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Destination Competitiveness: Determinants and Indicators
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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,
Downloaded by [UNSW Library] at 15:55 15 July 2011
while appreciating 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 destina-
tion. These indicators, comprising both objective and subjective measures, were iden-
tified from the major elements comprising the generic destination competitiveness
model and also from discussions at workshops held in Korea and Australia. This paper
has four major objectives: to develop a model of destination competitiveness that 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 destination competitiveness and an
associated set of indicators allows identification of the relative strengths and weak-
nesses of different tourism destinations, and can be used by industry and governments
to increase tourism numbers and expenditure, and enhance socioeconomic 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-
tion’s 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 destination competi-
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-
ated set of indicators will allow identification 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
370 Current Issues in Tourism
governments to increase tourism numbers, 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;
´ to develop an appropriate set of indicators of destination competitiveness;
´ 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
to capture the main elements 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
destination competitiveness model and also from discussions 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-faceted concept. We can regard the notion of competitiveness as associated
with three major groups of thought. These are:
Destination Competitiveness: Determinants and Indicators 371
(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 & D’Cruz, 1993).
(2) A strategy and management perspective (Day & Wensley, 1988; D’Cruz &
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,
each group has suggested different indicators to explain or measure competitive-
ness (Moon & Peery, 1995; Waheeduzzaman & Ryans, 1996).
The definitions offered in the literature provide both a micro and a macro
connotation of ‘competitiveness’.
From a 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 President’s Commission on Industrial Competitiveness, 1985).
On the other hand, from a micro perspective it is seen as a firm-level phenome-
non: firm-specific behaviours determine competitiveness. Porter’s competitive
analysis framework (Porter, 1980) emphasises industry attractiveness and its
characteristics, such as the potential to enhance the firm’s power vis à 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 acquisition and 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 firm’s sustained competitive advantage as the implementation of
a value-creating strategy not simultaneously being implemented by any current
or potential competitors and when these competitors are also unable to duplicate
the advantages based on such a strategy. Core competence provides potential
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 sustained through some kind of ‘isolating mecha-
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 return or price. In the long run, in a free enterprise system, competitiveness is
measured by the ability of the organisation to stay in business and to protect the
organisation’s 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 nation is not an end but a means to an end; its ultimate goal
is to increase the standard of 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 tended to stress competitive advantage (resulting from value-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: 35–6). 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 tourism sector 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 to form a total experience of the area visited’ (Murphy et al., 2000:44).
It is appropriate to inquire, however, as to the lessons that can be learned from
the competitiveness literature in developing a framework of destination compet-
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 sensitivity of travellers is high in certain markets (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 tourism firms (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
possession of ‘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 advantage is a more market-oriented phenomenon. In order 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 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 traveller’s 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 such as 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
destination to 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 ‘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’
(Dwyer et al., 2000a: 9).
Recently, two international tourism journals 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 Croatia’s hotel sector (Cizmar & Seric;
Osmagic-Bedenik); the role of public administration in the competitiveness of
Spain’s 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; d’Hauteserre; Go &
Govers), competitiveness and transport (Prideaux), and competitiveness and the
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
tourism industry, as well as subjectively measured variables such as ‘richness of
culture and heritage’, ‘quality of the tourism experience’ 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’
(d’Hartserre, 2000: 23). Hassan 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’ (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 to attract 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 tourism’s economic contribution to an area using
Computable General Equilibrium modelling reveals that the expansion of
tourism will often ‘crowd out’ other economic sectors, resulting in a change in the
composition of industry rather than an expansion of 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
economy’s 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 tourism stakeholders and policy makers. Go and Govers (1999), in
a study of conference site selection, measure a destination’s 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 destination’s 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 destination’s 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 detailed work undertaken by tourism researchers on overall tourism
competitiveness is that of Crouch and Ritchie (1995, 1999) and Ritchie and
Crouch (1993, 2000). They examined the applicability to tourism destinations 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 illusory without sustainability’ (Ritchie & Crouch, 2000: 5). They claim
that ‘to be competitive, a destination’s development of tourism must be sustain-
able, not just economically and not just ecologically, but socially, culturally and
politically as well’ (5). Ritchie and Crouch focus on long-term economic 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).
Heath’s 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.), managing capacity); Capitalising on the ‘Value
Adders’ (e.g. location, value, and destination linkages); 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 and indirect stakeholder involvement and beneficiation; information
management, research and forecasting; managing competitive indicators
and benchmarks.
´ The Building Blocks are essential to make tourism ‘happen’ 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 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 (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 destination competitiveness. It
also explicitly recognises that destination competitiveness 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.) and Heritage or Cultural (cuisine,
handicrafts, language, customs, belief systems etc.). Created Resources include
tourism infrastructure, 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 allocated their 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,
378
Destination Management
Government Industry
Resources
Endowed Created
Resources Resources
Natural Situational
Conditions
Heritage
Supporting
Socioeconomic Prosperity
Resources
Destination Competitiveness
Demand
Destination Quality
Competitiveness of Life
Indicators Indicators
Current Issues in Tourism
Figure 1 The main elements of destination competitiveness

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 correspond to the Qualifying and Amplifying determinants as identified by
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 organisation managers 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 destination’s
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

tourism infrastructure (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 Destination Management to achieve and maintain sustainability whilst
the activities of public- and private-sector tourism organisations 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 towards a more fundamental aim of socioeconomic well-being
for residents. Each of these objectives is associated with a 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-
gate employment levels, per capita incomes, rate of economic growth and so on.
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 can be classified in several ways, and core 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 destination’s endowment of natural resources is
crucial for many forms of tourism and visitor 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 and powerful attracting force 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 destination’s heritage endowment, may well mask the
quality of these attractions.
Created resources
Porter (1990) and others 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 convention and visitor bureaux. Tourism also
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, administration offices (police, courts etc.). In the eyes of many tour-
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 tourist’s experience of the destination
product. Murphy et al. (2000) found that the level or lack of infrastructure affects
tourist experiences and that ‘tourism infrastructure’ 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 tourism etc.), in which the tourism experience is enhanced by the lack
of created tourism infrastructure. This reinforces the importance of the demand
side as a determinant of destination competitiveness (see below).
Special events
This category is intended to capture those happenings where the visitor tends to
be highly involved as a participant (e.g. a Mardi Gras, a World Fair) or those events
where simply ‘being there’ is significant (royal weddings, papal coronations, the
investiture of a world leader, Wimbledon tennis). The capacity of special events to
generate tourism expenditure is well documented although 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
contribution to tourism destinations, 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 (and costs) of a more ‘intangible’ nature that impact on local
communities as well as entire regions. These include associated social and cultural
benefits to a destination, the exchange of ideas, fostering business contacts,provid-
ing fora for continuing education and training, facilitating technology transfer 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 destination’s 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-
tion’s 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 than its perceived quality or 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 consumer’s mind
with the destination, even though it could be staged practically anywhere. They
thus claim that the competitiveness value of this event exceeds its entertainment
value as a mere ‘religious’ event (11).
Shopping
Shopping can be regarded as a form of entertainment or, possibly, a necessary
chore for many tourists. For some cultures, e.g. Japanese and Koreans, 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).
Given the 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 collection of specific skills not easily imitable by rivals can be an impor-
tant source of sustained competitive advantage (Barney, 1991; Prahalad &
Hamel, 1990).
General infrastructure
A destination’s 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 tourism experience is vital. Efforts must be made
to ensure quality of service and there is now recognition of 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 destination’s 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 integrity of 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
situation since different levels of quality may well be appropriate for a given cost
level in different situations or settings.
The perceived quality of tourism services 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 destination’s 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 have become increasingly reliant on the delivery of quality prod-
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) and an in-depth knowledge of their needs and expectations’ (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; competition among carriers etc. Visas may be expensive
in terms of monetary outlay and/or inconvenient to procure, thus deterring visi-
tation. Countries may also impose restrictions on outbound travel by residents.
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 information to tourists; attitudes
towards tourists and the tourism industry. Tourist guidance and information,
including good signage, 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 tourism destinations have a dependency on others that is competitive or
complementary in nature (Ritchie & Crouch, 2000). For example, Macau tourism
relies on tourism flows to Hong Kong, and tourism to Monaco is very dependent
upon tourism numbers to the French and Italian Riviera. Similarly, international
tourism to Tasmania is associated with visitor numbers to Australia. This type of
dependency can also be considered as a form of market tie.
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
facilitation strategy. The marketing activities of DMOs are mainly centred 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 familiarisation trips 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-term appeal to the target travel customer
segments. He claims that ‘destinations are winning competitive battles 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 away from home, and information to 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 destination image; creation of a high level
of destination awareness and awareness of the destination’s specific products
and service offerings; identification of high yield customer bases; development
of strong links with tourism wholesalers and retailers; 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, tourism must be developed and managed within 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 tourism businesses, 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 and managers wish it to be in the future’. Visioning is an
important step in formulating a tourism plan. 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 and including those elements in the shared image 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 from it. 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 destination’s existing tourism resources and
capabilities, as well as the current functioning of its tourism operations (Inskeep,
1991). The tourism audit covers the supply side (tourism products and support-
ing factors and resources), the demand side (tourist preferences) as well as
community attitudes to tourism development. 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 tourism develop-
ment, and the challenges that must be met for the destination and 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 tourism resources. These associations may differ in their percep-
tions of the ecological, social, and cultural impacts of tourism development.
Tourism resources are likely to be used more effectively when the different asso-
ciations and industry groups share a common view regarding a destination’s
strategy for tourism development (Inskeep, 1991).
Pechlaner (1999) stresses the need to undertake a ‘future-oriented’ evaluation
of a destination’s development. He lists several ‘destination potentials’ including
destination reputation for responsiveness to tourism demand, and preparedness
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 tourism organisations, ‘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
program of destination management can serve to improve the tourism compet-
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 increasing recognition of the importance of broad community partici-
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 involved in tourism (WTO, 1979).
In some cases the DMO will also provide the leadership necessary to provide
overall direction for tourism development 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-related decisions. The DMO can improve the management and develop-
ment of tourism by ensuring coordination and cooperation between 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 with the information required for understanding customer needs, and
for appropriate new product development and marketing by tourism organisa-
tions in both the private and public sectors.
Two categories of information are important; first, information that is internal
to the destination provides an ability to better manage the performance of the
destination’s 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 tourism development, information which monitors and tracks the atti-
tude of the local population towards the tourism. Such information can enhance
the ability of tourism stakeholders to forecast demand to aid long-term planning.
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 and comprehensive 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 to which national tourism organisation
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 can play in sustaining a firm’s competitive superiority
(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 firm’s 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 tourism stakeholders include the need to understand the HRM
practices that strengthen the organisational knowledge – sustained competitive
advantage relationship, to find out the obstacles that organisations face 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 and friendliness has been found to be a key predictor of destination ‘quality’
(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 firm’s 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 among travelers, 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 can be increased by proper management of environmental quality of 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
tourism destinations 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 from other profitable opportunities which can lead to a rise in costs 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
industry all firms benefit from environmental preservation, and the costs of envi-
ronmental policy to tourism firms 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 tourism stakeholders 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 country’s 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 remain mindful that it is not so much
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 tourism context, there is a much more intimate relation-
ship between environmental quality and consumer perceptions of the quality of
the product purchased than is to be found in 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 classify situational conditions as falling within a
destination’s 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
Destination location determines the physical distance from markets and must
affect travel time from origin markets, even allowing for changes in transporta-
tion technology. A destination’s location, particularly from major source
markets, has much to do with its ability to attract 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 within which firms in the tourism industry must adapt in order to compete.
A competitive destination depends in part on a local tourism industry consist-
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 firm’s 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 destination’s 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 how a firm can achieve ‘value-competitive advantages’. A healthy

system of enterprise ensures that market gaps and unmet needs remain unrecog-
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-term viability depends on integrating all three objectives in deci-
sion making. Rather than regarding 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. A diversified portfolio of tourism products, 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
location advantages. 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 firm’s 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 nation’s competitiveness is strengthened in the course of
struggles by entrepreneurs to overcome high risks and maximise returns to
achieve competitive advantages over rivals. Risk taking by entrepreneurs is
essential if an economy is to move from being Investment Driven to a more
evolved stage of being innovation driven. 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. Following Porter et al. (2001) we can identify ‘productivity vari-
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
quality of output of tourism ‘experiences’ 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 today’s 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, team spirit, 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 satisfaction of 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
competition to 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) claim that ‘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 direction for tourism development 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 (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). Collaborative arrangements
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 tourism industry 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 Calgary and Fort Worth have established 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
destination tourism system is 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 and the ways in which they are managed (Evans et al., 2003:
251). Research is needed on the information needs 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 imposed in the tourism industry encourage 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 how to 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 concern for the environment, restructuring of economies, shifting
demographics of the marketplace, the increasingly complex technology–human
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 dimension is a key factor that contributes to the nature of the desti-
nation product. 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 medium to long-term development 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 tourism demand. 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 destination’s
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
destination’s 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
tourism products. Technology can be accessed through licensing, 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 increasing their competitiveness. With new technology and communica-
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 tourism experience, in its broadest terms (i.e. including
transportation costs to and from destination as well as costs incurred within the
destination), influence travel decisions. Price competitiveness indices can be
constructed given information on 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 destination depends on the 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 discussion of 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 reason for 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 individual’s social context. These are real motivational forces and
determine a destination’s ‘competitiveness’ from the tourist viewpoint (Josiam et
al., 1999).
In the wider research literature on competitiveness, the nature of demand for

the industry’s product is regarded as having an important 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 tourism context. In many cases it is domestic tourism that drives
the nature and structure of a nation’s tourism industry. Foreign demand thrives
more readily when domestic demand is well established.
With respect to destination price competitiveness, Dwyer et al. (1999) have
demonstrated that, 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 attended a Sydney workshop while nine attended its counterpart in Bris-
bane.
Although these numbers are not large, the interactive discussion provided 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
symposium suggested 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 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 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 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
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
always emphasised that no reliable measures exist for such competitiveness 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 tourism competitive-
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 are several issues that must be addressed in 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 tourism destination as 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.
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 on the 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 on the relative importance of the differ-
ent 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 envi-
ronments? 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 attrib-
utes 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 differ-
ent 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 can inform tourism operators
about the cost effectiveness of different investments that can help their constitu-
ent firms achieve and maintain competitive advantage while enhancing destina-
tion competitiveness. The model should also provide a basis for informing
governments about potential ‘net benefits’ from alternative policies to enhance
destination competitiveness. In this latter role, the model can be used to 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, to compare the effects on destination competitiveness 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
tourism flows, it can be used to 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 destination’s 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 tourism destinations, 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
are useful 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 tourism destination 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 taken into account in developing a comprehen-
sive framework of destination competitiveness.
A model of destination competitiveness was developed that sought to capture

the main elements 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
destination competitiveness model and also from discussions at workshops held
in Korea and Australia.
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 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 tourism flows between Australia and South Korea.
The project was undertaken on behalf 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
Research Institute (KTRI). The resulting report was titled Destination 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 Tourism Research 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

Article in Current Issues in Tourism · March 2010

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Keywords: Tourism industry, destination competitiveness, competitiveness

1368-3500/03/05 0369-46 $20/0 © 2003 L. Dwyer & C. Kim

governments to increase tourism numbers, expenditure, economic impacts, and

undertaken. It is argued that none of the models of destination competitiveness

Perspectives on ‘International Competitiveness’

(1) Comparative advantage and/or price competitiveness perspective (Bellak,

access to a wide variety of markets, makes a significant contribution to the

Lessons from the wider literature

From the literature on comparative advantage and price competitiveness

competitiveness of its constituent firms, these variables must be recognised in a

Cultural and related factors

distinction will involve the reality of the situation, as indicated in objective

Perspectives on Destination Competitiveness

‘competitiveness’. These include objectively measured variables such as visitor

the international tourism market primarily to foster the economic prosperity of

be expected to play an important part in any framework of overall price and

Crouch (1993, 2000). They examined the applicability to tourism destinations of

existing models do not appear to adequately provide an integrated treat-

Heath’s model is presented in the form of a house with foundations, cement,

channels, etc.); Focusing on the Experience Enhancers (e.g. hospitality, service

A model of destination competitiveness has been developed by the present

Figure 1 The main elements of destination competitiveness

private- and public-sector institutions in a destination are important because, to

resources is insufficient to generate visitation to a destination in the absence of

The box representing Destination Competitiveness is linked backwards to the

emphasised by management theorists resource disadvantages can be overcome

Range of available activities

Supporting factors and resources

Supporting factors and resources underpin destination competitiveness.

quality of service production and delivery deserves ‘a comprehensive approach

dependency can also be considered as a form of market tie.

Destination marketing management

awareness etc, as determinants of destination market share and overall destina-

demographic, psychographic and behavioural market segments. Relevant activ-

Destination planning and development

which is why planning at a holistic level is required. The outcome can be a

Destination management organisation

enhancement and organisation of tourism resources. As Buhalis notes, destina-

Monitoring and evaluation

evaluation to provide a more solid foundation for strategic decision making,

Human resource development

In the wider general management literature it is recognised that a firm’s envi-

tourism destinations and thus a primary concern for destination managers

It has become increasingly recognised in the general management literature

Competitive (micro) environment

tion to develop in a sustainable way, business operations must be sustainable.

The capabilities of destination firms and organisations

The strategies of destination firms and organisations

all emphasise how a firm can achieve ‘value-competitive advantages’. A healthy

(1) Specialisation. There is a growing industry trend in many countries towards

1993). Ideally, investors should have a strong commitment to environmen-

As Hassan recognises ‘in the tourism context, the multiplicity of industries

approach to promoting destination competitiveness’ through building capaci-

As the tourism industry becomes increasingly global, it has become necessary