Hospitality Industry
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Tourism Behavior in an Indexed World

EHL Insights
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Keynote speaker Dr. Rico Maggi addressed these questions and offered a solution for better tourism indexes at EHL’s 3rd Annual Hospitality Finance & Economics Research Conference.

Every year, tourism data and ranking reports come out saying how much the industry has grown and what the most visited destinations are. While indexing tourism is useful for confirming trends and predicting future growth, it may also create a negative impact by shaping tourism preferences in an unhealthy way. Furthermore, data about who goes where and what they spend isn’t really helpful for businesses and destinations that want to grow tourism in a positive way.

Dr. Rico Maggi addressed this issue in his keynote speech “Tourism Behavior in an Indexed World” at EHL’s 3rd Annual Hospitality Finance & Economics Research Conference with a down-to-earth discussion about the impacts of indexing on tourist behavior.

Dr. Rico Maggi is a full professor at the Università della Svizzera italiana and the former Dean of Faculty of Economics. He began by explaining that he had observed a decline in the “reason for being” behind some forms of data collection and research.

“Once upon a time,” he began, “We used to care about theory. Nowadays, young people in my classes, they all follow the same pattern. They start with a literary review, then the research methods, and the data, and finally the results. But I remember a time when we often began by seeking a purpose, or establishing a theory guiding our research.”


In a world of Big Data, we see an ever growing, competing number of studies and ranking reports about tourism, education and other lifestyle topics, and the purpose of this data has gotten a bit lost, to the point where we must as ourselves:


Are indices good or bad for tourism?

In hospitality and tourism, Dr. Maggi pointed out that we are not talking about the indices like those of real estate where we see such specific indicators as hedonic regressions, etc. The purpose of those indices is to create a benchmark for transactions or performance and to gauge whether or not our transaction or performance is close to the norm.

But what are tourism indices about and what do they contribute? Does a tourism index help promote sustainability in the sector? Does it encourage growth? Or bring greater wealth? It is true that we need to understand the behavior of consumers, including tourists, as business people and academics working with hospitality data. However, the act of publishing indices actually affects tourism, so we should make sure it is a positive effect.

“It can go both ways. What we see today is that when a destination becomes very popular, it gets ranked in an index as one of the most visited cities or countries, and this publicity actually spurs more growth. Tourists see well-frequented destinations as a good option with a lot of selection and amenities. They like the idea of having enough choice in terms of accommodation, restaurants and sight-seeing tours etc.,” Dr. Maggi said. “So an index can have a negative impact by directing tourists towards over-crowded destinations. On the other hand, indices could have a positive impact if they put the spotlight on destinations for more positive aspects of sustainability or authenticity.”

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Tourism before and after indices

In the past, when a person was planning a vacation, they would often consult a tourism agency or a brochure where each destination got its little introduction: Paris has this, London has that, Madrid has such and such, and so on. Today, consumers have a different way of planning vacations and indices may play a role in influencing their awareness of different destinations, thereby affecting their decisions.

“The trouble is that most destination indices are all ordered rankings,” said Dr. Maggi “So is that number one destination a good place to visit just because everyone goes there? We can assume that tourists might not behave the same if there wasn’t this categorization, compared to a world where you just have values or features for each place. In an indexed world, we give more attention to the “best” at the top of the list.”

There is also a question of accessibility, before the rise of Online Travel Agencies and online review sites, people would get their information about a destination from a catalog with a relatively small set of well-known destinations. Now consumers have to choose from anywhere, anytime, there are certainly risk and sustainability factors for this self-directed, easy access.

How should tourism be measured?

Dr. Maggi shared his views from a consultant’s standpoint, as he might for a client wishing to invest in a tourism business.

In a consulting style, we look at the mix of ingredients Price, Quality, Risk etc. That is what we are interested in, in locations, goods and services. Some are based on performance, the more arrivals the higher up you are, some are based on values of sustainability, but their purpose is ranking, benchmarking, branding. Their behavioral relevance is different.

 

He named a number of existing indices: MasterCard’s 2018 Global Destination Cities Index which “ranks cities in terms of the number of their total international overnight visitor arrivals and the cross-border spending by these same visitors”. The Travel and Tourism Competitivity Index (TTCI) by the World Economic Forum, which measures “the set of factors and policies that enable the sustainable development of the travel and tourism sector, which in turn, contributes to the development and competitiveness of a country”. WEF also publishes many of these ranking style reports such as “South East Asia’s most tourist friendly destinations”.

These rankings, while insightful and useful for gaining an overview of the industry, still don’t address the key areas that might help us to shape a better world through growing tourism.

An Ideal Index for Tourism

Instead of just measuring quantitative aspects of tourism in different destinations, Dr. Maggi shared his research findings that argue for a different ways to measure tourism.

He explained that “The perceived pleasure of a tourism experience increases with number of tourists, and then decreases after a certain peak and declines with over-tourism. Therefore, indices are bad for promoting the most popular destinations, they may contribute to overcrowding and they could be bad for sustainability unless offset by an e-tax. Even worse, if we look at the economics of super-stars, where the best get most of the cake, the risk is over-tourism driving prices down for local businesses.”

“The next step will be to measure the Performance (How much will I enjoy it?) and Sustainability (How good can I feel about it?) of a vacation destination. This might give a very different result from the classic indices that measure tourism arrivals. We need indices comparing destinations not as an aggregate construct, but on a qualitative level.” Dr. Maggi concluded, “Indices should be resource based and include externalities.

Bridging the gap from research to application

EHL hosts these types of conferences to create a bridge between research and academia and the industry. Being attuned to the industry’s needs for applied research, the EHL Advisory Services branch connects businesses and institutions with consultants who can take this type of research and extend or apply it to a business case.

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