A roadmap for destination management in the digital economy

digital.jpeg

(Rodion Kutsaev, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Silvina Moschini, Co-founder, TransparentBusiness, Inc.


In the digital economy, tourist destinations face management challenges like never before.

As tourism has become a truly global activity, destinations compete with other destinations worldwide. New technologies have accelerated tourism growth, bringing supply and demand closer, facilitating travel and booking and transforming marketing operations and business models. In the last 20 years, travel aggregators, online travel agencies, social media applications, metasearch engines and a host of new players have significantly transformed the tourism business and influenced demand behaviour.

The digital economy has led to new challenges for destination management—but destinations can overcome them and indeed thrive by harnessing the power of data.

The challenges of the digital economy for destination management

In the digital economy, uncertainty is guaranteed in the decision-making process of governments, destinations and businesses: changes in business models, the emergence of new disruptive technologies, changes in society, the emergence of insecurity phenomena in tourist areas, a greater frequency of natural disasters.

On the other hand, everything happens very fast. The travel-planning process has been significantly shortened and last-minute bookings are more common, as the consumer increasingly has almost real-time information influencing buying decisions, such as hotel and flight availability and price, weather conditions and user-generated content about destinations.

Tourist arrivals worldwide have risen 56-fold since 1950

Tourist arrivals worldwide have risen 56-fold since 1950
Image: UN World Tourism Organization / Our World in Data

Indeed, these technological developments have transferred power to the consumer in terms of decision making, forcing tourism stakeholders to adapt their strategies.

This transition has been a challenge for tourist destinations, and the fragmentation of the tourist industry makes it more difficult. More advanced players and small businesses coexist in the digital economy; for the latter, digitalization is a distant ambition, making them—and the destination—less competitive in the medium term.

Traditionally marketing-oriented, destination-management organizations are also evolving into more management-focused organizations. They are redefining their organizational structures, incorporating innovation and product development into their core business and investing significantly in knowledge production and dissemination to support this change.

For years, destination management used a limited number of indicators, available with some timing delay and limited granularity, complemented by demand surveys and generic research. This worked for market-oriented management. However, new developments and the aforementioned challenges completely change decision-making data needs, and even the role of the destination-management organizations. As in other industries, data will be the key resource for future tourism destination management.

Reports from WTTC, OECD and UNWTO clearly identify the benefits of big data, Internet of Things (IoT), machine learning, artificial intelligence and blockchain for better management of the sector, allowing continuous monitoring of performance, marketing campaign optimization, benchmarking with competitors and monitoring flows within the destination. Destination managers also have at their disposal data from social networks, mobile devices, credit cards, flights and airports, among others.

Barriers to implementing data-driven destination management

Given this large amount of data, the question is how to mobilize it and build a knowledge-based strategy for destination management.

The answer is far from easy. In fact, we have moved from a restricted number of data sources, provided by traditional institutions, to a constellation of new sources, complex by nature and with their own nomenclature, in order to respond to a completely new agenda.

There are several barriers to effective use of these new data sources, big data specifically:

  • Data access usually requires a strong investment in data acquisition, storage and software that enables analysis of large volumes of data
  • Data volume and complexity implies the need for analytical skills, which, today, are scarce and expensive, generally not available in destination management organizations
  • Lack of innovation-oriented culture with the ability to maximize the use of data to turn insights into competitive advantages
  • Ability to promote the transfer of knowledge to the firm level, inducing innovation in the development of products and services and in the generation of new business models
  • Poor levels of vertical cooperation between national and local level in terms of destination management

The expertise required to overcome each of these barriers is spread across different organizations (data providers, universities, IT companies, accelerators and governments) and is difficult to concentrate in one single organization.

Overcoming these barriers will require a network approach or, in other words, setting up a knowledge ecosystem with increasing interdependencies among all stakeholders.

 

Ecosystems as a potential driver of change

Managing a complex problem requires a solution that, while equally complex, can produce results seen as win-win solutions for all partners.

As with any ecosystem, a clear and shared strategy is key to aligning partners and enabling a common roadmap.

Leadership is also essential. In the case of tourism, destination-management organizations, due to their role, their knowledge of the industry and its specificities and the data to which they have access, must assume the leadership role and serve as a platform for knowledge-sharing by other stakeholders.

While there is not exactly a template, we can identify key elements of the process:

First, organizations must upgrade their knowledge base by incorporating new data sources.

Next, organizations should promote the development of analytical tools to transform this data into information ready for decision-makers. This requires them to build teams of analysts who can perform these tasks. In this case, to solve the skills issue, partnerships with universities are good ways to test new analytics solutions or the feasibility of using new data sources. An example is the project developed by Turismo de Portugal, NOVA SBE university and telecom company NOS to test the feasibility of using mobile data in the management of tourist destinations, allowing managers, data analysts and data providers to join.

Information sharing is another challenge. The development of data portals has been one solution. The European Commission’s Virtual Tourism Observatory, TravelBI by Turismo de Portugal (see below) or the Buenos Aires Tourism Observatory are examples of best practices in terms of data portals that allow users to consult and use data about the tourism sector.

TravelBI's data portal

TravelBI’s data portal
Image: TravelBI by Turismo de Portugal

A final challenge is applying knowledge to new business development. This challenge has driven the emergence of open data portals making data open and accessible to developers and academics, and used in open innovation programs to develop solutions for business and destination issues.

Only those destinations and organizations that can adapt to the digital economy and harness data will overcome the challenges of this new world, and succeed.

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