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Destination Competitiveness: A Model and Determinants

Larry Dwyer Phd.


Head, Tourism and Hospitality Strategy Group
University of Western Sydney
Australia

Chulwon Kim Phd.


Keimyung University
Korea

ABSTRACT

The paper develops a model of destination competitiveness that will enable comparison
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 emphasized
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 subjective measures, were identified from the major elements comprising the
generic destination competitiveness model. The development of a model of destination
competitiveness and an associated set of indicators allows identification of the relative
strengths and weaknesses of different tourism destinations, and can be used by industry and
Governments to increase tourism numbers, expenditure and positive economic impacts. Key
words: tourism, destination competitiveness, indicators

Introduction

To succeed in the international tourism marketplace any destination must ensure that its
overall attractiveness, and the integrity of the experiences it delivers to visitors, must equal or
surpass that of the many alternative destinations open to potential visitors. The development
of a model of destination competitiveness and an associated set of indicators will allow
identification of the relative strengths and weaknesses of different tourism destinations, and
can be used by industry and Governments to increase tourism numbers, expenditure and
economic impacts.
In recognition of the importance of determining the factors underlying destination
competitiveness is fact has given rise to a joint project between the Department of Industry
Science and Resources and the National Centre for Tourism in Australia, and the Korean
Ministry of Culture and Tourism, in association with the Korea Tourism Research Institute
(KTRI). The project was entitled “ Competitiveness of the Tourism Industry in the Asia-
Pacific Region with Reference to the Bilateral Tourism Flows Between Australia and the
Republic of Korea”. A model of destination competitiveness was constructed, indicators
developed, and Korean and Australian tourism stakeholders were surveyed as to their views
as to the competitiveness of their home country compared to a representative set of Asian
Pacific destinations1.
This paper has three major objectives: to develop a model of destination competitiveness that
identifies key success factors in determining destination competitiveness; to highlight the
advantages and limitations of the model; and to identify areas for further research.

Competitiveness

The notion of destination competitiveness must be consistent with the notion of


‘competitiveness’ in the international economics and international business literature. The
literature on international competitiveness was critically reviewed with a view to developing
a framework suitable for tourism research. Despite all the discussions on competitiveness, no
clear definition or model has yet been developed. It has proved to be a very broad and
complex concept, defying attempts to encapsulate it in universally applicable terms. It is a
complex concept because a whole range of factors account for it. Competitiveness is both a
relative concept (ie. compared to what?) and is multi-dimensional (ie. what are the salient
attributes or qualities of competitiveness?) (Spence and Hazard 1988).
Perspectives in various disciplines reveal that competitiveness is a multi-faceted concept. We
can regard the notion of competitiveness as associated with four major groups of thought
(Waheeduzzan and Ryans 1996). These are: (1) comparative advantage and/or price
competitiveness perspective; (2) a strategy and management perspective; (3) a historical and
socio-cultural perspective;(4) development of indicators of national competitiveness

From the literature on comparative advantage and price competitiveness comes recognition of
the potential importance of destination price competitiveness in influencing visitor flows.
Studies by tourism researchers indicate the price sensitivity of travellers is high in certain
markets (Lee, Var and Blain 1996 ). Empirical studies highlight the importance of levels of
technology, exchange rates, government policies, industry competition, and the influence of
multinational enterprises as factors influencing the price competitiveness of tourism firms
(See Dwyer, Forsyth and Rao 2000a, 2002).
From a Strategy and Management Perspective comes a recognition of the importance of the
firms’ resources in influencing the achievement and maintenance 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
(Rumelt 1984, Porter 1985, 1990, Prahalad and Hamal 1990, Barney 1991, Grant 1991,
Waheeduzzan and Ryans 1996, Cho 1998, Narashima 2000). In order to achieve competitive
advantage, the focus should be 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 competitors assets and skills” (Aaker 1989: 105). Resources of the firm that
are considered to offer competitive advantage include: the skills of the employees, assets,
cash-flow, capital/investment, human, non-human and strategic), structure of the organization
(flexibility, balance, and dynamic aspects), organization-environmental interface (source and
positional advantage, organizational alignment, generic strategy, strategic planning, and
customer-oriented offering), and many firm-specific variables (core competencies, imitability
of products, information, intelligence system, value-added by the firm, and quality). Since the

1
Dwyer and Kim were, respectively, the academic project leaders of the study. Input from team members Roger
March, Peter Forsyth, Geoff Crouch, and Keetag Choi is gratefully acknowledged. The support of the Australian
Department of Industry, Science and Resources,and the Korea Tourism Research Institute is also acknowledged.
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.
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, Hofstede and Bond 1991; World Economic Forum 2001).
From the attempts to develop indicators of national competitiveness such as those developed
by the World Economic Forum (2001) and WTTC (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 tourism context an important 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 traveler’s perceptions
(e.g. perceptions 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 tourist’s perceptions is such as to warrant separate recognition in a model of
destination competitiveness (Murphy, Pritchard and Smith 2000).

Perspectives on Destination Competitiveness


Destination competitiveness would appear to be linked to the ability of a destination to
deliver goods and services that perform better than other destinations on those aspects of the
tourism experience considered to be important by tourists. Dwyer, Forsyth and Rao (2000a)
state that “tourism competitiveness is a general concept that encompasses price differentials
coupled with exchange rate movements, productivity levels of various components of the
tourist industry and qualitative factors affecting the attractiveness or otherwise of a
destination”. Competitiveness has also been defined as ‘---the ability of a destination to
maintain its market position and share and/or to improve upon them through time’
(d’Hartserre 2000: 23). Hassan (2000) defines competitiveness as “the destination’s ability to
create and integrate value-added products that sustain its resources while maintaining market
position relative to competitors”.
The most detailed work undertaken by tourism researchers on overall tourism
competitiveness is that of Crouch and Ritchie (1993,1994, 1995, 1999, 2000, 2001). To be
competitive, a destination’s development of tourism must be sustainable, not just
economically and not just ecologically, but socially, culturally and politically as well (p 5).
They focus on long-term economic prosperity as the yardstick by which destinations can be
assessed competitively. Thus the most competitive destination is that which most effectively
creates sustainable well-being for its residents.

In the view of the present authors, none of the models of destination competitiveness that
have been proposed to date are entirely satisfactory. In our view 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.
A model of destination competitiveness has been developed by the 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 tourism researchers, Crouch and
Ritchie in particular. The integrative model proposed here contains many of the variables and
category headings identified by Crouch and Ritchie but differs some important respects.
These differences will be discussed below.
Figure 1 displays the main elements of destination competitiveness as falling into several
major categories.

Figure 1. Integrated Model of Destination Competitiveness


Situational Conditions
Destination Socio-
Inherited Created Competitiveness Economic
Resources Resources Destination
Destination
Prosperity
Management
Management

Supporting National/Regio
Factors & Demand Destination nal
Resources Conditions Competitiveness Competitivene
Indicators ss Indicators

Inherited and Created Resources are each allocated their own box, as is Supporting Factors
and Resources. These three boxes are, in turn, grouped within a larger box. Together, these
factors provide the various characteristics of a destination that make it attractive to visit and
the foundations upon which a successful tourism industry is established. Together, they
provide the basis for destination competitiveness.
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 situational conditions (Crouch and Ritchie 1999). The category includes
the activities of Destination Management Organizations, Destination Marketing Management,
Destination Policy, Planning and Development, Human Resource Development and
Environmental Management.
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 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.
Situational Conditions are forces in the wider environment that define the limit, or influence
the potential of destination competitiveness. These forces can moderate, modify or mitigate
destination competitiveness by filtering the influence of the other groups of factors and thus
may be positive or negative in their influence on competitiveness.
The box representing Destination Competitiveness is linked backwards to the various
determinants of competitiveness and forwards to one representing Regional/National
Prosperity indicating that destination competitiveness is itself an intermediate goal toward a
more fundamental aim of socio-economic well-being for residents. Each of these objectives is
associated with a set of indicators. Indicators 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 National/Regional Socio-Economic Prosperity relate to
key macroeconomic variables including productivity levels in the economy, aggregate
employment levels, per capita incomes, rate of economic growth etc.

The integrated model of destination competitiveness retains a good deal of the Crouch
Ritchie framework but there are some significant differences. The main elements structure of
each model are displayed in Table 1.

Table 1. Comparison of Integrated Model and Crouch-Ritchie Model


Integrated Model Crouch-Ritchie Model
Endowed Resources Core Resources & Attractors
Natural Resources Physiography and Climate
Cultural/Heritage Resources Culture and History
Created Resources Market Ties
Tourism infrastructure Mix of Activities
Special events Special Events
Range of available activities Entertainment
Entertainment Superstructure
Shopping

Supporting Factors and Resources Supporting Factors & Resources


General Infrastructure Infrastructure
Quality of Service Accessibility
Accessibility of Destination Facilitating Resources
Hospitality Hospitality
Market Ties Enterprise

Destination Management Destination Management


Destination Management Organisation Marketing
• Coordination Finance and Venture Capital
• Provision of information Organisation
• Monitoring and evaluation Human Resource Development
Destination Marketing Management Information/Research
Destination Policy Planning, Development Quality of Service
Human Resource Development Visitor Management
Environmental Management Resource Stewardship

Situational Conditions Destination Policy, Planning, Development


Destination Location System definition
Competitive (micro)Environment Philosophy
• Capabilities of Firms Vision
• Strategies of Firms Audit
• Industry Structure and Firm Rivalry Positioning
Global (macro) Environment Development
• political/legal/regulatory Competitive/collaborative analysis
• economic Monitoring & evaluation
• sociocultural
• technological Competitive (micro) Environment
Security/ safety
Price competitiveness Global (macro) Environment

Qualifying & Amplifying Determinants


Demand Conditions
Location
Tourist preferences
Interdependencies
Awareness of destination
Safety/security
Destination image
Awareness/image/brand
Cost/value
1. The integrated model includes some types of determinants missing from the Crouch-
Ritchie model:
The distinction between inherited (endowed) and created resources, explicitly drawn in the
integrated model, but not in the Crouch-Ritchie model, seems to be a useful one, which has
policy significance. As Crouch and Ritchie themselves recognize, destination
competitiveness will depend importantly on both types of assets. In the integrated model
‘market ties’ are included among the Supporting Factors and Resources, rather than under
Core Resources and Attractors as in the Crouch-Ritchie model.
The integrated model explicitly recognizes Demand Conditions as an important determinant
of destination competitiveness. Tourist awareness of alternative destinations, their
perceptions of different destinations, and their perception of the extent to which the
destination’s product offerings will meet their needs, are critical to tourist flows. A
destination’s product must develop in a way that ‘matches’ the evolving consumer
preferences, if the destination is to enhance or even maintain competitiveness. The Crouch-
Ritchie model seems to neglect the demand side of competitiveness determination. Focus on
the supply side determinants gives an incomplete picture of destination competitiveness.
The integrated model explicitly recognizes that destination competitiveness is not an ultimate
end of policy making but is an intermediate goal toward the objective of regional or national
economic prosperity. It therefore explicitly allows for selected performance indicators of both
Destination Competitiveness and National Prosperity to be highlighted.

2. The integrated model does not provide a separate box for Destination, Policy and
Development but subsumes this determinant type under Destination Management. Thus, in
the integrated model Destination Management includes ‘those factors that shape and
influence a destination’s competitive strength’ as well as those that ‘create an environment
within which tourism can flourish in an adaptive manner’. The category Destination
Management now comprises five major dimensions- Destination Management Organisation,
Destination Marketing Management, Destination Policy, Planning and Development, Human
Resource Development and Environmental Management.

3. The category, ‘Qualifying and Amplifying Determinants’ in the Crouch-Ritchie model is


now re-labeled “Situational Conditions’.
In the integrated model, the competitive (micro) environment and the global (macro)
environment are included among the Situational Conditions. This is consistent with Strategic
Management theory wherein firms operate within two types of external environments: an
industry (micro) environment as well as a more remote (macro) environment.
In the Crouch-Ritchie model ‘interdependencies’ between destinations are included as a
separate heading under Qualifying and Amplifying Determinants whereas in the integrated
model they are recognized to relate to the ease of combining travel to different destinations,
that is, accessibility attributes, and so appear under that element of Supporting Factors and
Resources.
The Crouch-Ritchie model includes awareness/image/brand among the Qualifying and
Amplifying Determinants. In the integrated model visitor awareness is included as a Demand
Condition. The image and brand of a destination also have relevance for Demand but they are
acknowledged also to be fashioned by Destination Marketing Management, a major sub
category of Destination Management.
4. The integrated model groups some of the elementary determinants of destination
competitiveness differently than does the Crouch-Ritchie model.
The Crouch-Ritchie model lumps all infrastructure together under the label ‘superstructure’
and includes this among the Core Resources and Attractors. In contrast, the integrated model
distinguishes between tourism infrastructure and general infrastructure and allocates only the
former to Created Resources. General infrastructure does not have tourist pulling power as
such and is therefore included among the Supporting Factors and Resources.
The Crouch-Ritchie model includes ‘Enterprise’ under Supporting Factors and Resources.
The integrated model includes enterprise within elements of the Competitive (Micro)
Environment. This acknowledges the views of Porter and others who have argued that the
strategies of firms and organizations in the home country, and its competitive environment
generally, provide the context for productivity increases. In the integrated model, in
deference to Porter’s Five Forces Analysis of Competition (Porter 1980), the Competitive
(Micro) Environment is discussed under three headings: the capabilities of destination firms,
their strategies, the extent of competitive rivalry and collaboration among firms, with the
customer environment included under demand conditions.
The Crouch-Ritchie model does not have a separate attribute of ‘shopping’. The shopping
sector is subsumed under mix of activities in that model. In contrast, the integrated model
recognizes the importance of shopping as a major attraction in its own right and one which
can impact substantially on visitor flows. ‘Shopping’ is included in the integrated model with
other Created Resources such as tourism infrastructure, special events, range of available
activities and entertainment.
Quality of Service, which is included under Destination Management in the Crouch-Ritchie
model, appears under Supporting Factors and Resources in the integrated model. This is to
regard service quality, associated with hospitality, as one of the foundations upon which a
successful tourism industry is established.
Finance and Venture Capital, included under Destination Management in the Crouch-Ritchie
model is regarded as an element of the Competitive (Micro) Environment within Situational
Conditions in the model presented here.

5. The integrated model attempts to provide a more realistic display of the linkages between
the various elements of destination competitiveness than does the Crouch-Ritchie model.
Thus, certain of the boxes drawn have two way arrows between them indicating interactive,
rather than one way, effects. Thus, for example, a destination may create certain resources
(eg. accommodation) to harmonise with its natural assets. The types of natural assets, in turn,
may determine the appropriate type of tourism infrastructure development. A destination’s
core resources (inherited and created) can influence the types of Supporting Factors and
Resources that are developed and these, in turn, provide an important foundation for the
tourism industry. Similarly, there are two way flows between the various other major
elements of the model, Destination Management and Demand Conditions.

Indicators of Destination Competitiveness


The indicators of destination competitiveness, under the various elements comprising the
competitiveness framework, can be categorized according as 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. Examples of ‘hard’ measures of a destination’s 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 destination’s competitiveness in natural resources would be those relating to ‘aesthetics’,
‘grandeur’, ‘beauty’, etc. An initial attempt to distinguish ‘hard’ and ‘soft’ measures for
tourism competitiveness has been undertaken by Crouch, Ritchie and Hudson (2000).
Participants at the workshops held in Korea and Australia identified the important indicators
of destination competitiveness falling under the main elements of the destination
competitiveness model. At these workshops, a set of indicators of competitiveness was
developed and formed the basis of a survey to rate both Korea and Australia against a set of
representative Asian Pacific countries. There is insufficient space to reproduce these
indicators here (But see Dwyer and Kim 2001, 2002).

Issues for Further Research

The end result of destination competitiveness- socio-economic 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 competitiveness 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 developed herein is intended to be
able to serve as a framework for determining the competitiveness of an entire country as a
tourism destination as well as its subregions, 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.
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 emphasized in WEF explorations of country competitiveness, additional research
is warranted on the applicability of the model to destinations at different stages of
development. This area has, to our knowledge, been totally neglected by tourism researchers
to date.
A major problem, underlying all attempts to establish indices of competitiveness, involves the
integration of objective and subjective attributes of competitiveness. An important issue for
further research is to explore the possibility to 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 on the relative importance of the different dimensions
of competitiveness. Thus, for example, how important are natural resources compared to, say,
destination image ? And within the category of natural resources, how important is, say,
climate, compared to pristine environments? How important is service quality compared to
price 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 attributes of
destination competitiveness in determining tourism flows 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 different components of the travel decision.
The implications of the framework for informing investment and other resource allocation
decisions by public and private sector tourism stakeholders need detailed exploration. Ideally,
the model should be able to play a role in informing tourism operators about the cost
effectiveness of different investments that can help their firms achieve and maintain
competitive advantage and at the same time, to enhance destination competitiveness. The
model should also inform governments about potential social returns from alternative policies
towards different priority areas. In this latter role, the model can be used to compare the
different policy measures and agreements enacted by different governments in terms of the
extent to which they promote or impede destination competitiveness.
Ideally, the model can be used to compare the performance of different destinations world
wide in respect of competitiveness. 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 destinations in
respect of the main dimensions of the model such as Created Resources, Supporting Factors
and Resources and Destination Management, or as noted above, to compare the effects on
destination competitiveness of different government policy measures. The model can be used
to develop strategies to increase bilateral tourism flows between any destination pair. In the
context of bilateral tourism flows, it can be used to address the ‘pull’ that the attributes of
each destination 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 destination competitiveness at
different points in time. The model allows for destination competitiveness to be assessed over
time in respect of particular types of travelers (by origin, demographic characteristics or
motivation), or by comparison 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
destination’s overall competitiveness, there is need to develop a framework and indicators of
destination competitiveness. The development of a set of competitiveness indicators can
serve as a valuable tool in identifying 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 authors have 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 competitiveness and an associated set of indicators
will allow identification of the relative strengths and weaknesses of different tourism
destinations, and can be used by industry and Governments to increase tourism numbers,
expenditure and positive economic impacts.
A model of destination competitiveness was developed. 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 emphasized
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 subjective measures, were identified from the major elements comprising the
generic destination competitiveness model and also from discussions at workshops held in
Korea and Australia. Unfortunately, considerations of space precluded listing and discussing
these indicators.
The advantages and limitations of the model were highlighted, and issues for further research
were explored. The model developed here can form the 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 comparing 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 is our knowledge about the interrelationships
between consumer preferences and destination attributes, the more informed can be decision
making by private and public sector stakeholders to enhance resident socio-economic
prosperity from the tourism industry.

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