Global Experience Industries. Jens Christensen
changes on the demand side as well as on the supply side. Within tourist companies and between these companies an integrated system of information and communication has been established. By way of the Internet, all tourist products have been made available to consumers, too. They are now visible and comparable, which has created a transparent market. At the same time, the increasing outsourcing and division of labor has made all parties of the tourist industry establish consumer sales channels of their own. By way of the Internet, consumers are now able to book and buy flights directly from airlines, hotel rooms at hotels, rental cars at rental companies and insurance at insurance companies. And if consumers wish, they may also use a travel agency to organize all these activities. Via the Internet, it is possible sometimes to make arrangements with attraction providers also. The different parts of the tourist industry have reacted to the rise of the buyer’s market by extending their activities to include links to the whole tourist value chain. For example, airlines and ferries offer whole packages of travel and accommodation for summer and winter holidays. In other cases, operators containing cruise lines, amusement parks or other resorts seek to cover a whole vacation experience. All kinds of tourism services can be provided and obtained by way of the Internet and this has even paved the way for exclusive Internet tourist companies.
In all the current production and distribution of tourist services, information processing has become a clue to value creation in the tourism industry. Airlines, hotels, tour operators, travel agencies and destination companies all extend their activities and sales channels towards customers. In step with the redefinition and blurring of business borders, it is becoming still more important what activities you control in the tourism value chain and this has led to increased competition and remodeling of the tourism industry.
The Tourism Industry
The global tourism industry is big business. It accounts for almost four percent of total world GDP and its wider economic impacts are as high as some 10 percent of world GDP. The tourism industry embraces a number of functionally separate industries, including various forms of transportation (airlines, railways, cars, ferries, buses), accommodation (hotels, holiday homes, camping sites, etc.), food and beverage (restaurants, bars, etc.), attractions (cities, beaches, cultural monuments, museums, amusement parks, events etc.) and finally shopping (malls, fashion shops, etc.). While industries such as airlines, hotels and restaurants are clearly related to tourism and may be analyzed as separate industries, attractions and, even more, shopping are harder to picture precisely. In general, revenues of the individual tourism industries, and therefore total revenue, are based on estimates (Table 4).
TABLE 4 Global Sectors of the Tourism Industry in $bn and % shares, 2005
| $bn | % | |
| TravelAccommodationFoodAttractions | 600350250500 | 35201530 |
| Total Tourism Industry, $bn/ % | 1700 | 100 |
Source: WTTC. World Tourism Satellite Account. Estimates based on national satellite accounts and revenues presented below.
The Value Chain
The tourism industry includes several sub-sectors. One part of the industry mainly focuses on bringing tourists abroad while other companies deal with incoming tourists from other countries and domestic tourists. In some cases, the same parties include outgoing as well as incoming tourism, for example airlines, and as a consequence of international consolidation the same large corporations serve tourists in many countries. The tourism industry comprises companies and industries related to one or more links of the total tourism value chain (Figure 9).
The core tourism industries are organized in a flow of activities, called the tourism system or tourism value chain. Some produce primary travel and tourism services, including transportation, accommodation, meals, electronic payment cards, insurance, car rental, taxis, and attractions. Airlines, railways, ferries, bus companies, car rental companies, taxi companies, and private cars take care of transportation, mainly airlines on international travels and cars for domestic travels. Accommodation and meals include hotels, holiday dwellings, camping sites, and restaurants.
FIGURE 9 The Tourism Industry Value Chain
Source: EU/Leidner. The European Tourism Industry, 33.
To reduce the gap between the holistic approach of consumers and the particularity of tourism industries, consolidated companies seek to cover a wider spectrum of the tourism value chain, while some are almost all-inclusive, such as cruise lines and park resorts. The tourism products are distributed and facilitated by tour operators, travel agents, booking systems providers, incoming agents linking local travel organizers and tourists, tour guides and other travel information. Finally, the consumer or tourist is the customer of one or more of these services, depending on whether he buys inclusive tours or travel on his own. The consumers are the most important link in the value chain. There would be no tourism industry without them and in addition, the turn of power in favor of tourists has transformed a supply-driven industry into a demand-driven industry.
Tourism products are intangible services that exist only when being consumed. That is why distribution channels are of fundamental importance. Travel agencies and tour operators are primary distributors of tourism products, even though airlines, hotels and other tourism providers sell directly to tourists, too. Booking systems have become the predominant distribution channel of travel and leisure products. Some industries and companies provide services at the vacation destination, while others operate from the country of tourist origin. As consolidation expands, most involved companies operate in their home country as well as the country of destination, however. All these links of the tourism value chain are dependent on many sub-suppliers, including transportation means, IT and communication systems, catering, food and beverage industries, shops, marketing and other management services, etc.
Like all other businesses, tourism companies include a back office organization that provides the resources and support needed to run travel and tourist activities. The value chain of a tourism firm includes the following links:
- The company infrastructure: strategic management, planning, financing, accounting, law, authority relations
- Human resources: recruiting, learning, wages, rewarding, negotiations
- R & D: product and organizational development
- Technology: pervasive IT, communications and Internet
- Purchasing: as service providers, tourism companies are very dependent on efficient purchase of a wide variety of sources, for instance catering, accommodation and transportation
- Marketing and sales: product marketing and sales channels are crucial to the existence and competitiveness of tourism companies.
As a consequence of globalization, liberalization, new technologies and demanding consumers, the tourism companies’ value chain is being changed. The traditional division of activities between tour operators, travel agencies, airlines, hotels, etc. is blurring. New strategies and business models are being launched as each company remodel their value chain to adapt itself to resourceful buyers that are increasingly able to organize travel and accommodation themselves, as they please.
Airlines, hotels and other transportation and accommodation providers can no longer allow marketing and sales to be left to travel organizers. Adapting their products to changing demands, they have to create direct channels to customers. Therefore, the traditional preserves of tour operators and travel agencies are being invaded by all other sub-sectors of the tourism industry. That includes global reservation systems and new web-based travel agencies, too. Pressure is being put on tour operators and travel agencies in particular and they have to come up with new flexible ways of creating value to customers. Competition on national, regional and global levels is increasing in all parts of the tourism industry, however. Also destinations and their service providers that may be reached via the Internet have to adapt to changing demands of customers, because they are also part of the global competition to attract tourists.