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Moving Up the Value Chain: Best Practices & Benchmarks for Rural Tourism

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Moving Up the Value Chain: Best Practices & Benchmarks for Rural Tourism Powered By Docstoc
					Moving up the Value Chain:
Best Practices & Benchmarks
for 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
PPT Slides Online
• DocStoc.com
  – www.docstoc.com/docs/135960665/Sustainable-Tourism-
    Lessons-from-Around-the-World
     • v.gd/No6drz
  – www.docstoc.com/docs/135960962/NanjingU---Tourism-
    Incognita
     • v.gd/RxAz1L
  – http://www.docstoc.com/docs/135962391/Sustainability-
    and-Resilience-in-Community-Based-Tourism
     • v.gd/Llcvqq
• Slidehare.net/alew
            Outline
1.   Benchmarking Indicators
2.   Creating Value
3.   Value Chain Analysis
4.   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
1. Benchmarking Indicators
            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
Benchmarking

Improving a Product
by Measuring it Against
a 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 Benchmarking
Indicators
  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 Approach
Comprehensive 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 More
Quality
                                             Quality

                        + customer benefit
Price
                                             Price

                          = business benefit
 Cost
                                             Cost

If Cost can be reduced more than Price, then business
benefit will increase.
2. Keep Quality, Reduce Cost + Price

 Quality                                    Quality

                           + customer benefit
 Price
                                             Price

  Cost                     = business benefit

                                             Cost

If Cost can be reduced more than Price, then business
benefit will increase.
3a. Increase Quality, Increase Cost
           + Price Less

                                           Quality
Quality                    + customer benefit

                                            Price
Price
                           = business benefit

                                            Cost
 Cost

If Price can be increased more than Cost, then business
benefit 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)

                                              Quality
Quality
                           = perceived customer benefit

                                              Price
Price
                           = perceived business benefit

                                              Cost
 Cost

If Price is increased more than Cost, then business
benefit will increase. If Quality is increased more than
Price, then customer benefit will increase.
Methods of
Creating 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 Tourism
Product 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
Iban / Dayak
Cultural
Ecotourism
in Sarawak,
Malaysia
Increasing Dayak Tourism Value




                             Group tour accommodations
    Award-winning tourism
      promotion poster for
         Sarawk, Malaysia
               Summary
• Value =
  – Customer + Business Perspectives
  – Product Quality + Price + Cost

• Value Creation =
  – Efficiency & Effectiveness
      • Increased Productivity
  – Investments & Creativity
      • Improved Product/Service Quality
      • New Product Development
          – Better than Competitors
3. Value Chain Analysis
 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 System
1.  How money flow within the production chain
2.  Relationships among various actors and exchange points
    in the chain
3. Share of tourism expenditures to each segment or group
    in the chain
   – Usually Firm or Industry Level
       •    Micro-level “input-output analysis”

Future Predictions / Planning
1.  Potential impacts of planned interventions
   – Activities that may provide higher value
       for each group
2. Potential impact of broader societal trends
• Example of a
  value chain
  analysis of
  Costaleo, a
  fictional coffee-
  producing
  country in
  South America.
               VCA Questions & Data
1.    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 Tool

If 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 Value
in Shenongjia




                Shennongjia National Forest County,
                                      Hubei, China
VCA + Complementary
Approaches
• 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
Java, Indonesia
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 Park's, 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
Orangutan
Rehabilitation




                          Balkipapan, East Kalimantan,
    “Charismatic Fauna”                      Indonesia
      Ecotourism Management Policies
1.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 groups

Education: 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 library

Services: 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 of
Ecotours
 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                  11.9

Comments:
   – 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 don't 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 Tour
Group Size – p.1
1. 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, Malaysia
2. 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.2
3. 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 places

4. 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 Destinations
1. Improving Quality
    •Smaller groups, personal attention; Improved facilities and
    human resources to meet market expectations
2. Reducing Price
    •Collaboration with complementary services; Awareness of
    competition’s quality & price
3. Becoming More Efficient
    •Efficient managements & delivery of conservation &
    authenticity products; Human resource development; Aware
    of new technologies & skills; Efficient marketing
4. Being Innovative
    •Creating unique selling propositions (activities, attractions)
    for a place; Surprise experiences; Awareness of global
    competition
5. Improving Linkages / Relationships
    •Through online longtail marketing & collaborations
  Outline &
  Conclusions
1. Benchmarking Indicators
  •    Comparison to Others:
        -- Efficiency                 Near Yangshuo (Guilin), China

  •    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

				
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