TOURISM PRODUCT AND DEVELOPMENT

MIDTERM PERIOD

CHAPTER 2: Fundamentals and Pre-requisite of Tourism Product Development

Tourism Product Development

Tourism product development - according to UNWTO and ETC (2011), it is a process

whereby the assets of a particular destination are molded to meet the needs of national and
international customers. It encompasses all the elements with which the visitor to a destination
comes into contact. It comprises only those attractions, activities and facilities that are
specifically provided for the visitors.

Also, it can be defined as comprising only those attractions, activities and facilities that are
specifically provided for the visitor. There are two key aspects to Tourism Product Development:

 It is not an activity undertaken in a vacuum, but is part of an extensive and interlinked

process.
 Market Research, product development and marketing represent a continuum. The failure to
deliver any of these key components will result in the destination under-realizing its
potential.

Prerequisite of Tourism Product Development

 Accessibility – The presence of adequate transport infrastructure and independence from

foreign operators. Factors include: trip frequencies, seat capacity and transportation
connectivity in the destination.
 Resources/existing products – range and quality of tourism resources, diversification,
geographic concentration or distribution of tourism resources, supply and quality of human
capital. It is evaluated by: quality, authenticity, uniqueness and composition.
 Demand – The scale and trends of current market demand, forecast growth rate, ability of
destination to offer products matching the tastes and characteristics of the market, etc.
 Policy and Government – Factor includes stability, openness to tourism, priority given to
tourism development, form of government which indicates level of participation allowed in
decision making and policy on tourism investment, etc.
 Tourism in relation to destination’s overall economy – this comprises of level and quality
of entrepreneurship, innovation, and education, destination stage in the TALC, Percentage of
jobs created by tourism, etc.
 Acceptability to stakeholders – Acceptance of different stakeholders such as: community
members, NGOs, national Government, Industry and the Local Government.

Adherence To Nationally Accepted Standards

 Accreditation – is a certification issued to a tourism enterprise that officially recognizes it as

having complied with the minimum standards for the operation of tourism facilities and
services (DOT).

Tourism Product Development Process

 According to International Labour Office, Tourism product development is designed to
increase the income in the sector. Tourism product development involves implementation of
a comprehensive plan of action that will guide towards dealing with estimated increase in
business over the short, medium and long-terms.
 The action strategies for the development and management of tourist destinations should
consider the needs and interests of all stakeholders in the tourism system: local/ rural
community, entrepreneurs, investors, governments, tourists and other stakeholders.

Tourism Product Development Process:

1. Identify tourism assets.

2. Match assets with potential markets.
3. Make the product more inviting, such as by providing infrastructure.
4. Develop activities around the tourism assets.
5. Develop tour packages.
6. Communicate benefits to target markets.
7. Develop a destination marketing organization (DMO)

Tourism Product Development Principles

(UNWTO-ETC(2011) Handbook on Tourism Product and Development)

Tourism product development should:

 be authentic and indigenous reflect the unique attributes of the destination.

 have the support of the host community.
 respect the natural and socio-cultural environments by not damaging these in any way.
 be differentiated from competitors, avoid “me too/copycat” developments.
 be of sufficient scale to make a significant economic contribution, but not large as to create
high economic leakage.

Product Diversification Strategy

Product Diversification Strategy Considerations

1. Quality of tourism resources relative to product requirements
2. Suitability of facilities and accommodations for the market segments that would be attracted
3. Anticipated investment required to enter the market
4. Expected return on investment and likely per-visitor yield
5. Compatibility with existing markets you serve
6. Your own relevant knowledge-base about the new product area

Tour Packaging

 Tour package – a combination of “a number of elements in a region into a themed

experience-accommodation, transportation, food, attractions and education/interpretation”
(EGS 2002)
 Create tour packages by combining tangible and intangible products that will satisfy different
market segments.
 Match the tour package to a specific market segment by altering the elements of the package
 Consumers prefer to buy tour packages because they equate the package with benefits as they
have been “pre-assembled to bundle the best of experiences.” They think tour packages offer
the best value and provide convenience. (EGS 2002)

Examples of Product Diversification Opportunities

Nature Appreciation Cultural Experiences

 Astronomy  Agritourism
 Birdwatching  Anthropology
 Environmental education  Archeology
 Jungle survival  Art
 Photography  Architecture
 Research tips  Cooking
 Videography  Gourmet gastronomy
 Wilderness skills  History tours
 Wilderness machine  Holistic health
  Wildlife viewing  Mine tours
 Mystery tours
 Pottery
 Retreats
 Yoga

Product Development Practices

Cruz R. (2014). Tourism Planning and Development

 Design the activities that are suitable for the place’s natural assets
 Take advantage of the terrain and other natural features, such as zipline of hanging bridge on
a hilly area.
 Take advantage of man-made features.
 Turn disasters into a tourist product like voluntourism or dark tourism.
 Create products from events
 If the place has no distinctive natural assets, develop man- made attractions.
 Hi-touch strategy – Personalize service quality and develop service styles.
 Hi-tech strategy – Use technology to create exclusivity and an aura of sophistication.
 Invent new product class.
 Find use for a negative attribute (mud festival in Korea).
 Use the Eco-brand in places which are infrastructure- deficient.
 Advocacy – appeal to the tourist’s sense of justice, compassion and ethics.
 Localize – Go native
 Celebrate local products (ex. Crocodile meat in Puerto Princesa)
 Complement do not compete (ex. Vigan – Laoag tour package)
 Incorporate other activities into the main activity (ex. Nature tour incorporates tree-planting
activity).
 Find niche; differentiate
 Provide certificates with accompanying photographs to create a sense of reaching a milestone
(ex. Crown Regency Hotel Sky Adventure Experience).
 Discover the story behind the attraction and use it for interpretation.
 Use unlikely places and materials.

Chapter 2.2 Stituation Analysis

The Present Situation Analysis

The overall priorities and policies for the tourism sector having been established, the approach to
the task of investigating the potential for Tourism Product Development, and turning the
opportunities identified into successful and sustainable developments that meet the market’s
requirements for innovation, differentiation and authenticity, involves a three-stage process as
follows:

 establishing the present situation;

 identifying the opportunities; and
 prioritizing the destination’s own tourism sector’s objectives.

There is a series of five analytical tools that can help a destination understand where it is, what
options it has in respect of the development of its tourism sector, and how best to focus its
product development and marketing strategies.
It is important that destinations understand where they fit, and how they are perceived, in the
international marketplace. There are a series of analytical tests destinations can conduct that will
help establish what their Tourism Product Development opportunities might be and, based on
these, what its priorities should be.

It is important at the outset for destinations to understand:

1. Where they are in terms of their political and socio-economic development – the backcloth
for tourism development. This is undertaken through PEST analysis – political, economic,
sociocultural, technological;
2. What their competitive position is, obtained through SWOT analysis – strengths, weaknesses,
opportunities, threats;
3. Where they are on the tourism area life cycle (TALC);
4. Whether they are facing a challenge of market development, product development or both
through use of the Ansoff Matrix; and
5. Where their existing product range fits on the Boston Consulting Group Matrix (e.g. star,
problem child, cash cow or dog).

Destination Cycles

The idea that destinations experience a predictable evolution is embodied in the concept of the
destination cycle. This theory, to the extent that it is demonstrated to have widespread relevance
to the real world, is of great interest to tourism managers, who would then know where a
particular destination is positioned within the cycle at a given point in time and what
implications this has for the future if no intervention is undertaken.

Tourism Area Life Cycle (TALC) Analysis

Destinations have a lifecycle. Butler’s 1980 TALC model indicated that in the initial –
exploration – phase, the destination is relatively unknown and few visitors come to as a
consequence of the limited access and facility development.
The positive word-of-mouth of those who visit the destination combined with features in the
travel media constantly looking for new destinations, lead to increased visitor flows, with
attractions and facilities being increased and improved – the development phase.

The Butler Sequence Butler

Butler in 1980 presented his S-shaped resort cycle model, or Butler sequence, which proposes
that tourist destinations tend to experience five distinct stages of growth (i.e. exploration,
involvement, development, consolidation, stagnation) under free market and sustained demand
conditions (Butler, 1980).

The model is structurally simple, being based on a concept — the product lifecycle curve — that
has long been used by economists and marketers to describe the behavior of the market in
purchasing consumer goods such as televisions and cars.

Butler’s model also has intuitive appeal, in that anyone who has travelled extensively or who has
conducted tourism research will agree that some kind of cyclical dynamic is indeed evident in
most destinations.

 Exploration stage is characterized by very small numbers of visitors who are dispersed
throughout the destination and remain for an extended period of time.
 Involvement stage is associated with strongly positive community attitudes toward tourism.
 Development stage is characterized by rapid tourism growth and dramatic changes over a
relatively short period of time in all aspects of the tourism sector.
 Consolidation stage involves a decline in the growth rate of visitor arrivals and other
tourism-related activity, although the total amount of activity continues to increase.
 Stagnation stage is where peak visitor numbers and levels of associated facilities, such as
available accommodation units, are attained.
 Decline where the destination will eventually experience either an upturn or a downturn in its
fortunes or Rejuvenation where it is almost always accompanied by the introduction of
entirely new tourism products, or at least the radical reimaging of the existing product, as a
way of recapturing the destination’s competitive advantage and sense of uniqueness

PESTEL ANALYSIS

PESTEL analysis is an acronym for a tool used to identify the macro (external) forces facing an
organization. The letters stand for Political, Economic, Social, Technological, Environmental
and Legal. Depending on the organization, it can be reduced to PEST or some areas can be added
(e.g. Ethical) In marketing, before any kind of strategy or tactical plan can be implemented, it is
fundamental to conduct a situational analysis. And the PESTEL forms part of that and should be
repeated at regular stages to identify changes in the macro- environment. Organizations that
successfully monitor and respond to changes in the macro-environment are able to differentiate
from the competition and create a competitive advantage.

The PEST analysis consists of five main steps:

1. Understand a category’s relevant trends for tourism in the destination.

2. Understand trend interdependencies.
3. Distil likely issues from the identified trends.
4. Forecast the direction of issues.
5. Derived implications for the destination.
ELEMENTS OF PESTEL ANALYSIS

 Political Factors - These determine the extent to which government and government policy
may impact on an organization or a specific industry. This would include political policy and
stability as well as trade, fiscal and taxation policies too.
 Economic Factors - These factors impact on the economy and its performance, which in
turn directly impacts on the organization and its profitability. Factors include interest rates,
employment or unemployment rates, raw material costs and foreign exchange rates.
 Social Factors - These factors focus on the social environment and identify emerging trends.
This helps a marketer to further understand their customers’ needs and wants. Factors include
changing family demographics, education levels, cultural trends, attitude changes and
changes in lifestyles.
 Technological Factors - These factors consider the rate of technological innovation and
development that could affect a market or industry. Factors could include changes in digital
or mobile technology, automation, research and development. There is often a tendency to
focus on developments only in digital technology, but consideration must also be given to
new methods of distribution, manufacturing and also logistics.
 Environmental Factors - These factors relate to the influence of the surrounding
environment and the impact of ecological aspects. With the rise in importance of CSR
(Corporate Sustainability Responsibility), this element is becoming more important. Factors
include climate, recycling procedures, carbon footprint, waste disposal and sustainability.
 Legal Factors - An organization must understand what is legal and allowed within the
territories they operate in. They also must be aware of any change in legislation and the
impact this may have on business operations. Factors include employment legislation,
consumer law, health and safety, international as well as trade regulation and restrictions.
 Political factors do cross over with legal factors; however, the key difference is that political
factors are led by government policy, whereas legal factors must be complied with.

SWOT ANALYSIS
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or business venture. It involves specifying the
objective of the project in this case the development of tourism in a destination – and identifying
the internal and external factors that are favorable and unfavorable to the achievement of that
objective.

 Strengths - Characteristics of the destination that have – or can be developed to have –

strong attraction for tourists, especially where these represent an advantage over other
destinations.
 Weaknesses - Characteristics that place the destination at a disadvantage relative to others.
 Opportunities - External chances to achieve significant growth in the destination’s tourism
sector by attracting additional tourists and tourist spending,
 Threats - External elements in the tourism market environment that could cause trouble for
the destination.

The purpose of a SWOT analysis is to determine the destination’s competitive position in order
that product development and marketing strategies can be put in place to take maximum
advantage of its strengths and to rectify its weaknesses e.g. product gaps.

In assessing a destination’s competitive position, an “outsider-in” approach is needed in order to

identify which of its characteristics represent:

 a major strength;
 a minor strength;
 a neutral factor;
 a minor weakness;
 a major weakness.

The destination should fully understand which strengths and weaknesses most affect the
perceptions and behavior of its targets. The resulting analysis becomes a major basis for
developing destination product development and marketing strategic plans.

Each opportunity and threat has to be evaluated according to the probability of occurrence and
the degree of advantage/harm its occurrence would have for the destination.
By assembling a picture of the major opportunities and threats facing a specific destination, its
overall attractiveness can be assessed:

 Ideal: high in opportunities and low in threats.

 Speculative: high in both major opportunities and threats.
 Mature: low in major opportunities and threats.
 Troubled: low in opportunities and high in threats.

ANSOFF MATRIX

Market conditions are constantly changing: market and product development opportunities wax
and wane. Timing is, thus, of the essence – having the right products available at the right time
targeted at the most fruitful markets and segments is what defines success for tourism
destinations. Profitable product market portfolios can expect to be continually under competitive
pressure, and it will be necessary to update and augment products continuously to match
changing customer needs and market conditions. The options for strategic growth are
incorporated in a four-box model devised by Ansoff (1987).

It is a tool used by firms to analyze and plan their strategies for growth. The matrix shows four
strategies that can be used to help a firm grow and also analyzes the risk associated with each
strategy.
Boston Consulting Group Matrix

Any company that has a range of businesses (or, in the case of a destination, product types) treats
them as separate units, monitoring, assessing and developing strategies for each as well as for the
whole portfolio. Continuous analysis is conducted according to, inter alia:

 share of market;
 market size, growth and stage of product life cycle;
 cash flow generation;
 return on investment;
 strength of competition.
The Boston Consulting Group (BCG) matrix plots the first two of these factors. The vertical axis
shows the rate of growth of the market in which the product is sold, while the horizontal one
represents the market share of the product compared with its major competitor. The matrix is
divided into four cells. These cells relate to:

 relatively new product-market groupings with good shares of growth markets (stars);
 profitable products with well-established shares of mature markets (cash cows);
 products with weak presence in emerging high growth markets (problem children);
 products with low shares of declining markets and poor profitability (dogs).

3.2 Identification of Tourism Product Development

By applying these strategic planning tools, a destination can determine:

1. what its current position and performance as a competitive destination are; and
 2. the strategic directions in terms of product and market development in which it could be
heading to achieve sustainable growth for its tourism sector.

3.3 Tourism Product Development Priorities

With the broad range of product development opportunities ascertained, the next stage is to
assess how approaches to realizing these opportunities might differ according to the destination’s
policy and strategic objectives established for tourism.

In three broad groups – economic, socio-economic, and management and coordination – it is

clear that there is a considerable degree of overlap and interdependence:

Economic:

1. To attract foreign investment.

2. To achieve more rapid and extensive development of the tourism sector.
3. To assist Market: Product diversification.
4. To assist product innovation.
5. To reduce the risk of over-concentration on a narrow product range (and limited market
base) by facilitating the development of a new range of products identified through
market research as being in line with market trends and preferences.
 6. To adjust the seasonal pattern of visitation through product developments that will spread
tourism more evenly across the year.
7. To increase employment, tourism being a labor-intensive sector.
8. To boost local SME development in order to retain a higher proportion of economic
benefits through the reduction of leakage and increased backward linkages.

Socio-economic:

1. To facilitate regional development by improving access to a part of a country not

benefiting from the sector as much as other parts e.g. rural areas, urban regeneration
projects.
2. To assist the development of responsible tourism products (e.g. fairness to local
community/pro- poor).
3. To support community-based tourism projects.
4. To seek to alleviate/eradicate poverty through programs such as Sustainable Tourism
for Eliminating Poverty.
5. To create a flagship attraction that represents a geographic hub in a part of the country
allowing other complementary products to be developed to create a cluster – can also be a
thematic flagship hub.

Management and Coordination:

1. To ensure the development of sustainable tourism, balancing economic benefits with the
retention of environmental resources and the host community’s values and culture.
2. To enhance the quality of the product offering.
3. To build a strongly positive image of the destination, by endorsing products of prestige
and quality, thereby creating benefits both for tourism and through inward investment in
other industries.
4. To coordinate tourism product developments that involve multiple assets and entities.
5. To facilitate Tourism Product Development that is dependent on State intervention and
would not occur otherwise.
6. To ensure that Tourism Product Development is in line with protection/preservation of
ecologically sensitive environments and the conservation of a community’s cultural
heritage and historic sites.
 7. To coordinate the development and marketing of product clusters and trails/circuits.

3.4 Putting the Plan into Action

Strategy and implementation are the most important dimensions for a destination seeking to
create a changed, relevant and strong tourism sector. The ability of a destination to succeed in
these two dimensions varies and leads to what Kotler et al. (2002) identify as four basic
environments, as summarized in the following matrix.

 Losers are those destinations with inadequate capacity to take action in either the strategic or

implementation dimension. Communities demand subsidy and compensation arguing on the

basis of “justice” or “need”.
 Frustrators possess strategic thinking capability but not the necessary implementation skills.
The planners end up being frustrated.
 Gamblers have weak strategic ability but strong implementation capability. Success comes –
unpredictably and only occasionally – from luck and hard work. Targeted marketing is rare
because the strategic targeting of the appropriate segments has not been made.
 Expanders are destinations where both the strategic and implementation capabilities are
well-developed. In destinations that fall into this category, it is normal for the government
and industry leaders to support long-term strategies, and to encourage and implement
appropriate sub-strategies and action plans.