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 comparisons between countries and between tourism sector industries. The model seeks to capture the main elements of competitiveness highlighted in the general literature, while appreciating the special issues involved in exploring the notion of destination competitiveness as 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 subjective measures, were identified from the major elements comprising the generic destination competitiveness model and also from discussions at workshops held in Korea and Australia. 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 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 weaknesses 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 destination’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 competitiveness, including price and non-price factors, there is a need to develop indicators 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 associated set of indicators will allow identification of the relative strengths and weaknesses of different tourism destinations, and can be used by industry and
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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 ‘competitiveness’ 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 relevant 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 literature, 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 competitiveness 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 competitiveness. 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:

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(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 competitiveness (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 ultimate 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 phenomenon: 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 competitive 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

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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 mechanisms’ 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 challenges 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 competitiveness 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 conditions (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 advantage 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 destination possesses do not necessarily suffer depletion, despite the fact that people have paid for their use, ‘the tourism phenomenon represents a fundamentally

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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 competitiveness.

Price competitiveness From the literature on comparative advantage and price competitiveness comes recognition of the potential importance of destination price competitiveness in influencing visitor flows. Studies by tourism researchers indicate the price sensitivity of travellers is high in certain markets (Lee et al., 1996). Empirical studies highlight the importance of levels of technology, exchange rates, government policies, industry competition, and the influence of multinational enterprises as factors influencing the price competitiveness of tourism firms (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 maintenance of sustainable competitive advantage. The basic premise is that the competitiveness of a nation stems from companies within that nation, so firm-specific factors that lead to competitiveness should be identified. 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 competitors’ assets and skills’ (Aaker, 1989: 105). Resources of the firm that are considered to offer competitive advantage include: the skills of the employees, assets, cash-flow, capital/investment (human, non-human and strategic), structure of the organisation (flexibility, balance, and dynamic aspects), organisationenvironmental interface (source and positional advantage, organisational alignment, generic strategy, strategic planning, and customer-oriented offering), and many firm-specific variables (core competencies, imitability of products, information, intelligence system, value added by the firm, and quality). 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. Positional advantage is a more market-oriented phenomenon. In order to be competitive a firm needs to manoeuvre both source and positional advantage. Since the competitiveness of a destination must somehow be essentially linked to the

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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. perceptions of relative price levels, perceptions of safety/security, views about comfort levels and the aesthetic appeal of different types of tourism resources). Indeed, the importance of 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 destinations on those aspects of the tourism experience considered to be important by tourists. Dwyer, Forsyth and Rao (2000a) state that ‘tourism competitiveness is a general concept that encompasses price differentials coupled with exchange rate movements, productivity levels of various components of the tourist industry and qualitative factors affecting the attractiveness or otherwise of a destination’ (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 destinations (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 variables 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

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‘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 goodwill. 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 environment, 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

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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 determinants 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 (existence 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 competitiveness 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 ‘competitiveness is illusory without sustainability’ (Ritchie & Crouch, 2000: 5). They claim that ‘to be competitive, a destination’s development of tourism must be sustainable, not just economically and not just ecologically, but socially, culturally and politically as well’ (5). Ritchie and Crouch focus on long-term economic prosperity as the yardstick by which destinations can be assessed competitively. Thus the most competitive destination is that which most effectively creates sustainable well-being for its residents. A model of destination competitiveness has been developed by Ernie Heath who claims that: existing models do not appear to adequately provide an integrated treatment 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 Competitive 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

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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 principles) and a Strategic and Holistic Destination Marketing Framework and Strategy (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 (inherited) 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, entertainment 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,

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Resources

Government

Industry

Endowed

Created

Resources Situational Conditions

Resources

Natural

Demand

Destination Competitiveness Indicators

Destination Competitiveness

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Socioeconomic Prosperity
Quality of Life Indicators

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Figure 1 The main elements of destination competitiveness

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hospitality and market ties. In the integrated model presented here, these three boxes are, in turn, grouped within a larger box, indicating that destination competitiveness depends on the value added to core resources by these other factors. Situational Conditions are forces in the wider external environment that impact upon destination competitiveness. Situational conditions relate to economic, social, cultural, demographic, environmental, political, legal, governmental, regulatory, technological, and competitive trends and events that impact on the way firms and other organisations in the destination do business, and present both opportunities and threats to their operations (David, 2001). These conditions correspond to the Qualifying and Amplifying determinants as identified by Crouch and Ritchie (1999). For present purposes it is useful to regard the situational conditions as falling within one of two interactive and interrelated contexts of organisations operating in the destination – the operating environment 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 undertaken 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 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. A destination’s product must develop in a way that ‘matches’ the evolving consumer preferences, if the destination is to enhance or even maintain competitiveness. The single direction arrows from Supporting Resources to Endowed Resources and Created Resources indicates that the mere existence of such

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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 visitation. 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. Indicators of destination competitiveness are many and varied and comprise both subjective attributes (destination ‘appeal’, ‘scenic beauty’) as well as those that are more objectively determined (destination market share, foreign exchange earnings from tourism). Indicators of Socioeconomic Prosperity relate to key macroeconomic variables including productivity levels in the economy, aggregate 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 attractors 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

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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 infrastructure, special events, range of available activities, entertainment and shopping. 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 infrastructure includes retail shopping facilities, food stores, garages (car maintenance, petrol stations), pharmacies, bookstores/newsagents/kiosks, laundries, hairdressers, administration offices (police, courts etc.). In the eyes of many tourists, and certainly for so-called ‘mass tourism’, destinations function more effectively 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,

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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). Festivals and events are recognised internationally as making a valuable economic contribution to tourism destinations, and also as having significant growth potential. 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,providing 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 destination’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).

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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 tourists, 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 important 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 attitudes 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

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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 products and services. Since meeting visitor needs and achieving business goals are increasingly inseparable, a commitment to quality by every enterprise in a destination (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 organisations 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 destination choice. The accessibility of the destination is governed by a variety of influences including the frequency, ease and quality of automobile, air, bus, train, sea access; aviation regulations, entry permits and visa requirements; route concessions; airport capacities; competition among carriers etc. Visas may be expensive in terms of monetary outlay and/or inconvenient to procure, thus deterring visitation. 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 distribution 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

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forming part of the macro-environment (Canestrelli & Costa, 1991; Machlis & Burch, 1983).

Market ties This category includes several dimensions along which a destination establishes 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.

Destination Management
Five types of destination management activities have a potentially important influence on destination competitiveness: destination marketing management; destination planning and development; destination management organisation; human resource development; and environmental management. Destination marketing management When implementing their marketing activities, destination management organisations (DMOs) can contribute to the achievement of sustainable tourism through various actions depending on whether their focus is a promotional or 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 coordinating familiarisation trips and supporting the private sector in the production and distribution of literature such as information relating to analysis of characteristics 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 marketplace’ (Hassan, 2000: 240). An important function of destination marketing managers is to create a destination 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,

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awareness etc, as determinants of destination market share and overall destination 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 activities 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, organisations, 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 implemented. 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 building, 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 destination planning and development requires the use of a competitiveness model that examines the relationships among all stakeholders involved in creating valueadded products to sustain resources while maintaining a market position relative 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

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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 supporting 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 development, 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 perceptions of the ecological, social, and cultural impacts of tourism development. Tourism resources are likely to be used more effectively when the different associations 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,

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enhancement and organisation of tourism resources. As Buhalis notes, destination management organisations (DMOs), which include convention and visitor bureaux, national and regional tourism organisations, ‘have overall responsibility for the entire destination product and through incentives and policies facilitate 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 competitiveness of a destination’. Three aspects of destination management organisation are especially important to competitiveness. These are: coordination, the provision of information, and monitoring and evaluation.

Coordination There is increasing recognition of the importance of broad community participation, of effective coordination and support between all involved parties as crucial to achievement of sustainable tourism and hence destination competitiveness. 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 development 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 stakeholder attitudes, values and actions that are compatible with sustainable development. 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 organisations 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

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destination product (Faulkner, 1997). Second, research results provide the information basis to enable a destination to adapt to changing market conditions through its marketing strategy e.g. visitor statistics on patterns of tourist behaviour, 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 attitude 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 integral part of policy and strategy formulation, including the need to systematically evaluate the effectiveness of major policies and strategies that have been previously 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 organisation. Human resources management (HRM) should be an integral part of corporate 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 advantage 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

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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 implementing 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, ambience 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 environmental 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 environmental 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 critical 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 environments with economic growth and stability (WTTC, 2001: 3). Mihalic claims that destination attractiveness (appeal) and its competitiveness can be increased by proper management of environmental quality of a destination’ (Mihalic, 2000: 67). She argues that destination competitiveness can be enhanced through such initiatives as codes of conduct, self-developed environmental 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 environmental quality is important for the competitiveness of most types of

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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 efficient 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 environmental 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 business agenda and environmental concerns are integrated into company culture (Wade- Benzoni, 1999). Given the great reliance of tourism stakeholders on environmental 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 environmental image (Okoroafo, 1995) that influences the buying decisions of the potential visitor. In the tourism context, there is a much more intimate relationship 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).

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Destination location Destination location determines the physical distance from markets and must affect travel time from origin markets, even allowing for changes in transportation 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 destinations that offer a similar product but are more distant. Competitive (micro) environment This includes the components that shape the immediate industrial environment within which firms in the tourism industry must adapt in order to compete. A competitive destination depends in part on a local tourism industry consisting 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 destination 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, including alliance formation, and (3) the competitive environment of firms and organisations 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 combination of these competencies and skills contributes to a destination’s competitiveness (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)

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all emphasise how a firm can achieve ‘value-competitive advantages’. A healthy system of enterprise ensures that market gaps and unmet needs remain unrecognised and unfilled for only a short period of time. The sustainable business has interdependent economic, environmental, and social objectives and understands that long-term viability depends on integrating all three objectives in decision 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 experiences can enhance destination attractiveness and therefore competitiveness. 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 trading 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 attractiveness 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,

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(4)

(5)

(6)

(7)

1993). Ideally, investors should have a strong commitment to environmental quality and sustainable development (Hassan, 2000: 243). 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 critically linked to high rates of social learning. Productivity. Following Porter et al. (2001) we can identify ‘productivity variables’ as another set of factors that contribute to the efficiency and effectiveness 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. Ethical Business Behaviour. Management theorists argue that a healthy corporate culture should cultivate a basic respect for all individuals, and emphasise honesty, fairness, open-mindedness, team spirit, loyalty, dedication, frank and full communication, life-long learning and constant improvement (Dwyer et al., 1998; Ford & Richardson, 1994). Business operations 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 innovative, 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 society must be kept in mind (Ford & Richardson, 1994). 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 maintaining 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

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approach to promoting destination competitiveness’ through building capacities 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, particularly of the small firm. Alliances differ in their motives, their scope, their structures, 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 decisions. Many have little understanding of how to finance their business decisions. Many fail to recognise their dependency on the competitiveness of the destination as a whole. It appears likely that future economies will consist of ‘virtual

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corporations’ involving a network of smaller enterprises. This will have enormous implications for destination competitiveness that will depend on the strategic alliances between individual firms. Global (macro) environment Tourism is influenced by a range of global forces including laws and regulations, 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 challenges and opportunities to the tourism industry. Kotler et al. (1996) propose that six environmental factors shape the (destination) 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 destination 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 competitiveness (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 competitiveness 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 technical 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

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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 communications, 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 determinant of its competitiveness. Elements include: political instability/unrest, probability 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. Price 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 indicator 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.

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The reason for this is that a destination may be competitive for one group of visitors 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 identified from the major elements comprising the generic destination competitiveness model as just discussed. The selected set of indicators was also based on discussions at workshops held in Korea and Australia during April and May 2001. The respondents were selected from databases of tourism industry stakeholders in

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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 stakeholders attended a Sydney workshop while nine attended its counterpart in Brisbane. 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 indicators of destination competitiveness falling under the main elements of the destination competitiveness model. (The scope of the project did not enable consumers to be directly surveyed; further use of the model would need to incorporate 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 implications 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 underlying 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 comprising 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 competitiveness 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

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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 Historic/Heritage sites and museums Artistic/Architectural features Traditional arts Variety of cuisine Cultural precincts and (folk) villages

Culture/Heritage

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 Water based Nature based Adventure activities Recreation facilities Sports facilities Variety of shopping items Quality of shopping facilities Quality of shopping items Value for money of shopping items Diversity of shopping experiences

Range of activities

Shopping

Entertainment

´ Amusement/Theme parks ´ Entertainment quality/variety ´ Nightlife
Special events/festivals

Destination Competitiveness: Determinants and Indicators
Supporting Factors General infrastructure

401

´ ´ ´ ´ ´ ´ ´ ´

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 satisfaction

´ Firms have programmes to ensure/monitor visitor ´ 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

402 Destination Management Destination management organisation

Current Issues in Tourism

´ NTO acts as coordinating body for private and public sector tourism
organisations development development development development

´ NTO effectively represents views of all tourism stakeholders in tourism ´ NTO liaises effectively with private sector in tourism policy, planning and ´ NTO provides statistical information as input to tourism policy, planning and ´ NTO strategically monitors and evaluates the nature and type of tourism
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 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

Destination policy, planning, development

Human resource development

´ Public sector commitment to tourism/hospitality education and
training training

´ Private sector commitment to tourism/hospitality education and ´ Training/education responsive to changing visitor needs ´ Range/quality of tourism/hospitality training programmes

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Environmental management

403

´ ´ ´ ´

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 Perceived ‘exoticness’ of location Proximity to other destinations Distance from major origin markets Travel time from major origin markets 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

Destination location

´ ´ ´ ´ ´ ´ ´ ´ ´ ´ ´ ´ ´ ´ ´ ´ ´ ´

Global (macro) environment

Price competitiveness

Safety/Security

´ Level of visitor safety in destination ´ Incidence of crimes against tourists in destination

404 Demand Factors

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´ 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

Destination Competitiveness: Determinants and Indicators
Government support for tourism

405

´ ´ ´ ´ ´ ´ ´ ´ ´

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 indicators 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 competitiveness 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 associated 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 framework 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 competitiveness can benefit from the ongoing research in this area. There is a need to explore the different types of indicators relevant to the different contexts (levels) in which the model can be applied. The model developed herein is intended to be able to serve as a framework for determining the competitiveness of an entire country as a tourism destination as well as its subregions, some of which may be quite small in size. It would be interesting to explore, for example, the relevance, advantages and limitations of the model for determining the competitiveness of a city or geographically small destination. While the model developed herein is intended to have generic import, specific problems may arise in particular applications.

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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 warranted on the applicability of the model to destinations at different stages of development. This area has, to our knowledge, been totally neglected by tourism researchers to date. A 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 destination). 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 competitiveness, involves the integration of objective and subjective attributes of competitiveness. 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 different dimensions of competitiveness. Thus, for example, how important are natural resources compared to, say, destination image? And within the category of natural resources, how important is, say, climate, compared to pristine environments? How important is service quality compared to price competitiveness? Such questions are unable to be answered in the absence of a specific destination being studied and for specific visitor market segments to that destination. There is also a need for further research on the importance of different attributes of destination competitiveness in determining tourism flows for visitors in different market segments, and for travel decisions made in different buying situations or contexts. These issues flag an ongoing need for more detailed empirical studies of destination attributes, consumer preferences and the different components of the travel decision. The implications of the framework for informing investment and other resource allocation decisions by public- and private-sector tourism stakeholders need detailed exploration. Ideally, the model can inform tourism operators about the cost effectiveness of different investments that can help their constituent firms achieve and maintain competitive advantage while enhancing destination 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).

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Performance ratings can be developed for destination competitiveness as a whole as well as for particular aspects of competitiveness. Thus measures can be developed to compare the competitiveness of destinations in respect of all of the main determinants taken together, to compare the competitiveness of destinations in respect of the main dimensions of the model such as Created Resources, Supporting Factors and Resources and Destination Management, or as noted above, to compare the effects on destination competitiveness of different government policy measures. The model can be used to develop strategies to increase bilateral tourism flows between any destination pair. In the context of bilateral tourism flows, it can be used to address the ‘pull’ that the attributes of each destination have for residents of the other country and to highlight areas where impediments are placed in the way of visitor flows. The model allows changes in destination competitiveness to be monitored over time. Application of the indicators can provide a ‘moving picture’ of destination competitiveness at different points in time. The model allows for destination competitiveness to be assessed over time in respect of particular types of travellers (by origin, demographic characteristics or motivation), or by comparison to a particular competitor destination or competitor set of destinations. In this way trends in destination competitiveness can be linked to various privateand 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 development of a set of competitiveness indicators can serve as a valuable tool in identifying what aspects or factors influence tourists in their decision to visit other countries. Unfortunately, to date only a small number of tourism researchers have addressed this important topic. The 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 competitiveness and an associated set of indicators will allow identification of the relative strengths and weaknesses of different tourism destinations, and can be used by industry and governments to increase tourism numbers, expenditure and positive 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’ competitiveness, 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 comprehensive framework of destination competitiveness.

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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 subjective measures, were identified from the major elements comprising the generic destination competitiveness model and also from discussions at workshops held in Korea and Australia. The advantages and limitations of the model were highlighted, and issues for further research were explored. The model developed here can form the basis for further conceptual and empirical research. Perhaps the major thrust of the required research agenda is to explore the role of demand side factors in comparing the competitiveness of different destinations. A substantial amount of empirical research is needed to develop suitable measures of destination competitiveness from the viewpoint of different types of tourists with their different travel motivations. The greater our knowledge about the interrelationships between consumer preferences and destination attributes, the more informed can be decision making by private- and public-sector stakeholders to enhance resident 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 Competitiveness: 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 Department of Industry, Science and Resources, and the Korea Tourism Research Institute 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). References
Aaker, D. (1989) Managing assets and skills: The key to a sustainable competitive advantage. California Management Review (Winter), 91–106. Adams, P. and Parmenter, B. (1992)The Medium Term Significance of InternationalTourism to the Australian Economy. Canberra: Bureau of Tourism Research. Balogh, S. and Briuberg, D. (1997) Affective images of tourism destinations. Journal of Travel Research 35 (4), 11–15. Barney, J.B. (1991) Firms resources and sustained competitive advantage. Journal of Management 17, 99–120.

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