Moving up the Value Chain: Best Practices & Benchmarks for Rural Tourism
Moving up the Value Chain:Best Practices & Benchmarksfor Rural Tourism Alan A. Lew, Ph.D., AICP Dept of Geography, Planning & Recreation Northern Arizona University, USA AlanLew.com Dept of Land Resource and Tourism School of Geographic & Oceanographic Sciences Nanjing University, Nanjing, China 15 November 2012
Outline1. Benchmarking Indicators2. Creating Value3. Value Chain Analysis4. Upscaling Product Quality Glacier Bay National Park, Alaska, USA
ISSUES• Demands of Development – Increasing accountability – Reason for Benchmarking Indicators• Increases Between Haves & Have-nots – How to maximize benefits for have-nots – Reason for Value & Value Chain Analsys• Aspirations of the Poor – Greater day because they know more – Reason for Upscaling Product Quality
Benchmarking Is …• “The means by which we attempt to locate a level of performance in a certain area that is superior to ours, then to change the way we do certain activities in order to improve our performance” – Paul Leonard, Benchmarking expert• “The continuous, systematic search for, and implementation of, best practices which lead to superior performance – Benchmarking Centre View from Burj Khalifa, Dubai• “Benchmarking is simply about making comparisons with other organisations and then learning the lessons that those comparisons throw up” – European Benchmarking Code of Conduct
BenchmarkingImproving a Productby Measuring it Againsta Recognized Standard• Widely used for quality control, marketing, finance, technology innovation• Vaguely understood in service industries (such as Tourism)
Internal & External• Internal Benchmarking : compare self with others in same organization – Internal audits, targets & efficiency – Good starting experience; Most common approach• External Benchmarking : compare with other organizations – rivals (‘competitive benchmarking’) – non-rivals (‘best-in-class’ or ‘best-practice benchmarking’) – aggregated sector data (‘sector benchmarking’) – done by strategic consultants using confidential data
External Benchmarks• Best-in-Class Benchmarking – Best practices in an area • e.g. marketing, human resources – Non-competitors from different sectors share data & results• Sector Benchmarking – Led by industry associations – To educate & stimulate competition
Tourism BenchmarkingIndicators 1. Volume & Value of Tourism – Visitor Number & Economic Value 2. Visitor Satisfaction – Surveys of Customer Perceptions 3. Stakeholder Satisfaction – Surveys of Tourism Providers & Residents 4. Organizational Performance – Sustainability • Energy use, Local sourcing, Recycling – Management • Financials: Cost and Efficiency • Innovation: Strategic/Long term Objectives
Balanced Score-card ApproachComprehensive view based on four (or more) perspectives: – Customers: How do customer see us ? – Internal Business: What processes must we improve ? – Innovation & Learning: Do we continually learn, improve, and create new value ? – Financials: How do we appear to our investors & employees ?
Net Promoter Score (NPS)• Rating of whether or not clients would recommend a product or service• Strong correlation with repeat use of products / services and referrals• Best indicator of overall ratings for a product or service
2. Creating Value At the PATA Ecotourism Conference, Balikpapan, Kalimantan (Borneo), Indonesia
Creating Value• Two Types of Value 1. Customer Value = meeting needs & desires 2. Company Value = profit & success• Value is Created by 1. Higher quality for purchase price = Customer value 2. Lower cost for sold price = Company Rainforest value Canopy Walk,• Customer Value Poring Hot Springs, – must be created first Sabah, Malaysia – Before company profit can be claimed
How to Change Value 1. Reduce Quality – Reduce Price More = Customer Value – Reduce Cost More = Company Value 2. Keep Same Quality – Reduce Price = Customer Value Folk artist, – Reduce Cost = Company Value Indonesia 3. Increase Quality – Increase Price Less or Reduce Price = Customer Value – Increase Cost Less or Reduce Cost = Company Value 4. Increase Quality + Price + Cost – Perceived Customer Value may Increase – Perceived Company Value may Increase
Quality, Price, Cost & Value Quality Customer Benefit Price Value Business Benefit Cost- Customer Benefit Value = User Needs & Aspirations- Business Benefit Value = Enterprise Profits
1. Reduce Quality, Reduce Price + Cost MoreQuality Quality + customer benefitPrice Price = business benefit Cost CostIf Cost can be reduced more than Price, then businessbenefit will increase.
2. Keep Quality, Reduce Cost + Price Quality Quality + customer benefit Price Price Cost = business benefit CostIf Cost can be reduced more than Price, then businessbenefit will increase.
3a. Increase Quality, Increase Cost + Price Less QualityQuality + customer benefit PricePrice = business benefit Cost CostIf Price can be increased more than Cost, then businessbenefit will increase.
3b. Increase Quality and Reduce Cost (on a comparable new product) Quality Quality + customer benefit Price Price + business benefit Cost Cost This model is appropriate for a new product. Price is the standard market price for a comparable product.
4. Increase Quality, Cost + Price (perceived benefits) QualityQuality = perceived customer benefit PricePrice = perceived business benefit Cost CostIf Price is increased more than Cost, then businessbenefit will increase. If Quality is increased more thanPrice, then customer benefit will increase.
Methods ofCreating Value (Spend) • Quality Increases – Better Facilities & Materials (Innovate) • Investment & Maintenance – Better Services • Human Resource Development – Better Innovations • Strategic Planning & Market Analysis • Price & Cost Decrease – Better Efficiency in Production • More work per worker; More product per raw material – Better Economies of Scale • Increased Customers through Better Marketing
Creating Value in Tourism 1. Loyalty Programs for repeat customers – Lower prices = Customer Value – Repeat customers = Business Value 2. Facilities & Service Upgrade Programs – New Facilities & Replacements – Staff Training/Skills Development – Higher costs & Lower profits – Repeat customers & Higher net promoter scores – Higher quality product for customers who becoming richer over time 3. Special Experiences – Back-stage experiences; Innovative products – Unexpected surprises – gifts, fruit, tickets
Rural TourismProduct Development• Goals – Increase Returns from the Same Number of Visitors – Increasing Tourist Stay / Nights• Special Interest Tourism – Spend more Money & Stay Longer – Active & Experiential Holidays (trend) • Personal involvement & active participation • Learning about people, cultures, traditions, foods, arts ... • Adventure & physical challenge attractions – More employment for guides & transport – Requires Careful Target Marketing
Value Chain Analysis (VCA)Q: How to Best Target Changes to Maximize Desired Benefit?A: Value Chain Analysis (VCA) – All activities required to bring a product or service to customers • conception, through production, to delivery – Focus on Points that Add Value • to target for development
VCA Identifies …Current System1. How money flow within the production chain2. Relationships among various actors and exchange points in the chain3. Share of tourism expenditures to each segment or group in the chain – Usually Firm or Industry Level • Micro-level “input-output analysis”Future Predictions / Planning1. Potential impacts of planned interventions – Activities that may provide higher value for each group2. Potential impact of broader societal trends
• Example of a value chain analysis of Costaleo, a fictional coffee- producing country in South America.
VCA Questions & Data1. For a study location, in which distinct areas does tourism show evidence of development ?2. How much income does tourism generate for the local economy in each identified area ?3. How do tourism activities in each area impact employment & business opportunities ?4. How does tourism in each area bring other desirable benefits to the local community ?5. What specific enabling changes can be made to enhance goals, such as: 1. Pro-poor tourism development 2. Sustainability practices 3. Other
VCA for Rural Populations (1)• Relationship Issues – Limited Relationships • In diversity of people & institutions • Socially, economically & geographically isolated from the mainstream economy – Unequal Relationships • Less influential & more dependent • More disadvantaged (or exploited) by private sector • Lacking key connections• VCA Goal: Strengthen Linkages & Access to better quality or more affordable goods & services
VCA for Rural Populations (2)• Human Resource Issues – Greater needs, with fewer resources – Less entrepreneurial & more Risk-Averse – Much shorter time horizons – Limited resources to make informed choices – Possibly: Lower self-esteem & culture of dependency• VCA Goals: Identify Incentives & Investments to Change Behavior – Increase effectiveness of actors – Create new value chain relationships – Increase capacity to empower change
Examples of Targeted Tourism Issues for Rural Communities• Overcoming Enclave Tourism – Hotels, coaches & other vehicles, tourist sites/attractions – Less accessible to rural local community• Overcoming Remoteness – Opening roads & improving transport to Transport Hubs & Tourist Markets • Intra-regional tourism – Marketing to Appropriate Upscale Market Segments • Predisposed to nature, culture and daily life of rural communities • International Visitors – tend to spend more – some more than others – Using the Longtail of Internet Marketing • Free Social Media Outlets
VCA – As A Capacity Building ToolIf Open & Participatory – Interviews, Focus Groups, Stakeholder Engagement= Effective Tool for – Capacity strengthening – Build a common understanding of a destination’s economic gaps – Promoting stakeholder dialogue
Finding Valuein Shenongjia Shennongjia National Forest County, Hubei, China
VCA + ComplementaryApproaches• VCA + Sustainable Livelihoods Approach – SLA describes target populations: Who they are, How they participate in value chains & What factors constrain or enable their engagement in upgrading opportunities• VCA + Food Security Programming – FSP increases availability of food & ability of poor to access it• VCA + Social Protection Approaches – SPA identifies & provides skills training, key assets, and legal & social barriers to build long-term capacity for VCA participation
Outline & Lesson So Far… 1. Benchmarking Indicators • Comparison to Others: Efficiency • Net Promoter Score 2. Creating Value – to get better benchmark scores • Quality Increase • Price (& Cost) Decrease 3. Value Chain Analysis – to target investments • Where to invest to get maximum local benefits • Human resources & Innovative products … 4. Upscaling Product Quality • Case Study: Upscaled Ecotourism
Upscaling Tourism Through Ecotourism• Survey of North American Ecotourism Companies – with Ecotours to the Asia- Pacific (excluding SW Asia)• Absolute / Pure Ecotourism
Country # Tour % of all Tour or Region Companies Companies Where North• Indonesia 16 40.0• India 13 32.5 American• Australia 12 30.0 Ecotours to• Nepal 12 30.0• Bhutan 10 25.0 Asia Went• New Zealand 8 20.0 (mid-1990s)• Tibet 8 20.0• China 7 17.5• Thailand 7 17.5• Burma 5 12.5• Cambodia 5 12.5• Laos 5 12.5• Pakistan 5 12.5• Malaysia 4 10.0• Papua New Guinea 4 10.0• Russian Far East 4 10.0• Vietnam 4 10.0• Central Asia 3 7.5• Japan 3 7.5• Mongolia 3 7.5• Sikkim 3 7.5• Philippines 2 5.0
Ecotour Types & Activities• NATURE Type (22 respondents) – Wildlife (5), Nature (4), Natural history (3), Jungles & Rainforests (2), Science-based nature tours (2), Fossil expeditions, National Parks, Nature reserves, Orangutans, Ornithology, Village wildlife conservation, Zoos• CULTURE Type (14) – Culture (6), Agriculture, Anthropology, Countryside tours, Culture exchanges, Ethnic area lodge, Food, Local guides, Sustainable technology• ADVENTURE Type (4) – Soft adventure (2), Adventure, Hard adventure, Outdoor adventure• PHYSICAL-LAND Activities (15 respondents) – Trekking (7), Walking (3), Cycling/Mountain Biking (2), – Backpacking, Bush Walking, Day hiking, Physical activity• PHYSICAL-WATER Activities (6) – Boat rides, Diving, Rafting, Sailing, Sea Kayaking, Whitewater rafting Trekking in Nepal• EDUCATION / OTHER Activities (11) – Educational (3), Guest scholar/teachers/experts (3), Animal riding safaris (2), Bird watching (2), Local educational programs, Photo-taking safaris, Study tours N = 31 respondents
OrangutanRehabilitation Balkipapan, East Kalimantan, “Charismatic Fauna” Indonesia
Ecotourism Management Policies1.Use guides native to visited area * 31 77.5%2.Have an education program for local guides 26 65.0%3.Provide a pre-arrival information packet 24 60.0%4.Providing a % of tour profits to local groups 19 47.5%5.Participate in local cleanup programs 17 42.5%6.Pack-it-out requirements 15 37.5%7.Other activities to support sustainable dev.** 16 40.0%N = 40 respondents* 67% use local guides exclusively** see next slide
Rainforest Education& Research Tourism Balikpapan, E. Kalimantan, Indonesia
Other Activities to Support Sustainable Development (40%)Donations: Generous donations to local charities; Funds for conservation & research (2); Land purchases for conservation; Sponsor Village Folk Theatre; Support clinic, school and religious organizations; Support local environmental groupsEducation: Environmental education kits; Quality environmental education; Scholarships; Post-trip mailings; Teach adult education class in ecotourism; Up to 70 pages long pre-arrival packets; Support village libraries; Environmental reading libraryServices: Provide medical services; Lobby government to protect rainforest; Support orphanages; Peer exchanges; Tree planting (2)Economic Development: Use of all reusable materials; Support ecovillages; Encourage Near Tonle Sap eco-purchases; Support local handicrafts; Invest Lake, Cambodia in eco-lodges; Support indigenous tourism projects
Added Value / Cost ofEcotours Extra Cost of Conducting Eco-sensitive Tours High: 40.0 % of Tour Price Mean: 11.1 Low: 0.0 Willingness of Participants to Donate Money to Local Environmental & Social Causes Very willing 38.9 % Somewhat willing 55.6 Not Interested or willing 5.6
Managing Tourist Behaviour- We strictly enforce proper behaviour on our tours 42.9%- We explain proper behaviour, but leave it up to the individual 33.3- We only explain proper behaviour in the most sensitive place 11.9- We seldom ever direct tourists in how to behave 11.9Comments: – Our travellers typically already know how to behave – We talk to individuals privately if there is a problem with their behaviour – Our policies vary based upon the destination – Our operators are responsible for establishing proper behaviour – We dont accept participants who will not behave – Policies vary depending on the place• N = 42 respondents In Nepal’s Khumbu Region
Tour Group Size Smallest Average Largest Group Group Group• Mean 4.5 11.4 24.7• Median 2 8 15• Range 1 - 22 3 - 60 4 - 125• Do you intentionally limit tour group sizes? • Yes 34 (81%) No 8 (19%)• If yes, what is your size limit?– Mean: 14.9 Mt.– Median: 14.5 Kinabalu,– Range: 6 - 40 Sabah, Malaysia
Reasons Limiting TourGroup Size – p.11. IMPACTS: (19) 1. To reduce/lessen impact / damage (7) 2. To minimize cultural concerns/impacts (4) 3. To minimize environmental impacts (4) 4. To ensure privacy 5. To ensure sustainable impact 6. Lower impact from camping 7. Impacts are greater with over 16 persons Hiking Mt. Kinabalu, Sabah, Malaysia2. EXPERIENCE: (14) 1. To ensure a quality and genuine experience (5) 2. Provide more personal contact/attention (3) 3. Increased opportunity to interact with locals / cross-cultural experience (2) 4. Better group rapport / dynamics (2) 5. To give more in-depth insight & equal service to each client 6. To enhance enjoyment of the environment and activities
Reasons Limiting Tour Group Size – p.23. CAPACITY: (8) 1. Due to the carrying capacity of the product (2) 2. Based on capacity of lodges (2) 3. Safety and the ability to airlift out of National Parks and mountains by helicopter if the weather turns bad 4. Our maximum size depends on the itinerary 5. Depends on destination, group size may be as little as two persons 6. Allows use of smaller vehicles to get to more remote places4. SERVICE: (8) 1. Ease of handling/controlling smaller groups (2) 2. Guides are unable to have personal contact and control the situation with more than 17 persons 3. More than eight is a mob 4. Some private groups may exceed our maximum 5. Logistics of moving too large a group in the destination region 6. Manageable, yet profitable, size 7. We break our larger groups into smaller groups of four to five persons each for daily activities
The North American Ecotourism Market• Specialty Tourism / Niche Market – Good for the Environment, • But may not meet full economic needs of an entire community – Fairly Wide Variety of Types & Activities – Willing to Pay More for Higher Quality• Ecotour Quality – Low Impact, Responsible Travel • Social & Environmental Contributions – Authentic & Insightful Place Experiences • Real Interactions with Locals (not staged?); Educational – Well Managed with Personal Service • Small groups sizes, appropriate to destination
Options for Upscaling Ecotourism Destinations1. Improving Quality •Smaller groups, personal attention; Improved facilities and human resources to meet market expectations2. Reducing Price •Collaboration with complementary services; Awareness of competition’s quality & price3. Becoming More Efficient •Efficient managements & delivery of conservation & authenticity products; Human resource development; Aware of new technologies & skills; Efficient marketing4. Being Innovative •Creating unique selling propositions (activities, attractions) for a place; Surprise experiences; Awareness of global competition5. Improving Linkages / Relationships •Through online longtail marketing & collaborations
Outline & Conclusions1. Benchmarking Indicators • Comparison to Others: -- Efficiency Near Yangshuo (Guilin), China • Net Promoter Score2. Creating Value – to get better benchmark scores • Quality Increase • Price (& Cost) Decrease3. Value Chain Analysis – to target investments • Where to invest to get maximum local benefits • Human resources & Innovative products4. Upscaling Product Quality • Case Study: Upscaled Ecotourism