1. Università della Svizzera Italiana
Faculty of Economics
NATIONAL TOURISM POLICY
Analytical Framework for the Evaluation of
Efficiency and Effectiveness: the Case of Italy
Master’s dissertation
Authors: Giacomo Grossi, Alberto Scappini
Supervisor: Prof. Peter Keller
Second Reader: Prof. Mara Manente
Academic year: 2010
Submission Date:

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“You can’t connect the dots looking forward; you
can only connect them looking backwards. So
you have to trust that the dots will somehow
connect in your future.”
(Steve Jobs)

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TABLE OF CONTENTS
TABLE OF CONTENTS..........................................................................................................................3
LIST OF FIGURES.................................................................................................................................4
INTRODUCTION..................................................................................................................................5
1. DEFINITION OF PUBLIC POLICY.......................................................................................................7
2. THE RATIONAL FOR STATE INTERVENTION IN TOURISM: WELFARE ECONOMICS ...........................9
2.1. WELFARE ECONOMICS AND PUBLIC CHOICE .............................................................................................9
2.1.1. Market failures and distribution .........................................................................................10
2.1.2. Market inadequacies in the field of tourism .......................................................................12
2.2. TRANSACTION COSTS: INNOVATION AND COOPERATION...........................................................................15
2.3. COMPETITIVENESS AND PROMOTION OF THE PLACE.................................................................................18
3. THE NATURE OF TOURISM POLICY ...............................................................................................26
3.1. IS THERE A TOURISM INDUSTRY? .........................................................................................................26
3.2. CONSIDERATIONS FOR A TOURISM POLICY .............................................................................................27
3.3. IMPLICATIONS FOR A TOURISM POLICY..................................................................................................29
3.3.1. The nature of tourism policy by Ritchie and Crouch and OECD...........................................30
4. SCOPES OF THE TOURISM POLICY ................................................................................................34
5. GOVERNANCE AND ORGANIZATIONAL STRUCTURE OF TURISM POLICY.......................................43
6. THE DECENTRALIZATION OF TOURISM POLICY.............................................................................52
7. THE MONITORING AND EVALUATION OF TOURISM POLICY.........................................................58
8. TOURISM POLICY REVIEW: PROPOSAL OF AN ANALYTICAL FRAMEWORK....................................64
8.1 OVERALL CONTEXT............................................................................................................................66
8.1.1 Global Context .....................................................................................................................66
8.1.2 National economic context ..................................................................................................69
8.1.3 Institutional and structural context .....................................................................................75
8.1.4 Vision and Basic principles of tourism policy........................................................................78
8.2 PLANNING PHASE: SWOT ANALYSIS, GOALS, STRATEGIES.........................................................................80
8.3 IMPLEMENTATION.............................................................................................................................82
8.4 EVALUATION....................................................................................................................................85
9. APPLICATION OF THE FRAMEWORK: THE CASE OF ITALY .............................................................92
9.1 OVERALL CONTEXT............................................................................................................................92
9.1.1 Global Context......................................................................................................................92
9.1.2 National Economic context ..................................................................................................94
9.1.2 Institutional and structural context ...................................................................................118
9.1.4. Vision and Basic Principles of tourism policy.....................................................................124
9.2 PLANNING PHASE............................................................................................................................125
9.2.1 Swot Analysis .....................................................................................................................125
9.2.2. Goals and Strategies .........................................................................................................130
9.3 IMPLEMENTATION PHASE..................................................................................................................134
9.4 EVALUATION..................................................................................................................................135
CONCLUSION .................................................................................................................................144
BIBLIOGRAPHY...............................................................................................................................146

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LIST OF FIGURES
FIGURE 1: COMPETITION AND COOPERATION ADAPTED FROM P. KELLER............................................................................. 16
FIGURE 2: MARKET INADEQUACIES RELATED TO PLACE PROMOTION, ADAPTED FROM P. KELLER (2000). .......................... 22
FIGURE 3: THREE LEVELS OF PRODUCTIVITY (SOURCE: P. KELLER).............................................................................. 36
FIGURE 4: PORTER’S DIAMOND (SOURCE: PORTER 1990) ............................................................................................. 38
FIGURE 5: STATE FUNCTIONS IN TOURISM (SOURCE: P. KELLER).................................................................................. 39
FIGURE 6: GOVERNANCE (SOURCE M. LOCKWOOD)......................................................................................................... 44
FIGURE 7: TOURISM PLANNING (SOURCE: OECD)............................................................................................................ 47
FIGURE 8: THE COMPETITIVE MICROENVIRONMENT ADAPTED FROM RITCHIE & CROUCH 2003......................................... 73
FIGURE 9: REAL GDP GROWTH RATE, PERCENTAGE CHANGE ON PREVIOUS YEAR (SOURCE: EUROSTAT)......................... 94
FIGURE 10: UNEMPLOYMENT RATE (SOURCE: EUROSTAT) ................................................................................................. 95
FIGURE 11: PRICE STABILITY (SOURCE: ISTAT) ....................................................................................................................... 96
FIGURE 12 PUBLIC DEBTS OF SOME EUROPEAN COUNTRIES AS PERCENTAGE OF GDP (SOURCE: EUROSTAT). ................ 96
FIGURE 13: PRESSURE OF TAXATION IN ITALY, FRANCE AND SPAIN (SOURCE: EUROPEAN COMMISSION)........................... 97
FIGURE 14: REGULATORY FRAMEWORK, SCORES GIVEN BY THE WEF (FROM 0 TO 7).......................................................... 98
FIGURE 15: PILLARS OF THE REGULATORY FRAMEWORK (SCORES), ADAPTED FROM WEF.................................................. 99
FIGURE 16: BUSINESS ENVIRONMENT ADAPTED FROM THE WEF (SCORES) ........................................................................100
FIGURE 17: PILLARS OF THE BUSINESS ENVIRONMENT (SCORES), ADAPTED FROM WEF. ..................................................101
FIGURE 18: HUMAN, CULTURAL AND NATURAL RESOURCES, ADAPTED FROM THE WEF (SCORES)....................................102
FIGURE 19: PILLARS OF THE HUMAN, CULTURAL AND NATURAL RESOURCES (SCORES), ADAPTED FROM WEF...............103
FIGURE 20: ITALIAN REGULATORY FRAMEWORK, ADAPTED FROM WEF.............................................................................103
FIGURE 21: ITALIAN BUSINESS ENVIRONMENT, ADAPTED FROM WEF................................................................................104
FIGURE 22: ITALIAN HUMAN, CULTURAL AND NATURAL RESOURCES, ADAPTED FORM WEF............................................104
FIGURE 23: NUMBER OF HOTELS AND OTHER TYPES OF ACCOMMODATION IN ITALY 2000 AND 2007 (SOURCE: ISTAT)
.......................................................................................................................................................................................105
FIGURE 24: BEDS OF HOTELS AND OTHER TYPES OF ACCOMMODATION IN ITALY 2000 AND 2007 (SOURCE: ISTAT)....105
FIGURE 25: DISTRIBUTION OF HOTEL TYPOLOGY (SOURCE: ISTAT).....................................................................................106
FIGURE 26: OCCUPANCY RATE OF HOTELS IN ITALY FROM 2000 TO 2007 (SOURCE: ISTAT) ..........................................107
FIGURE 27: DOMESTIC AND INTERNATIONAL ARRIVALS (MILLIONS) IN ITALY FROM 2000 TO 2007 (SOURCE: ISTAT)...109
FIGURE 28: DOMESTIC AND INTERNATIONAL OVERNIGHT STAYS (MILLION) IN ITALY FROM 2000 TO 2007 (SOURCE:
ISTAT)..........................................................................................................................................................................109
FIGURE 29: DOMESTIC AND INTERNATIONAL LENGTH OF STAY (DAYS) IN ITALY FROM 2000 TO 2007 (SOURCE: ISTAT)
.......................................................................................................................................................................................110
FIGURE 30: DISTRIBUTION OF INTERNATIONAL ARRIVALS BY COUNTRY OF ORIGIN IN 2007(SOURCE: BANCA D’ITALIA)..110
FIGURE 31: DISTRIBUTION OF EXPENDITURE OF INTERNATIONAL ARRIVALS BY COUNTRY OF ORIGIN IN 2007(SOURCE:
BANCA D’ITALIA) ..........................................................................................................................................................111
FIGURE 32: PERCENTAGE INCREASE OF INTERNATIONAL VISITORS TO ITALY FORM OECD COUNTRIES AND RESTO OF THE
WORLD (BANCA D’ITALIA)............................................................................................................................................111
FIGURE 33: PERCENTAGE OF DIRECT AND INDIRECT VALUE ADDED ACTIVATED BY TOURISM CONSUMPTION DIVIDED BY
SECTORS, 2007 (SOURCE: CISET AND IRPET). ........................................................................................................113
FIGURE 34: PERCENTAGE OF DIRECT AND INDIRECT EMPLOYMENT ACTIVATED BY TOURISM CONSUMPTION DIVIDED BY
SECTORS 2007 (SOURCE: CISET AND IRPET)...........................................................................................................114
FIGURE 35: TOURISM BALANCE OF PAYMENTS (CISET ELABORATIONS; SOURCE: “RELAZIONE GENERALE SULLA SITUAZIONE
ECONOMICA DEL PAESE 2007”).................................................................................................................................115
FIGURE 36: TOURISM BALANCE AND MAIN ENTRIES OF THE COMMERCIAL BALANCE (CISET ELABORATIONS; SOURCE:
“RELAZIONE GENERALE SULLA SITUAZIONE ECONOMICA DEL PAESE 2007”)..........................................................115
FIGURE 37: TOTAL EXPENDITURE OF REGIONS FROM 2000 TO 2007 (SOURCE: “RAPPORTO SUL TURISTMO ITALIANO” XVI
EDIZIONE)......................................................................................................................................................................117
FIGURE 38: TOURISM EXPENDITURE OF REGIONS FROM 2001 TO 2006 BY TYPE OF EXPENDITURE (SOURCE:
CONFTURISMO, “LA SPESA DELLE REGIONI PER IL TURISMO”)..............................................................................118
FIGURE 39: PERCENTILE RANGES LEGEND (SOURCE: WORLD BANK)....................................................................................122
FIGURE 40: GOVERNANCE INDICATORS OF FRANCE AND ITALY IN 2009 (SOURCE: WORLD BANK)...................................123
FIGURE 41: GOVERNANCE INDICATORS OF SPAIN AND ITALY IN 2009 (SOURCE: WORLD BANK)......................................123

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INTRODUCTION
Tourism is a phenomenon that has grown constantly since the 50s. Economic crisis
or other global forces have negatively affected it just for small amounts of time but,
in general, trends have always been positive.
There is no discussion that there are more important and urgent issues and sectors
to be managed by the state; nevertheless, tourism is a more and more important
generator of wealth, thus income, employment, development and externalities, both
positive and negative. This has caused an interesting change in countries’ policy
definition in which, tourism policy, has gained more and more relevance. Moreover,
tourism is still important for the economy of the most developed countries. In OECD
countries, international tourism has grown faster than GDP in the last ten years and
it generates between 2% and 12% of GNP and between 3% and 11% of employment
(OECD 2010; Keller 2008). If on one side developed countries face an increase of
competition from developing countries, on the other side the better economic
conditions of the latter create the opportunity to attract new markets.
This argument should have definitely given an answer to the long debated question
“should there be a tourism policy?”
As affirmed by W. Revill Kerr, “there is a widespread failure to consider the fact that
a tourism policy may be subordinate to wider economic developments policies, or
entirely unnecessary” (W. Revill Kerr, 2003).
The objective of this research is to create a framework with which to analyze
national tourism policies. This framework has been created after a theoretical
analysis of all the implications of state involvement in the tourism sector and the
analysis of the problems and methods used for the evaluation of public policies.
Finally, the framework has been tested applying it to the Italian case.
The first chapter studies the reasons for state intervention in tourism and how it
should intervene. The second chapter gives a look on the nature of tourism policy,

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defining the implications derived from its horizontal character. The third chapter
analyses what are the scopes of tourism policy and explains the levels of
intervention (micro and macro) of the state and its functions. The forth chapter
introduces the concept of governance, the principles of good governance and the
institutional structure theory. The fifth chapter explains benefits and costs of the
decentralization and the principle of subsidiarity. Chapter six defines the aspects of
monitoring and evaluation, discussing the difficulties in evaluating a tourism policy
and some possible solutions. Chapter seven deals with the creation of the analytical
framework, explaining each part in detail. In chapter eight the model is used to
analyze the Italian tourism policy, trying on one side to evaluate it and on the other
side to test the model in order to discover weaknesses and parts to be improved.

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1. DEFINITION OF PUBLIC POLICY
Public policy can be defined as “a set of interrelated decisions taken by a political
actor or group of actors concerning the selection of goals and the means of achieving
them within a specified situation where those decisions should, in principle, be within
the power of those actors to achieve” (William Jenkins in Policy Analysis: a Political
and Organizational Perspective, 1978).
This definition can be considered extremely comprehensive of the concept of public
policy because it underlines not only its complexity (made up of many interrelated
decisions and actors), but also the relevance of effective governance.
Public policy, in practice, should be developed with the so-called Policy Cycle, five
defined phases or steps through which policy starts and ends.
The phases are:
1) agenda setting 2) policy formulation 3) adoption 4) implementation 5)
evaluation.
Each phase of the policy cycle corresponds to a phase of the so called application of
problem solving.
The definition of public policy, in democratic states, is a prerogative of the
parliament and, in general, of the State, recognized through the elections by the
people of a nation. Thus it is clear how the organization of a State defines what are
the functions and limits of every body or actor. As a matter of fact, a federal state
works differently from unitary states. However, it is reductive to consider policy as a
product made just by the State or public sector. Private sector has, in fact, profound
influence on policy definition. Due to the complexity of the network of actors
involved directly in policy making, the public policy theory speaks about “policy
subsystems” to define the actors themselves.
The variety of instruments that policy makers can use to implement a certain policy
goes from coercive instruments, such as state control and regulations, to voluntary
instruments such as the market, family and community, passing through mixed
instruments such as taxes, subsidies etc. (Howlett, Ramesh 1995).

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A certain public policy, evolving through the different phases of the policy cycle, is
always influenced by many forces. These can be macro economic reasons,
interactions between institutions and economy, ideologies and also stakeholders,
which means all the actors involved and conditioned by that policy. These
characteristics make inevitably the fifth phase of policy cycle, evaluation, an
extremely challenging task.
Public policy theory presents many possible points of view and argumentations upon
this topic, however, the practical side or, in other words, the real implementation of
a policy evaluation (useful to underline weak points and possible changes) remains
still very vague. This point becomes much more relevant when the public policy to
be analyzed is tourism public policy. According to Edgell (1990) “the highest purpose
of tourism policy is to integrate the economic; political; cultural; intellectual; and
environmental benefits of tourism cohesively with people; destinations; and,
countries in order to improve the global quality of life and provide a foundation for
peace and prosperity: in essence, a statement of governments’ vision, goals and
objectives.”
If we consider tourism policy from this point of view, it is clear how complicated and
challenging can be a comprehensive evaluation of it. Moreover there is a common
perception and agreement among scientists that “tourism research is not as highly
valued as that of other disciplines” (Revil Kerr, 2003).
These characteristics can be considered the main reason for such a diversity and lack
of order in approaching tourism policy and its analysis and evaluation.
Bibliography
Edgell, D.L., (1990) International Tourism Policy, Van Nostrand Reinhold, New York.
Jenkins,W. (1978) Policy Analysis: a Political and Organizational Perspective, Martin Robertson,
London.
Kerr, R.W. (2003), From Tourism Public Policy, and a Strategic Management of Failure, Elsevier.
Ramesh, H. (1995) Studying public policy: Policy cycles and policy subsystems ,Oxford, (Italian edition).

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2. THE RATIONAL FOR STATE INTERVENTION IN
TOURISM: WELFARE ECONOMICS
2.1. Welfare economics and public choice
The welfare of a nation does not depend only on the resources it has but also on the
way it uses these resources. Welfare economics concerns the efficient allocation of
resources and the distribution of income, that is to say it deals with the economic
well being of a nation (Arrow 1951).
Welfare economics is based on two theorems. The first one argues that if the
economy is competitive it is Pareto efficient and the second states that a Pareto
efficient distribution of resources can be reached through a redistribution of wealth
followed by a competitive process. Concerning the first theorem, an economy is
competitive when it is exchange efficient, production efficient and product mix
efficient (Stiglitz 2000). However, in reality there are several restrictions on
instruments that prevent policies to be Pareto efficient, this is why for governments
benchmark is appropriate to take into consideration second best Pareto efficiency.
Neoclassical and Keynesian economists believe that governments can correct
market failures by intervening in the economy.
The theory of welfare economics, however, cannot explain exhaustively the
government intervention. In fact, even if the correction of market failures should be
the aim of political interventions, the public choice theory can explain why often the
“economic” optimal choice is not undertaken. This is due to the fact that
programmes reflect the interests of politicians, namely to increase citizens’
consensus, rather then reflecting the interests of the “common good”. Therefore,
policies reflect the preferences of voters, politicians and political institutions rather
than reflecting optimal solutions for the efficient allocation and redistribution of
resources. This is why the “Public Choice School” suggests that a market failure is
not necessarily the justification for state intervention due to the costs of
government failure. In conclusion, the planning and implementation of a policy is a
political decision and it is only in part defined by an economic reasoning. In fact,

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other variables influence its definition, namely the institutional arrangements, the
influence of interest groups, the allocation of power, the values and the ideology
(Hall & Jenkins 1995; Hall 2008).
Therefore, an additional role of government is to reduce non-market failures
produced by its very intervention. The reasons for its failure are (Smeral 1998): the
presence of public monopolies (such as transportation), many interest groups that
affect the decision-making, principle agent problems and lack of performance-based
processes in public organizations. In order to reduce the negative effects of
necessary government intervention, it should speed up its bureaucratic systems,
deregulate (even if regulation has to be effective in case of state monopolies)
liberalize where it is possible, decrease the tax burden and relay on performance-
based public organizations.
A different point of view is expressed by some heterodox schools of economics (e.g.
the Austrian School), which excludes the existence of “market failures” and believes
the market is able to eliminate inefficiencies without government intervention. The
Austrian School suggests a strictly limited role of government in the economy with
an amount of interventions as small as possible, namely in the enforcement of law
and in the creation of a “safety net” for the most needy people (von Hayek).
2.1.1. Market failures and distribution
States intervene in the economy with two main objectives: allocation objective and
redistribution objective. The first one concerns the fact that the market is not always
efficient in economic terms, therefore the state can intervene in order to correct
these market failures (or market inadequacies) to better reallocate resources. The
causes of market failure are (Stiglitz 2000):
- Imperfect competition: when competition is not perfect, the market is not
Pareto efficient; the presence of monopoly, oligopoly or monopolistic
competition is a sign of market failure.
- Public goods: these are those goods that the private sector either
underproduces or it does not produce at all due to their intrinsic nature of
non-rivalry and non-excludability. Put another way, the enjoyment of an

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extra unit of a public good bears near zero marginal costs and it is impossible
or very difficult to exclude other people from using it.
- Externalities: there are externalities when costs and benefits caused to third
parties are not compensated.
- Incomplete markets: it happens when the market does not provide a good or
a service in spite of the fact that the willingness to pay for such products is
higher than the cost of production. An example is innovation whose
production can be reduced due to transaction costs, enforcement problems
and asymmetries of information.
- Information failures: the lack of information about products distorts the
market since the buyers are not able to undertake the optimal choice
according to their utility.
- Unemployment: it can be considered the evidence of market failure since in a
perfect market the demand for labour have to match the supply of it.
The second objective (redistribution) relates to the absence of social commitment in
market rules. This means that wealth is not distributed according to the society’s
preferences, even if the market is economically efficient.
Of course, state intervention is justified, besides the abovementioned objectives,
when it has the possibility to improve the situation (availability of appropriate
instruments) and when the cost of intervention is lower than the benefits it creates.
All things considered, the approach chosen hereafter is mainly that of the
neoclassical school. The market presents situations of inefficiency, which will be
called “market inadequacies” instead of “market failures”. Government can
intervene in order to correct them, however, the risk of distorting the market is high.
In order to avoid the worsening of the situation instead of improving it, it is
important that states limit their intervention to the creation of those framework
conditions necessary to reduce inefficiencies and to foster competitiveness.
Governments have to avoid direct intervention, for example with subsidies, because
this instrument creates heavy market distortions and makes inefficient the

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mechanism of the “spontaneous market order” (von Hayek). Besides limiting the
intervention to some limited areas and using the less distorting instruments,
governments should also diminish the risk of creating distortion by eliminating those
factors that are the cause of government failures. An efficient and simple
bureaucracy helps to reduce transaction costs of actions undertaken, performance
oriented public agencies can improve the public sector efficiency and limiting the
lobbyist power help to reduce distorting influences concerning the decision-making
process.
2.1.2. Market inadequacies in the field of tourism
In the field of tourism it is more appropriate to talk about market inadequacies
instead of market failures. In fact, the presence of “market failure” it is a strong
assumption since tourism would exist even without state intervention.
Cases of market inadequacies in tourism can be divided in those concerning
companion policies and those related to promotion policies. Companion policies are
territorial management, nature and landscape protection, promotion of agriculture,
incentivising of training and upgrading of infrastructures. Promotional policies
include research and development, creation of innovative processes, organization
and financing of destination marketing and tourism infrastructure. The following
market inadequacies have been identified in tourism.
Public goods
The main resources of tourism destinations are their attractions. They are the most
important destination goods at the base of the value of a destination. Their
importance and quality affect the possibility of SMEs to apply a value-based pricing
because they influence the willingness to pay of tourists (Keller 2005). Many natural
and cultural resources are by nature public goods, they increase the attractiveness of
a destination and no stakeholder can be excluded.
The image of a destination is a public good because it is clearly non-excludable and
non-rival in consumption. All stakeholders benefit from it and, in a fragmented
sector such as tourism, it creates the umbrella brand (based on attractions) that

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allows SMEs to apply a value-based pricing (Keller 2004). Moreover, a good image
creates several positive externalities, that is to say the attraction of sophisticated
firms, which in turn attract more sophisticated visitors, which will ask for more and
more sophisticated services (Keller & Smeral 1997) in a sort of upgrading vicious
cycle that stimulates innovation.
The construction and maintenance of infrastructure is usually government’s
responsibility due to their nature of public goods. If we consider general
infrastructure such as roads, it becomes quite expensive to exclude people and, in
addition to this, if we exclude people from consumption (when the marginal cost for
its use is near zero) the result is underconsumption, that is to say market
inefficiency. Concerning tourism infrastructure, even if sometimes these goods are
inexpensively excludable (for example establishing a fee for a cultural centre or for
an event) their creation increases the attractiveness of a destination and no actor
can be excluded from it (free rider problem). The same argument is valid also for the
general infrastructure; therefore, we can state that the building and maintenance of
all kind of infrastructure in a destination increases the overall attractiveness and
usability of it and no stakeholder can be excluded from the related benefits. It must
be specified that the upgrading of infrastructure is of inter-sectoral concern, and
tourism can only affect decision taken in other economic policies related to
infrastructure. In fact, the quality of infrastructure influences the quality of the
business environment in which all kind of company operates.
Finally, also information and knowledge can be considered public goods, however
this argument is developed in the section concerning transaction costs of innovation
and cooperation.
Negative externalities
This is related to the problem of common goods where consumption exceeds
sustainable levels of utilization. The overuse of natural and cultural resources does
not respect both the ecological and social carrying capacities. In fact, the social costs
(for example congestion) and environmental costs (for example pollution) are not
charged on consumers, who incur only in market prices (Keller & Smeral 1997).

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Pollution, resources depletion and social frictions are negative externalities to be
avoided for a sustainable prosperity of tourism. The role of state is to act as a
territorial manager in order to find the right equilibrium between “the need for
protection and the need for development” (Keller 2008).
Market powers
On one side the trend is to deregulate and liberalize the market in order to make it
more efficient. In spite of this, specific regulations to avoid strong market powers are
still needed. In the case of tourism, the big market powers are airlines and TOs
(oligopoly competition) and there is the need to avoid mergers that lead to quasi-
monopoly situations and the creation of cartels. However, sometimes, the public
intervention is not necessary. For example the evolution of Internet is decreasing the
power of intermediaries, or the very deregulation of aviation has decreased the
power of flagship companies thanks to the development of low cost carriers. All
things considered, a simple and effective antitrust body of laws is still important.
Transaction costs
The presence of important transaction costs avoids the right (socially efficient)
production and consumption of certain goods or services. The presence of
transaction costs in innovation and cooperation are dealt in the next section.
Market distortions
The main market distortions identified in tourism are (Keller & Smeral1997):
- Building of risk capital: European tourism SMEs are characterized by
insufficient equity capital and a liability structure with high and fluctuating
interest rates (Keller & Smeral 1997). Bieger explains that the loans granted
to SMEs are scarce and with a high interest rate due to several peculiarities of
such a fragmented sector. First, the smaller the firm, the higher the
transaction costs, situation that decreases the appeal of investment in SMEs,
due to the low return it can generate. This situation is worsened by the

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problem of asymmetric information between banks and firms. Second,
several risk factors raises the interest rates of loans. These risks are that firms
are tied to a specific location, their profitability depends also on other
stakeholders of the destination, the risk of the property market and risks
concerning the low rate of innovation and slow processes of decision making
at the destination level. Finally, there is the problem of moral hazard due to
the uncertainty of profits (put another way the high standard deviation of
return on equity) due to the low growth rate and volatility of demand
influenced by exchange rates, seasonality, trends and exogenous factors such
as weather conditions, natural disasters, terroristic attacks etc. (Bieger 2000).
In conclusion, state intervention in facilitating access to capital is justified by
the market distortion due to an incomplete market for the granting of loans
to the tourism sector. It can be considered an incomplete market since the
private market fails to provide loans even if the cost is less than the potential
willingness to pay, due to the presence of transaction costs and asymmetries
of information (Stiglitz 2000).
- Labour market inflexibilities and rigidities: social constraints that do not
match completely market demand. Government should encourage more
flexible working and opening times.
- Difficulty of market exit: it keeps firms in the market even if their low
efficiency would suggest leaving the market. Government should encourage
conversion into other kind of activities or to allow tax benefits in order to
lower the burden of sunk costs that lower the entry and exit rates of a
market.
2.2. Transaction costs: innovation and cooperation
Developed countries faces several problems in tourism growth due to several
changes. Today, the tourism sector is not only competing with destinations in
developed countries (which benefit from the so-called “advantage of

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backwardness”1
), but also have to compete with other more productive sectors in
the market of factors of production. In fact, due to its labour intensive nature and
the increasing productivity of other economic sectors, tourist companies face more
and more difficulties in attracting capital and skilled labour forces. In addition to this,
the lifecycle of the product offered by those countries is in its maturity phase and
the risk is to face decline. Innovation can be the solution to these problems and be
the “motor of growth” (Keller 2006).
Innovation is not a matter of planning but it is created in early stages through
entrepreneurship and in the maturity phase through constant R&D, becoming a
matter of routine. Innovations thrive in free and open markets, characterized by
competition. This is also supported by the fact that sectors with low barriers witness
more innovations, since, often, those that bring new ideas are the new entrants.
Figure 1: Competition and Cooperation adapted from P. Keller
However, in tourism there are several factors that inhibit the innovation process.
First of all the high level of imitation generates a free rider problem, making R&D
less attractive as investment. Second, the fragmentation of the sector and the small
size of firms mean scarce financial resources of single companies and then the lack
of in-house facilities of R&D. In addition to this, innovation in destinations usually
involves cooperation since the improvement of processes and the upgrading of a
1
The advantages of developing countries are mainly pristine natural resources, the
abundant and inexpensive labour and favourable exchange rates (Keller 2008).

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product involve several actors. Therefore, cooperation can be the solution necessary
to overcome the abovementioned problems.
All things considered, the ingredients whose combination has the ability to boost
innovation are competition and cooperation. Competition is the main driver of
innovation while cooperation is necessary to overcome the problems caused by the
fragmented nature of the sector (Figure 1).
The intervention of the state is quite controversial. However, there are several
arguments in support of the role of the state as catalyst of innovation. First of all,
cooperation includes high transaction costs that often the private sector cannot
afford. The more specific the nature of cooperation, the higher the transaction costs
are (Keller 2006); an example of specific cooperation is the creation of a destination
based reservation system. Second, innovation has the nature of public good since its
imitation and dissemination create benefits for the whole society and not only for
few stakeholders. The positive externalities for the society are the increase of
prosperity (more income) that generates additional employment.
Even if we agree on the need for public intervention, it is naïve to believe that the
state itself can either create innovation or innovation processes. In fact, the state
can only incentive the private sector; its role is to create the best framework
conditions where innovation can proliferate with the help of a favourable incentive
system. First, it has to guarantee a free and deregulated market in order to foster
competition since it is the major driver of innovation. Second, it has to reduce the
transaction costs of cooperation providing the right incentives. Finally, it has to
concentrate its efforts in creating the best conditions for the development of the so-
called “innovation creation mechanisms”. In order to support these mechanisms,
governments should focus on education, research and information.
The role of state in education is not universally agreed, however there are several
arguments that justify public support due to the positive externalities it creates
(Stiglitz 2000) to the whole society (even if it cannot be considered a pure public
good). In the case of tourism, there is a need for appropriately trained specialists and
managers, but also workers that learn on the job. Probably, one of the main

18. 18
problems in this area, is the scarce interaction between the academic world and the
private sector; the private sector should not waste the amount of information
created by the investment (often public investment) in universities and research
centres. A closer collaboration between researchers and the private sector have
several advantages, such as a better focused research on practical problems and the
reduction of wasted money due to the current mismatch between demand and
supply of research and the mismatch between demand and supply of specific
professionals’ profiles.
Also information is fundamental for the innovation creation mechanisms. The
production and dissemination of knowledge has positive effects since they increase
the productivity of firms. It is of public competence to support a good statistical
monitoring system and to disseminate information in a clear way. The diffusion of
information depends also on the quality of a country’s information technological
infrastructure, which is a public infrastructure.
2.3. Competitiveness and promotion of the place
Competitiveness of destinations
For Ritchie and Crouch the competitiveness of a destination can be defined as the
“ability to increase tourism expenditure, to increasingly attract visitors while
providing them with satisfying, memorable experiences, and to do so in a profitable
way, while enhancing the well being of destination residents and preserving the
natural capital of the destination for the future” (Ritchie & Crouch 2003). In this
definition we can identify two aspects; the first one relates to the economic
competitiveness that can be summarized by the ability to sell and the ability to earn
(value added of tourism); the second one relates to the need for sustainability,
which includes economic sustainability (satisfying the visitor, not deceiving her/him),
social sustainability (respecting and involving residents) and environmental
sustainability (protecting the main assets of a destination).
While the value added of tourism is the result of competitiveness (a sort of measure
of performance), the determinants of competitiveness are those explained by Porter

19. 19
(Porter 1990). Several authors applied these determinants to tourism (Keller &
Smeral 1997; Ritchie & Crouch 2003; Vanhove 2005), therefore the competitiveness
of a national tourism sector are:
- Factor conditions;
- Demand conditions;
- Related and supporting industries;
- Firm strategy, structure and rivalry;
- Government;
- Chance.
The World Economic Forum establishes from 2007 a yearly report on tourism
competitiveness2
that is based on the idea of competitiveness of Porter. The report
provides a ranking of more than a hundred world countries according to the
competitiveness of their tourism sectors.
Ritchie and Crouch provide a different approach to competitiveness. Their idea is not
to analyse competitiveness for the benchmarking of destinations because the
competitiveness of a destination depends on whether it has the resources and is
able to employ them in a way to reach the goals established by the destination itself.
This is way they provide a comprehensive model that enable destination makers to
analyse the different aspects that determinates the competitiveness of their
destination. According to them, competitiveness is determined by several groups of
factors: macro environment, micro environment (competitive environment),
comparative advantages (endowment of resources), competitive advantages
(deployment of resources), core resources and attractors, supporting factors and
resources (e.g. infrastructure), destination management, destination policy, planning
and development, and qualifying and amplifying factors (e.g. location and security).
In addition to this, they also state how it is important to think about competitiveness
in a sustainable way.
2
“The Travel & Tourism Competitiveness Report 2009”

20. 20
Finally, also OECD (OECD 2010) defines competitiveness considering on one side
productivity and profitability and on the other side the development in a sustainable
context (social, cultural and environmental).
A different view of the competitiveness of a sector is considering different levels.
First of all, competitiveness is determined by productivity at the firm level, and thus
their ability to sell and to earn. Since developing countries have productivity
advantages related to the abundance of low-cost resources, industrialized nations
have to have to rely on entrepreneurship and innovation, operating in the most
efficient and effective way. However, the productivity of firms is not sufficient, and
competitiveness is also affected by the micro and macro economic conditions in
which they operate. They need qualified staff, low tax burden, good infrastructures,
appropriate information and knowledge dissemination, easy administrative
procedures etc. This requires the intervention of the state in the following areas
(Keller 2008):
- Liberalization and deregulation of the market;
- Macro-economic stability and improvement of the business environment;
- Co-production of destination goods;
- Innovation oriented incentives of growth.
The policy options that can support a competitive and sustainable development of
tourism are (OECD 2010):
- Boosting innovation and the knowledge economy;
- Helping SMEs to access the global market;
- Addressing environmental and climate change issues;
- Accessibility of destinations;
- Focusing on marketing and branding;
- Promoting economic development;
- Valorising culture and local attributes;
- Increasing safety and security;
- Improving measurement and evaluation.

21. 21
Economic importance of tourism
The presence of market inadequacies is one of the conditions that justify tourism
policy. However, the need for such a policy depends also on the specialization of a
certain country in tourism, put another way, its economic importance. At first sight
one can state that tourism is less and less important in advanced countries due to its
lower productivity compared to other sectors, which are gaining greater share of
national GDP. However, several studies shows that tourism is still important for the
economic growth of OECD countries (Lee & Chang 2008) and it has several benefits
at the macro-economic level such as its contribution to the balance of payment
(representing a high share of service exports), generation of employment (in OECD
countries is between 3% and 11%) and contribution to GNP (in OECD countries is
between 2% and 12%) (Keller 2008). In addition to this, tourism has another function
at the macro-economic level, it helps to redistribute wealth from richer regions
(generators of demand) and poorer ones. Usually remote areas have witnessed the
disappearance of other traditional industries and tourism is an alternative resource
to be exploited.
Promotion of the place
The role of state as promoter of tourism is perhaps the most controversial among
the main areas of intervention of the state. In fact, while the role of legislator,
territorial manager and co-producer are generally accepted, its role of promoter
creates a high risk of market distortions. However, on the other side, those countries
that do not promote tourism faces the problem of the “prisoner dilemma”; not
promoting tourism means loosing market share. This is way “authorities should limit
themselves to measures of allocation and distribution, in the spirit of ‘welfare
economics’, i.e. measures designed to eliminate clear cases of market failure or
which help to eliminate unwanted disparities” (Keller 2005).
Promotion in its extended meaning can be understood as “stimulation” as it is called
in the book of Hall (Hall 2008). Stimulation by the state is achieved by providing
financial incentives, sponsoring research for general benefits and subsidizing
marketing and promotion. Special attention is given by the author to marketing and

22. 22
promotion, saying that the scope of this function is not only to attract tourists but
also to attract investors. Finally, he explains that public intervention is justified by
the nature of public good and the market failure created. In fact, if marketing and
promotion are left to the private sector the risk is of undersupply, due to the free-
rider problem (Hall 2008).
The promotion of the place should enhance the competitive position in the tourism
market with particular attention to three aspects (Keller 2000): foster innovation for
the renovation of the market structure (section 2.2), promote cooperation to
improve the accessibility to the market of SMEs (section 2.2) and the promotion of
the image which, is a public good (Figure 2).
Figure 2: Market inadequacies related to place promotion, adapted from P. Keller (2000).
Since the communication and marketing of a destination image has not been dealt
with yet, box 1 explains more in details the issues related to this topic.
Box 1
Communication and Marketing
Globalization has skyrocketed competition among destinations worldwide and the
governments has now a major role to play in developed economies (Keller 2008a).
Competition is first of all among destinations and it has a monopolistic character
since each destination is unique and has to sustain differentiation strategies in order
to succeed in this environment. Destinations that fail in promoting themselves in the

23. 23
international market not only will not upgrade their situation, but also they will lose
market share, due to the sharp competition of locations in developing countries and
the fact that other destinations are involved in self promotion (prisoner’s dilemma).
As abovementioned, developed countries have to direct efforts on quality-based
value, but it is also necessary to communicate this value, because the lack of
information causes market distortions and visitors might choose “less valuable”
destinations.
Conclusion
In conclusion, state intervention in the tourism sector should be limited to some key
areas and using instruments and actions with the minimum risk of market
distortions. The state should act as:
- legislator: deregulation and liberalization create the best conditions in which
competition can boost innovation and prosperity.
- Territorial manager: it has to ensure a sustainable equilibrium between
development and preservation, and to correct the negative externalities
produced by overconsumption.
- Co-producer: the state has the responsibility of “producing” those
destination goods with the nature of public goods.
- Promoter: it has to promote innovation and cooperation to overcome the
transaction costs that affect the sector and to promote the image of the
destination since it is a public good.
Bibliography
Arrow, K. J. (1951, 2nd ed., 1963), Social Choice and Individual Values, Yale University Press, New
Haven.
Bieger, T. (2000),’Destination management e finanziamenti’, in Pechlaner, H. and Weiermair, K. (2000)
eds Destination Management: fondamenti di marketing e gestione delle destinazioni turistiche,

24. 24
Touring Editore, Milano.
Hall, C.M. (2008), Tourism Planning: Policies, Processes and Relationships, 2nd edition, Prentice Hall,
Harlow.
Hall, C.M., Jenkins, J.M. (1995), Tourism and Public Policy, Routlege, London.
Keller, P. (2000),’Le organizzazioni turistiche nazionali a una svolta’, in Pechlaner, H. and Weiermair, K.
(2000) eds Destination Management: fondamenti di marketing e gestione delle destinazioni turistiche,
Touring Editore, Milano.
Keller, P. (2000a), ‘Globalization and Tourism’, in: W.C. Gartner and D.W. Lime, Trends in Outdoor
Recreation, Leisure and Tourism, CABI Publishing, New York, pp. 287-297.
Keller, P. (2004), ‘The future of small and medium size enterprises in tourism’, in: AIEST, Vol. 46 St.
Gallen, pp. 7-21
Keller, P. (2005), ‘A new look on global tourism’, in: Trigo, L.E. et al., Turismo Brasileiro, Analises
regionais e globais do Turismo brasilerio, Sao Paolo 205.
Keller, P. (2006), ‘Toward an innovation oriented tourism policy’, in: OECD, Innovation and Growth in
Tourism, Paris.
Keller, P. (2008), ‘New paradigm for international tourism policy’, in: OECD, Tourism in OECD
Countries 2008, Paris, and pp. 11-26.
Keller, P. (2008a), ‘Structural Changes and Challenges for Tourism Management’, in: Change
Management in Tourism, ESV, Berlin pp. 31-39.
Keller, P., Smeral, E. (1997), Increased International Competition: New Challenges for Tourism Policies
in European Countries, Background Paper, World Tourism Organisation (WTO), Madrid.
Koch, K. (2000), The shareholder concept in the field of tourism, 2
nd
Summit of Tourism, Chamonix-
Mont-Blanc.
Lee, C.C., Chang, C.P. (2008), ‘Tourism development and economic growth: At closer look at panels’,
Tourism Management, Vol.29.
OECD (2010), Tourism Trends and Policies, OECD, Paris.
Porter, M.E. (1990), The Competitive Advantage of Nations, The Free Press, New York.
Ritchie, J. R. B. and Crouch, G. I. (2003), The Competitive Destination: A Sustainable Tourism
Perspective, CABI, Oxon.

25. 25
Smeral, E. (1998), ‘The impact of globalization on small and medium enterprises: new challenges and
for tourism policies in European countries’, Tourism Management, Vol. 19, No. 4, pp. 371-380.
Solow, R. (1970), Growth Theory: an Exposition, New York: Oxford University Press.
Stiglitz, J.E. (2000), Economics of the Public Sector – 3rd ed., Norton, New York.
Vanhove, N. (2005), The Economics of Tourism Destinations, Elsevier.
World Economic Forum (2009), The Travel & Tourism Competitiveness Report 2009, WEF, Geveva.

26. 26
3. THE NATURE OF TOURISM POLICY
3.1. Is there a tourism industry?
Tourism policy is “a set of regulations, rules, guidelines, directives and
development/promotion objectives and strategies that provide a framework within
which the collective and individual decisions directly affecting tourism development
and the daily activities within a destination are taken” (Ritchie & Crouch 2003).
Before analysing the nature of tourism policy it is useful to spend few words on
whether a “tourism industry” exists or not. Talking about “tourism industry” is very
common in articles, speeches and publications, but there is a continuous debate on
whether tourism is an industry, a sector or neither. Those against the argument say
that an industry is composed by firms that produce the same group of products or at
least that use the same raw materials. Those in favour claim that tourist firms all
supply tourist needs, then they have a common function (Vanhove 2005).
As a matter of fact, tourist firms are defined by demand and this is the only way to
group them together in an industry or a sector. However, only few of them have the
exclusive function to supply tourist needs (e.g. hotels), while for many of them
tourism needs are only part of their supply (Costa & Manente 2000). For example
theatres, restaurants and wineries satisfy both the needs of tourists and inhabitants.
This is why, in order to establish the value of tourism in the economy, many states
adopt the TSA (Tourism Satellite Account), which establishes the kind of firms to
include in the account and their relative weight in tourism. This is due to the fact
that the “tourist product” is finally assembled by the tourist itself, a tour operator
together with the tourist or in few cases completely by a tour operator. . Therefore,
what is more likely to be considered a tourism industry is the group of tour
operators, even if, in many cases, the household production is an essential part of
the final product. From this point of view, it is clear that it would be more correct to
talk about “tourism industries”3
than a tourism industry.
3 For more information see Leiper 2007.

27. 27
This argument is strengthened by the fact that the elements the tourist buys can be
considered in economic terms “complementarities”4
, that is to say when products
complement one another in order to satisfy customer needs (Porter 1998). Tanking
into consideration another article of Porter (Porter 2008), he suggests that in order
to understand weather two firms are part of the same industry we should analyse
the five forces that define industry structure (threat of entry, power of suppliers,
power of buyers, threat of substitutes and rivalry among existing competitors)
because “If industry structure for two products is the same or very similar *…+, then
the products are best treaded as being part of the same industry. If industry structure
differs markedly, however, the two products may be best understood as separate
industries” (Porter 2008). It is clear that analysing the different actors of tourism we
can identify different structures of competition.
3.2. Considerations for a tourism policy
Established that tourism is not a proper industry, a tourism policy should also take
into consideration the peculiar characteristics of tourism compared to other
economic sectors:
- Heterogeneous structure of tourism related industries (Keller 2008): first of
all, firms can be divided in two broad groups. On one side there are
international travel companies whose products are standardized and where
competition is mainly on price. These companies are big corporations that
respond to the needs for packages. On the other side there are destination-
based SMEs with differentiated products among which competition is mainly
on quality because they are more oriented towards the personalization of
experiences. An additional division concerns those firms that aim at “all
inclusive” supply of services and those that aim at self-service supply
(national flagship airlines and low cost airlines for example). Policy makers
4
Also Porter refers to tourist products in a cluster (destination) as
complementarities in his article “Clusters and the new economics of competition”
(Porter 1998).

28. 28
have to take into consideration the different needs of such different kind of
companies.
- Tourism is defined by demand: the actors involved in a tourism policy are
many and different.
- Competition is first of all among destinations (Keller 2009): destinations are
territory bound competitive units that represent the first choice of
customers. Attractions are the most important elements of destination value
and they are the bases of an umbrella brand. The effects of a good or bad
policy aimed at attractions have great influence on the profitability of the
destination’s firms.
- Tourism is an experience “industry”: policy makers have to consider the
experience nature of the tourism product, whose quality depends on many
actors. The fragmentation of the industry makes it more complicated to
deliver a good experience and then the success of a destination’s stakeholder
depend on the behaviour of their neighbours.
- Tourism is a service activity: the product is intangible, then the customers
cannot try it before consumption, which means that the role of marketing
and communication is even more important than for other services. Its
consumption is inseparable from production and it is the tourist that moves
to obtain the service. Here again a public policy support in marketing is
important since even if production is strongly tied to locations, competition is
global. This stresses the need for particular attention in differentiated
policies for both demand (international character) and supply (local
character). Finally, the tourism product is perishable, therefore the capacity
not sold in a particular day cannot be recovered (Vanhove 2005) and this is
worsened by the fixed capacity of firms (e.g. an hotel cannot easily change its
capacity of number of rooms to respond to market needs).
- Seasonality: this phenomenon is mainly due to the climate and in part to
social constraints (social behaviour and quite inflexible holidays periods of
schools and firms). Seasonality causes several problems (Vanhove 2005):
o Fluctuating occupancy rate;
o Under-occupation of tourism infrastructure during off periods;

29. 29
o Seasonal unemployment that creates both welfare and in-house
training problems for firms;
o Congestion in peak periods that creates on one side negative
externalities (physical, social and environmental carrying capacities)
and on the other side visitors’ dissatisfaction.
o Lack of clear understanding of tourism and its economic impacts: this
is due to the fact that only recently tourism has been considered a
strategic economic sector for nations (OECD 2010) and that it is
difficult to calculate the economic impact of such a fragmented sector
that includes different industries to different extents.
The abovementioned elements have important implications for policy
makers, above all those concerning carrying capacity for the organization of
supply, and seasonal unemployment and peak periods of occupancy rate for
specific actions of promotion.
3.3. Implications for a tourism policy
All things considered, it can be affirmed that a tourism policy should aim to promote
destinations rather than promoting tourism related industries since competition is
first of all among destinations. Destinations are sometimes wrongly considered
similar to corporations. However, in Europe, they are characterized by several
independent actors that offer multiple products and services. In this case the
destination is a market place, and not a corporation. Those destinations that can be
considered corporations are those fully consolidated present in North America. In
the European case, a good vertical cooperation, with the support of a central
organization, is necessary to promote and protect the brand of a destination.
Moreover, public intervention for specific industries has more chances to create
market distortions, while a policy concerning destinations maintains unchanged the
market equilibrium within the competitive unit, correcting the market failures
discussed in chapter 2. The same argument is stressed by Porter in its theory that
supports cluster policies as better alternative instead of industrial policies (Porter
2007).

30. 30
Therefore, in principle destinations have to be promoted instead of specific firms or
industries. However, leading or engine industries have important externalities (such
as hotels or cable cars) so subsidies can make sense particularly if they are limited in
time and in space.
Tourism policy is more than an industrial policy since it affects several actors with
different characteristics and different needs and it has to consider the fact that
production is strictly related to locations and that competition is global. This implies
different approaches for supply side actions and for demand side actions.
Tourism policy is by the nature of its object a horizontal or transversal policy.
Considering the fact that tourism includes so many actors and sectors, tourism policy
concerns on one side different ministerial responsibilities and on the other side
different levels of governments (since different levels of government have different
tasks). This requires a “whole government approach” (OECD 2010), in which
different departments and government levels collaborate in order to undertake
coherent actions. Moreover, different representatives of industry associations have
to be involved in the decision process since it is difficult to fully understand the
dynamics and problems of such a heterogeneous sector. Acting in this way means
not only a higher level of effectiveness, but also obtaining the consensus and
support of many stakeholders. For the sake of quality of collaboration and the
coherence of actions a clear division of tasks and responsibilities is fundamental. In
addition to this, it is important to avoid time consuming and expensive bureaucratic
procedures. A manner to avoid these problems is to collaborate on a project basis
above all for the collaboration among different levels of government and among
public and private sector.
3.3.1. The nature of tourism policy by Ritchie & Crouch and
OECD
The authors identify several features that characterize a tourism policy (Ritchie &
Crouch 2003):
- Focus on societal views of tourism development at national and subnational
levels;

31. 31
- Long-term perspective;
- Best allocation of scarce resources to match the needs and opportunities of a
changing environment;
- The process of formulation must consider not only traditional methods of
research but also “tacit knowledge and personal experience”;
- Avoid stereotype-based views encouraging “organized creativity”;
- “It must be constructed to permit and facilitate a continuing dynamic social
process requiring inputs from multiple sources”;
- Avoidance of boundaries between different disciplines and sectors of
tourism;
- Integration in the “total economic system of a nation or region” relating with
the other subsystems present in it;
OECD suggests several characteristics that a tourism policy should have in order to
be effective (OECD 2010):
- Long term orientation;
- Whole government approach;
- Industry engagement;
- Collaboration and coherence between levels of government;
- Outcomes, evaluation and performance measurement.
Having considered all the features a tourism policy should have, it can be added that
its efficiency is also determined by the process of its formulation. It can be divided in
four phases: definitional phase, analytical phase, operational phase and
implementation phase (Ritchie & Crouch 2003). The authors explains these phases as
follows:
- Definitional phase: the establishment of the structure of the tourism system
and its stakeholders is important for the coherence and comprehensiveness
of the policy; it is also important to identify the destination philosophy, which
means the role of tourism in a region or nation; once defined the philosophy,
policy makers have to “craft” the vision as a leading instrument for the

32. 32
establishment of clear and measurable objectives (and of course the related
constraints).
- Analytical phase: it concerns the gathering and assessment of information in
order to evaluate possible alternatives that can be undertaken to achieve the
vision; the internal (supply) analysis includes the review of existing
programmes, a resource audit (distribution and quality of services) and an
impact analysis (economic, environmental and social); the external (demand)
analysis includes a study at the macro-level (nature and structure of existing
demand using national statistics), a study at the micro-level (motivations and
behaviour of different segments), a competitive analysis (benchmark of
destinations with similar markets) and an analysis of possible supporting
policies (alliances and cooperations in order to create synergies).
- Operational phase: it identifies strategic conclusions from the great amount
of information collected in the former phase, it determines “the implications
of the conclusions for the supply and demand development strategies” and
specifies related recommendations.
- Implementation phase: essential elements are the clear division of
responsibilities among organizations, the estimate of financial requirements
and the definition of timing.
Conclusion
The nature of a tourism policy can be explained on one side by the characteristics of
a public policy and on the other side by the peculiarities of tourism. Therefore it is
defined not only according to a pure economic evaluation of costs and benefits but
also according to the institutional arrangements between the different levels of
government and different bodies, the influence that the several tourist associations
and interests groups have on government decision, the values (and the importance
of tourism in the political agenda) and the power allocation. On the other side, a
tourism policy has to take into consideration the horizontal character of the sector.
Thus it has to engage the different private actors, be coordinated with other sectoral

33. 33
policies, be coherent among the different levels of government and has to improve
the measurement and evaluation tools due to the difficulty of analysing such a
complex sector.
Bibliography
Costa, P., Manente, M. (2000), Economia del turismo: Modelli di analisi e misura delle dimensioni
economiche del turismo, Touring Editore, Milano.
Hall, C.M., Jenkins, J.M. (1995), Tourism and Public Policy, Routlege, London.
Keller, P. (2009), Destination marketing, 3
rd
Advance in Tourism Marketing Conference, Bournemouth,
September 2009.
Leiper, N. (2007), ‘Why ‘the tourism industry’ is misleading as a generic expression: The case for the
plural variation, ‘Tourism industries’’, Tourism Management, 29.
OECD (2010), Tourism Trends and Policies, OECD, Paris.
Porter, M.E. (1998) ‘Clusters and the new economics of competition’, Harvard Business Review, 76(6):
77-90.
Porter, M.E. (2007), ‘Clusters and Economic Policy: Aligning Public Policy with the New Economics of
Competition’, White Paper, HBS. Institute for Strategy and Competitiveness.
Porter, M.E. (2008), The Five Competitive Forces that Shape Competition, in Porter, M.E. (2008), On
competition, Harvard Business Press, Boston.
Ritchie, J. R. B. and Crouch, G. I. (2003), The Competitive Destination: A Sustainable Tourism
Perspective, CABI, Oxon.
Vanhove, N. (2005), The Economics of Tourism Destinations, Elsevier.

34. 34
4. SCOPES OF THE TOURISM POLICY
Before approaching the broad topic regarding the several objectives of a public
policy in the tourism sector, it is fundamental to analyze and absorb two main
concepts: Competitiveness and Productivity.
As affirmed by Porter in the Global Competitiveness Report 2007-2008, “the most
intuitive definition of competitiveness is a country’s share of world markets for its
products.” This makes this concept the basis for the prosperity of a country and its
citizens.
This definition can be easily applied to every economic sector of the whole economy
of a country, speaking consequently of competitiveness of a certain sector in
comparison to other sectors.
The most suitable measure to reflect the level of competitiveness of an economic
sector or country is the value added per employee (Porter 1991). This introduces us
to the second fundamental element that is Productivity.
It measures the economic performance of resources employed (Keller, Bieger 2007).
“Productivity depends both on the value of a nation’s products and services,
measured by the prices they can command in open markets, and the efficiency with
which they can be produced (Porter, Global Competitiveness Report 2007-2008)”.
Again the measure to evaluate the level of productivity is the value added per
employee. This gives evidence of the strict relation between Competitiveness and
Productivity.
Considering that an increase in productivity or in production factors can lead to a
change in growth, measured in an increase in GDP (Keller, Bieger 2007), we can
finally approach the first big scope of the tourism policy when it is considered as a
relevant part of the economic policy: Growth.
The framework conditions of growth, in the tourism sector, have had important

35. 35
changes since the globalization process have given the developing countries the
possibility to enter the market as tourist destinations. These countries enjoy the
advantage of low costs for production factors, in particular for labour. Being tourism
a typical labour-intensive sector, this condition determines a strong competitive
advantage. This is the reason why “developing countries are in the process of closing
the gap with industrialized countries” (Keller 2008). However they have to be
completely developed if they want to close the gap.
Moreover, tourism in developed countries suffers of a lack of productivity due to
high labour cost (in an labour intensive sector) and smallness of SMEs that form the
great part of tourism supply.
This low productivity, in comparison with more productive economic sectors, leads
to the so called cost disease: SMEs, in order to balance this productivity gap, are
obliged to rise prices. This is the most relevant difference with developing countries,
where tourism is much more productive than other sectors. This mechanism,
however, is not without consequences. As a matter of fact, SMEs become weaker in
two directions:
- ability to sell: too high prices make the product hard to sell;
- ability to earn: difficulty to procure production factors because of low
competitiveness level.
Taken cognizance of this process, developed countries have to focus their policies
and strategies on what is called productivity-based growth (Keller, Bieger 2007). This
concept is based on the assumption that developed countries cannot decrease
labour costs, being more efficient, so the only effective way to increase productivity
is to increase quality, pushing tourism “from a purely service sector to an experience
industry” (Keller 2005).
As shown in the figure below, productivity depends on three levels: firm level,
industrial or business environment level (micro-economic level, Porter 2007) and
macro level or framework conditions.
All these levels are within that context formed by the endowments that are basically

36. 36
natural resources and location (Porter 2007).
Figure 3: Three levels of productivity (Source: P. Keller)
Each level is independent and connected to the other levels at the same time. As a
matter of fact, one firm can be competitive by its own nature thanks to successful
strategies and management, but its competitiveness, and thus productivity, depends
also on the micro-economic environment conditions. The same reasoning can be
applied to the business environment (micro-economic) in relation with the macro
level.
The “smallest” level, that is the firm one, has to be let free from State intervention.
Firms have to play freely their roles in the market, stimulating that fundamental
process and vital energy, for every economic sector, which is competition.
On the contrary, we can observe the State’s roles, and so the tourism policy related
objectives, in the other two levels: Business environment and Framework
Conditions.
According to Porter, we can subdivide the macro level (framework conditions) into
four contexts: economic, legal, political and social.
- These areas contain several issues/objectives which are not directly related to
tourism, but that are fundamental (necessary condition but not sufficient) for
the prosperity of the sector. Among these we can find (Ritchie and Crouch,
The competitive Destination, 2003):

37. 37
- taxation;
- interest rate policy;
- air agreements;
- environmental policies;
- immigration policy;
- communication policy;
- minimum wage policy;
- welfare policy;
- education policy;
- cultural policy;
- foreign investments policy;
- security policy;
- funding policy;
- infrastructure policy;
- legal system;
It has to be specified that these policies do not follow any particular field. These are
the basis for every sector and some of these are not even under the full power of
just one State. As a matter of fact, some framework conditions depend on global
trends (e.g. interest rates).
However, the great majority of them can be managed directly by the State, and it is
extremely important to recognize that they can have significant effect on tourism
sector. So, if a State has a clear vision in tourism, it must consider and evaluate these
elements and their impacts on it, making an effort in order to provide friendly
tourism framework conditions. Thus, this can be considered the second main goal
of tourism public policy.
“Microeconomic conditions translate the opportunities created by the
macroeconomic, political, legal and social context and the endowments of natural
resources and geographic location into prosperity.”
These are the words with which Porter (2007) introduces the second and last level to
analyze: the business environment.
It is composed by all the tourism related industries but it depends on many State

38. 38
activities in order to be productive. This is the area where market failures take place,
so it is also the place where we can observe the majority of State interventions.
“The business environment can be understood in terms of four interrelated areas:
the quality of factor (input) conditions, the context for firm strategy and rivalry, the
quality of local demand conditions and the presence of the related and supporting
industries. Because of their graphical representation, these four areas have
collectively become referred to as the diamond.” (Figure 4)
(Porter, Global Competitiveness Report 2007-2008)
Figure 4: Porter’s diamond (Source: Porter 1990)
The four areas that are going to be explained below (see figure above) can be
shaped by the Nation (State) in order to achieve success in a certain industry. If
business environment has the optimal characteristics, firms can compete creating
value.
- Factor (input) conditions: “the nation’s position in factors of production”
(Porter 1990). So this area represents the characteristics (efficiency, quality,
specialization) of inputs available to firms in each sector. Natural resources,
human resources, capital resources, physical resources, administrative and
information infrastructures, technological infrastructures are part of this
area.
- Context for firm strategy and rivalry: local context and rules that encourage

39. 39
investments and productivity. This context must be characterized by “open
and vigorous competition especially among locally based rivals” (Porter
1990).
- Demand conditions: “the nature of home demand for the industry’s product
and service” (Porter 1990). Level of expectation, sophistication, market
segments characteristics are part of this area.
- Related and supporting industries: presence and characteristics of suppliers
and related industries of the analyzed industry/sector (tourism). Presence of
clusters.
It has been affirmed above that the State intervenes in the economic sectors both at
the Macro level and Micro level. The figure below shows what are the functions with
which the State intervenes: Co-producer, Legislator, Territorial manager, Promoter.
Figure 5: State functions in tourism (Source: P. Keller)
The four functions embody also the objectives of the public policy related to the
business environment.
As a matter of fact, the State acts as a Co-Producer in the sense that “it makes
available the necessary destination goods” (Keller 2005).
Tourism, as an economic sector, is based on public goods such as cultural attractions,
infrastructures (transportation, energy, water, technology), natural attractive

40. 40
resources (landscape), education and training. Since it is basic economic assumption
that public goods causes market failures, it is evident that the State has to intervene.
So the main goal for the state as co-producer is to produce, provide, maintain and
protect the public goods that are fundamental for tourism prosperity. Finally, the
State, in order to avoid the problem of free-riding, is the main actor for destination
promotion. This function is mainly related to the business environment’s area of
factor (input) conditions.
The second function of public policy in the business environment is the Legislative
one. The goal, in this case, is to guarantee liberalization and deregulation to the
tourism sector. It enables tourism related industries to establish free competition
and cooperation. Thus this function is mainly related to the business environment’s
areas of context for firm strategy and rivalry and related and supporting industries.
The third function assigns to the State the role of Territorial Manager. The key role
here is played by carrying capacity. As a matter of fact, the State has the
responsibility and thus the objective to find the optimum between positive and
negative externalities, the balance between too much growth and too little (Keller
2005). This function is mainly related to the business environment’s areas of factor
(input) conditions and demand conditions. It is important to remember that this
function occurs in different forms/ways, in several types of government
organizations and at different scales (national, regional and local) (Hall 2008).
The fourth and last function is the one as Promoter. Here promoter is not just
referred to the marketing activity but it is viewed in a wider sense as an encouraging
source in order to stimulate competitiveness, innovation and thus quality.
The state, in this case, has the goals of rising competitiveness of business
environment, maximizing positive externalities, supporting innovation creation
mechanism. There are many available instruments used to achieve these objectives.
Competitiveness, for example, can be increased through incentives to investments
(e.g. 3.5% VAT in Switzerland for hotel sector; convenient interest rates). Moreover,
rising competitiveness, and stimulating cooperation at the same time, public policy

41. 41
can act as catalyst for creation of that “tension between the two poles (competition-
cooperation) that sparks innovation” (Keller 2005). Innovation is also extremely
connected and dependent from education system and vocational training produced
also by the State through the function of co-producer.
Finally, assuming that tourism and its related industries produce high levels of
externalities (positive and negative), the scope of public policy is to correct them,
maximizing positive ones (e.g. employment).
Besides these four functions, it is extremely important to remember that the State
develops and represents also other functions such as Coordination (among different
levels of government, among different bodies and between public and private
sectors), Social responsibility (to guarantee some opportunities also to weak
minorities such as unemployed, handicapped etc.) and finally Public Interest
Protector (e.g. defence of local minorities) (Hall 2008).
These three functions are not directly related to tourism but they can influence
tourism policies so it is important to remind them in order to have a complete
image.
Conclusion
It is fundamental, in order to have a clearer idea of what are the scopes of the public
policy in the tourism sector, to sum up all the important points analyzed in the
chapter.
The first main scope of every type of economic policy is Growth. This concept is
strictly related to competitiveness and productivity and includes also creation of
attractive and well paid jobs for citizens. Thus it has been explained why growth in
tourism sector of developed countries means productivity-based growth.
Then we moved to analyze the institutional environment that impacts and
determines productivity. It is composed of three levels. The “smallest” one has to be
free from State intervention. At this level the private sector is the main actor and
decision maker. On the contrary, State can intervene in the other two levels: Macro
and Micro (business environment). At the Macro level the scope is to provide

42. 42
friendly tourism framework conditions, however, public policy here is not directly
focused on tourism sector. Moreover, it has to be specified that public policy and
tourism sector are not able to influence some framework conditions such as
exchange rates and inflation.
As a matter of fact, Tourism sector is represented in the business environment level
(micro level). It is divided into four areas according to Porter theory.
The State acts as co-producer, legislator, territorial manager and promoter.
The scope of the State as co-producer is to produce, provide, maintain and protect
the public goods, fundamental for tourism sector prosperity.
The scope as Legislator is to guarantee liberalization and deregulation.
The objective as territorial manager is to find the optimum between positive and
negative externalities, thus the balance between too much growth and too little.
Finally the scopes as promoter are to increase competitiveness of business
environment, maximize positive externalities, support innovation creation
mechanism.
The State carries out also important functions such as coordinator, social
responsible and public interest protector.
Bibliography
Keller, P., Smeral, E. (1997), Increased International Competition: New Challenges for Tourism Policies
in European Countries, Background Paper, World Tourism Organisation (WTO), Madrid.
Keller, P. (2008), ‘New paradigm for international tourism policy’, in: OECD, Tourism in OECD
Countries 2008, Paris.
Keller, P, Bieger, T.,(2007), ‘Productivity and Tourism’, in: Keller, P., Bieger, T. (Ed.), Productivity and
Tourism, Berlin.
Keller, P. (2005), ‘A new look on global tourism,’ in: Trigo, L.E. et al., Turismo Brasileiro, Analises
regionais e globais do Turismo brasilerio, Sao Paolo 2005
Porter,M.,Ketels,C.,Delgado,M, (2007), ‘The Microeconomic Foundaions of Prosperity: Findings from
the Business Competitiveness Index’, in The Global Competitiveness Report 2007-2008, Word
Economic Forum.
Ritchie, J.R. B., Crouch, G.I., (2003), The Competitive Destination A sustainable tourism perspective,
CABI, Oxon

43. 43
5. GOVERNANCE AND ORGANIZATIONAL STRUCTURE
OF TURISM POLICY
There is a long lasting debate about the concept of Governance. There is no real
agreement upon the interpretation and use of this term. Moreover, concerning
tourism sector, it becomes more and more confused.
Thus, it is fundamental to try to clarify and put order among some concepts in this
sphere. Governance is a term that can be considered strictly related to other terms
such as Policy and Planning.
Comparing definitions of many authors in this topic (Chadwick, Dror, Dye, Hall,
Kooiman, Lanoo, Morales-Moreno, Stoker, Rhodes), Policy can be understood as a
continuous cycle of activities, developed by governmental institutions, starting with
certain needs that are transformed in goals, developed through strategies and
evaluated according to certain indicators. At the same time, Planning, is nothing else
but the first phase of a policy, induced by a received need.
It has to be kept in mind that policy is typically a public activity. However, it does not
mean that policy is ONLY a public activity. As a matter of fact many diverse actors,
with diverse natures (public, private, mixed) and interests, work and influence policy
process. Therefore, given all the above mentioned concepts, it can be introduced the
definition of Governance:
“Governance refers to self-organizing, inter-organizing networks characterized by
interdependence, resource exchange, rules of the game and significant autonomy
from the State” (Rhodes 1997). So Governance, in general, is about the capacity and
way of managing all the relations, flows, interests, thus diversity, that coexist within
the complex picture of policy.
Another differentiation that has to be made is the one between Governance and
governmental Institutions.
Very often, these two concepts are misunderstood or used as synonymous. In
reality, taking into consideration the many definitions presented by academics,
Governance has to be considered as the “action, manner or system of governing *…+”
(Stoker 1995) or the “whole system of rights, processes and controls*…+” (Lanoo

44. 44
1995). On the contrary, Institutions are the bodies or systems of actors that are in
charge of governing. Thus, it can be affirmed that governance is the process
developed by governmental institution in order to reach the goals of the process
itself. However, the fact that governance is an intangible element makes it difficult
to analyze and evaluate.
That is why, very often, the structure and system of institutions is considered as a
“window” to have a look on and evaluate Governance. This is the origin of confusion
and misunderstanding upon the two concepts. So when, for example, academics
speak about levels of Governance, they often speak about the institutions that carry
out Governance at that level. It would be more correct to speak about the process of
Governance characterizing a certain territorial level (national, regional etc.) and the
governmental institutions that develop it at the same level.
However, it emerges that, concerning public institutions, the structures, so the
organization charts, are not always significant of the process of Governance. Many
governmental institutions, in fact, have structures that can be evaluated as rationale
or “well done”, but the process of Governance can be problematic.
The first thing to know in order to understand Governance is that effective
Governance depends mainly on what M.Lockwood (2009) defines as Governance
quality (Ethics, Rationality and Good Governance Principles). At the same time,
effective Governance is a necessary condition for effective Management (Hockings
et al. 2006).
Figure 6: Governance (Source M. Lockwood)
So, before approaching the broad topic of organizational structures of tourism
policy, it is important to define properly the elements of Governance quality:

45. 45
Ethics “underpin what is necessary and acceptable with respect to core values rights
and responsibilities” (Lochwood M. 2009)
Rationality “directs governance design by giving normative weight to processes that
provide logical connection between means and ends, identify forms of knowledge
and how they should be applied and establish conditions for quality communication”
(Lochwood M. 2009).
These two elements serve as foundation to identify good governance principles.
These principles are listed below (Lochwood M. 2009):
Legitimacy: acceptance and justification of shared rules by a community. It deals
with validity of an organization’s authority, consistency of authority’s decisions, etc.
Transparency: visibility of decision-making process, clarity of reasons behind a
decision, availability of information, etc.
Accountability: allocation and acceptance of responsibility for decisions and actions,
extents to which governing bodies are answerable to their constituency and to
higher-level authorities, etc.
Inclusiveness: refers to the opportunities for all stakeholders to participate in and
influence decision-making processes and actions.
Fairness: respect and attention given to stakeholders, respect among different level
authorities, absence of personal bias, recognition of human rights, etc.
Connectivity: coordination among different levels and actors.
Resilience: it refers to the amount of change and disturbance a system can absorb
before it has to be reconstituted completely. It deals, for example, with the balance
between flexibility and other needs such as security.
Given all the above-mentioned concepts, let’s introduce the second concept of this
chapter: theory on organizational structures or institutions.
It has to be kept in mind that tourism is relatively new as a strategic economic sector
for nations, thus “yet many countries find it difficult to focus on tourism sector”
(OECD 2010). Moreover tourism can be defined as a cross-sector sector or
transversal sector. In terms of governance structure it means that tourism “cuts
across many ministerial portfolios, making it difficult to identify one ministerial area
of responsibility. *…+ This is the reason why just few countries have a dedicated

46. 46
Ministry of Tourism” (OECD 2010).
Another fundamental concept to understand, is the fragmented nature of tourism in
terms of related industries. This implies a big variety of interests (recognizable in
several stakeholders) and points of view that Governance has to take into
consideration, in order to be effective and to maintain consensus.
Planning the suitable form of institutional structure (organizational structure) is one
of the key points for a definitional phase of tourism policy.
There is common agreement on the fact that tourism policy has to be carried out by
different levels of governmental institutions, considering the different issues that are
involved in the policy process. That is why the first classification to be made is
among types and levels of tourism destination according to the political jurisdiction
(Ritchie & Crouch 2003):
- Nation or Country;
- Region or Province within a country (the name of lower territorial levels,
compared to the higher level “Nation”, depends on the organization of the
Nation itself. It can be region, province but also canton or state within a
federal state);
- Municipality.
On a general basis, National governments has to take the lead in the industry’s
strategic planning, developing long-term strategies, defining a clear vision and
coordinating different “levels of governance” (vertical coordination) and different
“areas (departments) of governance” (horizontal coordination) (OECD 2010).
However, the lower the territorial level, the more detailed and particular are the
objectives and tasks. As a matter of fact, tourism supply is decentralized being
“based on interactions between service providers and visitors, which invariably
occurs at the place of consumption” (Keller 2008). On the contrary, tourism demand
is “genuinely global” and thus promotion (Keller 2008). Generally, national tourism
organizations are mainly focused on demand side policies (promotion, analysis of
market trends etc.) while lower levels of governmental institutions (sub-national) are

47. 47
more in charge of supply side policies (visitor management, public-private
partnerships...).
So results and performances of tourism policy depend on supply side strategies,
demand side strategies and, as mentioned above, on organizational structure. These
three elements ca be considered as a consequence of a certain tourism philosophy,
tourism vision and tourism objectives (mission) and constraints of a certain country
(Figure below).
Figure 7: Tourism planning (Source: OECD)
As Nordin and Swensson assert in “The Significance of Governance in Innovative
Tourism Destinations” (2005), “governance is not a single model, but takes different
forms in different contexts *...+ In today’s society old forms of governance generally
based on command and control forms of imperative order appear to be increasingly
ineffective, as there has been a decline in hierarchical or top-down methods for
determining goals and means. The policy process required in today’s society needs to
rely more on consensus building and inclusiveness. Relations among actors are a key
concern.”
As it has been affirmed above, Governance is a process that is developed and carried
out by different institutions. This is a very broad field, where boundaries between
public and private sector can become very thin. As a matter of fact, the institutions

48. 48
in charge of destination governance can be pure State institutions but also private or
mixed institutions (depending on the territorial level). As Stoker affirms, governance
is “action, manner or system of governing in which the boundary between
organizations and public and private sectors has become permeable” (Stoker 1998).
In particular, concerning lower territorial levels (regions, municipalities), destination
promotion is often entrusted to organizations (DMOs) that can take several forms
(public, private, mixed). They exist since governmental bodies recognize them and
outsource to them some functions, so they are not pure governmental bodies.
However, DMOs are key actors and they are part of the complex and wide concept
of Governance. Moreover, since Governance is not only related to “pure politics”,
several forms of institutions have to be considered in order to fully understand the
process.
Given the above elements we can classify the institutions that are involved in the
process of Governance (considered in its broader meaning, thus including
destination management), at different territorial levels. These include pure political
institutions (responsible for tourism policy) and other institutions, such as different
forms of DMOs (responsible for particular functions entrusted to them by politics
itself).
- National Level (country):
o Government tourism department
o Government tourism and
economic/development/recreation/parks/culture department
o National tourism commission
o National tourism authority
o Crown/government corporation
- Regional/Provincial level:
o Government tourism department
o joint public/private agency
- Urban level:
o City tourism department
o Convention and visitor bureau
o member based

49. 49
o non-member based
o joint economic-development-promotion agency
(Ritchie & Crouch, 2003)
As a matter of fact, apart from the pure governmental authorities, such as the
government tourism department (at national and regional levels), which are
completely part of the public authority, we can observe several natures in the above
mentioned structures. According to the “Survey on destination governance” made by
UNWTO in 2010, a relevant percentage (almost 50%) are Non profit organizations
(non profit association of tourism business and non profit public-private
partnership). Moreover, a part from public governmental departments, it is possible
to observe public authorities outsourcing to private companies and different types of
partnerships of public authorities.
In any case, as declared in the same UNWTO report (2010), “it is generally agreed
that the involvement of private sector in destination management, particularly in
strategic planning and decision making (so mainly at lower territorial levels of
governance, see chapter 6), is fundamental requirement for good governance and
there are several forms through which private stakeholders may contribute to the
operational efficiency and performance of a DMO.”
Thus, it is fundamental to understand the importance of public private partnership in
tourism sector, as much as understanding the orientation of the board of a certain
form of governance. As a matter of fact, public philosophy tends to be more focused
on public service, community development, thus common prosperity. On the
contrary, private orientation is compulsorily towards profit (Ritchie & Crouch 2003).
These two different natures can coexist connecting objectives on important topics
such as cost efficiency or innovation. On the other side, they could clash on other
fields.
That is why Fayos-Solà asserts “Tourism administration cannot operate like
companies: the administrations and companies are institutions of a completely
different nature” (Fayos-Solà 1996 ).
Thus, once the orientation of a certain form of governance has been understood,

50. 50
and the goals of each member are declared, collaboration among public sector and
private sector must be done. Tourism arena has become too complex and
competitive to maintain “public sector intervention dissociated from the specific
requirements of tourism enterprises. Total quality management and efficiency in
tourism enterprises and regions, in a context of greater financial austerity, often
require a partnership of the private, public and voluntary sectors to develop new
tourism policy programmes” (Fayos-Solà E. 1996).
In this “new” context, the tasks of each actor and the functions to be undertaken,
have to be re-planned, passing from a pure public management view of destinations
(lasted until the end of 80s) to the public-private partnership (PPP) view.
In terms of structure/form of governance, it has been proved that some
organizational structures are more suitable than others to stimulate and implement
public-private partnerships. In particular, decentralization, thus the application of
the principle of subsidiarity (explicitly or implicitly), is generally considered a basic
element. As a matter of fact, PPP has to be used from the supply side in order to
solve problems that cannot be solved by the public authority alone. It has a strategic
role to innovate thus to increase quality (PPP and principle of subsidiarity are
analyzed in Chapter 6).
The fact that decentralization is a very important condition for effectiveness of
tourism policy is not only proved by the above mentioned fact that supply in tourism
is local and so local authorities are obviously more effective in monitoring, managing
and coordinating, but also by the benchmarking that can be done among
governmental structures of all the OECD countries.
What emerges from this analysis is a quite clear drawing: in the big majority of OECD
countries, in particular in Europe, central responsibility for tourism sector is assigned
to a department under a wider ministry that normally is economic, development,
industry Ministry. This, for central government functions. Then, concerning actual
development and implementation of strategies, lower territorial levels are
responsible.