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Journal of Travel & Tourism Marketing, 26:522–546, 2009

Copyright # Taylor & Francis Group, LLC

ISSN: 1054-8408 print / 1540-7306 online
DOI: 10.1080/10548400903163079


Henry Tsai
Haiyan Song
Kevin K. F. Wong

ABSTRACT. Competitiveness has been a subject of study in the manufacturing and related
sectors since the early 1990s. However, only recently have some researchers started to examine
the tourism and hospitality competitiveness, both conceptually and empirically, with a
particular focus on tourism destinations and the hotel industry. The goal of this article is to
review the published studies on destination and hotel competitiveness, provide critiques, and
point out future directions in tourism and hotel competitiveness research. Such a review shall
provide researchers with a good understanding of the current status of competitiveness research
and with a vision for advancing the existing knowledge of destination and hotel competitiveness.

KEYWORDS. Competitiveness, destination, hotel, productivity

INTRODUCTION some researchers started to examine the

international competitiveness of the service
The competitiveness of industry and firms sector with a particular focus on tourism
has been one of the most important themes destinations and the hotel industry that
of research in the fields of economics and deserves a systematic and critical review.
business studies. Although the concept of As the tourism and hotel industry continue
competitiveness of nations was initially to prosper in the global economy, competi-
proposed by economists (e.g., Porter, 1990), tion—whether it be international or domes-
the term has also gained importance as a tic among members of the industries—
subject of study among management scho- becomes fiercer. Possessing competitive
lars during the last decade. Most empirical advantages could be key to success for those
studies on competitiveness at the industry members. In this article, we aim to synthesize
level have been related to the manufacturing the published studies in tourism destination
and related sectors, and only recently have and hotel competitiveness and provide a

Henry Tsai (E-mail: is Assistant Professor, Haiyan Song (E-mail: is Chair Professor and Associate Director, and Kevin K. F. Wong (E-mail: is Associate Professor in the School of Hotel and Tourism Management at
The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong.
The authors would like to acknowledge the financial support of The Hong Kong Polytechnic
University (Grant No. 1-ZV32) and to express appreciation for the research assistant Miss Lee Yuen

Tsai, Song, and Wong 523

holistic picture of what has been examined In terms of the driving factors that
previously with a view to facilitating further determine national competitiveness, Porter
research in these areas. argued that ‘‘it is firms, not nations, which
The article is organized as follows. In the compete in international markets’’ (1998,
next section we briefly discuss the concepts of p. 33). Clark and Guy (1998) believed that
competitiveness in general contexts, as they lay competitiveness ultimately depends upon the
the foundation for the development of compe- firms in the country competing both in
titiveness research in tourism destinations and domestic and international markets. The
the hotel industry. The following section firm-level competitiveness generally refers
synthesizes competitiveness studies in the to the ability of the firm to increase in size,
context of tourism destinations and the hotel expand its global market share, and its
industry, respectively. The important factors profit. According to Papadakis (1994), a
and different methods and analyses that relate nation’s competitiveness can be measured by
to competitiveness of destinations and the the accumulation of the competitiveness of
hotel industry are summarized and presented firms operating within its boundaries;
next. Issues are then discussed, including furthermore, the strength of these firms is
suggestions for future research directions. considered to be the single most important
The final section concludes this article. criterion of national competitiveness.
In addition to the role of firms in
determining the national competitiveness,
CONCEPTS OF COMPETITIVENESS Newman, Porter, Roessner, Kongthong,
and Jin (2005) listed a number of other
Competitiveness research starts arguably factors that could influence national compe-
with the seminal work on the competitive- titiveness. They believe that competitiveness
ness of nations by Porter (1990), who defined encompasses everything from national gov-
national competitiveness as an outcome of a ernment policies and citizens’ attitudes to
nation’s ability to innovatively achieve, or investments in infrastructure and manufac-
maintain, an advantageous position over turing capability. National competitiveness
other nations in key industrial sectors. exists because of competition. Francis (1992)
Organisation for Economic Co-operation argued that the presence of competition
and Development (OECD) defined competi- makes competitiveness a relative quality
tiveness as ‘‘the degree to which a country and competitiveness is essentially a zero-
can, under free and fair market conditions, sum game. In other words, it is the quality of
produce goods and services which meet the a competitor that determines its probability
test of international markets, while simulta- of winning the competition, which indicates
neously maintaining and expanding the real that the competition has to be specified
incomes of its people over the longer term’’ along with the competitiveness. Papadakis
(1992, p. 237). Adding a time dimension to (1994) described the same notion from a
the definition of the national competitive- consumer’s perspective, suggesting that com-
ness, Boltho (1996) distinguished between petitiveness is reflected by the consumer
the short- and long-run competitiveness of choice between two or more goods compet-
nations. He viewed the short-run interna- ing for the consumer’s dollar.
tional competitiveness as the level of the real Some researchers and practitioners define
exchange rate that ensured internal and competitiveness through the assessment of
external balance with appropriate domestic national/firm productivity. Competitiveness
policies; the longer-run international compe- is considered to involve a combination of
titiveness, on the other hand, could be assets and processes, where assets are either
associated with the highest possible growth inherited (e.g., natural resources) or created
of productivity that was compatible with (e.g., infrastructure) and processes transform
external equilibrium. assets to achieve economic benefits through

sales to customers (Department of Industry, national competitiveness is a meaningless

Science and Resources, 2001). According to concept and the obsession with the concept
Tefertiller and Ward (1995), competitiveness is both wrong and dangerous. He rather
is related to productivity growth and entails treated national living standards as over-
quality differences, relative prices, production whelmingly determined by domestic factors
and distribution costs, the ability to market, rather than by competitive rivalry between
and the efficiency of the supporting market- nations of world markets.
ing and distribution system. In the same vein, Despite its complexity, the issue of com-
Scott and Lodge defined competitiveness as petitiveness continues to attract much atten-
‘‘a country’s ability to create, produce, tion from policymakers worldwide who
distribute and/or service products in interna- attempt to develop the best indicators for
tional economy, while rising returns on its countries to benchmark their performances.
sources’’ (1985, p. 3). Competitiveness is also In recent years, the concern with competi-
‘‘about producing more and better quality tiveness has also drawn the attention of
goods and services that are marketed success- researchers in the fields of destination tour-
fully to consumers at home and abroad. ism and the hotel industry as evidenced
(Newall, 1992, p. 94). by the growing number of research studies
In comparison with the definitions of compared to that in other areas of the
national competitiveness, the firm-level com- tourism industry. These studies will be
petitiveness is a straightforward concept. A reviewed and synthesized in the next section.
widely accepted firm-level competitiveness is
by D’Cruz and Rugman (1992), who viewed
the competitiveness of a firm as its ability to DESTINATION COMPETITIVENESS
design, produce, and/or market its products
superior to those provided by its competi- The issue of competitiveness of tourism
tors, considering both the price and non- destinations has become increasingly impor-
price factors. tant, particularly for countries and regions
Competitiveness remains a difficult con- that rely heavily on tourism (Gooroochurn &
cept and is still not precisely defined in Sugiyarto, 2005). A destination may be
various contexts as is shown by the definitions considered competitive if it can attract and
given above. Nevertheless, competitiveness is satisfy potential tourists. Not only does the
obviously seen as involving elements of competitiveness of a destination directly
productivity, efficiency, and profitability as affect tourism receipts in terms of visitor
a means of achieving rising standards of living numbers and expenditures, but also it indir-
and increasing social welfare (Huggins, 2000). ectly influences the tourism-related busi-
Furthermore, the definitions indicate the nesses, such as the hotel and retail industries
importance of firms and the environment in in that destination, to a certain extent. As
which the firms are operating. Indeed, the Cizmar and Weber (2000) pointed out,
nation’s competitive position lies in the destination choice remains one of the first
creation of a social and economic environ- and most important decisions made by
ment that encourages the firms to take actions tourists; and this decision in turn is, to a
that promote their own self-interest, while at large extent, subject to a number of external
the same time enhancing national competi- factors, such as country image, accessibility,
tiveness (Blaine, 1993). However, an impor- attractiveness, safety, etc. Destination choice,
tant point to make is that not all of the firms/ on the other hand, also determines inter-
industries in the nation contribute to compe- enterprise competition between airlines, tour
titiveness. If they did, it is likely that it was operators, hotels, and other tourism services
dependent on the way profits influence firm (Ritchie & Crouch, 2000). Many researchers
strategy and managerial behavior (Blaine, have studied destination competitiveness, and
1993). Krugman (1994) further cautioned that the following subsections review the concepts,
Tsai, Song, and Wong 525

models and determinants of destination well as subjectively measured variables

competitiveness. such as ‘richness of culture and heritage,’
‘quality of the tourism experience,’ etc.’’
The Concept of Destination (Heath, 2003, p. 9).
Competitiveness N ‘‘…the most competitive destination in
the long term is that the one which
Most competitiveness research has focused
creates well-being for its residents’’
on the firm as a unit of analysis for a number (Bahar & Kozak, 2007, p. 62).
of industries, which certainly has its limita-
tions in applying to the tourism destination Adding a time dimension to their original
competitiveness context. As argued by Bordas competitiveness model proposed in 1993,
(1994), the tourism business is not singular Ritchie and Crouch (2000) argued that
but encompasses a three-dimensional concept competitiveness is illusory without sustain-
including market, product, and technology ability. True destination competitiveness
that satisfy people’s leisure wants and needs. must be sustainable not just economically,
Going beyond the firm level, he conceptua- and not just ecologically; but socially, cultu-
lized destination competitiveness based on the rally, and politically as well (Crouch &
notion that it is a cluster of tourist attractions, Ritchie, 1999). Dwyer and Kim (2003) stated
infrastructure, equipment, services, and orga- that the ultimate goal of competitiveness is to
nization that jointly determines what a maintain and increase the real income of its
destination has to offer to its visitors. In this citizens. In this connection, destination com-
context, competitiveness is not established petitiveness is not an end but rather a means
between countries but rather between clusters to an end that enhances the standard of living
and tourist businesses. Hassan (2000) also of the people in the destination under free and
noted that, because of the multiplicity of fair market conditions (Heath, 2003).
industries involved in making destinations
become competitive, it is necessary to look Destination Competitiveness Models and
beyond rivalry among firms and examine the Determinants
extent of cooperation needed for the future of
competitiveness. Comparative advantages (e.g., low labor
Various researchers have defined destina- costs and attractive exchange rates) had long
tion competitiveness as follows: been believed to be the only contributing
factor to a successful tourist market.
N ‘‘…the ability of a destination to provide However, as Bordas (1994) pointed out,
a high standard of living for residents of competitive advantages appear to be key to
the destination’’ (Crouch & Ritchie, assure a long-term success of tourist destina-
1999, p. 137). tions. He argued that efforts of governments
N ‘‘…the destination’s ability to create and should be focused on two areas: strategic
integrate value-added products that planning of the country’s tourist businesses,
sustain its resources while maintaining which guides the development of the public
market position relative to competitors’’ sector as well as the private one and the
(Hassan, 2000, p. 239). involvement of all the affected parts; and to
N ‘‘…the ability of a destination to main- establish a competitive environment for this
tain its market position and share and/or kind of business, which should be the base of
to improve upon them through time’’ the tourism policy. In particular, competitive
(d’Hauteserre, 2000, p. 23). plans for clusters must be made and inte-
N ‘‘…include objectively measured vari- grated on higher levels of region, destination,
ables such as visitor numbers, market or country in order to create/enhance the
share, tourist expenditure, employment, well-being of the residents (Heath, 2003;
value added by the tourism industry, as Bahar & Kozak, 2007).

Based on the Calgary Model of Bordas (1994), Tourism Policy was identified
Competitiveness (CMC) in Tourism, an as a separate element to the above frame-
exploratory framework of competitiveness of work in order to further cover critical policy,
international tourism advanced by Crouch planning, and development issues that con-
and Ritchie (1999), Chon and Mayer (1995) tribute to destination competitiveness and
reasoned the incorporation of five tourism- sustainability (Ritchie & Crouch, 2000).
specific sub-factors including substitutes, Surveying solely from the tourism stake-
entry/exit barriers, organization design, holders’ perspective, Yoon (2002) theoreti-
technology, and value to the CMC that is cally developed a structural equation model
specifically applicable to Las Vegas. They of tourism destination competitiveness and
particularly emphasized that service quality empirically tested the interplay of relation-
should be independent of price, not related to ships among five constructs: tourism devel-
it. Indeed, value perceived by customers in the opment impacts, environmental attitudes,
hospitality setting ‘‘combines elements of both place attachment, development preferences
price and a customer’s expectations for a about tourism attractions, and support for
service experience’’ (Chon & Mayer, p. 235). destination competitive strategy, where the
Their proposed destination competitiveness first three are exogenous and the latter two
model for Las Vegas further pinpoints poten- are endogenous. Tourism development
tial problem or opportunity areas for the Las impacts construct in terms of creating jobs
Vegas market and offers insight for further and attracting investment capital and place
destination competitiveness research. attachment construct in terms of emotional/
Crouch and Ritchie (1999) developed a symbolic attachment to the community were
comprehensive and sophisticated framework found to significantly influence the stake-
for tourism destination management. This holders’ development of tourism attractions,
framework is based on the theoretical which in fact also positively determine their
concepts of competitive (effective use of support for destination competitive strategy.
resources) and comparative advantages Dwyer and Kim (2003) developed a model
(Porter, 1990; Enderwick, 1990), which con- of destination competitiveness that enables
sider a number of broad categories of factor comparisons between countries and between
endowments—human resources, physical industries within the tourism sector. The
resources, knowledge resources, capital model borrowed the main elements of
resources, infrastructure, and historical and competitiveness studies—in particular from
cultural resources. However, they argued that Crouch and Ritchie (1999)—who see the
it is not good enough to merely list the factors importance of competitive and comparative
that determine the destination’s competitive- advantage. (See the previous section for the
ness; it is also important to understand the determinants.) The model explicitly recog-
relationships and interplays between these nizes demand conditions as an important
factors. The conceptual model of destination determinant of destination competitiveness
competitiveness includes the following com- (Dwyer & Kim), which was not mentioned
ponents: competitive (micro) environment, by Crouch and Ritchie.
global (macro) environment, core resources Concerning the inability of the existing
and attractors for primary elements of models of destination competitiveness to
destination appeal, supporting factors and adequately apply in the Southern African
resources for secondary elements of destina- context, Heath (2003) proposed a destination
tion appeal, destination management (see also competitiveness model based on the experi-
Go & Govers, 2000), and qualifying determi- ence gained through the destination strategic
nants (i.e., situational factors). Government planning processes in addition to the main
and chance events are viewed as influencing indicators proposed by Ritchie and Crouch
competitiveness through their impact on (2000) and Dwyer and Kim (2003). The
the basic determinants. Possibly inspired by model was presented in the form of a house,
Tsai, Song, and Wong 527

where the foundations provide an essential services, availability of tourist facilities and
base for competitiveness, the cement links the activities, and quality of infrastructure—
respective facets of competitiveness, the build- were extracted; the 23 potential determinants
ing blocks connect sustained destination of destination competitiveness and signifi-
competitiveness involving an integrated devel- cant differences were found to exist between
opment policy and framework and a strategic tourists and service providers on their views
and innovative destination marketing frame- of the competitive position of Turkey.
work and strategy, and the roof, representing Dwyer, Forsyth, and Rao (2000) com-
the key success drivers, covers the ‘‘people’’ pared the price competitiveness of 19 coun-
factor of destination competitiveness. He tries by developing a price competitiveness
further emphasized the concept of the insepar- index. They argued, similar to Francis
ability between tourism development and (1992), that competitiveness is a relative
marketing, which echoed ‘‘competitive mar- concept. Price differentials, along with
keting’’ advanced by Bordas (1994). exchange rate movements, productivity
By combining 37 business-related factors levels of various components of the tourist
and 15 conventional destination image/ industry, and qualitative factors affect the
attractiveness factors, Enright and Newton attractiveness or otherwise of a destination.
(2004) applied the Importance-Performance They claimed that overall destination com-
analysis grid in assessing the importance of petitiveness is determined by both price and
the determinants of competitiveness as well non-price factors—socio-economic, demo-
as their competitiveness relative to those graphic, and qualitative factors that deter-
main competing destinations. Their study mine the demand for tourism. Song,
showed the value of looking beyond tourism- Romilly, and Liu (2000) also stressed the
specific factors in providing a holistic picture importance of non-economic influences on
of destination competitiveness. In a later tourists’ destination choices. They con-
study, Enright and Newton (2005) empiri- structed a tourism destination preference
cally studied the destination competitiveness index that considers social, cultural, and
based on Crouch and Ritchie (1999) and psychological influences, such as tourists’
Ritchie, Crouch, and Hudson (2001) and social statuses, personal interests, and cul-
found the evidence that supports the inclu- tural backgrounds and the geographic char-
sion of both industry (business-related fac- acteristics of the destination country.
tors) and destination attributes in
Focusing only on relative tourism price
competitiveness research. In this study,
competitiveness, Oyewole (2004) calculated
critique is also given to other approaches of
the price competitiveness index following
destination competitiveness, which assume
Dwyer et al. (2000) for 22 African countries
that the relative importance of attributes is
in the international tourism industry. The
common across locations and markets. They
results indicate that not only relative price
further demonstrated that attributes may
competitiveness of a country could differ
vary in their importance, depending on the
from one sector of the international tourism
product mix and target markets.
basket to the other, but also how changes in
Different from those competitiveness stu-
price competitiveness from one period to
dies focusing on either only tourists (Hsu,
Wolfe, & Kang, 2004) or only service another could results from changes in the
providers (Enright & Newton, 2004; Yoon, exchange rate, the CPI, or cost of tourism
2002), Bahar and Kozak (2007) examined basket relative to other goods and services
the competitive position of Turkey vis-à-vis within the country, or a combination of all.
five other countries by comparing the views The Competitiveness Monitor
from both tourists and service providers. In
their study, four factors—including cultural Gooroochurn and Sugiyarto (2005) dis-
and natural attractiveness, quality of tourist cussed eight main indicators of tourism

competitiveness under a Competitiveness account market share and economic growth

Monitor (CM) initiated by World Travel & indicators weighted by bilateral distances of
Tourism Council (WTTC) for over 200 the geographical location of destinations and
countries. The indicators in the destination the inclusion of a cultural heritage indicator,
CM for tourism were similar to those used in three of the eight competitiveness determi-
monitoring the mainstream competitiveness nants were found to contribute to the overall
of nations based on the seminal work of destination competitiveness: heritage and
Porter (1990), who introduced the concept of culture, economic wealth, and education.
‘‘National Diamond.’’ Moreover, Attention should be paid on the education
Gooroochurn and Sugiyarto derived the factor that countries of lower educational
indicators, based on the factor endowment standard benefit in terms of competitive
of Crouch and Ritchie (1999), and borrowed advantage. Destination competitiveness in
the environment quality concept of Inskeep their study significantly explained ordinary
(1991) and Middleton (1997). They are market shares based on international arrivals
convinced that environmental policies are and distance-weighted market shares. Their
vital for the development of the tourism study demonstrated theory building on the
sector. Furthermore, as international trave- use of destination competitiveness beyond
lers are sensitive to price, it is important to merely defining, aggregating, and indexing
pay particular attention to the price compe- it.
titiveness of a destination (Dwyer et al.,
2000). European Foundation for Quality
The eight indicators, presented in index Management Model (EFQM)
form, show the level of performance of each
Go and Govers (2000) discussed the
country relative to other countries
European Foundation for Quality
(Gooroochurn & Sugiyarto, 2005) and
include price, openness in (international) Management Model (EFQM), which is used
trade, technology, infrastructure, human to assess and evaluate destination competi-
tourism (i.e., achievement of human devel- tiveness in Europe. This model assumes that
opment in terms of tourism activity), social factors such as customer satisfaction, people
development in the quality of life in the (employee) satisfaction, and impact on society
society, environment, and human resources. are realized through leadership-driving policy
The social and technology indicators have and strategy, people management, resources,
the most weight, while, surprisingly, human and processes—leading ultimately to excel-
tourism and environment indicators have the lence in business results. In particular, leader-
lowest. The environmental indicator is of ship, planning, human resources, customer
particular importance to tourism, especially satisfaction, and measurement of performance
when the growth of eco-tourism is the main are identified as important conditions to
concern in a destination. Price had a attain quality improvement and implementa-
significant inverse relationship with competi- tion. The research findings indicate that
tiveness: Developed countries tend to be integrated quality management in tourism
more competitive in terms of the other destinations is underdeveloped, which inevi-
indicators and less competitive in terms of tably could diminish their competitiveness;
price (Gooroochurn and Sugiyarto). destinations tend to be strong in one element
Gooroochurn and Sugiyarto argued that of the EFQM model (like strategy or human
each indicator is far from exhaustive. resources management) and did not have a
Extending from the definitional frame- good balance of this framework.
work of the destination CM, Mazanec, Destination Benchmarking
Wober, and Zins (2007) proposed and
empirically tested an explanatory model of Fuchs and Weiermair (2004) critically
destination competitiveness. Taking into assessed the Benchmarking Indicator
Tsai, Song, and Wong 529

System implemented by the Austrian criticized by different researchers (Oliver,

Government in 1987, which initially was 1997; Matzler, Sauerwein, & Heischmidt,
based on price and capacity only, and 2003). One of the main criticisms is that the
conceptually extended this benchmarking theory fails to explain why different satisfac-
approach by linking tourists’ satisfaction tion factors can be arrived at by combining
measures. They categorized tourism quality implicitly and explicitly derived importance
attributes into three different categories of scores.
factors (basic factors, excitement factors,
and performance factors) that display a Brandt’s Method
differing impact on tourist satisfaction.
These three categories are based on the Brandt’s Penalty-Reward-Contrast analy-
model of Kano (1984), which implies that sis is a performance-only approach, which
basic factors are the prerequisite conditions only focuses on one variable (i.e., the
for market entry. If the basic factors are satisfaction; Fuchs & Weiermair, 2004). This
delivered, it is also important to have method employs a dichotomized regression
performance factors that are directly con- model with two sets of dummy variables, in
nected to customers’ needs and desires. which the first set exemplifies in quantitative
Finally, unexpected (excitement) factors form excitement factors and the second
could make a destination more attractive. represents quantitative form basic factors
Vavra (1997) and Brandt (1987) proposed (Brandt, 1987). Fuchs and Weiermair carried
two different methods, to be discussed out a multiple regression analysis to empiri-
below, which can be used to empirically test cally quantify destination-related basic (i.e.,
these three-factor structures of customer minimum satisfaction) requirements and
satisfaction. satisfying (i.e., motivating) factors using the
11-point total destination satisfaction mea-
Vavra’s Method sure as the dependent variable and the
dummy variables for each of the seven
Vavra’s two-dimensional Importance destination value-chain domains as indepen-
Grid, which is a structural picture of dent variables. The constant in the regression
customer satisfaction, is based on customers’ equation in their study represents the average
self-stated importance assessments. It deci- for all observations in the reference group
phers hygiene and enhancing factors of with regards to tourist satisfaction. In this
customer satisfaction by comparing impor- method, if customers are experiencing low
tance scores regarding specific service (i.e., levels of satisfaction, the penalties for a
destination) attributes with implicitly derived destination would be expressed in an incre-
performance scores (Vavra, 1997). It is mental decline (i.e., amount subtracted from
hypothesized that tourists can distinguish the constant); if customers are experiencing
between explicit and implicit importance high levels of satisfaction, rewards are then
dimensions of service features, which in turn expressed in an incremental increase (i.e.,
can help identify three distinct satisfaction amount to be added to the constant).
determinants: satisfiers, performance factors, Consequently, the observed destination attri-
and dissatisfiers. Advantages of this method butes would be classified as basic factors if
include the usefulness in pinpointing rela- penalty levels surpass reward levels. If, on the
tionships between satisfaction and impor- other hand, the reward index surpasses the
tance values, and its application to a penalty value, the observed destination attri-
relatively large set of variables that have bute should be interpreted as an excitement
been correlated with the measure of total factor. If the reward and penalty values are
destination satisfaction to derive implicit the same, customers are said to be satisfied
importance scores (Fuchs & Weiermair, only if the performance level of the attribute is
2004). However, this method has been relatively high, while dissatisfaction will result

from low performance level of the attribute destination attractive to international tour-
on the other side (Fuchs & Weiermair). ists. The TTCI is composed of 14 ‘‘pillars’’ of
According to Fuchs and Weiermair, this travel and tourism competitiveness, which
approach seems to have a better potential, include: policy rules and regulations, envir-
compared to Vavra’s method, for identifying onmental regulations, safety and security,
the factor-structure configuration of tourist health and hygiene, prioritization of travel
satisfaction in destinations. and tourism, air transport infrastructure,
Kozak and Rimmington (1999) argued ground transport infrastructure, tourism
that destination benchmarking is proble- infrastructure, information and communica-
matic since there are so many factors that tion technology (ICT) infrastructure, price
influence the satisfaction levels of tourists. competitiveness in the travel and tourism
However, they tried to develop a new industry, human resources, affinity for travel
benchmarking method, which measures a & tourism, and natural and cultural
number of specific elements of destination resources. These factors have also been
performance (Kozak & Rimmington, 1998). considered by researchers in destination
They argued that qualitative and quantita- competitiveness studies. The 14 pillars are
tive measures are helpful in destination then organized into three subindexes captur-
competitiveness assessment. According to ing the broad categories of variables that
Laws (1995), features of destinations can be facilitate or drive travel and tourism compe-
classified under two main headings: primary titiveness. These categories are (a) travel and
and secondary features (see also Crouch & tourism regulatory framework; (b) travel and
Ritchie, 1999), which together contribute to tourism business environment and infra-
the overall competitiveness of a tourism structure; and (c) travel and tourism human,
destination. Primary features include cli- cultural, and natural resources.
mate, ecology, culture, and traditional archi- Although this report provides a ready
tecture; and secondary features refer to competitiveness index encompassing a vari-
superstructures developed specifically for ety of ‘‘pillars’’ related to travel and tourism
tourism, such as hotels, catering, transport, and an improvement over its previous
and entertainment facilities. This study report released in 2007, there are unfortu-
makes use of tourists’ opinions about their nately a number of limitations. Among
experience at different destinations. One various criticisms, Crouch (2007) argued
major advantage of the method, according that national goals of economic and social
to Gooroochurn and Sugiyarto (2005), is its development differ between countries, and
ability to capture the intrinsic characteristics these differences will lead to a diverse focus
of a destination, which may, otherwise, be on important industries. Furthermore,
difficult to measure. Crouch stated that destinations vary enor-
mously and countries compete for different
Travel and Tourism Competitiveness
market segments in tourism, and so it is
Index (TTCI) more meaningful to compare countries by
The World Economic Forum Geneva market segment. Indeed, the attributes that
recently published the Travel & Tourism matter more in one segment may be less
Competitiveness Report (TTCR) 2008 important in a different segment. However,
(World Economic Forum, 2008), in an the report is valuable in advising developing
attempt to explore the factors that drive destinations on areas that deserve attention
travel and tourism competitiveness of desti- or focus for better tourism destination
nations. The aim of the Travel & Tourism development.
Competitiveness Index (TTCI) is to provide Table 1 presents a summary of the major
a comprehensive strategic tool for measu- determinants of tourism destination compe-
ring the factors and policies that make a titiveness discussed in previous studies.
Tsai, Song, and Wong 531

TABLE 1. Major Determinants of Tourism Destination Competitiveness

Major Determinants Authors

Technology and Innovation Bordas (1994); Chon & Mayer (1995); Gooroochurn & Sugiyarto (2005); Heath (2003)
Infrastructure Bahar & Kozak (2007); Bordas (1994); Crouch & Ritchie (1999); Dwyer & Kim (2003);
Enright & Newton (2005); Gooroochurn & Sugiyarto (2005); Kozak & Rimmington
(1999); World Economic Forum (2008)
Human Capital Bordas (1994); Chon & Mayer (1995); Gooroochurn & Sugiyarto (2005); Heath (2003);
Go & Govers (2000); Mazanec et al. (2007); World Economic Forum (2008)
Price Chon & Mayer (1995); Crouch & Ritchie (1999); Dwyer & Kim (2003); Dwyer et al.
(2000); Gooroochurn & Sugiyarto (2005); Kozak & Rimmington (1999); World
Economic Forum (2008)
Environment (Milieu) Dwyer & Kim (2003); Enright & Newton (2005); Gooroochurn & Sugiyarto (2005); Heath
(2003); Kozak & Rimmington (1999); Ritchie & Crouch (1993, 2000); World Economic
Forum (2008)
Openness Gooroochurn & Sugiyarto (2005), World Economic Forum (2008)
Social Development Dwyer & Kim (2003); Enright & Newton (2005); Gooroochurn & Sugiyarto (2005);
Mazanec et al. (2007)
Human Tourism Go & Govers (2000); Gooroochurn & Sugiyarto (2005); World Economic Forum (2008)
Government Bordas (1994); Crouch & Ritchie (1999); Dwyer & Kim (2003); Enright & Newton (2005);
Go & Govers (2000); Kozak & Rimmington (1999); World Economic Forum (2008)
History and Culture Bahar & Kozak (2007); Crouch & Ritchie (1999); Dwyer & Kim (2003); Enright & Newton
(2005); Go & Govers (2000); Heath (2003); Kozak & Rimmington (1999);
Mazanec et al. (2007); World Economic Forum (2008); Yoon (2002)
Micro Environment Bordas (1994); Crouch & Ritchie (1999); Dwyer & Kim (2003); Enright & Newton (2005)
Macro Environment Bordas (1994); Chon & Mayer (1995); Crouch & Ritchie (1999); Dwyer & Kim (2003);
Enright & Newton (2005); World Economic Forum (2008)
Destination Management Bordas (1994); Chon & Mayer (1995); Crouch & Ritchie (1999); Dwyer & Kim (2003);
(Marketing) Dwyer et al. (2000); Enright & Newton (2005); Go & Govers, (2000); Heath (2003);
Kozak & Rimmington (1999); World Economic Forum (2008); Yoon (2002)
Situational Factors Crouch & Ritchie (1999); Dwyer & Kim (2003); Dwyer et al. (2000); Enright & Newton
(2005); Go & Govers (2000); Heath (2003); Kozak & Rimmington (1999); World
Economic Forum (2008)
Demand Conditions Bordas (1994); Dwyer & Kim (2003); Go & Govers (2000); Song et al. (2000)
Customer Satisfaction Bahar & Kozak (2007); Chon & Mayer (1995); Fuchs & Weiermair (2004); Go & Govers
(2000); Gooroochurn & Sugiyarto (2005); Kozak & Rimmington (1999)
Social, Psychological Factors Crouch & Ritchie (1999), Enright & Newton (2005); Song et al. (2000); Yoon (2002)

COMPETITIVENESS IN THE for hotel rooms. There are many other

HOTEL INDUSTRY factors (e.g., input, process, output, and
outcome) that determine the hotel industry’s
The competitiveness of a country derives competitiveness. Indeed, hotels utilize input
from the performance of its enterprises factors and produce a variety of products
(Barros, 2005), which certainly include the and services (outputs), and the nature of
hotel industry. While a community’s growth these outputs depends very much on hotels’
stimulates hotel performances, in turn hotels strategic and competitive positions in the
contribute to the community’s economic, region. The impact of these measures in
social, and cultural development (Go, Pine, terms of tangible outcomes is reflected by the
&Yu, 1994). The hotel industry benefits from market share of the hotel industry and by the
a destination’s economic growth and stabi- price competitiveness of the hotel industry in
lity and community developments, such as the regional market.
office buildings, retail malls, and entertain- The available studies and literature that
ment facilities, which draw both business discuss the competitiveness of the hotel
and leisure travelers and help create demand industry usually examine a limited number

of factors, but fail to develop a model/ analyzing three categories of factors, which
framework that captures the relationships include physical characteristics, factors
among those factors. Fortunately, there are a determined by the market, and factors that
few exceptions that attempted to develop are controllable (e.g., salaries) by the hotel
more comprehensive frameworks and mod- general manager (see also Morey & Dittman,
els. In the following sections the important 1995; Phillips, 1996; Barros, 2005).
hotel competitiveness factors and some
related frameworks and models are dis- Competitive Action Framework
The Competitive Action Framework has
Strategic Decisions been designed to analyze strategic conduct
among firms in the hotel industry (Yeung &
Strategic decisions guide the development Lau, 2005). In particular, slightly different
of a firm and hence affect its competitive- from Phillips (1999), this framework suggests
ness. The ability of a firm to find or create a that the extent of differences of action
position in a market is at the core of strategy portfolios within and between firms is
development (Yeung & Lau, 2005; Roth & relevant in determining a firm’s performance
van der Velde, 1991; Roth, 1993). When (Yeung & Lau). The extent of difference and
firms in the industry have reached their effectiveness of the action portfolio is deter-
mature stage, each firm within this industry mined by the competitive environment; it is
may struggle with the formulation of corpo- the matter of the possession of resources, as
rate and business strategies to stay ahead of well as the moves of the competitor (Porter,
their competitors (Wong & Kwan, 2001; 1991). Two modes of differentiation were
Hwang & Chang, 2003). A number of devised: diversity in competitive actions
frameworks are identified that could help (Olsen, 1995; D’Aveni, 1994) and non-
firms formulate strategic decisions leading to conformity behavior toward competitive
a competitive position. actions of competitors. It is found that
strategic flexibility is important; it is better
Hotel Performance Measurement for hotels to have a diversified competitive
Framework—Phillips action portfolio, which should conform to
that of their competitors (Yeung & Lau).
Phillips’ (1999) framework is perhaps the
most comprehensive one, which links three Hotel Productivity
salient areas of strategic planning: formula-
tion, implementation, and evaluation. The Productivity is always a top priority for
traditional way of gauging hotel perfor- hotel operators (Brown & Dev, 1999, 2000;
mance from a finance-only perspective is Reynolds & Thompson, 2007; Sigala, 2004;
not capable of presenting the true perfor- Wang, Hung, & Shang, 2006). Hotel pro-
mance of the hotel industry. This framework ductivity generally encompasses an umbrella
was designed to capture both economic and concept that includes efficiency, effective-
organizational-specific factors and changes ness, quality, predictability, and other per-
in the external environment. According to formance dimensions, as well as a concept
Phillips (1999), the central theme of the reflecting only production efficiency (Sigala).
framework is that input, output, processes, According to Lovelock and Young (1979),
market, strategic orientation, and environ- service firms can increase productivity in
mental characteristics are associated with four ways. Firstly, the firm can improve its
outcomes (Fitzgerald, Johnston, Brignall, labor force through better recruiting or more
Silvestro, & Voss, 1991; Neely, Gregory, & extensive training (human capital). Secondly,
Platts, 1995; Brignall & Ballantine, 1996; it can invest in more efficient capital equip-
Brown & Dev, 2000). Moreover, the evalua- ment (capital). Thirdly, the firm can replace
tion of a hotel’s performance involves works with automated systems (technology).
Tsai, Song, and Wong 533

Lastly, the firm can recruit consumers to factors can be differentiated and are beyond
assist in the service process. As labor costs the traditional input-output setting, but
generally account for the highest percentage contribute to efficiency. Moreover, a boot-
of hotel operating expenses, these four ways strapping technique, proposed by Xue and
of enhancing productivity could serve to help Harker (1999), is also used to overcome the
produce the highest level of output with the dependency problem of DEA efficiency
lowest level of input. scores when used in regression analysis.
In addition, firms can improve their Additionally, Sigala (2004) extended the
productivity through effective strategic deci- above mentioned DEA approach by devel-
sions, as suggested by Brown and Dev oping a stepwise model of DEA, an iterative
(1999). Barros (2005) agreed with Brown procedure in which the productivity is
and Dev that operational efficiency is a measured in terms of the important factors
management objective. Efficient manage- identified. In this approach, the important
ment is the main issue that managers should factors are identified by examining the
pay attention to, because this would affect factors that correlate with the efficiency
the productivity of hotels (Yang & Lu, 2006; measures, and judgments are made to
Brown & Ragsdale, 2002; Sustainable determine the cause-and-effect relationship
Energy Ireland [SEI], 2001). Moreover, between the efficiency measures and the
Brown and Dev (1999), being consistent factors identified. The identified factors are
with Phillips (1996) and Morey and then incorporated into the DEA model, and
Dittman (1995), emphasized the role of the the process is repeated until no other factors
hotel general manager in making the right that determine the efficiency measures
strategic decisions according to the demand remain. The stepwise approach is beneficial
and competitive conditions. for decision-making purposes, as this
method can interpret why particular units
Productivity Assessment Using Data are either efficient or inefficient at each step,
Envelopment Analysis by separating the efficiency scores of every
step in the efficiency tables. (See also Sigala,
One way to examine the performance/
Airey, Jones, & Lockwood, 2004.)
productivity of a hotel is the use of data
envelopment analysis (DEA). DEA can take Marketing
into account controllable and uncontrollable
(environmental and situational) factors in As competition in the hotel industry
analyzing the firm’s productivity/efficiency becomes more intense, it is increasingly
(Reynolds, 2004; Reynolds & Thompson, important for hotels to invest more in
2007). Indeed, meaningful productivity sta- marketing activities to attract and retain
tistics must not only accurately identify guests and distinguish themselves from their
inputs and outputs, but must integrate all rivals in order to stay in the industry (Keh,
critical variables if such a measure is used to Chu, & Xu, 2006; Brown & Ragsdale, 2002).
assess the overall operational productivity or Investment in processes is important, as it
efficiency (Reynolds, 1998). A major advan- influences customer satisfaction and service
tage of DEA is that it does not require an quality in the end (Roth & Jackson, 1995); if
assumption about the functional form of the processes perform badly, it will affect the
model that underpins the relationships efficiency, and certainly competitiveness of
between the input and output variables firms.
(Hwang & Chang, 2003). Like most companies, hotel firms typically
Wang et al. (2006) employed the DEA and spend considerable amounts of their budgets
used the Tobit regression model to evaluate on marketing activities, including sales and
the efficiency determinants of the firms. This promotion (branding). According to Kotler
model was applied because firm and market (1984), marketing is considered a social and

managerial process by which individuals are important to a firm’s success. Indeed, if a

obtain what they need and want through firm is able to project a clear image, it can
creating and trading product and values with communicate effectively with its customers
others. Moreover, a marketing-oriented firm in terms of service, price, and amenities
tries to create value through providing goods (Brown & Ragsdale, 2002; Prasad & Dev).
and services geared toward consumers Thus, effective marketing programs on
(Levitt, 1986). Cizmar and Weber (2000) branding are important, because they create
claimed that effective marketing activities greater awareness and association of the
are positively related to business perfor- brand with customers, which induce custo-
mance; they also argued that if a service mer loyalty and their willingness to pay a
firm wants to perform well, it has to analyze premium price for the brand (Kim & Kim).
the market and plan and implement market-
ing strategies properly. As discussed earlier Consumer Satisfactions, Service Quality,
(see Morey and Dittman, 1995; Phillips, and Pricing
1996; Barros, 2005; Gundersen, Heide, &
Olsson, 1996), a firm’s efficiency/productiv- Understanding consumer satisfaction is
ity depends very much on the ability of the critical as it is believed that satisfaction leads
managers to formulate the right marketing to repeat purchases and favorable word-of-
strategies, which could then be implemented mouth promotion by clientele (Mattila &
effectively by the marketing department O’Neil, 2003; Cardozo, 1965; Fornell, 1992;
within the service firm. Consistently, Halstead & Page, 1992). In the hotel
Mandelbaum and Nicholas (2006) stressed industry, customers tend to stay loyal to a
the importance of the marketing department, brand when they are satisfied with the
in particular marketing personnel. They quality of the service that has been provided.
argue that the growth in brands and market As such, service quality has an important
segmentation has stimulated the need for effect on the performance and competitive-
hotels to ‘‘staff up’’ within the marketing ness of the hotel (see also Akbaba, 2006).
department. Employing the DEA model, Consumer (dis)satisfaction consists of the
Keh et al. (2006) highlighted the crucial role general feelings that a consumer has devel-
of marketing and promotion in enhancing oped about a product or service after its
firms’ efficiency. However, they also argued purchase (Westbrook & Oliver, 1991). In
that if marketing expenditure is too exces- addition, this is influenced by items such as
sive, the purpose of marketing may be culture, social class, personal influence and
defeated. That is, service firms should first family, and other individual differences
minimize the level of marketing expenditure (motivation and involvement, knowledge,
efficiently and then use marketing effectively attitude, lifestyle, personality, and demo-
to raise the level of productivity. graphics; Engel, Blackwell, & Miniard,
Market positioning, through various pro- 1990). Numerous studies have linked satis-
motional and communication strategies, is faction with product attributes (Choi & Chu,
part of the marketing processes and refers to 1999), instead of the product themselves
the location of a brand relative to its (Mittal, Kumar, & Tsiros, 1999; Ratchford,
competitors in the customers’ minds (Kim 1975; Ladd & Zober, 1977). Attributes are
& Kim, 2005; Reis & Trout, 1972). Brands the underlying characteristics of the product
have also been increasingly considered as or service. According to Ratchford, product
primary capital, termed brand equity, for the attributes may be measured either objec-
hospitality industry to obtain the competi- tively (e.g., presence of facilities, number of
tive advantage (Kim & Kim; Gundersen et rooms, etc.) or perceptually (e.g., cleanliness
al., 1996; Prasad & Dev, 2000), which in turn of hotel, staff’s helpfulness and efficiency,
fosters the role of strategic alliances. Brands etc.; Oh, 1999; Dube, Enz, Renaghan, &
are based on customer perceptions, which Siguaw, 1999).
Tsai, Song, and Wong 535

Gundersen et al. (1996) used Linear differences. They found that the service
Structural Relations (LISREL) to examine expectations of hotel customers differed
hotel customer satisfaction among business from culture to culture.
travelers. LISREL is a modeling program By adopting the model of Phillips as the
that can be employed to empirically assess theoretical framework, which includes four
theories that are usually formulated as equations (price of the product, direct
theoretical models for observed and latent production costs, market share, and returns
(unobservable) variables. If data are col- on investments); and by applying the struc-
lected for the observed variables of the tural equations modeling, Campos-Soria,
theoretical model, the LISREL program Gonzalez-Garcia, and Ropero Garcia
can be used to fit the model to the data (2005) analyzed and quantified the main
(, 2007). In their study, interrelationships between service quality
Gundersen et al. (1996) demonstrated that and the competitiveness of hotels, distin-
tangible and intangible dimensions of three guishing between external and internal
departments (reception, housekeeping, and effects. The external effects are customer
food and beverage) could explain overall satisfaction and its influence on the sales
satisfaction, in which tangible aspects of the volume and the client’s willingness to pay.
housekeeping and intangible aspects of The external effect mainly refers to the
reception were found to have the strongest average direct costs of service provision.
effects on overall guest satisfaction. They found that the service quality had a
Choi and Chu (1999) discussed service positive and direct effect on competitiveness.
quality in the hotel industry. They were of Moreover, they also found that service
the opinion that service quality is difficult to quality had an indirect effect via other
define and argued that as hotel products and variables, such as the occupancy level and
services become more homogeneous, it is average direct costs (Campos-Soria et al.,
crucial for hotels to provide high quality 2005).
services to differentiate themselves from their Another important variable that relates to
competitors. Lewis and Booms (1983), customer satisfaction and service quality is
nevertheless, defined service quality as how pricing. According to Qu, Xu, and Tan
well the service delivered meets customers’ (2002), hotel room price has a significant
expectations, where delivering a quality effect on the demand for rooms. Tsai, Kang,
service means conforming to customers’ Yeh, and Suh (2005) further found that the
expectations. In addition, Berry, Zeithaml, hotel room demand is positively related to
and Parasuraman (1990) stated that service the consumer price index (CPI). That is,
quality cannot be measured objectively, and hotel room price possesses a relative quality,
therefore it remains a relatively elusive and compared to general goods and services,
abstract construct; it is even difficult to which may either stimulate or deaden the
measure. Some service quality measurement hotel room demand. Mattila and O’Neil
methods were proposed, and one such (2003) discuss the role of pricing on customer
method is SERVQUAL. Akbaba (2006) used satisfaction. They argue that a customer may
SERVQUAL to examine the service quality experience a similar level of service during
expectations of hotel customers. Caution has two hotel stays, yet their satisfaction levels
to be made that the service quality dimen- could be very different depending on the
sions in the SERVQUAL differ from one room rate. Moreover, hotel customers expect
segment of the hotel industry to another and to receive a higher level of service when they
that cultural differences matter as well. pay more for that service (Parasuraman,
Armstrong, Mok, Go, and Chan (1997) Berry, and Zeithaml, 1991). If a hotel fails to
recognized this issue when applying the satisfy the customers’ needs, the hotel will
SERVQUAL and investigated the quality tend to lose its customers (Oh, 1999). From a
of service in consideration of cross-cultural focus group interview, Lockyer (2005) also

found out that price has a major impact on The relationship between innovation pro-
the selection of accommodations through the pensity and the hotels’ category, governance
process of early decision (budget, location, settings and size are also considered by
reason for stay, etc.). Moreover, besides these Siguaw, Enz, and Namasivayam, (2000).
early decision items, Mattila and Choi (2006) The results of their study show that higher-
agreed with Armstrong et al. (1997) by tariff hotels and hotels that belong to a chain
emphasizing the role of cross-cultural influ- are more innovative, because they tend to,
ences on hotel room pricing. Previous and can easily, gain the ‘‘know-how’’ and
research demonstrated that customer expec- other intangible assets compared with the
tations differ between Asian and Western lower tariff and hotels that do not belong to
consumers, thus influencing their satisfaction any chains. It has also been demonstrated
with hotel services (Mattila & Choi). that in order to improve the competitiveness,
hotels need to adjust training and other
human resources investments in response to
Technologies and Innovation innovations (see, for example, Cohen &
Levin, 1989; Griliches, 1990; Olsen &
Empirical studies have demonstrated the
Connolly, 1999; Sirilli & Evangelista, 1998).
role of technology on hotel labor productiv-
Moreover, Chandrasekar and Dev (1989)
ity enhancement. As technological innova-
labelled technology in the service industry as
tion of products and services is different,
knowledge technology, because the employ-
innovation in the accommodation services
ees carry the knowledge that is needed in the
should be treated differently. The hotel
hotel business. Pine (1992) discussed tech-
industry is a supplier-driven sector that
nology transfer in the hotel industry and
innovates in applying research and develop-
acknowledged the importance of human
ment (R&D) embodied in technology, rather
capital in this process. He demonstrated that
than undertaking internal R&D activities
physical technology, such as buildings and
(Orfila-Sintes, Crespi-Cladera, & Martinez-
associated equipment, are easy to transfer;
Ros, 2005). As long as technological innova- but technology needed for innovative meth-
tion leads to better and rapid reaction to the ods and processes in the service organization
changing environment conditions and as is more difficult to transfer. It requires
long as the innovation is integrated in the different types of skills, knowledge, and
company strategy, technology can be seen as absorption capacity of people. In particular,
a way to improve competitiveness (Orfila- successful technology transfer in the hotel
Sintes et al., 2005). On the other hand, industry depends upon the availability and
Barros and Alves (2004) also argued that willingness of employees who are provided
technology investments may lead to with adequate education, training, develop-
improved total productivity; in particular ment, and promotional opportunities (Pine).
they emphasized that Sigala, Airey, Jones, and Lockwood (2004)
further argued that productivity gains accrue
Technological change (innovation) not only from investments per se, but also
involves any investment that improves from the full exploitation of the information
total productivity of a productive unit; and communication technology networking
it arises due to capital accumulation, and informationalization capabilities.
which gives rise to the adoption of Chandrasekar and Dev (1989) examined
technology by best-practice hotels, the relationships between technology and
thus, shifting the frontier of technology. structure in the lodging industry by present-
In hotel business, technological change ing a technological framework. The techno-
means investing in new […] techniques logical dimensions in this framework can be
with the aim of improving results. viewed from a service perspective along two
(p. 223) dimensions: diversity, which refers to the
Tsai, Song, and Wong 537

number of different service units; and com- increasing costs of resources and the impact
plexity, which represents the degree and of waste could affect the income, environ-
nature of relationships that exist between mental performance, and public image of the
subunits. They further indicated that hotel.
increased diversity and complexity will have Karagiorgas et al. (2007) introduced a
technological implications, which requires a model for the simulation of the energy flows
more coordinated organizational structure. and energy consumptions in a hotel. The
Information Technology (IT), such as the energy flows in the hotel start from the
Internet, intranets, and central reservation various fuel inputs (such as LPG, electricity,
systems, is one of the crucial technology etc.), which belong to eight cost centers (e.g.
investments that are often made by hotels to lift, catering, laundry, etc.) and finally down
improve performance (Wong & Kwan, 2001; to the five end-use services (such as leisure,
Alpar & Kim, 1990; Mahmood & Mann, bar, baths, room stay, etc.). This model,
1993; Law & Jogaratnam, 2005). Further- which is based on the energy mix matrix, is
more, Siguaw et al. (2000) stated that IT applied to show the importance of reducing
decisions will improve performance and can cost and the growing sensitivity to environ-
create a competitive advantage. Ham, Kim, & mental factors in hotel designs. Shimming
Jeong (2005) examined the effect of IT and Burnett (2002) stressed the importance of
applications on the performance of lodging an energy management program in achieving
operations. Their findings indicate that the increased profitability due to reduced opera-
installation of computer applications in tional costs and other non-business (sustain-
the front office could improve performance able development) reasons to conserve energy
of hotels. Although installing back-office use in hotels. However, it is important to
applications, such as personnel, purchasing note that without the skills and knowledge of
modules, accounting modules, and financial employees, it is not possible to implement
reporting modules, may not contribute to the effective energy management programs.
improvement of hotel performance in the Thus, human capital is a crucial factor; hotels
short-term, it does help with the improvement should invest more in training and educating
of the hotel’s long-term productivity. their staff about the environmental issues
Moreover, the unique finding of their study (SEI, 2001; Trung & Kumar, 2005).
showed that restaurant and banquet manage-
ment systems have a significant impact on the
performance of the hotel operation. Other Aspects of Hotel Competitiveness
Preble, Reichel, and Hoffman (2000) and
Operational (Environmental) Costs Pine and Phillips (2005) focused on the role
of strategic alliances in the hospitality
Some authors discussed operational industry competitions (see also Hwang &
costs—in particular, environmental and Chang, 2003). Strategic alliances are often
energy related (Karagiorgas, Tsoutos, & formed with competing firms that possess
Moia-Pol, 2007)—of a hotel firm in relation complementary skills and resources
with hotel performance and competitiveness. (Varadarajan & Cunningham, 1995). Key
In many hotels, energy charges account for a resources include location, brand name, and
substantial proportion of operating costs. customer base. Direct advantages for mem-
After staffing costs, energy is one of the bers are: quick access to new markets,
largest elements of expenditure; rising price technology, knowledge and customers, cir-
of energy leads to an increase in operating cumventing or co-opting regulatory barriers,
costs for hotels and a potential reduction in absorbing a key local competitor, lowering
profitability (SEI, 2001). Furthermore, risk by sharing costs, and benefiting from a
Trung and Kumar (2005) stated that partner’s political connections.

Go et al. (1994) applied Porter’s diamond Evidence from industry professionals sug-
model to assess the competitiveness of the gests that managers lack an understanding of
hotel industry. As already discussed in the how competitive interventions can be
previous sections, there are four main factors planned, implemented, and integrated with
that determine competitiveness, such as the existing processes or new processes for rapid
factor conditions and demand conditions scale-up of competitiveness. To address this
(see also Pine & Phillips, 2005). The observa- issue, future research on hotel competitive-
tions of Go et al. indicate that the hotel ness could focus on investigating how exist-
industry conforms to Porter’s model. In ing models and approaches could be adapted
particular, the hotel industry’s performance for determining appropriate interventions in
is determined by the factor conditions, different stages of development of the hotel.
including well-trained staff and infrastruc- This would provide a better understanding
tures; the demand conditions, such as the of the relationship between competitiveness
spending power of tourists; the supporting and the functional process for developing
industries like transportation and travel fresh strategies to raise the firm’s competitive
industries; and firm strategy, structure, and edge.
rivalry, such as the entry mode, pricing At the state level, some studies strongly
strategy, and even the location of the head suggested the need for organizational gov-
office of the hotel chains, etc. They also ernance coupled with incentives and trans-
pointed out that a healthy market, together parency to achieve efficiency in operational
with effective investments in technology, are activities to achieve the ultimate goal of
also important determining factors of the profitability for a hotel, while others extol
hotel industry’s competitiveness. the merits of privatization. While some
Table 2 presents a summary of the major researchers may strive to find the optimal
determining factors of hotel competitiveness balance between these two approaches, there
from previous research and Table 3 lists the is some bias toward the fostering of enter-
frameworks and models used in measuring prise and risk taking to stimulate growth and
hotel competitiveness. innovation in the industry. For large, emer-
ging economies like China, scant evidence
and reliable findings exist on the economic
DISCUSSION merits of the privatization of the hotel sector
and its impact on the level of international
In cognizance of the multidimensionality and domestic competitiveness. Thus exist the
of the competitiveness concept viewed at the need and the continuing challenge for
country, industry, or firm level, the challenge researchers to undertake more rigorous,
researchers have to confront in future future in-depth research into the changing
research lies in attaining a deeper under- market structures in the competitive process.
standing of the salient factors determining A major concern in establishing, raising,
firm-level competitiveness. These factors and sustaining competitiveness (in the long
involve internal corporate resource strengths run) at the firm, industry, and destination
(both tangible and intangible) in the context level, is the amount of resources available, its
of the firm’s immediate task environment effective use, and its productivity. For the
(strategic moves by immediate competitors) tourism and hospitality sector, the issues and
and its relationship to the sustainability of measurement issues are even more demand-
destination competitiveness. ing. Core resources ranging from the physio-
Our review has systematically surveyed an graphy of a destination to its culture and
abundance of past and current research on history and tourism superstructure, facilitat-
firm-specific competitiveness and has drawn ing resources (availability and quality of
upon diverse methodologies with varying capital and labor resources), enterprise and
degrees of specificity and sophistication. in-house (company) inputs and capabilities
Tsai, Song, and Wong 539

TABLE 2. Major Determinants of Hotel Competitiveness

Factors Authors
Destination Go et al. (1994); Cizmar & Weber (2000)
Human Capital, Education Level, Training Go et al. (1994); Phillips (1996, 1999); Morey & Dittman (2003); Wong &
Kwan (2001); Brown & Dev (1999); Barros (2005); Yang & Lu (2006);
Reynolds (2004); Cizmar & Weber (2000); Mandelbaum & Nicholas
(2006); Gundersen et al. (1996); Brown & Ragsdale (2002); Orfila-Sintes
et al. (2005); Chandrasekar & Dev (1989); Sustainable Energy Ireland
(2001); Trung & Kumar (2005)
Technology Go et al. (1994); Phillips (1999); Wong & Kwan (2001); Brown & Dev
(1999); Orfila-Sintes et al. (2005); Ham et al. (2005); Chandrasekar &
Dev (1989); Siguaw et al. (2000); Law & Jogaratnam (2005); Barros &
Alves (2004); Sigala et al. (2004)
Strategies Go et al. (1994); Phillips (1996, 1999); Morey & Dittman (2003); Yeung &
Lau (2005); Wong & Kwan (2001); Brown & Dev (1999, 2000); Barros
(2005); Cizmar & Weber (2000); Hwang & Chang (2003)
Productivity Brown & Dev (1999); Barros (2005); Reynolds & Thompson (2007);
Reynolds (2004); Yang & Lu (2006); Sigala (2004); Seol, Choi, Park &
Park (2007); Barros & Alves (2004); Brown & Dev (2000)
Capital Brown & Dev (1999); Barros (2005)
Customer Satisfaction—Service Quality Reynolds & Thompson (2007); Brown & Ragsdale (2002); Campos-Soria
et al. (2005); Mattila & O’Neil (2003); Gundersen et al. (1996); Reynolds
& Biel (2007); Choi & Chu (1999); Armstrong et al. (1997); Akbaba (2006)
Brand Image Brown & Ragsdale (2002), Kim & Kim (2005); Prasad & Dev (2000)
Strategic Alliances Preble et al. (2000); Kim & Kim (2005); Pine & Phillips (2005)
Operational Costs (Environmental) Barros (2005); Sustainable Energy Ireland (2001); Trung & Kumar
(2005); Karagiorgas et al. (2007)
Market Conditions Go et al. (1994), Phillips (1999); Morey & Dittman (2003); Yeung & Lau
(2005); Brown & Dev (1999); Barros (2005); Yang & Lu (2006); Reynolds
(2004); Brown & Dev (2000)
Demand Conditions Go et al. (1994); Phillips (1999); Brown & Dev (1999)
Marketing Go et al. (1994); Cizmar & Weber (2000); Keh et al. (2006); Mandelbaum
& Nicholas (2006)
Pricing Reynolds & Biel (2007); Qu et al. (2002); Mattila & O’Neil (2003); Lockyer
(2005), Mattila & Choi (2006)
Physical Characteristics Phillips (1999); Morey & Dittman (2003); Barros (2005); Reynolds (2004);
Yang & Lu (2006); Reynolds & Thompson (2007)
Process Management Phillips (1999); Yang & Lu (2006); Cizmar & Weber (2000); Seol et al.

of a firm have to be clearly identified with future research on tourism and the hospital-
their efficiency and productivity accurately ity sector to focus on developing appro-
assessed. This highlights the critical need for priate methodologies for assessing the

TABLE 3. Frameworks and Models Applied in Measuring Hotel Competitiveness

Frameworks and Models Authors

Data Envelopment Analysis Barros (2005); Reynolds & Thompson, (2007); Reynolds (2004); Yang &
Lu (2006); Brown & Ragsdale (2002); Keh et al. (2006); Reynolds & Biel
(2007); Johns, Howcroft, & Drake (1997); Sigala (2004); Wang et al.
(2006); Seol et al. (2007); Sigala et al. (2004); Hwang & Chang (2003)
LISREL Gundersen et al. (1996)
SERVQUAL Akbaba (2006); Armstrong et al. (1997)
Structural Equations Modeling Campos-Soria et al. (2005)
Porter’s Diamond Go et al. (1994)
Hotel Performance Measurement Framework Phillips (1999)

contributions made by these core resources prominent hotel groups (global presence) to
in enhancing the sector’s competitiveness serious market research on its growing
in future research on productivity and clientele, the compilation of detail and
efficiency. quality data will also expedite the use of
Productivity concerns of hospitality firms DEA for more complex productivity analy-
involve issues of efficient management, labor sis.
productivity (measurable), service productiv- The growing number of strategic alliances
ity (elusive measures), and capital productiv- among the various segments of the hospital-
ity. Change in emphasis and in the focus of ity industry (hotels, travel agents, card
productivity measures has been raised as an companies, cruise companies, etc.) will also
issue by some researchers (Brown & Dev, intensify competition in the already fiercely
1999, 2000) to address the need for a more competitive industry by strengthening com-
appropriate comparative statistic. Thus, for petitive advantages of incumbent firms. This
further investigation into this issue in the will further complicate the measurement of
future, it has been suggested that future efficiency and productivity changes asso-
research should include the modification of ciated with re-structuring and altered use of
productivity measures to reflect the hotels’ resources (manpower, capital, assets, etc.)
changing focus from a ‘‘rooms-only’’ orien- within enlarged or re-engineered units. Does
tation to a ‘‘full-service’’ one, which then size matter? What is the optimal size of a
makes the use of a Sales per available room firm (hotel, tourist attraction, etc.) before it
(SalesPAR) measurement—a more useful reaps economies of scale or suffers diseco-
one than Revenue per available room nomies of scale? In relation to these devel-
(RevPAR). This is also related to the opments, in the future, greater effort should
possible change in research emphasis toward be devoted toward developing extensions of
customer-oriented measures as opposed to DEA and more sophisticated methods of
product-oriented ones. Furthermore, it has efficiency measures, such as bootstrapping
been argued that productivity measures techniques, to further raise the level of
incorporating the actual purchasing habits accuracy in these key measurements in the
of the customer over time may be more tourism and hospitality sector for competi-
valuable than those calculations which only tive analysis.
take into account the physical assets of the In addition, further development of new
hotel and its employees, thus signaling a assessments of methodologies and indicators
need to change the research focus in this will be needed as technological innovation
aspect as well. and technological transfers (globally) experi-
On the methodological frontier for enced by expanding hospitality firms lead to
research into firm-specific competitiveness higher productivities, increased diversities,
factors in hotels, the application of the non- and a more rapid response to the changing
parametric approach data envelopment ana- business environment (task and general
lysis (DEA) will be beneficial, as it is a environment).
rigorous productivity analysis tool that Viewing competitiveness research in
provides a direct assessment of efficiency to broader terms, the quest for ascertaining
be compared with financial performance. It and evaluating the level of competitiveness
takes into consideration multiple input and of a tourism destination will continue to be
output measurements in the evaluation of on the agenda of Tourism Authorities and
relative efficiencies of the large decision- Government Agencies. For destination com-
making units in international hotel chains. petitiveness, future research will need to
As such, it has distinct advantages over continue focusing on the construction and
methods such as the asset-process-perfor- development of appropriate and useful travel
mance approach. In addition, with greater and tourism competitive indices. While price
attention and resources devoted by the competitiveness may take precedence over
Tsai, Song, and Wong 541

the other identified factors driving competi- and models—could help policymakers and
tiveness, the attention to non-price attributes industry operators not only pinpoint stron-
of a destination will attain greater signifi- ger areas for reinforcement and weaker ones
cance as recognition of the increasingly for improvement, but also formulate
discerning travelers highlights the other informed corporate strategies and decisions
service attributes and qualitative differences that will help maintain/establish a competi-
that makes a destination attractive or tive position for the enterprises. Ultimately,
special. Dwyer and Kim (2003) emphasize it has been argued by some researchers that
this latter issue, stating the need for further destination planners and policymakers will
research to integrate the objective and only succeed in the ‘‘competitive game’’ in
subjective attributes of competitiveness by the long run if it can raise the standard of
integrating the hard and soft factors into a living (welfare) for its own residents along
single index. with its tourism development.
This review article served the purpose of
providing updated knowledge on theories,
CONCLUDING REMARKS concepts, ideas, and empirical studies on
competitiveness in the context of tourism
In a multi-faceted industry like tourism destinations and the hotel industry and
and hospitality, the identifiable attributes should assist, to a large extent, researchers
that contribute to a destination’s competi- in advancing from existing knowledge bases.
tiveness will vary in their importance across Further research work on critical issues in
locations, depending on the product mix and the competitive process, competitive forces
target market segments. In the past, some at the industry, firm-specific level, as well as
researches have attempted to assign ‘‘appro- the destination level, have also been sug-
priate’’ weightings to different attributes of gested. Through such work and the devel-
competitiveness based on differences in opment of appropriate methodologies for
location and the size of economies to assessment and key indicators for future
evaluate the level of competitiveness between benchmarking, the understanding of the
destinations. Moreover, this study also ever-changing parameters, policies, and insti-
points out the significance of economies of tutional elements in the business environ-
scale and other benefits that arise from ment that impact future competitiveness in
clustering of tourist attractions and provi- the hospitality and tourism sector can be
sion of appropriate tourist-related infra- further enhanced.
structure and equipment. Importantly, the
state of competitiveness of a destination can
effectively be raised by the quality of services
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