External threats to tourism destinations; how to act upon? [event review]

Chamonix December 2007; almost 200 professionals from the tourism industry gathered to discuss the effects of property boom at the 9th Tourism Summit. Approximately 85% French participants and speakers, others came from mainly Switzerland, Italy and Germany.  Marketing and communication efforts are important destination drivers. Most of the presentations and comments were driven by an inside-out approach; a typical phenomenon when changes in market conditions appear. Which are these radical external changes?

External changes in market conditions such as (but not limited to):

  • the property boom and the current property value
  • decreasing availability of plots
  • fewer successions in family businesses (hotels, leisure attractions…)
  • climate change
  • from brand, city, destination loyal to unloyal
  • click and go tourism
  • authenticity yes, but with a touch of Ipodness
  • governmental & environmental restrictions
  • change of sociographics (60% of major European city inhabitants are single house-holds, aging population and the European melting pot)
  • new destinations in the East and increase of low-cost travel providers
  • rising costs of marketing and decreasing responses of target groups
  • fierce competition in tourism destinations and services.

This conference focused on the boom in property, mainly in secondary homes. The scarcely available land, especially in mountain and costal regions doesn’t allow much new development. Some older buildings are renovated or completely rebuild. The secondary homes are averagely used 17,3 days per year, creating ghost towns apart form Christmas, Easter and other holidays. Owners tend not to put these properties on the rental market, because of privacy reasons and relatively low rents to be collected. The current boom drives property prices up, so local residents cannot purchase or rent houses and are driven out of their villages. Schools empty out, shops dry up and of-season unemployment increases. Also for season workers, housing is limited. In some countries secondary homes are taxed less or tax is paid in another region (at their primary home), hence resulting in less local income. The infrastructure, especially roads for the secondary homes have to be financed with fewer resources. And other privately owned tourist attractions and installations have to be paid by fewer tourists. The empty beds during the year in secondary homes (referred to as cold beds) is out of balance in relation to the warm beds in hotels or frequently rented out apartments. So the discussion at the tourism summit focused on turning cold beds into warm ones and on how to get more money from cold bed owners. Less attention to the fact that tourism destination compete for clients with sophisticated communications. A truly inside-out thinking with a limited view of the reality or the opportunities. Tourism beds and flights a not a rare commodity; Thailand is successfully competing with a The Alps with often more attractive pricing.

Some of the Tourism Summit speakers:

  • Prof. Peter Keller, President of the comity ‘Scientifique des Sommets du Tourisme’
  • Bruno Hensler, University of St. Gallen
  • Sergio Arzenzi, Director OCDE, Paris, France
  • Prof. Peter Williams, Simon Fraser University, Burbany, Canada
  • Fabrizia Derriard, Mayor of Courmayeur, Italy
  • Michel Charlet, Mayor of Chamonix-Mont-Blanc, France.

This inside-out thinking is understandable because most of the dilemmas are being interpreted from a local residents’ point of view. Our schools have to close down, our local bakery shop is disappearing, local free ski passes are gone, we pay more taxes……The professionals dealing with these problems are elected Mayors (representing political views) and local marketing managers, real-estate planners & developers…..Local seems to key here and professional or unbiased are the major question marks here! For example the former Mayor of Whistler, B.C. (number one North American ski resort ranked by Condé Nast Traveler magazine), was a Dutchman from a country with no mountains. Bringing in international expertise is part of a solution of dealing with external market changes in destination management.

The focus of most the French destinations is mainly on foreign property ownership related problems. This group represents only 10% of the secondary homes. Should one want to address this problem is it clear now, after the numbers were presented, that it is a French domestic problem. The importance of the deep and reliable analyses at the start of strategy formulation is of major importance. Complaints from residents that they are not able to rent or own homes, because of the high property prices, can also be seen from another perspective. One or two generations before their family were the property owners. At the time prices were increasing, they felt it necessary to harvest their profits. Today the younger generations have a difficulty of entering the property market like in many cities in Europe.

Some striking examples discussed at this tourism conference:

  • Courmayeur in the shade of Chamonix as part of the Mont Blanc area, has about 1500 locals and 20.000 cold beds
  • a cold bed is averagely used 17,3 days per year
  • residents in Germany did not pay taxes on secondary homes, now that they do; couples split up in terms of residence to pay less taxes
  • lots of attention to the foreigners who have taken over all the property, especially ‘Les Britanniques’; however only 10% of secondary homes are owned by non-French
  • politics and Mayors are driving forces in responding to external changes; other stakeholders have less influence
  • 20% of UK owners rent out their second homes
  • numbers across countries cannot be compared, because of miss-alignment of definitions concerning for example residential vs. non-residential
  • sufficient water supply for snow making or golf courses tends to be one of shortages of the future
  • today’s ultra-high-net-worth individuals aim for: a house in town, a house in the country, an apartment in Gstaad, a villa in Marbella, a farm in Tuscany, a house in the mountains, a loft in New York-London-Paris, an estate in South America…..
  • for Europeans, the eastern countries (Bulgaria, Croatia…) and southern (Sharm el-Sheik, Morocco…) are within short travel range
  • 16% of British population own or want to own property abroad
  • nearly 13 million beds in secondary homes segments in France.

Major changes in external environment do call upon strategy change.

Changing one’s strategy is a complex process involving many in and external stakeholders. Nearly all companies, resorts, tourism destinations call upon professionals to help them create the strategy to a prosperous future. This future is at the beginning of a strategy process vague and this is how it should be. Leaving all opportunities open to be examined, analysed and discussed in different stakeholder combinations. What a strategy process is not; some discussions among a few stakeholders with some financial analysis and resulting in some changes.

What does a proper strategy process look like (brief summary):

  • strategic management or process, is a tailor made effort, different case by case
  • strategic management is about the direction of the destination
  • the practice is very old (Rome period); the theory child of the sixties (Ansoff; one of the first publicists)
  • strategy is about: focus, fit, fitness and flexibility
  • starts with a thorough understanding an analysis of the external (societal and industry) and internal (structure, culture, resources)  environment
  • is a lengthy and complex process often dealt with too quickly and/or only numbers crunching (playing tennis by watching the scoreboard instead of the ball; Economist 1988)
  • strategy formulation process; mission, vision (everything a mission is NOT), objectives, goals, functional strategies (corporate, business, competitive and functional)
  • strategy implementation
  • strategy evaluation

Bruno Hensler (University of St. Gallen) shared his thoughts, during the conference, on hybrid forms of accommodation. In this model; ownership, services/operations and operational possessions are separated. On various axes the following entities can be plotted:

  • right to use vs. ownership
  • unlimited individual access vs. limited
  • minimal services degree vs. maximal
  • room seize vs. service level
  • and possibly to add in the future ‘client segmentation’.

Examples of this hybrid accommodation: time share, fractional ownership, private residence clubs, all suites hotels, self contained holiday units…. Fractional ownership of hotel residences continues to grow at luxury resort companies, including the Four Seasons, St. Regis, The Ritz Carlton, Timbers Resorts, Rosewood Hotels and Mandarin Oriental. Customers demand more space than traditional hotel rooms, greater availability and the privileges that come with fractional ownership. Private residence clubs (single locations) and destination clubs (multiple locations) have increased markedly over the last five years and now comprise the multi-billion dollar shared-ownership resort real estate industry. An example of shifting of ultra-high-net-worth individuals spending is private residence club; Aurora. As a club member you (family, friends…) may use 9 weeks per year on superyachts, manors, country houses, ski lodges, penthouses…, all staffed and with full of amenities (cars, boats, motorbikes…).

General recommendations for destinations facing severe external changes in market conditions:

  • organise a thorough strategy process with the support of an external qualified consultant
  • in this process analyse all radical options; from e.g. ‘closing down Chamonix for local residents and creating a 24/7 top of the world mountain brand & destination to becoming the authentic mountain village with cows grazing on the Chamonix golf course greens
  • agree to disagree if needed and move on through the strategy process
  • open your hearts and minds to see all opportunities; for every problem there is a strategy
  • tackle the problem from an outside-in approach
  • create a group of external (international experts (consultants, trend watchers, consumer insight researchers, other destination managers…)
  • commence the strategic management process with these experts and follow it through until the very end
  • set aside for now; the politicians and invite a broad range of representatives of all stakeholders
  • in the strategic options process; let it happen, consider dramatic options like closing down the resort, relocating the local residents nearby (like in Las Vegas), repositioning your destination…
  • choose your best strategy on; focus, fit, fitness and flexibility
  • once the strategy is determined and resources (people, funds, infrastructure) alignment is in place, decisively follow it through to the end and receive the fruits of hard and dedicated labour.
  • open your hearts and get connected with customers, experts, partners, governments and in the end even with the politicians
  • there is one guarantee>>>

If you always do what you did, you’ll always get what you got!

This Tourism Summit in Chamonix was covered by Christian ter Maat MCC, MMC, CMC Editor of Eventbuzz and Gek op klanten and Managing Director of Carevolution and cutting the red tape.

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