Searching for a balance in tourism development strategies

Xavier Font & Tor E. Ahjem

Abstract
This article introduces the ethical reasons for tourist destinations to follow market-led
or supply orientated strategies when developing tourism as an economic option.
Economic, environmental and social issues will be used to exemplify the
consequences of either pure strategy. The article argues that there is a need to take into
account the public sector, the private sector, non-profit organizations and the residents
in order to design sustainable tourism strategies.
Introduction
Tourism is one of the fastest-growing industries in the second half of the twentieth
century, and is often used as a key for economic growth in both developed and
developing countries. With other aspects of the economy weakening, tourism is seen
by many areas and areas and nations as a quick and easy solution to combating
economic deficiencies. Increasingly, countries are choosing to develop and promote
their resources in order to attract tourists. This has increased the competition and has
posed new challenges to prospective destinations.
Over the past decade, there has been increasing recognition of those controlling
development, and ignoring interest in the techniques of control and ownership they
employ (Smith & Eadington, 1992). Developers in the tourism industry fall into three
categories, namely governments, private businesses and non-profit organisations.
Together these three groups comprise the independent decision-makers that generate
tourism supply. Inevitably, the individual objectives of each of these three groups vary
and to an extent differences will affect the way in which the supply as a whole is
managed.
The extent to which an organisation manages to fulfil self-assigned objectives is itself
a measure of its success. In contrast, the traveller's own holiday satisfaction depends
on many external factors, outside the control of the company. With this variance in
mind, tourism providers, each catering fore different interests, stand to benefit from
reaching a consensus when planning tourism development (Gunn, 1994). In far too
many cases this responsibility is offloaded onto the public sector.

Forty years of mass tourism have yielded a wide variety of approaches to tourism
development from countries involved in this particular industrial arena. Two fields of
thought will be examined in this paper. Firstly, the private sector strategy of serving
market requirements to maximize profit margins will be examined. This will be
followed by a closer look at public sector strategy, which focuses on optimizing use of
available resources and places greater importance on the net social benefits of
development, instead of profit maximization.
Market-led development
Societal evolution is a fundamental of the everyday life of the consumer and the
continual change that this implies must necessarily contribute to the opportunities and
threats encountered by suppliers. Developing a new tourist destination or a
specifically tourism-related product requires great tenacity, initially in order to gain a
proportion of the market share, and then to maintain this position in the medium to
long term.
In the sixties, when mass tourism began in Western Europe, all tourists frequented
similar destinations, arriving at them by relatively similar means and under similar
conditions. Few destinations offered the basic services desired at an affordable price
and, as a result, competition was not a crucial issue. With time, the original sand-seasun destinations of the Spanish coastal resorts have struggled increasingly to maintain
their positions at the forefront of their market. Competition from newer destinations,
such as Turkey, Tunisia, South East Asia and the Caribbean has continued to grow
posing an ever greater threat. Similar scenarios can be identified in other destination
sectors, for example, ski resorts, cultural cities, spa resorts; in each case developing
countries offering more affordable prices and unspoiled resources have taken over a
large stake of the market. But how can tourist destinations compete other than with
prices? And how can developing countries stay in the tourism picture when their
economies, and subsequently, their prices catch up with other competitors?
Today's tourists are more experienced, and therefore discerning with the type of
holidays they take. Western customers are accustomed to purchasing products tailored
to their needs, holidays included: in the United Kingdom alone, hundreds of tour
operators prepare offers based on special interest activities. Specialized operators
target tourists with specific interests in an effort to secure a market share that is large
enough for survival but modest enough to avoid penetration by new competitors.
Tourist destinations, like companies, need to find out what they are good at and use

their strengths to create differential strategies. In turn, this means that only those
destinations that adapt their products to what tourists want will survive. Emerging
tourist destinations need to find out what a certain type of tourist wants and serve
them as well as possible, in an effort to satisfy a particular segment of the market.

Qe: Quantity in equilibrium

Pe: Price in equilibrium
S: Supply
D: Demand
Private companies will research the holiday market and target specific investments
that offer the highest return on capital employed. Those countries that view tourism as
an economic alternative for gaining economic growth make investment as easy as
possible for prospective investors, on the assumption that the market mechanism will
give the optimal economic benefits from the development, as illustrated in figure 1.
The supply curve (S) shows how much producers are willing to sell for each price
they receive in the market. The slope depends on the pricing strategy that the
company is following. The demand curve (D) shows how much consumers are willing
to buy for each price in the market. The tendency in a free market for the price to
change until the market clears (i.e. until the quantity supplied and the quantity
demanded are equal) is called the market mechanism (Pindyck and Rubinfeld, 1995).
In this sense, a market-led strategy for tourism development would mean that tourist
destinations should offer what the tourist wants, and monitor changes in consumer
motivations and satisfaction with the product in order to keep up-to-date. Market-led
companies should talk and listen to customers and intermediaries (in this case, tour
operators and travel agents) and conduct specific market research in order to further
adapt the product offered (say, types of holidays or activities within the stay) and then
communicate the changes made to prospective customers. To a certain extent, that is
what tour operators do when they assess the success of each tourist destination and
hotel within their brochures. Repeated inclusion only occurs if they have generated
the returns expected. If this method works for tour operators, why not let the market
for tourist destinations clear itself through a free market system?

The first reason is that such a system requires complete information for and from all
participants in the market, a demand which is particularly complicated in tourism
since most businesses are small players. This is further complicated by the fact that
tourists base their holiday choices on images of destinations, which may not
correspond with reality (Font, 1997). Also, production factors are not as mobile as
required, tourism businesses are fixed in time and place, their services are perishable,
seasonality is high and there are high fixed costs involved. Furthermore, the tourism
product relies on goods and services that cannot be priced from a private business
perspective, such as the use of city parks, countryside footpaths or even a coastal
resort's ambiance (see fig 2).

Secondly, profit maximization theories do not take into account environmental and
social impacts of tourism. Tourist use of a destination changes the nature of the place
through wear and tear on the attractions and services provided. Most of the places
visited by tourists belong to the public sector (i.e. areas of outstanding natural beauty,
museums, cathedrals, castles) which can be damaged by their misuse. Also, residents
might react negatively to sharing the destination resources with tourists. These
impacts have been reported both in developing countries (deKadt, 1976, Mathieson &
Wall, 1982) and more recently expanded to developed heritage villages (Font, 1995)
and cities (Snaith & Haley, 1994). Fully market-led economies will not translate these
effects into the market price. This implies price zero, occuring into differences
between the social and private costs and benefits associated with tourism (Sinclair,
1991).
Thirdly, each tourist destination follows a lifecycle process (Cooper et al, 1993). At
the beginning, some adventurous tourists discover an unspoiled place and are attracted
to it (see fig 3). Numbers are low, due to poor access and limited services.
Development starts when some companies decide to cater for those tourists' needs,
attracting higher numbers of those people that wouldn't travel without certain
commodities. With time, local and international companies invest in tourism-related
facilities, which means that the place has been adapted to the newcomers. This is
commonly known as commoditisation of tourism resources (Cohen, 1988). In turn,
this makes the more discerning tourists explore other places, leaving behind a nonfashionable resort. If the private business does not consider the costs of rejuvenating
the tourist destination, these will be paid by the destination as a whole, i.e. the
deterioration of the actual attractions that are offered to the tourist, in a non-

sustainable process.
Fourthly, market-led promotion means selecting the most interesting resources in a
country and promoting them as tourist attractions. The selection process is not made
in terms of the actual historical, geographical and artistic value of the resources, but in
terms of how appealing it might be to the prospective tourist (Hewison, 1987). This
could mean, for example, that internationally important archeological resources are
not promoted, and indirectly, not preserved, because they are not as interesting to visit
as, say, palaces or cathedrals. Furthermore, there is an international trend to invest in
heritage interpretation in order to increase the interest and use of heritage sites, which
again means that the consumer is more interested in how information is displayed (use
of images, sounds, movement...) than what is actually presented.

It would seem fairly obvious from the discussion above that purely market led
planning would not enable the destination to achieve the objective of sustainable
tourism, because of the tendency to forget environmental and social impacts. Whether
or not a the pure market orientation might lead to undesirable effects on the
environment and host community, the demand side can not be ignored. Demand is the
basis for all industrial activity, and it would be fruitless to develop a destination for
the number of tourists a place is able to carry without basis in terms of demand.
Supply-side orientation
Tourism is a special industry in the sense that several decision-makers are involved in
delivering the holiday product. Private businesses provide most services that the
tourist needs to get to the destination and the products consumed while on site. The
public sector owns and manages the destination's infrastructure and is concerned with
the overall country's well-being; non-profit organizations run a large number of the
attractions visited; the residents participate in the welcome to the tourist and allow
them to share the day-to-day of the place. A supply-side orientation takes into account
all players and gives them a chance to be represented. A Tourism Master Plan to
embrace all these needs can only be developed by a controlling public body, but
results can be enhanced with the participation of all four sectors providing the holiday
product and experience.
Supply-side strategies will involve the best allocation of existing resources in a tourist
destination. This means that instead of looking at the profit and loss accounts, one

looks at net social benefit. The concept of net social benefit implies a combination of
getting as much as possible out of the development with the least possible
environmental and social damage. Looking at tourism development from the
destination side also implies considering tourism as a long-term investment: resources
have to be kept because they are the only ones available; once used the lifespan of the
destination is over. To be able to manage this it is important that all the participants
understand the need for sustainable development, and recognize the fact that business
success depend on the resources and their protection.
What is described above requires the willingness and commitment of all parties. This
is not always forthcoming. Then the government can use different economic or
statutory instruments to impose a certain direction on development. Options open to
the government include the use of supply-side economics as defined by Begg et al
(1991: 468): "Supply-side economics is the pursuit of policies aimed not at increasing
aggregate demand but at increasing aggregate supply". In this case it would not be to
increase supply but to control it. The instruments could be control of land use
(through taxation or regulation by law), building regulations (often used to support
land control), tax structure, financial, and investment incentives (in accommodation
and related facilities), decreases in capital costs, decreases in operating costs and
investment security.
To explain all these in detail would go beyond the scope of this article, but for the
purposes of exemplification a closer look at taxes is given. As one can see from figure
4, if the government found that a certain quantity of tourists were impacting too
severely the resources being used, they could impose a tax to reduce the demand for
the product. Sinclair (1991) says that taxing tourism may be implemented in an
attempt to recover some of the costs which tourists impose on a country or a local
area. An example is the airport taxes that the British government, amongst others, are
currently charging as a method to discourage British tourists spending their holidays
overseas. Other examples could be the attempts to impose direct charges for
recreational access to the countryside, on the one hand traditionally understood as a
public right but on the other hand suffering increasing environmental pressures
(Sharpley, 1993). The above examples show that taxation is often used after the
undesirable effects have occurred, having limited use as a long-term planning tool but
used more like a short term escape valve.

Qe: Quantity demanded before tax

Qt Quantity demanded after tax

Pe: Equilibrium price
P1 Price after tax
P2 Price received by suppliers
S: Supply after tax
D: Demand
Pricing, taxation and incentive policies that take account of social cost and benefits
can help to achieve goals such as balanced tourism development and environmental
conservation. However, a common result of a pure supply-side orientation is that
economic investment opportunities will inevitably be lost, due to the risk avoiding
nature of the public sector. It is unlikely therefore to be an optimal approach from an
economic point of view.
The role of the supply sector is not only to control supply, but also to stimulate or
control demand. There are four primary policy instruments used by governments to
manage demand (Cooper et al, 1993). Marketing and promotion are often the
principal functions of the National Tourist Organizations and can be used to stimulate
demand. Provision of information can be used to control tourism flows, both in terms
of numbers and in terms of letting the tourist know what is acceptable behaviour. This
also includes monitoring of private information about a destination to see if it is a fair
presentation of the destination. Pricing of public attractions can work as examples for
the private sector pricing policy. This could also be done indirectly through foreign
exchange restrictions, duty-free shops for tourists,... Controlling access can be done
by limiting the number of visas issued, protection of national air carrier, ...
A complicating factor is that all the different elements of the supply side are usually
owned by three sectors; private enterprise, non-profit organizations and public sectors.
All these are likely to have different and in many instances conflicting objectives. The
private sector is unlikely to invest in tourism if all planning activity, that put down the
criteria for how their investment will perform, is dictated by the public sector and the
critical private funding of tourism development will dry out.
The discussion above indicates that the supply side instruments available can be used
to limit environmental and social damage of the destination. However, to achieve a
long term economic, as well as social and environmental sustainability the private
sector needs to be involved in the planning from the outset. Recognizing the fact that
the tourism related industries are dominated by private sector that needs incentive in

order to put money into a risky business. Therefore, a pure supply orientation will not
be able to meet all the requirements to create a sustainable tourism development.
Conclusion
Tourism development planning requires careful coordination and cooperation of all
tourism decision-makers, and in both, the public and private sector, in order to carry
out a development that will remain sustainable over time. However, reaching this
agreement point will not be easy, and each destination will choose a strategy
depending on their short-term needs and their ability to preserve part of their
resources for the future.
The private sector tends to use a market oriented approach, whilst the public sector
tends to take a supply oriented (resource based) approach. There is a natural
contradiction between the danger of destroying the environment (what the tourists
come to see) and the commercial wishes (both in terms of private profit maximization
and governments urge for more national incomes, through taxes, balance of
payments,...). From the discussion above one can see that neither a pure market lead
planning nor supply orientation incorporates all elements of the concept of sustainable
tourism.
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