto tourismdestinations, and also as having significant growth poten-
tial. Economic impacts include the contribution to employment and income,
nationally and regionally. Events tourism is also regarded as associated with a
range of other benefits (andcosts) of a more intangible naturethat impact onlocal
communities as well as entire regions. These include associatedsocial and cultural
benefits toadestination, theexchange of ideas, fosteringbusiness contacts, provid-
ing fora for continuingeducationandtraining, facilitatingtechnologytransfer and
so on (Dwyer, Mellor, Mistilis & Mules, 2000).
Range of available activities
The mix of activities possible within a destination are important tourism
attractors. These can include recreation and sports facilities summer facilities
(golf, tennis etc); winter facilities (skiing); water sports (swimming, boating,
fishing); night clubs/night life; facilities for special interest visitors such as
adventure tourists, ecotourism, cultural/heritage tourism and biking trails.
The more diversified a destinations portfolio of tourism products, services
and experiences the greater is its ability to attract different tourist market
segments. A climate of competition stimulates improvement and discourages
stagnation. For example, the continuing development and expansion of Las
Vegas casinos and more recent diversification beyond gambling to encompass a
broader range of entertainment and family-oriented activities has enabled Las
Vegas to continue to evolve and develop as a destination. Moreover, a destina-
tions seasonal constraints may be partly overcome when tourism enterprises
expand the range of seasonal experiences available.
Entertainment
This category primarily encompasses behaviours where the visitor assumes a
rather passive spectator role such as the theatre and film festivals (Crouch &
Ritchie, 1999). Entertainment can be found in many forms. From a consumer
perspective, the amount of entertainment available at a destination is probably
less important thanits perceived qualityor uniqueness. Even more important for
destination competitiveness is the degree to which the entertainment offerings
are appropriate to the destination. Ritchie, Crouch and Hudson (2000) cite the
Oberammergau Passion Play as uniquely associated in the consumers mind
with the destination, even though it could be staged practically anywhere. They
thus claimthat the competitiveness value of this event exceeds its entertainment
value as a mere religious event (11).
Shopping
Shopping canbe regarded as a formof entertainment or, possibly, a necessary
chorefor manytourists. For some cultures, e.g. Japanese andKoreans, gift giving
upon returning home is an important element of the entire travel experience
(Hobson, 1996). In various parts of the world, the opportunity to shop for
duty-free items has provided, in itself, a major motive for travel. For many tour-
ists, the opportunity to shop in an exotic location, or duty free, is an important
pull factor of outbound travel. Destinations such as Hong Kong and Singapore
have at times marketed themselves as shopover destinations. Over 50% of
visitor expenditure in Singapore is on shopping items (Singapore Tourism
Board, 2000).
Giventhe importance of shopping in tourist expenditure generally, and in the
purchasing behaviour of Asian tourists in particular, this category is identified
separately in the destination competitiveness model.
Supporting factors and resources
Supporting factors and resources underpin destination competitiveness.
Private- and public-sector organisations supporting tourism activity that
possess a collectionof specific skills not easily imitable by rivals canbe an impor-
tant source of sustained competitive advantage (Barney, 1991; Prahalad &
Hamel, 1990).
General infrastructure
A destinations general infrastructure includes road networks, airports, train
system, bus system, water supply, telecommunications, sewerage, health-care
facilities, sanitation, the electricity generation system, financial services, and
computer services.
Smith (1994) claims that service infrastructure is housed within the larger
macro-environment or physical plant of the destination, while Watson and
Kopachevsky (1994) have argued that tourist experiences cannot be properly
understood unless we take into account the larger context and setting in which
these encounters take place. Consumer research on service experiences also
confirms this notion (Bittner, 1990).
Quality of service
The service dimension of the tourismexperience is vital. Efforts must be made
to ensure qualityof serviceand there is nowrecognitionof the need to take a total
quality of service approach to visitor satisfaction(Go & Govers, 2000). Provision
of reliable and responsive visitor services enhances a destinations competitive
advantage. Initiatives to enhance the quality of the experience provided by a
tourism destination include: establishment of standards for tourism facilities
and performance of personnel; programmes to objectively and subjectively
monitor the quality of experiences provided; and monitoring of resident atti-
tudes towards visitors and towards development of the tourism sector.
Some researchers stress the relevance to destination competitiveness of the
concept of the integrityof visitor experiences (Go&Govers, 1999). This concept is
intended to convey the idea that the quality of the experience actually provided
should be appropriate to the situation and the price charged. It also implies that
the service provider delivers the quality of experience that is promised to a given
situationsince different levels of qualitymaywell be appropriate for a given cost
level in different situations or settings.
The perceived quality of tourismservices appears to be crucially linked to the
context of service experiences (Johns, 1993). In consumer settings, both the focal
(service) and the contextual (environmental) dimensions of a product play a
significant role in determining quality (Gotlieb et al., 1994). These findings
support the view that both the destinations macro-environment and its service
dimension affect tourist perceptions of quality. Murphy et al., (2000) found that
destination environment in terms of climate, scenery, ambience, friendliness
and, to a lesser extent, cleanliness, is a key predictor of destination quality.
Destinations havebecome increasingly reliant onthe delivery of qualityprod-
ucts and services. Since meeting visitor needs and achieving business goals are
increasingly inseparable, a commitment to quality by every enterprise in a desti-
nation (public or private) is necessary to achieve and maintain international
competitiveness (Go & Govers, 2000: 80). Indeed, it has been argued that the
quality of service production and delivery deserves a comprehensive approach
and a definitive integration among its key stakeholders (residents, visitors,
trade) andanin-depth knowledge of their needs andexpectations (Go&Govers,
2000:80). The need for integration relates to the network of different organisa-
tions that require interaction to cater effectively and efficiently to consumer
needs and expectations and to minimise the potential negative sociocultural,
economic and ecological impacts on the host community.
Accessibility of destination
McKercher (1998) demonstrates the link between market access and destina-
tion choice. The accessibility of the destination is governed by a variety of influ-
ences including the frequency, ease and quality of automobile, air, bus, train, sea
access; aviation regulations, entry permits and visa requirements; route conces-
sions; airport capacities; competitionamong carriers etc. Visas maybe expensive
in terms of monetaryoutlayand/or inconvenient to procure, thus deterring visi-
tation. Countries mayalsoimposerestrictions onoutboundtravel byresidents.
Prideaux (2000: 56) notes that tourist choice between alternative destinations
is influenced by inefficiencies in the transport system such as uncompetitive
practices, safety concerns, comfort levels and journey time.
Ease of access to a destination may be facilitated through upgraded distribu-
tion channels or through developing a more extensive network of sales contacts.
Improving inter-modal linkages among transportation systems contributes to
destination competitiveness. Following the Asian currency crisis in late 1997,
Ansett Australia, Qantas and Air New Zealand suspended services to Korea,
demonstrating the effect of external variables on destination accessibility.
Hospitality
Hospitality relates to the perceived friendliness of the local population and
community attitudes towards tourists. It includes: warmth of reception by local
population; willingness of residents to provide informationto tourists; attitudes
towards tourists and the tourism industry. Tourist guidance and information,
including goodsignage, is important to visitors feeling valued by residents of a
destination. Resident support for tourism development fosters a competitive
destination. The perceived hospitality of residents is a major social factor
forming part of the macro-environment (Canestrelli & Costa, 1991; Machlis &
Burch, 1983).
Market ties
This category includes several dimensions along which a destination estab-
lishes and builds linkages with people in origin markets. It includes ethnic ties
underlying VFR travel business ties, and trade links underlying business
tourism (Dwyer et al., 1995); economic and social ties including ongoing trade
relationships, membership of professional and trade associations, historical and
recent immigration flows, common culture and language, common religion.
Some tourismdestinations have a dependency onothers that is competitive or
complementary in nature (Ritchie &Crouch, 2000). For example, Macautourism
relies on tourismflows to Hong Kong, and tourismto Monaco is very dependent
upon tourismnumbers to the French and ItalianRiviera. Similarly, international
tourismto Tasmaniais associatedwithvisitor numbers to Australia. This type of
dependency can also be considered as a form of market tie.
Destination Management
Five types of destination management activities have a potentially important
influence on destination competitiveness: destination marketing management;
destination planning and development; destination management organisation;
human resource development; and environmental management.
Destination marketing management
When implementing their marketing activities, destination management
organisations (DMOs) can contribute to the achievement of sustainable tourism
through various actions depending on whether their focus is a promotional or
facilitationstrategy. The marketing activities of DMOs are mainlycentred on the
promotion of the destination as a whole. However, a natural extension of such
efforts is a facilitation role that typically includes collecting, analysing and
disseminating market research data, establishing a representation in the main
target markets of origin, participating in trade shows, organising and coordinat-
ing familiarisationtrips and supporting the private sector in the production and
distribution of literature such as information relating to analysis of characteris-
tics of key travel markets related to travel volume and associated spending
(Lewis et al., 1995).
Hassan (2000) argues that to maintain tourism competitiveness, destination
management should focus on a systematic examination of unique comparative
advantages that provide a special long-termappeal to the target travel customer
segments. He claims that destinations arewinningcompetitivebattles by careful
analysis and response to the core values and needs of the segmented market-
place (Hassan, 2000: 240).
An important function of destination marketing managers is to create a desti-
nation image, that is the sum of beliefs, ideas and impressions that people have
of a place (Kotler et al., 1993). Recent research has focused on the meaning and
measurement of destination image (Balogh & Brunberg, 1997).
Uysal et al. (2000) show the importance of positioning, branding, image,
awareness etc, as determinants of destination market share and overall destina-
tion competitiveness. They claim that
the challenge of destination marketing is that it is made up of many
suppliers and service producers. Marketing a tourism region involves
complex and coordinating action among the central attractions (both
public and private) that draw tourists to a region, the transportation
network to connect visitors to a variety of attractions, the hospitality
services to fill basic needs while awayfromhome, andinformationto help
tourists meet needs and find their way in a new environment (Uysal et al.,
2000: 94).
Enhancing the appeal of a destination involves a programme of marketing
efforts designed to influence the decision process of prospective visitors. These
efforts may focus on increasing awareness of the existence of the destination or
improving the perceptions of the features of the destination to different
demographic, psychographic and behavioural market segments. Relevant activ-
ities include: development of a strong destinationimage; creation of a high level
of destination awareness and awareness of the destinations specific products
and service offerings; identification of high yield customer bases; development
of stronglinks withtourismwholesalers andretailers; development of attractive,
price competitive tour packages tailored to customer needs.
Destination planning and development
Tourism planning takes place on many levels: site, destination, region,
national, international. Planning is carried out by different agencies, organisa-
tions, and businesses for different purposes and at different scales, possibly with
the aid of external consultants.
In order to protect ecosystems and economic benefits and to distribute the
latter equitably, tourismmust be developed and managedwithin a hierarchy of
controls, ranging from the local to the territorial or provincial, to the national,
and even to the international level. The responsibilities at each level of control
must be clearly identified and a process of accountability must be imple-
mented. Tourism planning requires an understanding of the meaning of
sustainable development and the guiding values for promoting sustainable
tourism. It requires that communities be made to be sufficiently aware of, and
to understand, the tourism industry and its impacts as well as the various
processes to integrate and engage in participatory planning, consensus build-
ing, and conflict resolution among all stakeholders. It is important to consider
which sustainable development principles can be implemented through
community control and which need to be implemented through controls at a
higher level.
Hassan (2000) maintains that the diversity of industries involved in destina-
tion planning and development requires the use of a competitiveness model that
examines the relationships among all stakeholders involved in creating value-
added products to sustain resources while maintaining a market position rela-
tive to other competitors. Sustainable development outcomes should be pursued
by tourismbusinesses, governments, local communities and other stakeholders.
The integration and cooperation of organisations and individuals is complex
which is why planning at a holistic level is required. The outcome can be a
balance between needed development and economic benefits and social and
environmental protection.
Destinations require strong, committed, and effective leadership by business,
government and community leaders at all levels. A pro-active role, rather than a
passive one, is required to ensure that environmental and heritage values are
fully sustained. A sustainable tourism industry requires a commitment by all
involved to sustainable development principles at all stages of development.
Only through such widespread commitment can the prerequisite holistic
emphasis necessary for long-term integration of social, environmental, and
economic objectives be attained (Dutton & Hall, 1989).
The destination vision provides a direction for development. According to
Newsome et al. (2002: 147) the basic task of planning is to visualise the area, that
is the product, as visitors andmanagers wishit tobe inthe future. Visioning is an
important step in formulating a tourismplan. In the visioning step, community
members attempt to look into the future and imagine what they would like their
community to be. Such an effort involves identifying what is really valued or
desired andincluding those elements in the sharedimage of the community. The
image can help community leaders decide among alternatives that are likely to
lead to the desired future and those that are likely to lead away fromit. It helps a
community decide how much of any type of development will fit within its
vision and determine what levels of change are acceptable.
Once stakeholders have formulated a destination vision they must undertake
a critical analysis, or audit, of the destinations existing tourism resources and
capabilities, as well as the current functioning of its tourismoperations (Inskeep,
1991). The tourismaudit covers the supply side (tourism products and support-
ing factors and resources), the demand side (tourist preferences) as well as
community attitudes to tourismdevelopment. This type of audit is necessary to
determine, in the light of market trends, the strengths and weaknesses of the
present state of the industry, and to highlight opportunities for tourismdevelop-
ment, and the challenges that must be met for the destinationand its component
firms to achieve and maintain competitive advantage.
The actions of various industry associations, e.g. air transport associations,
hotel associations, tour operator associations, restaurant associations, affect the
deployment of tourismresources. These associations may differ in their percep-
tions of the ecological, social, and cultural impacts of tourism development.
Tourismresources are likely to be used more effectively when the different asso-
ciations and industry groups share a common view regarding a destinations
strategy for tourism development (Inskeep, 1991).
Pechlaner (1999) stresses the need to undertake a future-oriented evaluation
of a destinations development. He lists several destinationpotentials including
destinationreputationfor responsiveness to tourismdemand, andpreparedness
for product and market changes. We agree with Pechlaner regarding the need to
attend to the dynamics or potentials of competitiveness
Destination management organisation
Various areas and levels of government are involved in the promotion,
regulation, presentation, planning, monitoring, maintenance, coordination,
enhancement and organisation of tourism resources. As Buhalis notes, destina-
tion management organisations (DMOs), which include convention and visitor
bureaux, national and regional tourismorganisations, have overall responsibil-
ity for the entire destination product and through incentives and policies facili-
tate the development of products, and create local partnerships for the delivery
of seamless experiences (Buhalis, 2000: 108).
Many of the factors underlying destination competitiveness are public
goods and thus government has an important role to play in achieving and
maintaining destination competitiveness (Bueno, 1999; Dwyer & Forsyth,
2000). According to Mihalic (2000: 66) a carefully selected and well executed
programof destinationmanagement can serve to improve the tourismcompet-
itiveness of a destination.
Three aspects of destination management organisation are especially impor-
tant to competitiveness. These are: coordination, the provision of information,
and monitoring and evaluation.
Coordination
There is increasingrecognitionof the importance of broadcommunitypartici-
pation, of effective coordination and support between all involved parties as
crucial to achievement of sustainable tourism and hence destination competi-
tiveness.
The primary function of the DMO is to serve as a coordinating body for the
many public- and private-sector organisations involvedin tourism(WTO, 1979).
In some cases the DMO will also provide the leadership necessary to provide
overall direction for tourismdevelopment within the destination. In all cases the
function is to enable the many parts of the tourism sector to work together, and
thus compete more effectively, design and implement public consultation
techniques and processes in order to involve all stakeholders in making
tourism-relateddecisions. The DMOcanimprove the management anddevelop-
ment of tourismby ensuring coordinationandcooperationbetween the different
agencies, authorities and organisations concerned at all levels, and that, where
such institutions exist, their jurisdictions and responsibilities are clearly defined
and complement each other. It can also help to raise awareness of sustainable
tourism and its implementation by promoting the exchange of information
between governments and all stakeholders on best practice for sustainable
tourism, and promote broad understanding and awareness to strengthen stake-
holder attitudes, values and actions that are compatible with sustainable devel-
opment.
Provision of information
Destinations that gather and use information effectively can improve their
competitive position. An effective use of information systems can provide
managers withthe informationrequired for understanding customer needs, and
for appropriate new product development and marketing by tourismorganisa-
tions in both the private and public sectors.
Two categories of informationare important; first, informationthat is internal
to the destination provides an ability to better manage the performance of the
destinations product. The better the system of information management, the
greater the ability of firms in a destination to manage different aspects of the
destination product (Faulkner, 1997). Second, research results provide the infor-
mation basis to enable a destination to adapt to changing market conditions
through its marketing strategy e.g. visitor statistics on patterns of tourist behav-
iour, performance measures which identify problems, tourist satisfaction studies
which identify problems and opportunities, economic, social and environmental
impacts of tourismdevelopment, informationwhich monitors and tracks the atti-
tude of the local population towards the tourism. Such information can enhance
theabilityof tourismstakeholders toforecast demandtoaidlong-termplanning.
Monitoring and evaluation
Strategic scanning and monitoring of the competitive environment is an inte-
gral part of policy and strategy formulation, including the need to systematically
evaluate the effectiveness of major policies and strategies that have been previ-
ously implemented in efforts to enhance destination competitiveness. Faulkner,
emphasising the importance of more rigorous andcomprehensive approaches to
evaluation to provide a more solid foundation for strategic decision making,
stresses the importance of the role of market share analysis in the evaluation
process as a central indicator of the extent towhichnational tourismorganisation
objectives are met (Faulkner, 1997). Faulkner recommends the exploration of
better ways to communicate research findings to enhance their usefulness to
decision makers.
Human resource development
The human resource function is critical to the performance of any organisa-
tion. Human resources management (HRM) should be an integral part of corpo-
rate strategy and not just remain a functional strategy (David, 2001). The
perspective of organisations as knowledge stocks reinforces the importance of
considering all employees as making up the organisational brain. The
resource-based perspective has begun to emphasise increasingly the role that
organisational knowledge canplay insustaininga firms competitivesuperiority
(Narasimbha, 2000). In a tourism context, Bueno argues that since competition
between firms is determined by skills, human resources are a central factor in
achieving competitiveness because of the new opportunities brought about by
new technologies and the importance of consumer loyalty in maintaining high
demand (Bueno, 1999: 321).
Workers in organisations that seek to be competitive must be highly skilled,
reliable, educated individuals (Duffey, 1988). They must be able to understand
and use the new forms of information technology and the information being
made available, adapt to rapidly changing organisation forms, and work well
with others. The links between knowledge creation and use and effective
management of the firms human resources need further examination.Training
has an important role to play in the development of the three dimensions of
organisational knowledge: breadth/depth of knowledge, competence, and
exploratory/exploitative knowledge (Narasimbha, 2000).
A combination of several different resources may create a sustained advan-
tage in a way that cannot be located in those individual resources. The sustained
advantage comes from the expertise in combining them or co-locating one or a
few vital resources in a combination with readily available ones such that it
becomes difficult to identify and duplicate the advantage (Prahalad & Hamal,
1990).
The lessons for tourismstakeholders include the need to understandthe HRM
practices that strengthen the organisational knowledge sustained competitive
advantagerelationship, to find out the obstacles that organisationsface in imple-
menting those practices, and to formulate programmes to educate and train all
tourism stakeholders.
Environmental management
As noted above, destination environment in terms of climate, scenery, ambi-
ence andfriendliness has been foundtobe a key predictor of destinationquality
(Murphy et al., 2000: 50). Resource stewardship is an increasingly important
function of destination managers in both the private and public sectors. This
recognises the importance of long-term sustainable competitiveness that
acknowledges the stewardship of ecological, social and cultural resources.
In the wider general management literature it is recognised that a firms envi-
ronmental performance is linked to its economic performance (Porter & Van der
Linde, 1995). When economic interests are broadened to include the interests of
other parties, especially future generations, the opportunity to create aggregate
value becomes more apparent. An intergenerational perspective enables us to
see that in the long run, economic and environmental interests often converge as
resources are transferred across generations (Wade-Benzoni, 1999).
The rationale for taking an intergenerational perspective to preserve envi-
ronmental resources appears to be particularly compelling in the context of
stakeholder strategies to achieve destination competitiveness. Resources must
be maintained in an appropriate way to guard against undue deterioration and
facilitate their sustainability. As Hassan notes, sustainable development is criti-
cal to the conservation of nature and the preservation of indigenous culture
(Hassan, 2000: 239). According to Hassan, it is critical for future destination
development plans to be compatible with environmental integrity for the
tourism industry to maintain its economic viability. All tourism stakeholders
have an important role to play here. As the WTTC notes,
Sustainable travel and tourism development relies upon policies which
support harmonious relationships amongtravelers, local communities, the
private sector and governments to balance natural, built and cultural envi-
ronments with economic growth and stability (WTTC, 2001: 3).
Mihalic claims that destination attractiveness (appeal) and its competitive-
ness canbe increasedby proper management of environmental qualityof a desti-
nation (Mihalic, 2000: 67). She argues that destination competitiveness can be
enhanced through such initiatives as codes of conduct, self-developed environ-
mental practice, certified or award-based best practice and accreditation
schemes. Mihalic argues that:
in many cases environmental objectives and practice must be incorporated
into the current attitudes, management strategies and methods in order for
destinations to stay competitive maintaining a high level of overall envi-
ronmental quality is important for the competitiveness of most types of
tourismdestinations and thus a primary concern for destination managers
(Mihalic, 2000: 67).
While a concern for the environment may require that the firm redirects its
resources fromother profitable opportunities whichcanleadtoa rise incosts and
prices and a loss of markets, there is an alternative view that an environmental
policy improves competitiveness by pushing firms into developing more effi-
cient ways to produce and therefore reduces costs. Some would go so far as to
argue that stringent environmental policy is a potent form of industrial policy,
and that it provides a double dividend whereby it improves the environment
and competitiveness (Esty & Porter, 2001; Wade-Benzoni, 1999). In the tourism
industryall firms benefit fromenvironmental preservation, andthe costs of envi-
ronmental policy to tourismfirms individually may well be substantially below
the benefits obtained through additional visitor expenditures generated as a
result of maintenance of a clean environment.
It has become increasingly recognised in the general management literature
that achieving sustainable business activity requires a shift of management
thinking from a compliance or reactive environmental stance to a more active
compliance plus strategy whereby the environment is placed high on the busi-
ness agenda and environmental concerns are integrated into company culture
(Wade- Benzoni, 1999). Given the great reliance of tourismstakeholders on envi-
ronmental preservation, this strategy would seem to be particularly appropriate
for firms in the tourism industry.
Environmental performance has been found to vary systematically with the
quality of a countrys environmental regulatory regime (Esty &Porter, 2001). As
noted above, destination environment in terms of climate, scenery, ambience,
friendliness has been found to be a key predictor of destination quality
(Murphy et al., 2000: 50). Of course, we must remainmindful that it is not somuch
the real but the perceived environmental quality (Mieczkowski, 1995) or envi-
ronmental image (Okoroafo, 1995) that influences the buying decisions of the
potential visitor. In the tourismcontext, there is a much more intimate relation-
ship between environmental quality and consumer perceptions of the quality of
the product purchasedthanis tobe foundin other industries. Policy makers have
long come to realise that environmental commitment makes good economic
sense for the tourism sector. Thus Hassan has claimed that environmental
commitment will be the forefront issue for the economic revitalization of the
tourism industry (Hassan, 2000: 244).
Situational Conditions
As noted above, it is useful to classifysituational conditions as falling within a
destinations operating (industry) environment or remote environment. The
conduct and performance of constituent institutions depends on the overall
structure of the industry in which they are situated (McGee, 1988; Porter, 1980,
1990). The remote environment comprises those forces and events outside the
destination that constrain the strategic options of organisation or destination
managers but over which they have no control (Johnson & Scholes, 1997: 89;
Tribe, 1999: 158). Situational conditions may enhance or reduce destination
competitiveness (Crouch & Ritchie, 1999).
Destination location
Destinationlocationdetermines the physical distance frommarkets and must
affect travel time from origin markets, even allowing for changes in transporta-
tion technology. A destinations location, particularly from major source
markets, has muchtodowithits ability toattract visitors. McKercher (1998) notes
that more proximate destinations exhibit a competitive advantage over destina-
tions that offer a similar product but are more distant.
Competitive (micro) environment
This includes the components that shape the immediate industrial environ-
ment withinwhichfirms inthe tourismindustrymust adapt inorder tocompete.
Acompetitive destinationdepends in part ona local tourismindustryconsist-
ing of numerous alternative suppliers that must survive on the basis of services
that are either unique or superior in some way, or available at a lower cost.
Competition among firms creates an environment for excellence. For a destina-
tion to develop in a sustainable way, business operations must be sustainable.
Sustainable development for business means adopting business strategies and
activities that meet the needs of the enterprise and its stakeholders today while
protecting, sustaining, and enhancing the human and natural resources that will
be needed in the future (International Institute for Sustainable Development,
1994: 4).
The competitive (micro) environment can be classified in several ways. One
useful set of distinctions is that between (1) the capabilities of destination firms
and organisations, the strategies of destination firms and organisations, includ-
ing alliance formation, and (3) the competitive environment of firms and organi-
sations in the destination.
The capabilities of destination firms and organisations
A firms capabilities can be classified in terms of each of the major functional
business areas management, marketing, finance, production/operations,
research and development (David, 2001; Dwyer & Kemp, 2003). Pechlaner
emphasises that core products and services based on core competencies are a
good basis for destination competitiveness (Pechlaner, 1999: 335). The core
competencies of suppliers and decision makers, their knowledge and their
developed skills, are those that are difficult to imitate. The appropriate combina-
tion of these competencies and skills contributes to a destinations competitive-
ness (Pechlaner, 1999: 339).
In order to maximise the potential strengths of its capabilities, the firm needs
to attend to the organisational culture. Aaker (1989) suggests that management
must identify cultural forces that affect employee roles to achieve organisational
effectiveness. The importance of organisational culture as a determinant of
organisation performance has been highlighted in studies of the strategic
management of resort hotels (Dwyer et al., 1998/9; Kemp & Dwyer, 2001).
The strategies of destination firms and organisations
The health, vitality and sense of enterprise, entrepreneurship, and new
venture development in a destination contribute to its competitiveness in a
variety of ways. Gilbert (1990), Poon (1993), Porter (1990) and Porter et al. (2001)
all emphasise howa firmcan achieve value-competitive advantages. Ahealthy
systemof enterprise ensures that market gaps andunmet needs remainunrecog-
nised and unfilled for only a short period of time. The sustainable business has
interdependent economic, environmental, and social objectives and under-
stands that long-termviabilitydepends onintegratingall three objectives in deci-
sion making. Rather thanregarding social and environmental objectives as costs,
a sustainable enterprise seeks opportunities for profit in achieving these goals.
A firm can enhance its competitiveness through specialisation, innovation,
investment, risk taking, and productivity improvements (Ritchie & Crouch,
2000). To this list we add the importance of adopting ethical business practices
and the formation of strategic alliances.
(1) Specialisation. There is a growing industry trend in many countries towards
differentiated new product strategies by tourism organisations to capture
different market segments. Ideally, each firm in the tourism industry will
seek to develop new products while focusing on its core competencies and
expertise. Buhalis (2000: 107) argues that the utilisation of new technology
provides the opportunity to customise products according to customers
specific requirements. Concentrating on core functions and outsourcing all
peripheral activities to networks of virtual cooperatives should enable
destinations and enterprises to innovate and to adapt to the needs of
consumers constantly.
(2) Innovation. Local businesses must continue to seek out and implement new
technologies to improve their productivity (Porter et al., 2001). Poon (1993)
argues that flexible specialisation or permanent innovative and ceaseless
change provides for the demands of the new tourism. Developments in
information and communications technology have greatly increased the
potential for collaboration between businesses by making it much easier to
integrate and coordinate network activities. These changes in technology
have made possible the development of virtual organisations and with
them, enhancement of competitive advantage(Evans et al., 2003), but it is on
the initiative of operators that new technologies are adopted.
(3) Investment. Adiversified portfolio of tourismproducts, services and experi-
ences can enhance destination attractiveness and therefore competitive-
ness. Investment in new products and services, matched to visitor needs,
may help to overcome seasonality constraints. Foreign investment may
enable faster growth of the destination tourism industry to the benefit of
local stakeholders (Dwyer & Forsyth, 1993, 1994). Key determinants of
foreign investment in tourism include ownership, internalisation and
locationadvantages. Ownership advantage relates to the market power of
multinational companies. Internalisation refers to market failures in trad-
ing of intangible goods such as knowledge and brands hence the need to
retain direct control of these goods and services in a foreign market
through some form of ownership. Location advantages include the attrac-
tiveness of an investment area in terms of local physical and human
resources, host government support for inward investment, costs for
employing local factors of production, and the fit between local strategic
assets and the foreign firms global pool of resources (Dunning, 1992,
1993). Ideally, investors should have a strong commitment to environmen-
tal quality and sustainable development (Hassan, 2000: 243).
(4) Risk taking. A nations competitiveness is strengthened in the course of
struggles by entrepreneurs to overcome high risks and maximise returns to
achieve competitive advantages over rivals. Risk takingby entrepreneurs is
essential if an economy is to move from being Investment Driven to a more
evolvedstageof being innovationdriven. As Porter et al. (2001) argue, at this
innovation stage of economic development, global competitiveness is criti-
cally linked to high rates of social learning.
(5) Productivity. FollowingPorter et al. (2001) we canidentifyproductivityvari-
ables as another set of factors that contribute to the efficiency and effective-
ness of a destination. These include variables that are hypothesised to
develop skills and/or conditions that are likely to increase the quantity and
qualityof output of tourismexperiences for a given level of resource input.
These variables relate to improving the quality of the people providing the
experience as well as the facilities and equipment that assists them in their
efforts. Improved training and better relationships between management
and labour form the basis for increased flexibility of labour that is a critical
component in todays rapidly changing environment.
(6) Ethical Business Behaviour. Management theorists argue that a healthy corpo-
rate culture should cultivate a basic respect for all individuals, and
emphasise honesty, fairness, open-mindedness, teamspirit, loyalty, dedica-
tion, frank and full communication, life-long learning and constant
improvement (Dwyer et al., 1998; Ford&Richardson, 1994). Business opera-
tions rest upon a foundation of shared interests and mutually agreed rules
of conduct. Competition takes place in a society that business presumably
both serves and depends on, and it is only within the bounds of mutually
shared concerns that competition is possible. The purpose of business has
been defined as the satisfactionof public demand; the introduction of inno-
vative, more efficient, more cost-effective products to fill a need; and the
optimal, on-going relation between producer and consumer. For business
competitionto make sense, the larger interests of the consumer and the soci-
ety must be kept in mind (Ford & Richardson, 1994).
(7) Alliance Formation. Strategic alliances can enhance the productivity and
competitiveness of the member organisations (Lewis, 1990; Porter et al.,
2001). Go and Govers (1999) claimthat partnerships, including private and
public sector collaboration between destinations, is a prerequisite to main-
taining destination competitiveness. Buhalis states that partnerships
between public and private sector and close cooperation between all local
suppliers is the key to the ability of destinations to offer quality products
(Buhalis, 2000: 111). The WTTC strongly advocates partnerships between
the private and public sectors as the most effective means of achieving
competitive travel and tourism development (WTTC, 2001).
As Hassan recognises in the tourism context, the multiplicity of industries
involved in creating and sustaining destinations requires the development of a
competitiveness model that examines the extent of cooperation needed for the
future of competitiveness (Hassan, 2000: 239). He advocates a relationship
approach to promoting destination competitiveness through building capaci-
ties for partnerships among three key constituencies: the private sector, the
public sector and non-governmental organisations including citizen groups
(Hassan, 2000: 243).
Tourism stakeholders now place on carefully chosen strategic alliances (TIA,
1999). Ideally, the DMO will also provide the leadership necessary to provide
overall directionfor tourismdevelopment withinthe destination. In all cases, the
function is to enable the many parts of the tourismsector to work together, and
thus compete more effectively (WTO, 1979). The interdependence of business
and mutual self-interest in the success of the destination encourages inter-firm
cooperation, e.g. marketing alliances, sectoral associations and management
structures (McDougall et al., 1994; Porter et al., 2001). Collaborativearrangements
of various types have become an increasingly important strategic method of
development, particularly in the travel sector of the industry (Evans et al., 2003:
250).
As the tourismindustry becomes increasingly global, it has become necessary
for individual firms, as well as destinations, to establish strategic alliances with
other organisations and destinations (Heath, 2000). Thus, for example, many
national and international airlines seek to enhance their ability to compete by
forming a broad range of working relationships with airlines that complement
their route structures as well as their marketing and technical capabilities. The
European Tourism Commission conducts joint research on behalf of its
members. The cities of CalgaryandFort Worthhaveestablished a direct working
linkage to jointly market their similar products in foreign markets as have
Prague, Budapest, and Vienna (Ratz & Puczko, 2000).
The issue of the interdependencies between enterprises and their role in the
destinationtourismsystemis under-researched (Shaw&Williams, 1990). So also
is appraisal of the specific and unique managerial challenges in tourism, particu-
larly of the small firm. Alliances differ in their motives, their scope, their struc-
tures, their objectives andthe ways in whichthey are managed(Evans et al., 2003:
251). Research is needed on the informationneeds of small firms and the ways in
which government and industry associations could assist. Unfortunately, very
little is known about the effectiveness of industrial policy in stimulating the
desired behaviour of entrepreneurs in tourism.
The competitive environment
Competition among firms creates an environment for excellence (Porter,
1990). A competitive destination depends in part on a local tourism industry
consisting of numerous alternative suppliers who must survive on the basis of
services that are either unique or superior in some way, or available at a lower
cost.
The relatively low entry barriers, few skills required, and few restrictions or
regulations imposedin the tourismindustryencourage the proliferation of small
firms (Sinclair &Stabler, 1997). Small firms tend to display a lack of appreciation
of the importance of staff training. Owner managers make bad investment deci-
sions. Many have little understanding of howto finance their business decisions.
Many fail to recognise their dependency on the competitiveness of the destina-
tion as a whole. It appears likely that future economies will consist of virtual
corporations involving a network of smaller enterprises. This will have enor-
mous implications for destination competitiveness that will depend on the stra-
tegic alliances between individual firms.
Global (macro) environment
Tourism is influenced by a range of global forces including laws and regula-
tions, growing concernfor the environment, restructuringof economies, shifting
demographics of the marketplace, the increasingly complex technologyhuman
resource interface, including computerisation. Such forces represent both chal-
lenges and opportunities to the tourism industry.
Kotler et al. (1996) propose that six environmental factors shape the (destina-
tion) marketplace: demographic, economic, natural, technological, political and
cultural factors. These forces are claimed to impinge upon visitor experiences
and sense of a destination. Some researchers use the acronyms PEST or STEEP to
classify the political, economic, environmental, sociocultural and technological
elements of the external or remote environment (Dwyer & Kemp, 2003; Evans et
al., 2003).
The political dimensionis a key factor that contributes tothe nature of the desti-
nationproduct. For example, the political stability, foreign policy or government
policy on important issues such as human rights or democratic elections can
determine tourist perceptions of behaviour (Murphy et al., 2000). The political
dimension can also influence the nature and form of heritage displays (Teye,
1988). Pechlaner argues that political regulations have an effect on destination
competitiveness (Pechlaner, 1999: 338). Governments need to streamline and
coordinate regulation to support mediumto long-termdevelopment and ensure
that the growth of the industry is not inhibited by broader policy developments
(WTTC, 2001).
An important economic variable impacting on destination competitiveness
includes the exchange rate, with a direct effect on destination price competitive-
ness (Dwyer et al., 2002). Other important economic variables include interest
rates that affect the amount of investment undertaken to respond to changing
patterns of tourismdemand. The government macroeconomic policy stance can
affect the economic contribution of tourism demand (Dwyer et al., 2000).
Sociocultural and demographic changes have a profound influence on the
travel motivations of people. A necessary requirement for destination competi-
tiveness is that there be a fit between tourist preferences and the destinations
product offerings (Kelly, 1978).
Technological forces represent major opportunities and threats that must be
considered in formulating strategies (Poon, 1993). Technological change can,
inter alia, create new markets, change relative cost positions in an industry,
reduce or eliminate cost barriers between businesses, create shortages in techni-
cal skills, result in changing values and expectations of employees, managers,
customers, and create new competitive advantages. Taking advantage of new
technologies and the Internet can also enable destinations to enhance their
competitiveness (Buhalis, 2000: 113). E-commerce capabilities can help boost a
destinations competitiveness because of the efficiencies gained through
Internet technologies. Technology can improve the efficiency of local suppliers
and also provide tools for the development and delivery of differentiated
tourismproducts. Technology can be accessedthroughlicensing, joint ventures,
foreign direct investment and imitation (Porter et al., 2001). One of the major
benefits of IT is the reduction of the dependency of firms on intermediaries for
the distribution of tourism products (Buhalis & Jafari, 1997). The new IT tools
enable smaller players, to compete on an equal footing with larger players
thereby increasingtheir competitiveness. Withnewtechnologyandcommunica-
tions, operational costs are reduced and flexibility, interactivity, efficiency,
productivity, and competitiveness are enhanced (WTTC, 2001).
The macro competitive strategy of a country either reinforces or nullifies the
competitive edge of the companies in that destination. Thus there is a very close
relationship between the micro and macro competitive strategies in a country.
Security and safety
Safety and security within a destination can be a critical qualifying determi-
nant of its competitiveness. Elements include: political instability/unrest, proba-
bility of terrorism, crime rates, record of transportation safety, corruption of
police/administrative services, quality of sanitation, prevalence of outbreak of
disease, quality/unreliability of medical services,and availability of medication
(Crotts, 1996). The current world downturn in tourism following the terrorist
attacks of September 11 is affecting both the volume and pattern of tourism
flows. Particular destinations, including the USA and countries in the Middle
East, are experiencing greater turndowns in visitors than others because of
visitor safety and security considerations. Issues of security and safety are now
firmly established as key elements of destination competitiveness.
The financial cost of a tourismexperience, in its broadest terms (i.e. including
transportationcosts to and from destination as well as costs incurred within the
destination), influence travel decisions. Price competitiveness indices can be
constructedgiven informationon purchasing power parities and exchange rates
(Dwyer et al., 2000a,b; 2002). Some costs are driven by larger socioeconomic and
global forces, others by government actions (e.g. taxes), while others can be
managed within limits.
The price competitiveness of a destinationdepends onthe respective prices of
the goods and services that cater to tourists needs (Dwyer et al., 2000a,b). The
perception of value is important, however. By itself, price is a meaningless indica-
tor if not taken in context with the corresponding quality of a product. Visitors
may be prepared to trade quality of experiences for lower prices (Buhalis, 2000:
106). Providing value for money is one of the key challenges facing any tourism
destination. A wide range of pricing techniques are available to tourism firms
and organisations, but regardless of what actual prices may be, it is ultimately
visitor perceptions of those prices and of value that count.
Demand Conditions
While the bulk of the discussionof the competitiveness of firms and nations as
appearing in the general literature focuses on supply-related items, demand
factors assume special importance in determining destination competitiveness.
The reasonfor this is that a destination may be competitive for one group of visi-
tors but not for another group, depending on their motivations for travel. Thus
travellers motivated by sunlust (Gray, 1970) or psychocentric (Plog, 1974)
characteristics, for example, will prefer a destination featuring sunshine,
beaches, resort hotels, or ski slopes, rather than one which has heritage resources
located in remote areas. And for a family wishing to experience theme park
entertainment, a resort island is no substitute for Orlando. Focus on the supply
side determinants gives an incomplete picture of destination competitiveness.
A widely used distinction between push and pull factors is relevant here
(Crompton, 1979). Pull factors can be regarded as destination attributes that
fulfil visitors travel motives. The discussion thus far has emphasised these pull
factors. By contrast, push factors are forces arising from within the individual
and from the individuals social context. These are real motivational forces and
determine a destinations competitiveness fromthe tourist viewpoint (Josiamet
al., 1999).
In the wider research literature on competitiveness, the nature of demand for
the industrys product is regarded as having animportant influence on firm, and
hence destination, competitiveness. Demand conditions, particularly domestic
demand and its internationalisation to foreign markets, establish the proving
grounds for the industry (Porter, 1990). A high domestic demand confers static
efficiencies and encourages improvement and innovation. Things seem to be no
different in the tourismcontext. In many cases it is domestic tourismthat drives
the nature and structure of a nations tourismindustry. Foreign demand thrives
more readily when domestic demand is well established.
With respect to destination price competitiveness, Dwyer et al. (1999) have
demonstratedthat, given the different purchasing patterns of tourists according
to motivation for travel, destination price competitiveness varies for different
groups of visitors. This again reveals the importance of considering the demand
side in discussion of the underlying factors of destination competitiveness.
For demand to be effective, tourists must be aware of a destination and its
specific offerings. There must also be a fit between the types of experiences
generated by these products and consumer expectations (Woodside &Lysonski,
1989). Thus, the competitiveness framework comprises three main elements of
tourism: demand-awareness, perception and preferences. Awareness can be
generated by various means, including destination marketing activities. The
image projected can influence perceptions and hence affect visitation. Actual
visitation will depend on the match between tourist preferences and perceived
destination product offerings.
Indicators of Destination Competitiveness
Having developed a framework for destination competitiveness, the next step
is to develop indicators of competitiveness. For the purposes of the present study,
a set of indicators of competitiveness was selected. These indicators were identi-
fied from the major elements comprising the generic destination competitiveness
model as just discussed. The selected set of indicators was also based on discus-
sions at workshops held in Korea and Australia during April and May 2001. The
respondents were selected from databases of tourism industry stakeholders in
both Australia and Korea and comprised industry operators/peak groups,
government officials and tourism research academics). In Australia, industry
workshops were held in both Brisbane and Sydney. An invitation was sent to
major industry stakeholders requesting them to send a representative to the
workshop. In Korea focus group meetings, which were comprised of academia,
travel business sectors (travel agencies, hotels, theme parks), and government
officials, were held in Seoul three times to identify important indicators which
can be applied to destination competitiveness. In Australia, 14 industry stake-
holders attendeda Sydney workshopwhile nine attendedits counterpart in Bris-
bane.
Although these numbers are not large, the interactive discussionprovided the
researchers with extremely useful input into model development and survey
development. Participants at these workshops identified the important indica-
tors of destination competitiveness falling under the main elements of the desti-
nation competitiveness model. (The scope of the project did not enable
consumers to be directly surveyed; further use of the model would need to incor-
porate consumer input and perceptions.) A symposium was held in Sydney on
17 July 2001 to discuss findings and feedback from industry stakeholders. The
symposiumsuggested research limitations, further research, and policy implica-
tions from findings.
It must be emphasised that there is no single or unique set of competitiveness
indicators that apply to all destinations at all times. For any given factor underly-
ing destination competitiveness, any number of indicators may be employed as
measures. And for any given destination, different indicators of competitiveness
will be relevant. At best the investigator can highlight certain indicators for
discussion. Some examples of relevant indicators are presented in Table 1. These
indicators are only some of those that are relevant to determining destination
competitiveness. There are a myriad of indicators that can be employed at any
given time.
As noted, individuals may differ in their perceptions of the same objective
reality(Carroll &Chang, 1970; Ritchie, Crouch&Hudson, 2000; Wish, 1971). The
indicators of destination competitiveness, under the various elements compris-
ing the competitiveness framework, can be categorised according to whether
they are objective or subjective. Thus, we can, for example, classify these key
indicators according to whether they are hard or soft measures. Hard
measures are those that are objectively or quantitatively measurable. These
would include the economic performance indicators in the final column of
Table 1. Examples of hard measures of a destinations competitiveness, in
respect of, say, natural resources, would be indicators such as the size of areas
devoted to national parks and nature reserves, topography, average mean
temperatures, sunshine levels, number of coral reefs etc. In contrast, soft
measures are those that relate to visitor perceptions and thus tend to be more
subjective or qualitative in form. Soft measures of a destinations competi-
tiveness in natural resources would be those relating to aesthetics, grandeur,
beauty, and so on.
More research needs to be devoted to distinguishing the different types of
measures appropriate to the different indicators of competitiveness. The World
Economic Forum, in its development of country competitiveness indices, has
Table 1 Selected Indicators of Destination Competitiveness
Endowed Resources
Natural
Comfortable climate for tourism
Cleanliness/Sanitation
Natural wonders/Scenery
Flora and fauna
Unspoiled nature
National parks/Nature reserves
Culture/Heritage
Historic/Heritage sites and museums
Artistic/Architectural features
Traditional arts
Variety of cuisine
Cultural precincts and (folk) villages
Created Resources
Tourism infrastructure
Accommodation quality/variety
Airport efficiency/quality
Tourist guidance/information
Local transport efficiency/quality
Visitor accessibility to natural areas
Convention/Exhibition facilities (capacity/quality)
Food services quality/variety
Range of activities
Water based
Nature based
Adventure activities
Recreation facilities
Sports facilities
Shopping
Variety of shopping items
Quality of shopping facilities
Quality of shopping items
Value for money of shopping items
Diversity of shopping experiences
Entertainment
Amusement/Theme parks
Entertainment quality/variety
Nightlife
Special events/festivals
Supporting Factors
General infrastructure
Adequacy of infrastructure to meet visitor needs
Health/Medical facilities to serve tourists
Financial institution and currency exchange facilities
Telecommunication system for tourists
Security/safety for visitors
Local transport systems
Waste disposal
Electricity supply
Quality of service
Tourism/Hospitality firms which have well defined performance
standards in service delivery
Firms have programmes to ensure/monitor visitor
satisfaction
Visitor satisfaction with quality of service
Industry appreciation of importance of service quality
Development of training programmes to enhance quality
of service
Speed/Delays through customs/immigration
Attitudes of customs/immigration officials
Accessibility of destination
Distance/Flying time to destination from key origins
Direct/Indirect flights to destination
Ease/Cost of obtaining entry visa
Ease of combining travel to destination with travel to other
destinations
Frequency/Capacity of access transport to destination
Hospitality
Friendliness of residents towards tourists
Existence of resident hospitality development
programmes
Resident support for tourism industry
Ease of communication between tourists and residents
Market ties
Business ties/trade links with major tourist origin
markets
Sporting links with major tourist origin markets
Ethnic ties with major tourist origin markets
Religious ties with major tourist origin markets
Extent of foreign investment in local tourism
industry
Destination Management
Destination management organisation
NTO acts as coordinating body for private and public sector tourism
organisations
NTO effectively represents views of all tourism stakeholders in tourism
development
NTO liaises effectively with private sector in tourism policy, planning and
development
NTO provides statistical information as input to tourism policy, planning and
development
NTO strategically monitors and evaluates the nature and type of tourism
development
Destination marketing management
Reputation of NTO
Effectiveness of destination positioning
Strength/Clarity of destination image
Efficient monitoring of destination marketing activities
Effective packaging of destination experiences
Links between destination tourism organisations and travel trade
NTO identification of target markets
NTO strategic alliances with other NTO
Destination marketing is based on knowledge of competitor products
Present fit between destination products and visitor preferences
Destination policy, planning, development
Existence of formal long-term vision for tourism industry development
Destination vision reflects resident values
Destination vision reflects tourism industry stakeholder values
Tourism policy conforms to a formal destination vision
Tourism planning and development conforms to a formal destination
vision
Tourism development is integrated into overall industrial development
Ongoing tourism development is responsive to visitor needs
Extent to which research findings are integrated into tourism planning and
development
Inventory of most significant attractors, facilities, services and experiences
offered in destination
Identification of major competitors and their product offerings
Community support for special events
Human resource development
Public sector commitment to tourism/hospitality education and
training
Private sector commitment to tourism/hospitality education and
training
Training/education responsive to changing visitor needs
Range/quality of tourism/hospitality training programmes
Environmental management
Public-sector recognition of importance of sustainable tourism development
Private sector recognition of importance of sustainable tourism development
Existence of laws and regulations protecting the environment and heritage
Research and monitoring of environmental impacts of tourism
Situational Conditions
Competitive (micro) environment
Domestic business environment in destination
Management capabilities of tourism firms and organisations
Extent of competitive rivalry between firms in domestic tourism
industry
Level of cooperation between firms in destination tourism industry
Links between tourism/hospitality firms and firms in other industrial
sectors
Entrepreneurial Qqualities of local tourism stakeholders
Access to venture capital
Tourism/hospitality firms operate in ethical manner
Firms use computer technology/commerce to achieve competitive
advantage
Destination location
Perceived exoticness of location
Proximity to other destinations
Distance from major origin markets
Travel time from major origin markets
Global (macro) environment
The global business context
Political stability
Legal/Regulatory environment
Government policies for tourism development
Economic conditions in origin markets
Sociocultural environment
Investment environment for tourism development
Technology changes
Value for money in destination tourism
Exchange rate
Air ticket prices from major origin markets
Accommodation prices
Destination package tour prices
Price of destination visit relative to competitor destinations
Safety/Security
Level of visitor safety in destination
Incidence of crimes against tourists in destination
Demand Factors
Destination awareness
Destination perception
Destination preferences
Market Performance Indicators
Visitor statistics (numbers)
Number of foreign visitors
Growth rate of foreign visitors
Market share of destination world, regional
Shifts in market share
Average length of stay
Rate of revisit
Visitor statistics (expenditure)
Expenditure of foreign visitors (FX receipts)
Growth rate of expenditure of foreign visitors
Share of destination in total tourism expenditure world,
regional
Shifts in expenditure share
Foreign exchange earnings from tourism as percentage of total
exports
Contribution of tourism to economy
Contribution of tourism to value added (absolute values and
percentages, and rate of growth)
Domestic tourism
International tourism
Contribution of tourism to employment (absolute numbers;
percentage of total employment and rate of growth)
Domestic tourism
International tourism
Productivity of tourism industry sectors
Indicators of economic prosperity
Aggregate levels of employment
Rate of economic growth
Per capita income
Tourism investment
Investment in tourism industry from domestic sources
Foreign direct investment in tourism industry
Investment in tourism as percentage of total industry investment
(and trend)
Price competitiveness indices
Aggregate price competitiveness indices
By journey purpose
By tourism sector
always emphasisedthat no reliable measures exist for suchcompetitiveness indi-
cators as the efficiency of government institutions, the sophistication of local
supplier networks, or the nature of competitive practices (Porter et al., 2001). An
initial attempt to distinguish hard and soft measures for tourismcompetitive-
ness has been undertaken by Crouch et al. (2000) for various dimensions of the
Crouch-Ritchie model of destination competitiveness.
No single table could list all of the dimensions of competitiveness or the asso-
ciated indicators. We have listed some of the main dimensions and indicators
only. Moreover, the distinction between hard and soft measures is one of
degree. Some measures have both a hard and soft feature. For example, the
uniqueness of flora and fauna can be determined objectively with reference to
whether they exist in the same forms in other locations (koalas, for example, are
found only in Australia). But some flora and fauna may not be perceived by the
tourist to be unique and thus may play no role in generating visitor flows.
Issues for Further Research
There areseveral issues that must be addressedin the development of a frame-
work of destination competitiveness.
One problem is that the end result of destination competitiveness
socioeconomic prosperity is not well defined. There is much debate among
social theorists about the appropriate measures of social welfare or well being.
In recent years researchers have developed measures of social well-being which
include economic as well as quality of life variables and variables relating to
environmental quality. The development of indicators of destination competi-
tiveness can benefit from the ongoing research in this area.
There is a need to explore the different types of indicators relevant to the
different contexts (levels) in which the model can be applied. The model devel-
oped herein is intended to be able to serve as a framework for determining the
competitiveness of an entire country as a tourismdestinationas well as its subre-
gions, some of which may be quite small in size. It would be interesting to
explore, for example, the relevance, advantages and limitations of the model for
determining the competitiveness of a city or geographically small destination.
While the model developed herein is intended to have generic import, specific
problems may arise in particular applications.
Government support for tourism
Budget for tourism ministry
Budget for NTO
NTO expenditure on destination marketing (comparison with competitors)
Support for transport infrastructure
Industry programmes accessed by tourism industry
Tax concessions
Subsidies to industry
Export marketing assistance
Vocational education skills/training for tourism industry
Given that the principal factors contributing to competitiveness and therefore
to the improvement of living standards will differ for economies at different
levels of development, a fact much emphasised in WEF explorations of country
competitiveness (World Economic Forum, 2001), additional research is warrant-
ed onthe applicability of the model to destinations at different stages of develop-
ment. This area has, to our knowledge, been totally neglected by tourism
researchers to date.
A further issue is that of the relationship between the competitive advantage
of the destination as a whole (as compared to alternative destinations) and the
competitive advantage achieved by its constituent firms and organisations (as
compared to other firms and organisations both inside and outside of the desti-
nation). While there is undoubtedly a link between the two, little is known about
its strength and directions of influence. The topic has, unfortunately, been
neglected by researchers.
A major problem, underlying all attempts to establish indices of competitive-
ness, involves the integration of objective and subjective attributes of competi-
tiveness. An important issue for further research is to explore the possibility of
incorporating qualitative factors into the construction of a competitiveness
index. There is no method available that can be used to integrate hard and soft
factors into a single index. More research needs to be undertaken as to how
objective and subjective attributes of competitiveness are to be given due
weight in determining overall destination competitiveness.
More research needs to be undertaken onthe relative importance of the differ-
ent dimensions of competitiveness. Thus, for example, how important are
natural resources comparedto, say, destinationimage? And within the category
of natural resources, how important is, say, climate, compared to pristine envi-
ronments? Howimportant is service qualitycomparedtoprice competitiveness?
Such questions are unable to be answered in the absence of a specific destination
being studied and for specific visitor market segments to that destination.
There is also a need for further research on the importance of different attrib-
utes of destination competitiveness in determining tourismflows for visitors in
different market segments, and for travel decisions made in different buying
situations or contexts. These issues flag an ongoing need for more detailed
empirical studies of destination attributes, consumer preferences and the differ-
ent components of the travel decision.
The implications of the framework for informing investment and other
resource allocationdecisions by public- and private-sector tourismstakeholders
need detailed exploration. Ideally, the model can inform tourism operators
about the cost effectiveness of different investments that can help their constitu-
ent firms achieve and maintaincompetitive advantagewhile enhancing destina-
tion competitiveness. The model should also provide a basis for informing
governments about potential net benefits from alternative policies to enhance
destinationcompetitiveness. In this latter role, the model canbe usedto compare
the costs and benefits of different policy measures and agreements enacted by
different governments in terms of the extent to which they ultimately increase or
reduce resident quality of life.
Ideally, the model can be used to compare the performance of different
destinations world-wide in respect of competitiveness (Dwyer et al., 2003).
Performance ratings can be developed for destination competitiveness as a
whole as well as for particular aspects of competitiveness. Thus measures can be
developed to compare the competitiveness of destinations in respect of all of the
main determinants taken together, to compare the competitiveness of destina-
tions in respect of the main dimensions of the model such as Created Resources,
Supporting Factors and Resources and Destination Management, or as noted
above, tocompare the effects ondestinationcompetitiveness of different govern-
ment policy measures. The model can be used to develop strategies to increase
bilateral tourism flows between any destination pair. In the context of bilateral
tourismflows, it can be usedto address the pull that the attributes of each desti-
nation have for residents of the other country and to highlight areas where
impediments are placed in the way of visitor flows.
The model allows changes in destination competitiveness to be monitored
over time. Application of the indicators can provide a moving picture of desti-
nation competitiveness at different points in time. The model allows for destina-
tion competitiveness to be assessed over time in respect of particular types of
travellers (by origin, demographic characteristics or motivation), or by compari-
son to a particular competitor destination or competitor set of destinations. In
this way trends in destination competitiveness can be linked to various private-
and public-sector initiatives or other variables.
Conclusions
Since existing and potential tourism flows to any destination are inextricably
linked to that destinations overall competitiveness there exists the need to
develop a framework and indicators of destination competitiveness. The devel-
opment of a set of competitiveness indicators can serve as a valuable tool in iden-
tifying what aspects or factors influence tourists in their decision to visit other
countries. Unfortunately, to date only a small number of tourism researchers
have addressed this important topic.
The paper has sought to develop a model and indicators of destination
competitiveness that will enable comparison between countries and between
tourism sector industries. The development of a model of destination competi-
tiveness and an associated set of indicators will allow identification of the rela-
tive strengths and weaknesses of different tourismdestinations, and can be used
by industry and governments to increase tourism numbers, expenditure and
positive socioeconomic impacts resulting from tourism growth.
The review of the management literature on competitiveness revealed that,
although the frameworks of competitiveness appearing in the wider literature
areuseful in highlighting the various determinants of firm or national compet-
itiveness, they do not address the special considerations relevant to determining
destination competitiveness.
The review of the literature on tourismdestination competitiveness revealed
that none of the models that have been proposed to date are entirely satisfactory.
In particular, they do not provide a comprehensive treatment of the various
issues surrounding the notion of competitiveness that are being explored in the
wider literature and that must be takeninto account in developing a comprehen-
sive framework of destination competitiveness.
Amodel of destinationcompetitiveness was developed that sought to capture
the mainelements of competitiveness highlighted in the general literature, while
addressing the special issues involved in exploring the notion of destination
competitiveness as emphasised by tourism researchers. Associated with the
model is a set of indicators that can be used to measure the competitiveness of
any given destination. These indicators, comprising both objective and subjec-
tive measures, were identified from the major elements comprising the generic
destinationcompetitiveness model and also fromdiscussions at workshops held
in Korea and Australia.
The advantages and limitations of the model were highlighted, and issues for
further researchwere explored. The model developed here canformthe basis for
further conceptual and empirical research. Perhaps the major thrust of the
required research agenda is to explore the role of demand side factors in com-
paring the competitiveness of different destinations. A substantial amount of
empirical research is needed to develop suitable measures of destination
competitiveness from the viewpoint of different types of tourists with their
different travel motivations. The greater our knowledge about the interrelation-
ships between consumer preferences and destination attributes, the more
informed can be decision making by private- and public-sector stakeholders to
enhance resident socioeconomic prosperity from the tourism industry.
Acknowledgements
Dwyer and Kim, were respectively, the academic project leaders of a study of
the determinants of bilateral tourismflows between Australia and South Korea.
The project was undertakenonbehalf of the Department of Industry, Science and
Resources and the National Centre for Tourism in Australia, and the Korean
Ministry of Culture and Tourism, is association with the Korea Tourism
ResearchInstitute (KTRI). The resulting report was titledDestination Competitive-
ness: Development of a Model with Application to Australia and the Republic of Korea.
Input from team members Roger March, Peter Forsyth, Geoffrey Crouch, and
Keetag Choi is gratefully acknowledged. The support of the Australian Depart-
ment of Industry, Science and Resources, and the Korea TourismResearch Insti-
tute is also acknowledged.
Correspondence
Any correspondence should be directed to Dr Larry Dwyer, Qantas Professor
of Travel & Tourism Economics, Centre for Tourism Policy Studies, School of
Economics, University of New South Wales, Sydney, NSW 2052, Australia
(l.dwyer@unsw.edu.au).
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Destination Competitiveness: Determinants and Indicators

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Destination Competitiveness:

Determinants and Indicators

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