WRITER: Dr Guy Assaker and Dr Rob Hallak
ILLUSTRATOR: Tang Yau Hoong
Worldwide growth in tourism demand has resulted in unprecedented levels of competition among destinations as they try to capture their share of the tourism pie.
Despite the recent downturn in the global economy, international tourism remains resilient and is one of the largest and fastest growing economic sectors in the world. According to the United Nations World Tourism Organisation, international tourist arrivals have increased from 278 million in 1980 to 1.35 billion in 2012. By 2030, this should reach 1.8 billion.
Tourism is a key driver of economic growth. It generates export revenues, creates employment, and stimulates investment in business and infrastructure. In Australia, tourism activities generated over 908,000 jobs and contributed A$87.3 billion to GDP during the 2011-2012 period. Tourism is Australia’s largest services export industry and has a Total Output Multiplier of 1.9—which means that for every dollar it earns, it generates an extra 90 cents to other parts of the Australian economy. This, according to Tourism Research Australia, is higher than retail trade (1.7), mining (1.6), and healthcare and social assistance (1.5).
Although Australia’s number of overseas visitors has increased by 21% over the past ten years (from 2001 to 2011), its share of global travel over this period has actually decreased. This is not particularly surprising given that competition will increase in line with an increasing demand for tourism worldwide. In addition, each new destination will generate new investments in products and services like hotels and resorts, as well as infrastructure such as rail and airports. Understanding what drives the ‘competitiveness’ of a destination in an increasingly dynamic global environment, remains a key challenge for governments and policy makers.
Examining the key determinants of destination competitiveness across 154 countries worldwide, new UniSA research* has found that three factors play a key role in influencing the competitiveness of a destination (as measured by International Tourist Arrivals and International Tourist Receipts for each country): 1) economics, 2) the environment, and 3) infrastructure.
The level of infrastructure in a country, measured by a number of indices (such as number of vehicles, road index, computers index, internet host index, sanitation facilities, and so on), has a direct effect on a country’s destination competitiveness. Naturally, the level of infrastructure is largely affected by economic factors. The state of the environment at a destination—measured through indices such as electricity production index, CO2 emissions index and Signed Environmental Treaties—has a modest effect on destination competitiveness.
An interesting finding is that the economic indicators of Industry Value Added (IVA), Foreign Direct Investment (FDI), and Purchasing Power Parity (PPP) do not influence destination competitiveness directly, but can indirectly affect competitiveness by strengthening the infrastructure at the destination. High levels of PPP and IVA create a positive economic environment and lead to positive social improvements and developmental progress. Consequently, these have a positive effect on a country’s destination competitiveness. FDI, however, was found to have a negative impact on social development because of the difficulties associated with directing it to areas that would be most beneficial to the economy and the locals. Evidence suggests that countries aiming to build tourism competitiveness (increased tourist arrivals and revenues) need to invest in their social and physical infrastructure.
The Internet and other wireless communication technologies are also important drivers of tourism, facilitating access for tourists to a destination.
The same research also assigned rankings to 154 countries using a tourism destination competitiveness score for each country. The results found that the US, France and China had the highest rankings for destination competitiveness. Australia, however, was ranked 21 out of the 154 nations.
While this still highlights Australia’s strength as a tourism destination, neighbouring countries like Singapore, Malaysia and Thailand all achieved higher ranks of competitiveness. Clearly, if Australia wishes to remain competitive in a dynamic, global market it must capitalise on recent economic successes and invest in its infrastructure.
Dr Guy Assaker is an expert in quantitative methods using multivariate statistics to examine the relationships between tourism variables. He is also an Adjunct Research Fellow with UniSA'sCentre for Tourism and Leisure Management.
Dr Rob Hallak has a wealth of experience in hospitality and event management, both in Australia and overseas. He is also a researcher with UniSA's Centre for Tourism and Leisure Management.
> For more information, visit the Centre for Tourism and Leisure Management
> Further reading: An Empirical Operationalization of Countries’ Destination Competitiveness Using Partial Least Squares Modeling, by Guy Assaker, Rob Hallak, Vincenzo Esposito and Peter O’Connor, published 2013 in the Journal of Travel Research.