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

• “Benchmarking is simply about making comparisons with other organisations and then learning the lessons that those comparisons throw up” – European Benchmarking Code of Conduct

View from Burj Khalifa, Dubai

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 value

• Customer Value

– must be created first – Before company profit can be claimed

Rainforest

Canopy

Walk,

Poring Hot

Springs,

Sabah,

Malaysia

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

– Reduce Cost = Company Value

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

Folk artist,

Indonesia

Quality, Price, Cost & Value

Quality

Customer Benefit

Price

Cost

Value

Business Benefit

- Customer Benefit Value = User Needs & Aspirations

- Business Benefit Value = Enterprise Profits

1. Reduce Quality, Reduce Price

+ Cost More

Quality

+ customer benefit

Price

Cost

Quality

Price

Cost

= business benefit

If Cost can be reduced more than Price, then business

benefit will increase.

2. Keep Quality, Reduce Cost + Price

Quality

+ customer benefit Price

Cost = business benefit

Quality

Price

Cost

If Cost can be reduced more than Price, then business

benefit will increase.

3a. Increase Quality, Increase Cost

+ Price Less

Quality + customer benefit

Price

Cost

Quality

Price

Cost

= business benefit

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

+ customer benefit

Price

Cost

Quality

Price

Cost

+ business benefit

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

= perceived customer benefit

Price

Cost

Quality

Price

Cost

= perceived business benefit

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

• Quality Increases

– Better Facilities & Materials

• 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

(Spend)

(Innovate)

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

Award-winning tourism

promotion poster for

Sarawk, Malaysia

Group tour accommodations

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

Where North

American

Ecotours to

Asia Went (mid-1990s)

Country # Tour % of all Tour

or Region Companies Companies

• Indonesia 16 40.0

• India 13 32.5

• Australia 12 30.0

• Nepal 12 30.0

• Bhutan 10 25.0

• New Zealand 8 20.0

• 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

• 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

Trekking in Nepal

Orangutan

Rehabilitation

Balkipapan, East Kalimantan,

Indonesia “Charismatic Fauna”

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 eco-purchases; Support local handicrafts; Invest in eco-lodges; Support indigenous tourism projects

Near Tonle Sap

Lake, Cambodia

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

– Median: 14.5

– Range: 6 - 40

Mt.

Kinabalu,

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

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

Hiking Mt. Kinabalu,

Sabah, Malaysia

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

• 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

Near Yangshuo (Guilin), China