The Competitiveness of Iceland as a Destination for Tourists
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1 The European Institute of Retailing and Services Studies Recent Advances in Retailing and Service Science July 9-12, 2012 The Competitiveness of Iceland as a Destination for Tourists Authors: Fridrik Eysteinsson, University of Iceland (fridrike@hi.is) School of Business, Gimli v/saemundargata, 101 Reykjavik, Iceland Thorhallur Gudlaugsson, University of Iceland (th@hi.is) School of Business, Gimli v/saemundargata, 101 Reykjavik, Iceland
2 ABSTRACT The tourism industry is the third biggest export revenue generator in Iceland. Only marine products and aluminum & ferrosilicon have a bigger share. The collapse of the three major Icelandic banks in September 2008 and the depression that followed have made export industries more important than ever. They have to provide the additional jobs and income needed to get the economy going again. Increasing their competitiveness is of paramount interest. There are three main streams of destination competitiveness research. The first stream has the aim of diagnosing the competitive positions of specific destinations. The second has focused on particular aspects of destination competitiveness. And the third stream has sought to develop general models and theories of destination competitiveness that are not specific to particular destinations or attributes. The authors research aims to answer the research questions: 1. Are the importance of determinant attributes and the performance of Iceland as a tourist destination different during the high tourist season and the low tourist season, in the eyes of foreign tourists? 2. How competitive is Iceland as a tourist destination in the eyes of foreign tourists? The methodology is quantitative. The population of interest is foreign tourists coming to Iceland. Surveys were, on the one hand, conducted in the summer of 2010, and on the other, during winter They show that the competitiveness of Iceland as a tourist destination during the high tourist season and the low tourist season is surprisingly similar. The results also show what are the strengths and weaknesses of Iceland as a tourist destination. The results can help policymakers and managers in the tourist industry position and promote Iceland as a tourist destination and decide on the best route(s) to improve its competitiveness. 1
3 INTRODUCTION According to the latest figures the share of tourism in Iceland s GDP was 4.6% in 2008 and its share of total export revenue 14.2% in 2009 (Ferðamálastofa, 2012). This makes the tourism industry the third biggest export revenue generator in the country. Only marine products and aluminium & ferrosilicon had a bigger share. The collapse of the three major Icelandic banks in September 2008 and the depression that followed have made export industries more important than ever. They have to provide the additional jobs and income needed to get the economy going again. Increasing their competitiveness is of paramount interest. There are three main streams of destination competitiveness research (Crouch, 2011). The first stream has the aim of diagnosing the competitive positions of specific destinations. The second has focussed on particular aspects of destination competitiveness. And the third stream has sought to develop general models and theories of destination competitiveness that are not specific to particular destinations or attributes. This paper is concerned with the first research stream because the research is intended to answer research questions that have to do with the rating of a particular destination. The methodology is quantitative. The population of interest was foreign tourists. Surveys were, on the one hand, conducted in the summer of 2010 (high tourist season), and on the other, during winter (low tourist season). According to Ferðamálastofa (2012) the number of tourists is equally split between the high season and the low season. What is different from earlier research on destination competitiveness is first of all that the questionnaire used only contains the ten attributes which have been shown to exert the greatest influence on the decision to visit a destination. Secondly tourists, not experts, were asked to rate the competitiveness of the destination during both the high season and the low season. The author s research aims to answer the research questions: 1. Are the importance of determinant attributes and the performance of Iceland as a tourist destination different during the high tourist season and the low tourist season, in the eyes of foreign tourists? 2. How competitive is Iceland as a tourist destination in the eyes of foreign tourists? Knowing the answers to these questions is important since one aim of destination competitiveness research is to find out which of its attributes need improvement. 2
4 1. DESTINATION COMPETITIVENESS Tourism contributes to a nation s income and employment and can therefore be a major sector of the economy and economically very import for the nation. To succeed, however, tourist destinations must ensure that their overall attractiveness to visitors must equal or surpass that of competing destinations. Factor conditions (e.g. physical, historical, cultural and recreational) are important determinants of destination attractiveness as the tourist is required to travel to a destination to receive the destination experience. The theory of comparative advantage (the ability of a nation to produce a particular good or service at a lower opportunity cost than another nation) (Ricardo, 1817) could therefore be expected to help explain the competitiveness of tourist destinations. Porter s (1990) theory of competitive advantage should also be expected to be of help in explaining destination competitiveness since it is concerned with a destination s ability to use its resources effectively. Crouch and Ritchie (1999) began to study destination competitiveness in Crouch and Ritchie s (1999) model was adopted for the purpose of this study as it is the most cited model of this type (Crouch, 2011). Their model is based on a destination s resource endowments as well as its capacity to deploy resources. Previous empirical studies that have applied this general model have found strong support for it (Enright and Newton, 2004, 2005). Dwyer and Kim (2003) and Dwyer, Mellor, Livaic, Edwards and Kim (2004) also contributed to the development of a general model of destination competitiveness as did Heath (2002. The forth contribution has been the Travel & Tourism Competitiveness Index. Earlier research, using the general models of destination competitiveness as frameworks, has used expert judgements (e.g. managers and/or academics) (See for example, Enright and Newton, 2004; Enright and Newton, 2005; Gomeselj and Mihalic, 2008; Crouch, 2011). Some authors (Evans and Chon, 1989; Faulkner, Opperman and Fredline, 1999) have argued that stakeholders views constitute accurate measures of attractions. The models involve both cause (attributes that can increase competiveness) and effect (attributes that can be used to measure competitiveness). Therefore the rational was that only experts had the required knowledge and/or experience to judge how important the various 3
5 attributes are to the competitiveness of destinations or how the destinations (or competing destinations) should be rated on those attributes. The general models of destination competitiveness that have been developed indicate that there is an extensive list of competitiveness attributes. They are, however, unlikely all to be of equal importance in determining how competitive destinations are. Crouch (2011) has identified the attributes that exert the strongest influence on tourist destinations. These ten determinant attributes are: physiography and climate, culture and history, tourism superstructure, mix of activities, awareness/image, special events, entertainment, infrastructure, accessibility and positioning/branding. Only one of these attributes can only be judged by experts. Tourists do not know how a destination intends to position itself or how it goes about its branding. What they can observe is the effects of those efforts i.e. awareness and image which are among the determinant attributes. The positioning/branding attribute is redundant since its effects are measured. This simple observation makes it possible to do a research comparing the views of experts and tourists. See table 1 for other minor changes. Table 1: Destination Competitiveness Attributes Determinant attributes Physiography and climate* Culture and history** Tourism superstructure Mix of activities Awareness/Image*** Special events Entertainment Infrastructure Accessibility Positioning/Branding Attributes used in the current research Nature Culture Tourism superstructure Mix of activities Awareness Special events Entertainment Infrastructure Accessibility Image *Physiography includes nature and nature includes climate **A double barrelled question. Culture is more important for Iceland as a tourist destination. History is therefore omitted. ***A double barrelled question. Split into two. Source: Crouch, G. I. (2011). Destination competitiveness: An analysis of determinant attributes, Journal of Travel Research, 50(1): The above observation makes it possible for the authors to answer the research questions set forth earlier. 4
6 2. METHODOLOGY The methodology is quantitative. Two surveys, using the same questionnaire, were conducted. In the following, populations of interest, the questionnaire and the procedure will be discussed. The population of interest is foreign tourists coming to Iceland on holiday for the first time from four major market areas (North-America, U.K., The Nordic countries and Middle and South Europe) during on the one hand the high tourist season (July-August) (n=200) and the other the low tourist season (September-May) (n=362). The questionnaire was split into four parts. In the first part the participants were asked to rank order the tourist destinations, besides Iceland, which they had considered visiting before deciding to visit Iceland (this was an open question). In the second part they were asked to rate the importance of the ten determinant attributes for the countries they had considered visiting on a 5 point Likert scale (1=very unimportant; 5=very important). The attributes were either described or explained in detail. In the third part the participants rated the competitiveness of Iceland as a tourist destination on the same ten attributes on a 5 point Likert scale (1=much worse; 5=much better). Lastly participants were asked their gender, age, nationality and their number one motivation for their holiday in Iceland. The questionnaire was in English. The participants during the high season were a good representation of the population, tourist coming to Iceland during summer 2010, in terms of gender, age and nationality. The same can be said of the participants during the low season (Ferðamálastofa, 2012). The surveys were conducted in August 2010 and March Data was gathered on the airport shuttle service from Keflavik airport to Reykjavik. The participants filled out the questionnaires while they were on board the busses. Data analysis was done in SPSS. 5
7 3. RESULTS The participants during the high season most often placed USA (8%), Norway (8%) and Sweden (6%) at the top of the list of competitors to Iceland as a tourist destination. The participants during the low season also put USA (12%) and Norway (10%) most often at the top of the list. They, however, put Italy most often in third place. The participants during both the high and low tourist seasons were asked to rate the importance of the ten determinant attributes for the countries they had considered visiting on a 5 point Likert scale (1=very unimportant; 5=very important). Table 2 shows the results for both the high season (summer) and the low season (winter). It also shows the differences between the averages. A t-test was performed. It revealed that there were only three statistically significant differences. Tourists during the summer rate nature as more important (M=4,54; SE=0,05) than tourists during the winter (M=4,36, SE=0,05) (t (559) = - 2,58, p <0,05). They also rate infrastructure as more important (M=3,28, SE=0,07) than tourists during the winter (M=3,08, SE=0,05) (t (559) =-2,33, p < 0,05). Finally, tourists during the winter rate tourism infrastructure as more important (M=3,36, SE=0,05) than tourists during the summer (M=3,09, SE=0,07) (t (559) =-3.2, p < 0,0001). Table 2: Importance of Attributes Average Attributes Winter Summer Difference P-value Nature 4,36 4,54-0,19 0,01* Mix of activities 3,47 3,40 0,07 0,433 Culture 3,74 3,76-0,01 0,884 Tourism superstructure 3,36 3,09 0,28 0,001* Accessibility 3,47 3,48-0,01 0,953 Special events 2,41 2,38 0,02 0,789 Awareness 3,30 3,28 0,02 0,821 Image 3,49 3,49 0,01 0,933 Infrastructure 3,08 3,28-0,20 0,02* Entertainment 2,79 2,66 0,12 0,193 Average of averages 3,35 3,33 0,02 *Statistically different The participants during both the high and low tourist seasons were also asked to rate the competitiveness of Iceland as a tourist destination on the same ten attributes on a 5 point Likert scale (1=much worse; 5=much better). Table 3 shows the results for both the high 6
8 season (summer) and the low season (winter). It also shows the differences between the averages. A t-test was performed. None of the differences between the two groups were statistically significant. Table 3: The Performance of Iceland on the Attributes Average Attributes Winter Summer Difference P-value Nature 4,04 4,09-0,05 0,521 Mix of activities 3,38 3,29 0,08 0,259 Culture 3,33 3,23 0,10 0,15 Tourism superstructure 3,09 3,14-0,05 0,474 Accessibility 3,11 3,11 0,00 0,965 Special events 2,78 2,77 0,01 0,847 Awareness 3,16 3,13 0,03 0,705 Image 3,54 3,49 0,06 0,476 Infrastructure 3,07 3,09-0,02 0,786 Entertainment 2,94 2,90 0,04 0,542 Average of averages 3,24 3,22 0,02 The importance and performance scores for each group of tourists produce a set of coordinates for each attribute that can be displayed in an importance- performance grid (see figure 1) where the dividing lines are the average of the importance numbers for the attributes (x=3,22) and performance numbers for the same attributes (y=3,33). Attributes ending up in the upper left right quadrant are strengths and attributes ending up in the upper left quadrant are weaknesses. Figure 1 shows the importance-performance grid for the high tourist season and table 4 the attributes coordinates (x=performance, y=importance). As can be seen nature, mix of activities, culture and image can be considered strengths during the high tourist season. The only weakness is accessibility. 7
9 Figure 1: Importance-Performance Grid for Iceland during the High Tourist Season Table 4: Attribute Coordinates during the High Tourist Season Coordinates Number Attributes X Y 1 Nature 4,09 4,54 2 Mix of actitities 3,29 3,40 3 Culture 3,23 3,76 Tourism superstructure 3,14 3, Accessibility 3,11 3,48 6 Special events 2,77 2,38 7 Awareness 3,13 3,28 8 Image 3,49 3,49 9 Infrastructure 3,09 3,28 10 Entertainment 2,90 2,66 Average of averages 3,22 3,33 Figure 2 shows the importance-performance grid for the low tourist season and table 5 the attributes coordinates. The strengths are the same as before, nature, mix of activities, culture and image. Accessibility is a weakness just like during the high tourist season. Tourism infrastructure is an additional weakness. 8
10 Figure 2: Importance-Performance Grid for Iceland during the Low Tourist Season Table 5: Attribute Coordinates during the Low Tourist Season Coordinates Number Attributes X Y 1 Nature 4,04 4,35 2 Mix of activities 3,38 3,47 3 Culture 3,33 3,74 4 Tourism superstructure 3,09 3,36 5 Accessibility 3,11 3,47 6 Special events 2,78 2,41 7 Awareness 3,16 3,30 8 Image 3,54 3,49 9 Infrastructure 3,07 3,08 10 Entertainment 2,94 2,79 Average of averages 3,24 3,35 9
11 4.0 DISCUSSION The research showed that tourists during the summer rate the importance of nature and the infrastructure higher than tourists during the winter. This is to be expected since tourists during the summer probable spend more time outdoors and do more travelling to various sights. This is also in line with the fact that tourists during the winter rate the importance of tourism infrastructure as more important. More of them are doing city tours and hotels and restaurants play a bigger part in their visits. When it comes to rating the performance of Iceland as a tourist destination the two groups are in unison. The first research question are the importance of the determinant attributes and the performance of Iceland as a tourist destination different during the high tourist season and the low tourist season, in the eyes of foreign tourists has therefore been answered. The competitiveness of Iceland as a tourist destination in the eyes of tourists is surprisingly similar during the high and low tourist seasons. The strengths are the same, nature, mix of activities, culture and image. The one weakness during both seasons is accessibility. Tourism superstructure is an additional weakness during the low tourist season. The first research question, how competitive is Iceland as a tourist destination in the eyes of foreign tourists has therefore been answered. It is the same except for tourism superstructure during the low tourist season. This research is an addition to the first research stream mentioned in the section on destination competitiveness, namely diagnosing the competitive positions of specific destinations. This is however the first time that destination competitiveness has been researched from the point of view of the tourists themselves not to mention during both the high and low tourist seasons. The results of this research can help policymakers and managers in the tourism industry position and promote Iceland as a tourist destination and decide on the best rout(s) to improve its competitiveness. Also knowing what are the differences between the competitive positions during the high and low seasons, the importance of determinant attributes and the performance of Iceland as a tourist destination, makes it easier to tailor marketing communication efforts to the different groups of prospective tourists. One limitation of this research is that tourists are asked upon their arrival in Iceland and therefore after they have made a decision as to which country to visit. In terms of future research it would therefore be interesting to do a study among tourist before they decide which competing destination to visit. 10
12 REFERENCES Crouch, G. I. (2011). Destination competitiveness: An analysis of determinant attributes, Journal of Travel Research, 50(1): Crouch, G. I. & Ritchie, J. R. B. (1999). Tourism, competitiveness, and societal prosperity, Journal of Business Research, 44: Dwyer, L. & Kim C. (2002). Destination competitiveness: Determinants and indicators. Current Issues in Tourism, 6(5): Dwyer, L., Mellor, R., Livaic, Z, Edwards, D. & Kim C. (2004). Attributes of destination competitiveness: A factor analysis. Tourism Analysis, 9(1-2): Enright, M. J. & Newton, J. (2004). Tourism destination competitiveness: A quantitative approach. Tourism Management, 25(6): Enright, M. J. & Newton, J. (2005). Determinants of tourism destination competitiveness in Asia Pacific: Comprehensiveness and universality. Journal of Travel Research, 43(4): Evans, M.R. & Chon, R.S. (1989). Formulating and evaluating tourism policy using importanceperformance analysis, Hospitality Education and Research Journal, 13(2): Faulkner, B., Oppermann, M. & Fredline, E. (1999). Destination competitiveness: An exploratory examination of South Australia s core attractions. Journal of Vacation Marketing, 5(2): Ferðamálastofa (2012). Online at files Ferdatjonusta_i_tolum_mars_2011. puff (accessed 4 March 2012). Gomezelj, D. O. & Mihalic, T. (2008). Destination Competitiveness-Applying different models, the case of Slovenia, Tourism Management, 29: Heath, E. (2002). Towards a model to enhance destination competitiveness: A Southern African perspective. Journal of Hospitality and Tourism Management, 10(2): Porter, M. E. (1990). The competitive advantage of Nations. The Free Press, New York, Ricardo, D. (1821). On the principles of political economy and taxation. London: John Murray (3 rd edition). 11
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