Università della Svizzera Italiana

Faculty of Economics

NATIONAL TOURISM POLICY

Analytical Framework for the Evaluation of

Efficiency and Effectiveness: the Case of Italy

Master’s dissertation

Authors: Giacomo Grossi, Alberto Scappini

Supervisor: Prof. Peter Keller

Second Reader: Prof. Mara Manente

Academic year: 2010

Submission Date:

2

“You can’t connect the dots looking forward; you

can only connect them looking backwards. So

you have to trust that the dots will somehow

connect in your future.”

(Steve Jobs)

3

TABLE OF CONTENTS

TABLE OF CONTENTS .......................................................................................................................... 3

LIST OF FIGURES ................................................................................................................................. 4

INTRODUCTION .................................................................................................................................. 5

1. DEFINITION OF PUBLIC POLICY ....................................................................................................... 7

2. THE RATIONAL FOR STATE INTERVENTION IN TOURISM: WELFARE ECONOMICS ........................... 9

2.1. WELFARE ECONOMICS AND PUBLIC CHOICE ............................................................................................. 9 2.1.1. Market failures and distribution ......................................................................................... 10 2.1.2. Market inadequacies in the field of tourism ....................................................................... 12

2.2. TRANSACTION COSTS: INNOVATION AND COOPERATION ........................................................................... 15 2.3. COMPETITIVENESS AND PROMOTION OF THE PLACE ................................................................................. 18

3. THE NATURE OF TOURISM POLICY ............................................................................................... 26

3.1. IS THERE A TOURISM INDUSTRY? ......................................................................................................... 26 3.2. CONSIDERATIONS FOR A TOURISM POLICY ............................................................................................. 27 3.3. IMPLICATIONS FOR A TOURISM POLICY .................................................................................................. 29

3.3.1. The nature of tourism policy by Ritchie and Crouch and OECD ........................................... 30

4. SCOPES OF THE TOURISM POLICY ................................................................................................ 34

5. GOVERNANCE AND ORGANIZATIONAL STRUCTURE OF TURISM POLICY....................................... 43

6. THE DECENTRALIZATION OF TOURISM POLICY ............................................................................. 52

7. THE MONITORING AND EVALUATION OF TOURISM POLICY ......................................................... 58

8. TOURISM POLICY REVIEW: PROPOSAL OF AN ANALYTICAL FRAMEWORK .................................... 64

8.1 OVERALL CONTEXT ............................................................................................................................ 66 8.1.1 Global Context ..................................................................................................................... 66 8.1.2 National economic context .................................................................................................. 69 8.1.3 Institutional and structural context ..................................................................................... 75 8.1.4 Vision and Basic principles of tourism policy ........................................................................ 78

8.2 PLANNING PHASE: SWOT ANALYSIS, GOALS, STRATEGIES ......................................................................... 80 8.3 IMPLEMENTATION ............................................................................................................................. 82 8.4 EVALUATION .................................................................................................................................... 85

9. APPLICATION OF THE FRAMEWORK: THE CASE OF ITALY ............................................................. 92

9.1 OVERALL CONTEXT ............................................................................................................................ 92 9.1.1 Global Context ...................................................................................................................... 92 9.1.2 National Economic context .................................................................................................. 94 9.1.2 Institutional and structural context ................................................................................... 118 9.1.4. Vision and Basic Principles of tourism policy ..................................................................... 124

9.2 PLANNING PHASE............................................................................................................................ 125 9.2.1 Swot Analysis ..................................................................................................................... 125 9.2.2. Goals and Strategies ......................................................................................................... 130

9.3 IMPLEMENTATION PHASE .................................................................................................................. 134 9.4 EVALUATION .................................................................................................................................. 135

CONCLUSION ................................................................................................................................. 144

BIBLIOGRAPHY ............................................................................................................................... 146

4

LIST OF FIGURES

FIGURE 1: COMPETITION AND COOPERATION ADAPTED FROM P. KELLER ............................................................................. 16 FIGURE 2: MARKET INADEQUACIES RELATED TO PLACE PROMOTION, ADAPTED FROM P. KELLER (2000). .......................... 22 FIGURE 3: THREE LEVELS OF PRODUCTIVITY (SOURCE: P. KELLER) .............................................................................. 36 FIGURE 4: PORTER’S DIAMOND (SOURCE: PORTER 1990) ............................................................................................. 38 FIGURE 5: STATE FUNCTIONS IN TOURISM (SOURCE: P. KELLER) .................................................................................. 39 FIGURE 6: GOVERNANCE (SOURCE M. LOCKWOOD) ......................................................................................................... 44 FIGURE 7: TOURISM PLANNING (SOURCE: OECD) ............................................................................................................ 47 FIGURE 8: THE COMPETITIVE MICROENVIRONMENT ADAPTED FROM RITCHIE & CROUCH 2003. ........................................ 73 FIGURE 9: REAL GDP GROWTH RATE, PERCENTAGE CHANGE ON PREVIOUS YEAR (SOURCE: EUROSTAT)......................... 94 FIGURE 10: UNEMPLOYMENT RATE (SOURCE: EUROSTAT) ................................................................................................. 95 FIGURE 11: PRICE STABILITY (SOURCE: ISTAT) ....................................................................................................................... 96 FIGURE 12 PUBLIC DEBTS OF SOME EUROPEAN COUNTRIES AS PERCENTAGE OF GDP (SOURCE: EUROSTAT). ................ 96 FIGURE 13: PRESSURE OF TAXATION IN ITALY, FRANCE AND SPAIN (SOURCE: EUROPEAN COMMISSION) ........................... 97 FIGURE 14: REGULATORY FRAMEWORK, SCORES GIVEN BY THE WEF (FROM 0 TO 7). ......................................................... 98 FIGURE 15: PILLARS OF THE REGULATORY FRAMEWORK (SCORES), ADAPTED FROM WEF. ................................................. 99 FIGURE 16: BUSINESS ENVIRONMENT ADAPTED FROM THE WEF (SCORES) ........................................................................ 100 FIGURE 17: PILLARS OF THE BUSINESS ENVIRONMENT (SCORES), ADAPTED FROM WEF. .................................................. 101 FIGURE 18: HUMAN, CULTURAL AND NATURAL RESOURCES, ADAPTED FROM THE WEF (SCORES). ................................... 102 FIGURE 19: PILLARS OF THE HUMAN, CULTURAL AND NATURAL RESOURCES (SCORES), ADAPTED FROM WEF. .............. 103 FIGURE 20: ITALIAN REGULATORY FRAMEWORK, ADAPTED FROM WEF. ............................................................................ 103 FIGURE 21: ITALIAN BUSINESS ENVIRONMENT, ADAPTED FROM WEF. ............................................................................... 104 FIGURE 22: ITALIAN HUMAN, CULTURAL AND NATURAL RESOURCES, ADAPTED FORM WEF. ........................................... 104 FIGURE 23: NUMBER OF HOTELS AND OTHER TYPES OF ACCOMMODATION IN ITALY 2000 AND 2007 (SOURCE: ISTAT)

....................................................................................................................................................................................... 105 FIGURE 24: BEDS OF HOTELS AND OTHER TYPES OF ACCOMMODATION IN ITALY 2000 AND 2007 (SOURCE: ISTAT) .... 105 FIGURE 25: DISTRIBUTION OF HOTEL TYPOLOGY (SOURCE: ISTAT) ..................................................................................... 106 FIGURE 26: OCCUPANCY RATE OF HOTELS IN ITALY FROM 2000 TO 2007 (SOURCE: ISTAT) .......................................... 107 FIGURE 27: DOMESTIC AND INTERNATIONAL ARRIVALS (MILLIONS) IN ITALY FROM 2000 TO 2007 (SOURCE: ISTAT) ... 109 FIGURE 28: DOMESTIC AND INTERNATIONAL OVERNIGHT STAYS (MILLION) IN ITALY FROM 2000 TO 2007 (SOURCE:

ISTAT) .......................................................................................................................................................................... 109 FIGURE 29: DOMESTIC AND INTERNATIONAL LENGTH OF STAY (DAYS) IN ITALY FROM 2000 TO 2007 (SOURCE: ISTAT)

....................................................................................................................................................................................... 110 FIGURE 30: DISTRIBUTION OF INTERNATIONAL ARRIVALS BY COUNTRY OF ORIGIN IN 2007(SOURCE: BANCA D’ITALIA) .. 110 FIGURE 31: DISTRIBUTION OF EXPENDITURE OF INTERNATIONAL ARRIVALS BY COUNTRY OF ORIGIN IN 2007(SOURCE:

BANCA D’ITALIA) .......................................................................................................................................................... 111 FIGURE 32: PERCENTAGE INCREASE OF INTERNATIONAL VISITORS TO ITALY FORM OECD COUNTRIES AND RESTO OF THE

WORLD (BANCA D’ITALIA). ........................................................................................................................................... 111 FIGURE 33: PERCENTAGE OF DIRECT AND INDIRECT VALUE ADDED ACTIVATED BY TOURISM CONSUMPTION DIVIDED BY

SECTORS, 2007 (SOURCE: CISET AND IRPET). ........................................................................................................ 113 FIGURE 34: PERCENTAGE OF DIRECT AND INDIRECT EMPLOYMENT ACTIVATED BY TOURISM CONSUMPTION DIVIDED BY

SECTORS 2007 (SOURCE: CISET AND IRPET). .......................................................................................................... 114 FIGURE 35: TOURISM BALANCE OF PAYMENTS (CISET ELABORATIONS; SOURCE: “RELAZIONE GENERALE SULLA SITUAZIONE

ECONOMICA DEL PAESE 2007”). ................................................................................................................................ 115 FIGURE 36: TOURISM BALANCE AND MAIN ENTRIES OF THE COMMERCIAL BALANCE (CISET ELABORATIONS; SOURCE:

“RELAZIONE GENERALE SULLA SITUAZIONE ECONOMICA DEL PAESE 2007”). ......................................................... 115 FIGURE 37: TOTAL EXPENDITURE OF REGIONS FROM 2000 TO 2007 (SOURCE: “RAPPORTO SUL TURISTMO ITALIANO” XVI

EDIZIONE). ..................................................................................................................................................................... 117 FIGURE 38: TOURISM EXPENDITURE OF REGIONS FROM 2001 TO 2006 BY TYPE OF EXPENDITURE (SOURCE:

CONFTURISMO, “LA SPESA DELLE REGIONI PER IL TURISMO”) .............................................................................. 118 FIGURE 39: PERCENTILE RANGES LEGEND (SOURCE: WORLD BANK) .................................................................................... 122 FIGURE 40: GOVERNANCE INDICATORS OF FRANCE AND ITALY IN 2009 (SOURCE: WORLD BANK)................................... 123 FIGURE 41: GOVERNANCE INDICATORS OF SPAIN AND ITALY IN 2009 (SOURCE: WORLD BANK) ...................................... 123

5

INTRODUCTION

Tourism is a phenomenon that has grown constantly since the 50s. Economic crisis

or other global forces have negatively affected it just for small amounts of time but,

in general, trends have always been positive.

There is no discussion that there are more important and urgent issues and sectors

to be managed by the state; nevertheless, tourism is a more and more important

generator of wealth, thus income, employment, development and externalities, both

positive and negative. This has caused an interesting change in countries’ policy

definition in which, tourism policy, has gained more and more relevance. Moreover,

tourism is still important for the economy of the most developed countries. In OECD

countries, international tourism has grown faster than GDP in the last ten years and

it generates between 2% and 12% of GNP and between 3% and 11% of employment

(OECD 2010; Keller 2008). If on one side developed countries face an increase of

competition from developing countries, on the other side the better economic

conditions of the latter create the opportunity to attract new markets.

This argument should have definitely given an answer to the long debated question

“should there be a tourism policy?”

As affirmed by W. Revill Kerr, “there is a widespread failure to consider the fact that

a tourism policy may be subordinate to wider economic developments policies, or

entirely unnecessary” (W. Revill Kerr, 2003).

The objective of this research is to create a framework with which to analyze

national tourism policies. This framework has been created after a theoretical

analysis of all the implications of state involvement in the tourism sector and the

analysis of the problems and methods used for the evaluation of public policies.

Finally, the framework has been tested applying it to the Italian case.

The first chapter studies the reasons for state intervention in tourism and how it

should intervene. The second chapter gives a look on the nature of tourism policy,

6

defining the implications derived from its horizontal character. The third chapter

analyses what are the scopes of tourism policy and explains the levels of

intervention (micro and macro) of the state and its functions. The forth chapter

introduces the concept of governance, the principles of good governance and the

institutional structure theory. The fifth chapter explains benefits and costs of the

decentralization and the principle of subsidiarity. Chapter six defines the aspects of

monitoring and evaluation, discussing the difficulties in evaluating a tourism policy

and some possible solutions. Chapter seven deals with the creation of the analytical

framework, explaining each part in detail. In chapter eight the model is used to

analyze the Italian tourism policy, trying on one side to evaluate it and on the other

side to test the model in order to discover weaknesses and parts to be improved.

7

1. DEFINITION OF PUBLIC POLICY

Public policy can be defined as “a set of interrelated decisions taken by a political

actor or group of actors concerning the selection of goals and the means of achieving

them within a specified situation where those decisions should, in principle, be within

the power of those actors to achieve” (William Jenkins in Policy Analysis: a Political

and Organizational Perspective, 1978).

This definition can be considered extremely comprehensive of the concept of public

policy because it underlines not only its complexity (made up of many interrelated

decisions and actors), but also the relevance of effective governance.

Public policy, in practice, should be developed with the so-called Policy Cycle, five

defined phases or steps through which policy starts and ends.

The phases are:

1) agenda setting 2) policy formulation 3) adoption 4) implementation 5)

evaluation.

Each phase of the policy cycle corresponds to a phase of the so called application of

problem solving.

The definition of public policy, in democratic states, is a prerogative of the

parliament and, in general, of the State, recognized through the elections by the

people of a nation. Thus it is clear how the organization of a State defines what are

the functions and limits of every body or actor. As a matter of fact, a federal state

works differently from unitary states. However, it is reductive to consider policy as a

product made just by the State or public sector. Private sector has, in fact, profound

influence on policy definition. Due to the complexity of the network of actors

involved directly in policy making, the public policy theory speaks about “policy

subsystems” to define the actors themselves.

The variety of instruments that policy makers can use to implement a certain policy

goes from coercive instruments, such as state control and regulations, to voluntary

instruments such as the market, family and community, passing through mixed

instruments such as taxes, subsidies etc. (Howlett, Ramesh 1995).

8

A certain public policy, evolving through the different phases of the policy cycle, is

always influenced by many forces. These can be macro economic reasons,

interactions between institutions and economy, ideologies and also stakeholders,

which means all the actors involved and conditioned by that policy. These

characteristics make inevitably the fifth phase of policy cycle, evaluation, an

extremely challenging task.

Public policy theory presents many possible points of view and argumentations upon

this topic, however, the practical side or, in other words, the real implementation of

a policy evaluation (useful to underline weak points and possible changes) remains

still very vague. This point becomes much more relevant when the public policy to

be analyzed is tourism public policy. According to Edgell (1990) “the highest purpose

of tourism policy is to integrate the economic; political; cultural; intellectual; and

environmental benefits of tourism cohesively with people; destinations; and,

countries in order to improve the global quality of life and provide a foundation for

peace and prosperity: in essence, a statement of governments’ vision, goals and

objectives.”

If we consider tourism policy from this point of view, it is clear how complicated and

challenging can be a comprehensive evaluation of it. Moreover there is a common

perception and agreement among scientists that “tourism research is not as highly

valued as that of other disciplines” (Revil Kerr, 2003).

These characteristics can be considered the main reason for such a diversity and lack

of order in approaching tourism policy and its analysis and evaluation.

Bibliography

Edgell, D.L., (1990) International Tourism Policy, Van Nostrand Reinhold, New York.

Jenkins,W. (1978) Policy Analysis: a Political and Organizational Perspective, Martin Robertson,

London.

Kerr, R.W. (2003), From Tourism Public Policy, and a Strategic Management of Failure, Elsevier.

Ramesh, H. (1995) Studying public policy: Policy cycles and policy subsystems ,Oxford, (Italian edition).

9

2. THE RATIONAL FOR STATE INTERVENTION IN TOURISM: WELFARE ECONOMICS

2.1. Welfare economics and public choice

The welfare of a nation does not depend only on the resources it has but also on the

way it uses these resources. Welfare economics concerns the efficient allocation of

resources and the distribution of income, that is to say it deals with the economic

well being of a nation (Arrow 1951).

Welfare economics is based on two theorems. The first one argues that if the

economy is competitive it is Pareto efficient and the second states that a Pareto

efficient distribution of resources can be reached through a redistribution of wealth

followed by a competitive process. Concerning the first theorem, an economy is

competitive when it is exchange efficient, production efficient and product mix

efficient (Stiglitz 2000). However, in reality there are several restrictions on

instruments that prevent policies to be Pareto efficient, this is why for governments

benchmark is appropriate to take into consideration second best Pareto efficiency.

Neoclassical and Keynesian economists believe that governments can correct

market failures by intervening in the economy.

The theory of welfare economics, however, cannot explain exhaustively the

government intervention. In fact, even if the correction of market failures should be

the aim of political interventions, the public choice theory can explain why often the

“economic” optimal choice is not undertaken. This is due to the fact that

programmes reflect the interests of politicians, namely to increase citizens’

consensus, rather then reflecting the interests of the “common good”. Therefore,

policies reflect the preferences of voters, politicians and political institutions rather

than reflecting optimal solutions for the efficient allocation and redistribution of

resources. This is why the “Public Choice School” suggests that a market failure is

not necessarily the justification for state intervention due to the costs of

government failure. In conclusion, the planning and implementation of a policy is a

political decision and it is only in part defined by an economic reasoning. In fact,

10

other variables influence its definition, namely the institutional arrangements, the

influence of interest groups, the allocation of power, the values and the ideology

(Hall & Jenkins 1995; Hall 2008).

Therefore, an additional role of government is to reduce non-market failures

produced by its very intervention. The reasons for its failure are (Smeral 1998): the

presence of public monopolies (such as transportation), many interest groups that

affect the decision-making, principle agent problems and lack of performance-based

processes in public organizations. In order to reduce the negative effects of

necessary government intervention, it should speed up its bureaucratic systems,

deregulate (even if regulation has to be effective in case of state monopolies)

liberalize where it is possible, decrease the tax burden and relay on performance-

based public organizations.

A different point of view is expressed by some heterodox schools of economics (e.g.

the Austrian School), which excludes the existence of “market failures” and believes

the market is able to eliminate inefficiencies without government intervention. The

Austrian School suggests a strictly limited role of government in the economy with

an amount of interventions as small as possible, namely in the enforcement of law

and in the creation of a “safety net” for the most needy people (von Hayek).

2.1.1. Market failures and distribution

States intervene in the economy with two main objectives: allocation objective and

redistribution objective. The first one concerns the fact that the market is not always

efficient in economic terms, therefore the state can intervene in order to correct

these market failures (or market inadequacies) to better reallocate resources. The

causes of market failure are (Stiglitz 2000):

- Imperfect competition: when competition is not perfect, the market is not

Pareto efficient; the presence of monopoly, oligopoly or monopolistic

competition is a sign of market failure.

- Public goods: these are those goods that the private sector either

underproduces or it does not produce at all due to their intrinsic nature of

non-rivalry and non-excludability. Put another way, the enjoyment of an

11

extra unit of a public good bears near zero marginal costs and it is impossible

or very difficult to exclude other people from using it.

- Externalities: there are externalities when costs and benefits caused to third

parties are not compensated.

- Incomplete markets: it happens when the market does not provide a good or

a service in spite of the fact that the willingness to pay for such products is

higher than the cost of production. An example is innovation whose

production can be reduced due to transaction costs, enforcement problems

and asymmetries of information.

- Information failures: the lack of information about products distorts the

market since the buyers are not able to undertake the optimal choice

according to their utility.

- Unemployment: it can be considered the evidence of market failure since in a

perfect market the demand for labour have to match the supply of it.

The second objective (redistribution) relates to the absence of social commitment in

market rules. This means that wealth is not distributed according to the society’s

preferences, even if the market is economically efficient.

Of course, state intervention is justified, besides the abovementioned objectives,

when it has the possibility to improve the situation (availability of appropriate

instruments) and when the cost of intervention is lower than the benefits it creates.

All things considered, the approach chosen hereafter is mainly that of the

neoclassical school. The market presents situations of inefficiency, which will be

called “market inadequacies” instead of “market failures”. Government can

intervene in order to correct them, however, the risk of distorting the market is high.

In order to avoid the worsening of the situation instead of improving it, it is

important that states limit their intervention to the creation of those framework

conditions necessary to reduce inefficiencies and to foster competitiveness.

Governments have to avoid direct intervention, for example with subsidies, because

this instrument creates heavy market distortions and makes inefficient the

12

mechanism of the “spontaneous market order” (von Hayek). Besides limiting the

intervention to some limited areas and using the less distorting instruments,

governments should also diminish the risk of creating distortion by eliminating those

factors that are the cause of government failures. An efficient and simple

bureaucracy helps to reduce transaction costs of actions undertaken, performance

oriented public agencies can improve the public sector efficiency and limiting the

lobbyist power help to reduce distorting influences concerning the decision-making

process.

2.1.2. Market inadequacies in the field of tourism

In the field of tourism it is more appropriate to talk about market inadequacies

instead of market failures. In fact, the presence of “market failure” it is a strong

assumption since tourism would exist even without state intervention.

Cases of market inadequacies in tourism can be divided in those concerning

companion policies and those related to promotion policies. Companion policies are

territorial management, nature and landscape protection, promotion of agriculture,

incentivising of training and upgrading of infrastructures. Promotional policies

include research and development, creation of innovative processes, organization

and financing of destination marketing and tourism infrastructure. The following

market inadequacies have been identified in tourism.

Public goods

The main resources of tourism destinations are their attractions. They are the most

important destination goods at the base of the value of a destination. Their

importance and quality affect the possibility of SMEs to apply a value-based pricing

because they influence the willingness to pay of tourists (Keller 2005). Many natural

and cultural resources are by nature public goods, they increase the attractiveness of

a destination and no stakeholder can be excluded.

The image of a destination is a public good because it is clearly non-excludable and

non-rival in consumption. All stakeholders benefit from it and, in a fragmented

sector such as tourism, it creates the umbrella brand (based on attractions) that

13

allows SMEs to apply a value-based pricing (Keller 2004). Moreover, a good image

creates several positive externalities, that is to say the attraction of sophisticated

firms, which in turn attract more sophisticated visitors, which will ask for more and

more sophisticated services (Keller & Smeral 1997) in a sort of upgrading vicious

cycle that stimulates innovation.

The construction and maintenance of infrastructure is usually government’s

responsibility due to their nature of public goods. If we consider general

infrastructure such as roads, it becomes quite expensive to exclude people and, in

addition to this, if we exclude people from consumption (when the marginal cost for

its use is near zero) the result is underconsumption, that is to say market

inefficiency. Concerning tourism infrastructure, even if sometimes these goods are

inexpensively excludable (for example establishing a fee for a cultural centre or for

an event) their creation increases the attractiveness of a destination and no actor

can be excluded from it (free rider problem). The same argument is valid also for the

general infrastructure; therefore, we can state that the building and maintenance of

all kind of infrastructure in a destination increases the overall attractiveness and

usability of it and no stakeholder can be excluded from the related benefits. It must

be specified that the upgrading of infrastructure is of inter-sectoral concern, and

tourism can only affect decision taken in other economic policies related to

infrastructure. In fact, the quality of infrastructure influences the quality of the

business environment in which all kind of company operates.

Finally, also information and knowledge can be considered public goods, however

this argument is developed in the section concerning transaction costs of innovation

and cooperation.

Negative externalities

This is related to the problem of common goods where consumption exceeds

sustainable levels of utilization. The overuse of natural and cultural resources does

not respect both the ecological and social carrying capacities. In fact, the social costs

(for example congestion) and environmental costs (for example pollution) are not

charged on consumers, who incur only in market prices (Keller & Smeral 1997).

14

Pollution, resources depletion and social frictions are negative externalities to be

avoided for a sustainable prosperity of tourism. The role of state is to act as a

territorial manager in order to find the right equilibrium between “the need for

protection and the need for development” (Keller 2008).

Market powers

On one side the trend is to deregulate and liberalize the market in order to make it

more efficient. In spite of this, specific regulations to avoid strong market powers are

still needed. In the case of tourism, the big market powers are airlines and TOs

(oligopoly competition) and there is the need to avoid mergers that lead to quasi-

monopoly situations and the creation of cartels. However, sometimes, the public

intervention is not necessary. For example the evolution of Internet is decreasing the

power of intermediaries, or the very deregulation of aviation has decreased the

power of flagship companies thanks to the development of low cost carriers. All

things considered, a simple and effective antitrust body of laws is still important.

Transaction costs

The presence of important transaction costs avoids the right (socially efficient)

production and consumption of certain goods or services. The presence of

transaction costs in innovation and cooperation are dealt in the next section.

Market distortions

The main market distortions identified in tourism are (Keller & Smeral1997):

- Building of risk capital: European tourism SMEs are characterized by

insufficient equity capital and a liability structure with high and fluctuating

interest rates (Keller & Smeral 1997). Bieger explains that the loans granted

to SMEs are scarce and with a high interest rate due to several peculiarities of

such a fragmented sector. First, the smaller the firm, the higher the

transaction costs, situation that decreases the appeal of investment in SMEs,

due to the low return it can generate. This situation is worsened by the

15

problem of asymmetric information between banks and firms. Second,

several risk factors raises the interest rates of loans. These risks are that firms

are tied to a specific location, their profitability depends also on other

stakeholders of the destination, the risk of the property market and risks

concerning the low rate of innovation and slow processes of decision making

at the destination level. Finally, there is the problem of moral hazard due to

the uncertainty of profits (put another way the high standard deviation of

return on equity) due to the low growth rate and volatility of demand

influenced by exchange rates, seasonality, trends and exogenous factors such

as weather conditions, natural disasters, terroristic attacks etc. (Bieger 2000).

In conclusion, state intervention in facilitating access to capital is justified by

the market distortion due to an incomplete market for the granting of loans

to the tourism sector. It can be considered an incomplete market since the

private market fails to provide loans even if the cost is less than the potential

willingness to pay, due to the presence of transaction costs and asymmetries

of information (Stiglitz 2000).

- Labour market inflexibilities and rigidities: social constraints that do not

match completely market demand. Government should encourage more

flexible working and opening times.

- Difficulty of market exit: it keeps firms in the market even if their low

efficiency would suggest leaving the market. Government should encourage

conversion into other kind of activities or to allow tax benefits in order to

lower the burden of sunk costs that lower the entry and exit rates of a

market.

2.2. Transaction costs: innovation and cooperation

Developed countries faces several problems in tourism growth due to several

changes. Today, the tourism sector is not only competing with destinations in

developed countries (which benefit from the so-called “advantage of

16

backwardness”1), but also have to compete with other more productive sectors in

the market of factors of production. In fact, due to its labour intensive nature and

the increasing productivity of other economic sectors, tourist companies face more

and more difficulties in attracting capital and skilled labour forces. In addition to this,

the lifecycle of the product offered by those countries is in its maturity phase and

the risk is to face decline. Innovation can be the solution to these problems and be

the “motor of growth” (Keller 2006).

Innovation is not a matter of planning but it is created in early stages through

entrepreneurship and in the maturity phase through constant R&D, becoming a

matter of routine. Innovations thrive in free and open markets, characterized by

competition. This is also supported by the fact that sectors with low barriers witness

more innovations, since, often, those that bring new ideas are the new entrants.

Figure 1: Competition and Cooperation adapted from P. Keller

However, in tourism there are several factors that inhibit the innovation process.

First of all the high level of imitation generates a free rider problem, making R&D

less attractive as investment. Second, the fragmentation of the sector and the small

size of firms mean scarce financial resources of single companies and then the lack

of in-house facilities of R&D. In addition to this, innovation in destinations usually

involves cooperation since the improvement of processes and the upgrading of a

1 The advantages of developing countries are mainly pristine natural resources, the

abundant and inexpensive labour and favourable exchange rates (Keller 2008).

17

product involve several actors. Therefore, cooperation can be the solution necessary

to overcome the abovementioned problems.

All things considered, the ingredients whose combination has the ability to boost

innovation are competition and cooperation. Competition is the main driver of

innovation while cooperation is necessary to overcome the problems caused by the

fragmented nature of the sector (Figure 1).

The intervention of the state is quite controversial. However, there are several

arguments in support of the role of the state as catalyst of innovation. First of all,

cooperation includes high transaction costs that often the private sector cannot

afford. The more specific the nature of cooperation, the higher the transaction costs

are (Keller 2006); an example of specific cooperation is the creation of a destination

based reservation system. Second, innovation has the nature of public good since its

imitation and dissemination create benefits for the whole society and not only for

few stakeholders. The positive externalities for the society are the increase of

prosperity (more income) that generates additional employment.

Even if we agree on the need for public intervention, it is naïve to believe that the

state itself can either create innovation or innovation processes. In fact, the state

can only incentive the private sector; its role is to create the best framework

conditions where innovation can proliferate with the help of a favourable incentive

system. First, it has to guarantee a free and deregulated market in order to foster

competition since it is the major driver of innovation. Second, it has to reduce the

transaction costs of cooperation providing the right incentives. Finally, it has to

concentrate its efforts in creating the best conditions for the development of the so-

called “innovation creation mechanisms”. In order to support these mechanisms,

governments should focus on education, research and information.

The role of state in education is not universally agreed, however there are several

arguments that justify public support due to the positive externalities it creates

(Stiglitz 2000) to the whole society (even if it cannot be considered a pure public

good). In the case of tourism, there is a need for appropriately trained specialists and

managers, but also workers that learn on the job. Probably, one of the main

18

problems in this area, is the scarce interaction between the academic world and the

private sector; the private sector should not waste the amount of information

created by the investment (often public investment) in universities and research

centres. A closer collaboration between researchers and the private sector have

several advantages, such as a better focused research on practical problems and the

reduction of wasted money due to the current mismatch between demand and

supply of research and the mismatch between demand and supply of specific

professionals’ profiles.

Also information is fundamental for the innovation creation mechanisms. The

production and dissemination of knowledge has positive effects since they increase

the productivity of firms. It is of public competence to support a good statistical

monitoring system and to disseminate information in a clear way. The diffusion of

information depends also on the quality of a country’s information technological

infrastructure, which is a public infrastructure.

2.3. Competitiveness and promotion of the place

Competitiveness of destinations

For Ritchie and Crouch the competitiveness of a destination can be defined as the

“ability to increase tourism expenditure, to increasingly attract visitors while

providing them with satisfying, memorable experiences, and to do so in a profitable

way, while enhancing the well being of destination residents and preserving the

natural capital of the destination for the future” (Ritchie & Crouch 2003). In this

definition we can identify two aspects; the first one relates to the economic

competitiveness that can be summarized by the ability to sell and the ability to earn

(value added of tourism); the second one relates to the need for sustainability,

which includes economic sustainability (satisfying the visitor, not deceiving her/him),

social sustainability (respecting and involving residents) and environmental

sustainability (protecting the main assets of a destination).

While the value added of tourism is the result of competitiveness (a sort of measure

of performance), the determinants of competitiveness are those explained by Porter

19

(Porter 1990). Several authors applied these determinants to tourism (Keller &

Smeral 1997; Ritchie & Crouch 2003; Vanhove 2005), therefore the competitiveness

of a national tourism sector are:

- Factor conditions;

- Demand conditions;

- Related and supporting industries;

- Firm strategy, structure and rivalry;

- Government;

- Chance.

The World Economic Forum establishes from 2007 a yearly report on tourism

competitiveness2 that is based on the idea of competitiveness of Porter. The report

provides a ranking of more than a hundred world countries according to the

competitiveness of their tourism sectors.

Ritchie and Crouch provide a different approach to competitiveness. Their idea is not

to analyse competitiveness for the benchmarking of destinations because the

competitiveness of a destination depends on whether it has the resources and is

able to employ them in a way to reach the goals established by the destination itself.

This is way they provide a comprehensive model that enable destination makers to

analyse the different aspects that determinates the competitiveness of their

destination. According to them, competitiveness is determined by several groups of

factors: macro environment, micro environment (competitive environment),

comparative advantages (endowment of resources), competitive advantages

(deployment of resources), core resources and attractors, supporting factors and

resources (e.g. infrastructure), destination management, destination policy, planning

and development, and qualifying and amplifying factors (e.g. location and security).

In addition to this, they also state how it is important to think about competitiveness

in a sustainable way.

2 “The Travel & Tourism Competitiveness Report 2009”

20

Finally, also OECD (OECD 2010) defines competitiveness considering on one side

productivity and profitability and on the other side the development in a sustainable

context (social, cultural and environmental).

A different view of the competitiveness of a sector is considering different levels.

First of all, competitiveness is determined by productivity at the firm level, and thus

their ability to sell and to earn. Since developing countries have productivity

advantages related to the abundance of low-cost resources, industrialized nations

have to have to rely on entrepreneurship and innovation, operating in the most

efficient and effective way. However, the productivity of firms is not sufficient, and

competitiveness is also affected by the micro and macro economic conditions in

which they operate. They need qualified staff, low tax burden, good infrastructures,

appropriate information and knowledge dissemination, easy administrative

procedures etc. This requires the intervention of the state in the following areas

(Keller 2008):

- Liberalization and deregulation of the market;

- Macro-economic stability and improvement of the business environment;

- Co-production of destination goods;

- Innovation oriented incentives of growth.

The policy options that can support a competitive and sustainable development of

tourism are (OECD 2010):

- Boosting innovation and the knowledge economy;

- Helping SMEs to access the global market;

- Addressing environmental and climate change issues;

- Accessibility of destinations;

- Focusing on marketing and branding;

- Promoting economic development;

- Valorising culture and local attributes;

- Increasing safety and security;

- Improving measurement and evaluation.

21

Economic importance of tourism

The presence of market inadequacies is one of the conditions that justify tourism

policy. However, the need for such a policy depends also on the specialization of a

certain country in tourism, put another way, its economic importance. At first sight

one can state that tourism is less and less important in advanced countries due to its

lower productivity compared to other sectors, which are gaining greater share of

national GDP. However, several studies shows that tourism is still important for the

economic growth of OECD countries (Lee & Chang 2008) and it has several benefits

at the macro-economic level such as its contribution to the balance of payment

(representing a high share of service exports), generation of employment (in OECD

countries is between 3% and 11%) and contribution to GNP (in OECD countries is

between 2% and 12%) (Keller 2008). In addition to this, tourism has another function

at the macro-economic level, it helps to redistribute wealth from richer regions

(generators of demand) and poorer ones. Usually remote areas have witnessed the

disappearance of other traditional industries and tourism is an alternative resource

to be exploited.

Promotion of the place

The role of state as promoter of tourism is perhaps the most controversial among

the main areas of intervention of the state. In fact, while the role of legislator,

territorial manager and co-producer are generally accepted, its role of promoter

creates a high risk of market distortions. However, on the other side, those countries

that do not promote tourism faces the problem of the “prisoner dilemma”; not

promoting tourism means loosing market share. This is way “authorities should limit

themselves to measures of allocation and distribution, in the spirit of ‘welfare

economics’, i.e. measures designed to eliminate clear cases of market failure or

which help to eliminate unwanted disparities” (Keller 2005).

Promotion in its extended meaning can be understood as “stimulation” as it is called

in the book of Hall (Hall 2008). Stimulation by the state is achieved by providing

financial incentives, sponsoring research for general benefits and subsidizing

marketing and promotion. Special attention is given by the author to marketing and

22

promotion, saying that the scope of this function is not only to attract tourists but

also to attract investors. Finally, he explains that public intervention is justified by

the nature of public good and the market failure created. In fact, if marketing and

promotion are left to the private sector the risk is of undersupply, due to the free-

rider problem (Hall 2008).

The promotion of the place should enhance the competitive position in the tourism

market with particular attention to three aspects (Keller 2000): foster innovation for

the renovation of the market structure (section 2.2), promote cooperation to

improve the accessibility to the market of SMEs (section 2.2) and the promotion of

the image which, is a public good (Figure 2).

Figure 2: Market inadequacies related to place promotion, adapted from P. Keller (2000).

Since the communication and marketing of a destination image has not been dealt

with yet, box 1 explains more in details the issues related to this topic.

Box 1

Communication and Marketing

Globalization has skyrocketed competition among destinations worldwide and the

governments has now a major role to play in developed economies (Keller 2008a).

Competition is first of all among destinations and it has a monopolistic character

since each destination is unique and has to sustain differentiation strategies in order

to succeed in this environment. Destinations that fail in promoting themselves in the

23

international market not only will not upgrade their situation, but also they will lose

market share, due to the sharp competition of locations in developing countries and

the fact that other destinations are involved in self promotion (prisoner’s dilemma).

As abovementioned, developed countries have to direct efforts on quality-based

value, but it is also necessary to communicate this value, because the lack of

information causes market distortions and visitors might choose “less valuable”

destinations.

Conclusion

In conclusion, state intervention in the tourism sector should be limited to some key

areas and using instruments and actions with the minimum risk of market

distortions. The state should act as:

- legislator: deregulation and liberalization create the best conditions in which

competition can boost innovation and prosperity.

- Territorial manager: it has to ensure a sustainable equilibrium between

development and preservation, and to correct the negative externalities

produced by overconsumption.

- Co-producer: the state has the responsibility of “producing” those

destination goods with the nature of public goods.

- Promoter: it has to promote innovation and cooperation to overcome the

transaction costs that affect the sector and to promote the image of the

destination since it is a public good.

Bibliography

Arrow, K. J. (1951, 2nd ed., 1963), Social Choice and Individual Values, Yale University Press, New

Haven.

Bieger, T. (2000),’Destination management e finanziamenti’, in Pechlaner, H. and Weiermair, K. (2000)

eds Destination Management: fondamenti di marketing e gestione delle destinazioni turistiche,

24

Touring Editore, Milano.

Hall, C.M. (2008), Tourism Planning: Policies, Processes and Relationships, 2nd edition, Prentice Hall,

Harlow.

Hall, C.M., Jenkins, J.M. (1995), Tourism and Public Policy, Routlege, London.

Keller, P. (2000),’Le organizzazioni turistiche nazionali a una svolta’, in Pechlaner, H. and Weiermair, K.

(2000) eds Destination Management: fondamenti di marketing e gestione delle destinazioni turistiche,

Touring Editore, Milano.

Keller, P. (2000a), ‘Globalization and Tourism’, in: W.C. Gartner and D.W. Lime, Trends in Outdoor

Recreation, Leisure and Tourism, CABI Publishing, New York, pp. 287-297.

Keller, P. (2004), ‘The future of small and medium size enterprises in tourism’, in: AIEST, Vol. 46 St.

Gallen, pp. 7-21

Keller, P. (2005), ‘A new look on global tourism’, in: Trigo, L.E. et al., Turismo Brasileiro, Analises

regionais e globais do Turismo brasilerio, Sao Paolo 205.

Keller, P. (2006), ‘Toward an innovation oriented tourism policy’, in: OECD, Innovation and Growth in

Tourism, Paris.

Keller, P. (2008), ‘New paradigm for international tourism policy’, in: OECD, Tourism in OECD

Countries 2008, Paris, and pp. 11-26.

Keller, P. (2008a), ‘Structural Changes and Challenges for Tourism Management’, in: Change

Management in Tourism, ESV, Berlin pp. 31-39.

Keller, P., Smeral, E. (1997), Increased International Competition: New Challenges for Tourism Policies

in European Countries, Background Paper, World Tourism Organisation (WTO), Madrid.

Koch, K. (2000), The shareholder concept in the field of tourism, 2nd

Summit of Tourism, Chamonix-

Mont-Blanc.

Lee, C.C., Chang, C.P. (2008), ‘Tourism development and economic growth: At closer look at panels’,

Tourism Management, Vol.29.

OECD (2010), Tourism Trends and Policies, OECD, Paris.

Porter, M.E. (1990), The Competitive Advantage of Nations, The Free Press, New York.

Ritchie, J. R. B. and Crouch, G. I. (2003), The Competitive Destination: A Sustainable Tourism

Perspective, CABI, Oxon.

25

Smeral, E. (1998), ‘The impact of globalization on small and medium enterprises: new challenges and

for tourism policies in European countries’, Tourism Management, Vol. 19, No. 4, pp. 371-380.

Solow, R. (1970), Growth Theory: an Exposition, New York: Oxford University Press.

Stiglitz, J.E. (2000), Economics of the Public Sector – 3rd ed., Norton, New York.

Vanhove, N. (2005), The Economics of Tourism Destinations, Elsevier.

World Economic Forum (2009), The Travel & Tourism Competitiveness Report 2009, WEF, Geveva.

26

3. THE NATURE OF TOURISM POLICY

3.1. Is there a tourism industry?

Tourism policy is “a set of regulations, rules, guidelines, directives and

development/promotion objectives and strategies that provide a framework within

which the collective and individual decisions directly affecting tourism development

and the daily activities within a destination are taken” (Ritchie & Crouch 2003).

Before analysing the nature of tourism policy it is useful to spend few words on

whether a “tourism industry” exists or not. Talking about “tourism industry” is very

common in articles, speeches and publications, but there is a continuous debate on

whether tourism is an industry, a sector or neither. Those against the argument say

that an industry is composed by firms that produce the same group of products or at

least that use the same raw materials. Those in favour claim that tourist firms all

supply tourist needs, then they have a common function (Vanhove 2005).

As a matter of fact, tourist firms are defined by demand and this is the only way to

group them together in an industry or a sector. However, only few of them have the

exclusive function to supply tourist needs (e.g. hotels), while for many of them

tourism needs are only part of their supply (Costa & Manente 2000). For example

theatres, restaurants and wineries satisfy both the needs of tourists and inhabitants.

This is why, in order to establish the value of tourism in the economy, many states

adopt the TSA (Tourism Satellite Account), which establishes the kind of firms to

include in the account and their relative weight in tourism. This is due to the fact

that the “tourist product” is finally assembled by the tourist itself, a tour operator

together with the tourist or in few cases completely by a tour operator. . Therefore,

what is more likely to be considered a tourism industry is the group of tour

operators, even if, in many cases, the household production is an essential part of

the final product. From this point of view, it is clear that it would be more correct to

talk about “tourism industries”3 than a tourism industry.

3 For more information see Leiper 2007.

27

This argument is strengthened by the fact that the elements the tourist buys can be

considered in economic terms “complementarities”4, that is to say when products

complement one another in order to satisfy customer needs (Porter 1998). Tanking

into consideration another article of Porter (Porter 2008), he suggests that in order

to understand weather two firms are part of the same industry we should analyse

the five forces that define industry structure (threat of entry, power of suppliers,

power of buyers, threat of substitutes and rivalry among existing competitors)

because “If industry structure for two products is the same or very similar *…+, then

the products are best treaded as being part of the same industry. If industry structure

differs markedly, however, the two products may be best understood as separate

industries” (Porter 2008). It is clear that analysing the different actors of tourism we

can identify different structures of competition.

3.2. Considerations for a tourism policy

Established that tourism is not a proper industry, a tourism policy should also take

into consideration the peculiar characteristics of tourism compared to other

economic sectors:

- Heterogeneous structure of tourism related industries (Keller 2008): first of

all, firms can be divided in two broad groups. On one side there are

international travel companies whose products are standardized and where

competition is mainly on price. These companies are big corporations that

respond to the needs for packages. On the other side there are destination-

based SMEs with differentiated products among which competition is mainly

on quality because they are more oriented towards the personalization of

experiences. An additional division concerns those firms that aim at “all

inclusive” supply of services and those that aim at self-service supply

(national flagship airlines and low cost airlines for example). Policy makers

4 Also Porter refers to tourist products in a cluster (destination) as

complementarities in his article “Clusters and the new economics of competition”

(Porter 1998).

28

have to take into consideration the different needs of such different kind of

companies.

- Tourism is defined by demand: the actors involved in a tourism policy are

many and different.

- Competition is first of all among destinations (Keller 2009): destinations are

territory bound competitive units that represent the first choice of

customers. Attractions are the most important elements of destination value

and they are the bases of an umbrella brand. The effects of a good or bad

policy aimed at attractions have great influence on the profitability of the

destination’s firms.

- Tourism is an experience “industry”: policy makers have to consider the

experience nature of the tourism product, whose quality depends on many

actors. The fragmentation of the industry makes it more complicated to

deliver a good experience and then the success of a destination’s stakeholder

depend on the behaviour of their neighbours.

- Tourism is a service activity: the product is intangible, then the customers

cannot try it before consumption, which means that the role of marketing

and communication is even more important than for other services. Its

consumption is inseparable from production and it is the tourist that moves

to obtain the service. Here again a public policy support in marketing is

important since even if production is strongly tied to locations, competition is

global. This stresses the need for particular attention in differentiated

policies for both demand (international character) and supply (local

character). Finally, the tourism product is perishable, therefore the capacity

not sold in a particular day cannot be recovered (Vanhove 2005) and this is

worsened by the fixed capacity of firms (e.g. an hotel cannot easily change its

capacity of number of rooms to respond to market needs).

- Seasonality: this phenomenon is mainly due to the climate and in part to

social constraints (social behaviour and quite inflexible holidays periods of

schools and firms). Seasonality causes several problems (Vanhove 2005):

o Fluctuating occupancy rate;

o Under-occupation of tourism infrastructure during off periods;

29

o Seasonal unemployment that creates both welfare and in-house

training problems for firms;

o Congestion in peak periods that creates on one side negative

externalities (physical, social and environmental carrying capacities)

and on the other side visitors’ dissatisfaction.

o Lack of clear understanding of tourism and its economic impacts: this

is due to the fact that only recently tourism has been considered a

strategic economic sector for nations (OECD 2010) and that it is

difficult to calculate the economic impact of such a fragmented sector

that includes different industries to different extents.

The abovementioned elements have important implications for policy

makers, above all those concerning carrying capacity for the organization of

supply, and seasonal unemployment and peak periods of occupancy rate for

specific actions of promotion.

3.3. Implications for a tourism policy

All things considered, it can be affirmed that a tourism policy should aim to promote

destinations rather than promoting tourism related industries since competition is

first of all among destinations. Destinations are sometimes wrongly considered

similar to corporations. However, in Europe, they are characterized by several

independent actors that offer multiple products and services. In this case the

destination is a market place, and not a corporation. Those destinations that can be

considered corporations are those fully consolidated present in North America. In

the European case, a good vertical cooperation, with the support of a central

organization, is necessary to promote and protect the brand of a destination.

Moreover, public intervention for specific industries has more chances to create

market distortions, while a policy concerning destinations maintains unchanged the

market equilibrium within the competitive unit, correcting the market failures

discussed in chapter 2. The same argument is stressed by Porter in its theory that

supports cluster policies as better alternative instead of industrial policies (Porter

2007).

30

Therefore, in principle destinations have to be promoted instead of specific firms or

industries. However, leading or engine industries have important externalities (such

as hotels or cable cars) so subsidies can make sense particularly if they are limited in

time and in space.

Tourism policy is more than an industrial policy since it affects several actors with

different characteristics and different needs and it has to consider the fact that

production is strictly related to locations and that competition is global. This implies

different approaches for supply side actions and for demand side actions.

Tourism policy is by the nature of its object a horizontal or transversal policy.

Considering the fact that tourism includes so many actors and sectors, tourism policy

concerns on one side different ministerial responsibilities and on the other side

different levels of governments (since different levels of government have different

tasks). This requires a “whole government approach” (OECD 2010), in which

different departments and government levels collaborate in order to undertake

coherent actions. Moreover, different representatives of industry associations have

to be involved in the decision process since it is difficult to fully understand the

dynamics and problems of such a heterogeneous sector. Acting in this way means

not only a higher level of effectiveness, but also obtaining the consensus and

support of many stakeholders. For the sake of quality of collaboration and the

coherence of actions a clear division of tasks and responsibilities is fundamental. In

addition to this, it is important to avoid time consuming and expensive bureaucratic

procedures. A manner to avoid these problems is to collaborate on a project basis

above all for the collaboration among different levels of government and among

public and private sector.

3.3.1. The nature of tourism policy by Ritchie & Crouch and OECD

The authors identify several features that characterize a tourism policy (Ritchie &

Crouch 2003):

- Focus on societal views of tourism development at national and subnational

levels;

31

- Long-term perspective;

- Best allocation of scarce resources to match the needs and opportunities of a

changing environment;

- The process of formulation must consider not only traditional methods of

research but also “tacit knowledge and personal experience”;

- Avoid stereotype-based views encouraging “organized creativity”;

- “It must be constructed to permit and facilitate a continuing dynamic social

process requiring inputs from multiple sources”;

- Avoidance of boundaries between different disciplines and sectors of

tourism;

- Integration in the “total economic system of a nation or region” relating with

the other subsystems present in it;

OECD suggests several characteristics that a tourism policy should have in order to

be effective (OECD 2010):

- Long term orientation;

- Whole government approach;

- Industry engagement;

- Collaboration and coherence between levels of government;

- Outcomes, evaluation and performance measurement.

Having considered all the features a tourism policy should have, it can be added that

its efficiency is also determined by the process of its formulation. It can be divided in

four phases: definitional phase, analytical phase, operational phase and

implementation phase (Ritchie & Crouch 2003). The authors explains these phases as

follows:

- Definitional phase: the establishment of the structure of the tourism system

and its stakeholders is important for the coherence and comprehensiveness

of the policy; it is also important to identify the destination philosophy, which

means the role of tourism in a region or nation; once defined the philosophy,

policy makers have to “craft” the vision as a leading instrument for the

32

establishment of clear and measurable objectives (and of course the related

constraints).

- Analytical phase: it concerns the gathering and assessment of information in

order to evaluate possible alternatives that can be undertaken to achieve the

vision; the internal (supply) analysis includes the review of existing

programmes, a resource audit (distribution and quality of services) and an

impact analysis (economic, environmental and social); the external (demand)

analysis includes a study at the macro-level (nature and structure of existing

demand using national statistics), a study at the micro-level (motivations and

behaviour of different segments), a competitive analysis (benchmark of

destinations with similar markets) and an analysis of possible supporting

policies (alliances and cooperations in order to create synergies).

- Operational phase: it identifies strategic conclusions from the great amount

of information collected in the former phase, it determines “the implications

of the conclusions for the supply and demand development strategies” and

specifies related recommendations.

- Implementation phase: essential elements are the clear division of

responsibilities among organizations, the estimate of financial requirements

and the definition of timing.

Conclusion

The nature of a tourism policy can be explained on one side by the characteristics of

a public policy and on the other side by the peculiarities of tourism. Therefore it is

defined not only according to a pure economic evaluation of costs and benefits but

also according to the institutional arrangements between the different levels of

government and different bodies, the influence that the several tourist associations

and interests groups have on government decision, the values (and the importance

of tourism in the political agenda) and the power allocation. On the other side, a

tourism policy has to take into consideration the horizontal character of the sector.

Thus it has to engage the different private actors, be coordinated with other sectoral

33

policies, be coherent among the different levels of government and has to improve

the measurement and evaluation tools due to the difficulty of analysing such a

complex sector.

Bibliography

Costa, P., Manente, M. (2000), Economia del turismo: Modelli di analisi e misura delle dimensioni

economiche del turismo, Touring Editore, Milano.

Hall, C.M., Jenkins, J.M. (1995), Tourism and Public Policy, Routlege, London.

Keller, P. (2009), Destination marketing, 3rd

Advance in Tourism Marketing Conference, Bournemouth,

September 2009.

Leiper, N. (2007), ‘Why ‘the tourism industry’ is misleading as a generic expression: The case for the

plural variation, ‘Tourism industries’’, Tourism Management, 29.

OECD (2010), Tourism Trends and Policies, OECD, Paris.

Porter, M.E. (1998) ‘Clusters and the new economics of competition’, Harvard Business Review, 76(6):

77-90.

Porter, M.E. (2007), ‘Clusters and Economic Policy: Aligning Public Policy with the New Economics of

Competition’, White Paper, HBS. Institute for Strategy and Competitiveness.

Porter, M.E. (2008), The Five Competitive Forces that Shape Competition, in Porter, M.E. (2008), On

competition, Harvard Business Press, Boston.

Ritchie, J. R. B. and Crouch, G. I. (2003), The Competitive Destination: A Sustainable Tourism

Perspective, CABI, Oxon.

Vanhove, N. (2005), The Economics of Tourism Destinations, Elsevier.

34

4. SCOPES OF THE TOURISM POLICY

Before approaching the broad topic regarding the several objectives of a public

policy in the tourism sector, it is fundamental to analyze and absorb two main

concepts: Competitiveness and Productivity.

As affirmed by Porter in the Global Competitiveness Report 2007-2008, “the most

intuitive definition of competitiveness is a country’s share of world markets for its

products.” This makes this concept the basis for the prosperity of a country and its

citizens.

This definition can be easily applied to every economic sector of the whole economy

of a country, speaking consequently of competitiveness of a certain sector in

comparison to other sectors.

The most suitable measure to reflect the level of competitiveness of an economic

sector or country is the value added per employee (Porter 1991). This introduces us

to the second fundamental element that is Productivity.

It measures the economic performance of resources employed (Keller, Bieger 2007).

“Productivity depends both on the value of a nation’s products and services,

measured by the prices they can command in open markets, and the efficiency with

which they can be produced (Porter, Global Competitiveness Report 2007-2008)”.

Again the measure to evaluate the level of productivity is the value added per

employee. This gives evidence of the strict relation between Competitiveness and

Productivity.

Considering that an increase in productivity or in production factors can lead to a

change in growth, measured in an increase in GDP (Keller, Bieger 2007), we can

finally approach the first big scope of the tourism policy when it is considered as a

relevant part of the economic policy: Growth.

The framework conditions of growth, in the tourism sector, have had important

35

changes since the globalization process have given the developing countries the

possibility to enter the market as tourist destinations. These countries enjoy the

advantage of low costs for production factors, in particular for labour. Being tourism

a typical labour-intensive sector, this condition determines a strong competitive

advantage. This is the reason why “developing countries are in the process of closing

the gap with industrialized countries” (Keller 2008). However they have to be

completely developed if they want to close the gap.

Moreover, tourism in developed countries suffers of a lack of productivity due to

high labour cost (in an labour intensive sector) and smallness of SMEs that form the

great part of tourism supply.

This low productivity, in comparison with more productive economic sectors, leads

to the so called cost disease: SMEs, in order to balance this productivity gap, are

obliged to rise prices. This is the most relevant difference with developing countries,

where tourism is much more productive than other sectors. This mechanism,

however, is not without consequences. As a matter of fact, SMEs become weaker in

two directions:

- ability to sell: too high prices make the product hard to sell;

- ability to earn: difficulty to procure production factors because of low

competitiveness level.

Taken cognizance of this process, developed countries have to focus their policies

and strategies on what is called productivity-based growth (Keller, Bieger 2007). This

concept is based on the assumption that developed countries cannot decrease

labour costs, being more efficient, so the only effective way to increase productivity

is to increase quality, pushing tourism “from a purely service sector to an experience

industry” (Keller 2005).

As shown in the figure below, productivity depends on three levels: firm level,

industrial or business environment level (micro-economic level, Porter 2007) and

macro level or framework conditions.

All these levels are within that context formed by the endowments that are basically

36

natural resources and location (Porter 2007).

Figure 3: Three levels of productivity (Source: P. Keller)

Each level is independent and connected to the other levels at the same time. As a

matter of fact, one firm can be competitive by its own nature thanks to successful

strategies and management, but its competitiveness, and thus productivity, depends

also on the micro-economic environment conditions. The same reasoning can be

applied to the business environment (micro-economic) in relation with the macro

level.

The “smallest” level, that is the firm one, has to be let free from State intervention.

Firms have to play freely their roles in the market, stimulating that fundamental

process and vital energy, for every economic sector, which is competition.

On the contrary, we can observe the State’s roles, and so the tourism policy related

objectives, in the other two levels: Business environment and Framework

Conditions.

According to Porter, we can subdivide the macro level (framework conditions) into

four contexts: economic, legal, political and social.

- These areas contain several issues/objectives which are not directly related to

tourism, but that are fundamental (necessary condition but not sufficient) for

the prosperity of the sector. Among these we can find (Ritchie and Crouch,

The competitive Destination, 2003):

37

- taxation;

- interest rate policy;

- air agreements;

- environmental policies;

- immigration policy;

- communication policy;

- minimum wage policy;

- welfare policy;

- education policy;

- cultural policy;

- foreign investments policy;

- security policy;

- funding policy;

- infrastructure policy;

- legal system;

It has to be specified that these policies do not follow any particular field. These are

the basis for every sector and some of these are not even under the full power of

just one State. As a matter of fact, some framework conditions depend on global

trends (e.g. interest rates).

However, the great majority of them can be managed directly by the State, and it is

extremely important to recognize that they can have significant effect on tourism

sector. So, if a State has a clear vision in tourism, it must consider and evaluate these

elements and their impacts on it, making an effort in order to provide friendly

tourism framework conditions. Thus, this can be considered the second main goal

of tourism public policy.

“Microeconomic conditions translate the opportunities created by the

macroeconomic, political, legal and social context and the endowments of natural

resources and geographic location into prosperity.”

These are the words with which Porter (2007) introduces the second and last level to

analyze: the business environment.

It is composed by all the tourism related industries but it depends on many State

38

activities in order to be productive. This is the area where market failures take place,

so it is also the place where we can observe the majority of State interventions.

“The business environment can be understood in terms of four interrelated areas:

the quality of factor (input) conditions, the context for firm strategy and rivalry, the

quality of local demand conditions and the presence of the related and supporting

industries. Because of their graphical representation, these four areas have

collectively become referred to as the diamond.” (Figure 4)

(Porter, Global Competitiveness Report 2007-2008)

Figure 4: Porter’s diamond (Source: Porter 1990)

The four areas that are going to be explained below (see figure above) can be

shaped by the Nation (State) in order to achieve success in a certain industry. If

business environment has the optimal characteristics, firms can compete creating

value.

- Factor (input) conditions: “the nation’s position in factors of production”

(Porter 1990). So this area represents the characteristics (efficiency, quality,

specialization) of inputs available to firms in each sector. Natural resources,

human resources, capital resources, physical resources, administrative and

information infrastructures, technological infrastructures are part of this

area.

- Context for firm strategy and rivalry: local context and rules that encourage

39

investments and productivity. This context must be characterized by “open

and vigorous competition especially among locally based rivals” (Porter

1990).

- Demand conditions: “the nature of home demand for the industry’s product

and service” (Porter 1990). Level of expectation, sophistication, market

segments characteristics are part of this area.

- Related and supporting industries: presence and characteristics of suppliers

and related industries of the analyzed industry/sector (tourism). Presence of

clusters.

It has been affirmed above that the State intervenes in the economic sectors both at

the Macro level and Micro level. The figure below shows what are the functions with

which the State intervenes: Co-producer, Legislator, Territorial manager, Promoter.

Figure 5: State functions in tourism (Source: P. Keller)

The four functions embody also the objectives of the public policy related to the

business environment.

As a matter of fact, the State acts as a Co-Producer in the sense that “it makes

available the necessary destination goods” (Keller 2005).

Tourism, as an economic sector, is based on public goods such as cultural attractions,

infrastructures (transportation, energy, water, technology), natural attractive

40

resources (landscape), education and training. Since it is basic economic assumption

that public goods causes market failures, it is evident that the State has to intervene.

So the main goal for the state as co-producer is to produce, provide, maintain and

protect the public goods that are fundamental for tourism prosperity. Finally, the

State, in order to avoid the problem of free-riding, is the main actor for destination

promotion. This function is mainly related to the business environment’s area of

factor (input) conditions.

The second function of public policy in the business environment is the Legislative

one. The goal, in this case, is to guarantee liberalization and deregulation to the

tourism sector. It enables tourism related industries to establish free competition

and cooperation. Thus this function is mainly related to the business environment’s

areas of context for firm strategy and rivalry and related and supporting industries.

The third function assigns to the State the role of Territorial Manager. The key role

here is played by carrying capacity. As a matter of fact, the State has the

responsibility and thus the objective to find the optimum between positive and

negative externalities, the balance between too much growth and too little (Keller

2005). This function is mainly related to the business environment’s areas of factor

(input) conditions and demand conditions. It is important to remember that this

function occurs in different forms/ways, in several types of government

organizations and at different scales (national, regional and local) (Hall 2008).

The fourth and last function is the one as Promoter. Here promoter is not just

referred to the marketing activity but it is viewed in a wider sense as an encouraging

source in order to stimulate competitiveness, innovation and thus quality.

The state, in this case, has the goals of rising competitiveness of business

environment, maximizing positive externalities, supporting innovation creation

mechanism. There are many available instruments used to achieve these objectives.

Competitiveness, for example, can be increased through incentives to investments

(e.g. 3.5% VAT in Switzerland for hotel sector; convenient interest rates). Moreover,

rising competitiveness, and stimulating cooperation at the same time, public policy

41

can act as catalyst for creation of that “tension between the two poles (competition-

cooperation) that sparks innovation” (Keller 2005). Innovation is also extremely

connected and dependent from education system and vocational training produced

also by the State through the function of co-producer.

Finally, assuming that tourism and its related industries produce high levels of

externalities (positive and negative), the scope of public policy is to correct them,

maximizing positive ones (e.g. employment).

Besides these four functions, it is extremely important to remember that the State

develops and represents also other functions such as Coordination (among different

levels of government, among different bodies and between public and private

sectors), Social responsibility (to guarantee some opportunities also to weak

minorities such as unemployed, handicapped etc.) and finally Public Interest

Protector (e.g. defence of local minorities) (Hall 2008).

These three functions are not directly related to tourism but they can influence

tourism policies so it is important to remind them in order to have a complete

image.

Conclusion

It is fundamental, in order to have a clearer idea of what are the scopes of the public

policy in the tourism sector, to sum up all the important points analyzed in the

chapter.

The first main scope of every type of economic policy is Growth. This concept is

strictly related to competitiveness and productivity and includes also creation of

attractive and well paid jobs for citizens. Thus it has been explained why growth in

tourism sector of developed countries means productivity-based growth.

Then we moved to analyze the institutional environment that impacts and

determines productivity. It is composed of three levels. The “smallest” one has to be

free from State intervention. At this level the private sector is the main actor and

decision maker. On the contrary, State can intervene in the other two levels: Macro

and Micro (business environment). At the Macro level the scope is to provide

42

friendly tourism framework conditions, however, public policy here is not directly

focused on tourism sector. Moreover, it has to be specified that public policy and

tourism sector are not able to influence some framework conditions such as

exchange rates and inflation.

As a matter of fact, Tourism sector is represented in the business environment level

(micro level). It is divided into four areas according to Porter theory.

The State acts as co-producer, legislator, territorial manager and promoter.

The scope of the State as co-producer is to produce, provide, maintain and protect

the public goods, fundamental for tourism sector prosperity.

The scope as Legislator is to guarantee liberalization and deregulation.

The objective as territorial manager is to find the optimum between positive and

negative externalities, thus the balance between too much growth and too little.

Finally the scopes as promoter are to increase competitiveness of business

environment, maximize positive externalities, support innovation creation

mechanism.

The State carries out also important functions such as coordinator, social

responsible and public interest protector.

Bibliography

Keller, P., Smeral, E. (1997), Increased International Competition: New Challenges for Tourism Policies in European Countries, Background Paper, World Tourism Organisation (WTO), Madrid.

Keller, P. (2008), ‘New paradigm for international tourism policy’, in: OECD, Tourism in OECD

Countries 2008, Paris.

Keller, P, Bieger, T.,(2007), ‘Productivity and Tourism’, in: Keller, P., Bieger, T. (Ed.), Productivity and

Tourism, Berlin.

Keller, P. (2005), ‘A new look on global tourism,’ in: Trigo, L.E. et al., Turismo Brasileiro, Analises

regionais e globais do Turismo brasilerio, Sao Paolo 2005

Porter,M.,Ketels,C.,Delgado,M, (2007), ‘The Microeconomic Foundaions of Prosperity: Findings from

the Business Competitiveness Index’, in The Global Competitiveness Report 2007-2008, Word

Economic Forum.

Ritchie, J.R. B., Crouch, G.I., (2003), The Competitive Destination A sustainable tourism perspective,

CABI, Oxon

43

5. GOVERNANCE AND ORGANIZATIONAL STRUCTURE OF TURISM POLICY

There is a long lasting debate about the concept of Governance. There is no real

agreement upon the interpretation and use of this term. Moreover, concerning

tourism sector, it becomes more and more confused.

Thus, it is fundamental to try to clarify and put order among some concepts in this

sphere. Governance is a term that can be considered strictly related to other terms

such as Policy and Planning.

Comparing definitions of many authors in this topic (Chadwick, Dror, Dye, Hall,

Kooiman, Lanoo, Morales-Moreno, Stoker, Rhodes), Policy can be understood as a

continuous cycle of activities, developed by governmental institutions, starting with

certain needs that are transformed in goals, developed through strategies and

evaluated according to certain indicators. At the same time, Planning, is nothing else

but the first phase of a policy, induced by a received need.

It has to be kept in mind that policy is typically a public activity. However, it does not

mean that policy is ONLY a public activity. As a matter of fact many diverse actors,

with diverse natures (public, private, mixed) and interests, work and influence policy

process. Therefore, given all the above mentioned concepts, it can be introduced the

definition of Governance:

“Governance refers to self-organizing, inter-organizing networks characterized by

interdependence, resource exchange, rules of the game and significant autonomy

from the State” (Rhodes 1997). So Governance, in general, is about the capacity and

way of managing all the relations, flows, interests, thus diversity, that coexist within

the complex picture of policy.

Another differentiation that has to be made is the one between Governance and

governmental Institutions.

Very often, these two concepts are misunderstood or used as synonymous. In

reality, taking into consideration the many definitions presented by academics,

Governance has to be considered as the “action, manner or system of governing *…+”

(Stoker 1995) or the “whole system of rights, processes and controls*…+” (Lanoo

44

1995). On the contrary, Institutions are the bodies or systems of actors that are in

charge of governing. Thus, it can be affirmed that governance is the process

developed by governmental institution in order to reach the goals of the process

itself. However, the fact that governance is an intangible element makes it difficult

to analyze and evaluate.

That is why, very often, the structure and system of institutions is considered as a

“window” to have a look on and evaluate Governance. This is the origin of confusion

and misunderstanding upon the two concepts. So when, for example, academics

speak about levels of Governance, they often speak about the institutions that carry

out Governance at that level. It would be more correct to speak about the process of

Governance characterizing a certain territorial level (national, regional etc.) and the

governmental institutions that develop it at the same level.

However, it emerges that, concerning public institutions, the structures, so the

organization charts, are not always significant of the process of Governance. Many

governmental institutions, in fact, have structures that can be evaluated as rationale

or “well done”, but the process of Governance can be problematic.

The first thing to know in order to understand Governance is that effective

Governance depends mainly on what M.Lockwood (2009) defines as Governance

quality (Ethics, Rationality and Good Governance Principles). At the same time,

effective Governance is a necessary condition for effective Management (Hockings

et al. 2006).

Figure 6: Governance (Source M. Lockwood)

So, before approaching the broad topic of organizational structures of tourism

policy, it is important to define properly the elements of Governance quality:

45

Ethics “underpin what is necessary and acceptable with respect to core values rights

and responsibilities” (Lochwood M. 2009)

Rationality “directs governance design by giving normative weight to processes that

provide logical connection between means and ends, identify forms of knowledge

and how they should be applied and establish conditions for quality communication”

(Lochwood M. 2009).

These two elements serve as foundation to identify good governance principles.

These principles are listed below (Lochwood M. 2009):

Legitimacy: acceptance and justification of shared rules by a community. It deals

with validity of an organization’s authority, consistency of authority’s decisions, etc.

Transparency: visibility of decision-making process, clarity of reasons behind a

decision, availability of information, etc.

Accountability: allocation and acceptance of responsibility for decisions and actions,

extents to which governing bodies are answerable to their constituency and to

higher-level authorities, etc.

Inclusiveness: refers to the opportunities for all stakeholders to participate in and

influence decision-making processes and actions.

Fairness: respect and attention given to stakeholders, respect among different level

authorities, absence of personal bias, recognition of human rights, etc.

Connectivity: coordination among different levels and actors.

Resilience: it refers to the amount of change and disturbance a system can absorb

before it has to be reconstituted completely. It deals, for example, with the balance

between flexibility and other needs such as security.

Given all the above-mentioned concepts, let’s introduce the second concept of this

chapter: theory on organizational structures or institutions.

It has to be kept in mind that tourism is relatively new as a strategic economic sector

for nations, thus “yet many countries find it difficult to focus on tourism sector”

(OECD 2010). Moreover tourism can be defined as a cross-sector sector or

transversal sector. In terms of governance structure it means that tourism “cuts

across many ministerial portfolios, making it difficult to identify one ministerial area

of responsibility. *…+ This is the reason why just few countries have a dedicated

46

Ministry of Tourism” (OECD 2010).

Another fundamental concept to understand, is the fragmented nature of tourism in

terms of related industries. This implies a big variety of interests (recognizable in

several stakeholders) and points of view that Governance has to take into

consideration, in order to be effective and to maintain consensus.

Planning the suitable form of institutional structure (organizational structure) is one

of the key points for a definitional phase of tourism policy.

There is common agreement on the fact that tourism policy has to be carried out by

different levels of governmental institutions, considering the different issues that are

involved in the policy process. That is why the first classification to be made is

among types and levels of tourism destination according to the political jurisdiction

(Ritchie & Crouch 2003):

- Nation or Country;

- Region or Province within a country (the name of lower territorial levels,

compared to the higher level “Nation”, depends on the organization of the

Nation itself. It can be region, province but also canton or state within a

federal state);

- Municipality.

On a general basis, National governments has to take the lead in the industry’s

strategic planning, developing long-term strategies, defining a clear vision and

coordinating different “levels of governance” (vertical coordination) and different

“areas (departments) of governance” (horizontal coordination) (OECD 2010).

However, the lower the territorial level, the more detailed and particular are the

objectives and tasks. As a matter of fact, tourism supply is decentralized being

“based on interactions between service providers and visitors, which invariably

occurs at the place of consumption” (Keller 2008). On the contrary, tourism demand

is “genuinely global” and thus promotion (Keller 2008). Generally, national tourism

organizations are mainly focused on demand side policies (promotion, analysis of

market trends etc.) while lower levels of governmental institutions (sub-national) are

47

more in charge of supply side policies (visitor management, public-private

partnerships...).

So results and performances of tourism policy depend on supply side strategies,

demand side strategies and, as mentioned above, on organizational structure. These

three elements ca be considered as a consequence of a certain tourism philosophy,

tourism vision and tourism objectives (mission) and constraints of a certain country

(Figure below).

Figure 7: Tourism planning (Source: OECD)

As Nordin and Swensson assert in “The Significance of Governance in Innovative

Tourism Destinations” (2005), “governance is not a single model, but takes different

forms in different contexts *...+ In today’s society old forms of governance generally

based on command and control forms of imperative order appear to be increasingly

ineffective, as there has been a decline in hierarchical or top-down methods for

determining goals and means. The policy process required in today’s society needs to

rely more on consensus building and inclusiveness. Relations among actors are a key

concern.”

As it has been affirmed above, Governance is a process that is developed and carried

out by different institutions. This is a very broad field, where boundaries between

public and private sector can become very thin. As a matter of fact, the institutions

48

in charge of destination governance can be pure State institutions but also private or

mixed institutions (depending on the territorial level). As Stoker affirms, governance

is “action, manner or system of governing in which the boundary between

organizations and public and private sectors has become permeable” (Stoker 1998).

In particular, concerning lower territorial levels (regions, municipalities), destination

promotion is often entrusted to organizations (DMOs) that can take several forms

(public, private, mixed). They exist since governmental bodies recognize them and

outsource to them some functions, so they are not pure governmental bodies.

However, DMOs are key actors and they are part of the complex and wide concept

of Governance. Moreover, since Governance is not only related to “pure politics”,

several forms of institutions have to be considered in order to fully understand the

process.

Given the above elements we can classify the institutions that are involved in the

process of Governance (considered in its broader meaning, thus including

destination management), at different territorial levels. These include pure political

institutions (responsible for tourism policy) and other institutions, such as different

forms of DMOs (responsible for particular functions entrusted to them by politics

itself).

- National Level (country):

o Government tourism department

o Government tourism and

economic/development/recreation/parks/culture department

o National tourism commission

o National tourism authority

o Crown/government corporation

- Regional/Provincial level:

o Government tourism department

o joint public/private agency

- Urban level:

o City tourism department

o Convention and visitor bureau

o member based

49

o non-member based

o joint economic-development-promotion agency

(Ritchie & Crouch, 2003)

As a matter of fact, apart from the pure governmental authorities, such as the

government tourism department (at national and regional levels), which are

completely part of the public authority, we can observe several natures in the above

mentioned structures. According to the “Survey on destination governance” made by

UNWTO in 2010, a relevant percentage (almost 50%) are Non profit organizations

(non profit association of tourism business and non profit public-private

partnership). Moreover, a part from public governmental departments, it is possible

to observe public authorities outsourcing to private companies and different types of

partnerships of public authorities.

In any case, as declared in the same UNWTO report (2010), “it is generally agreed

that the involvement of private sector in destination management, particularly in

strategic planning and decision making (so mainly at lower territorial levels of

governance, see chapter 6), is fundamental requirement for good governance and

there are several forms through which private stakeholders may contribute to the

operational efficiency and performance of a DMO.”

Thus, it is fundamental to understand the importance of public private partnership in

tourism sector, as much as understanding the orientation of the board of a certain

form of governance. As a matter of fact, public philosophy tends to be more focused

on public service, community development, thus common prosperity. On the

contrary, private orientation is compulsorily towards profit (Ritchie & Crouch 2003).

These two different natures can coexist connecting objectives on important topics

such as cost efficiency or innovation. On the other side, they could clash on other

fields.

That is why Fayos-Solà asserts “Tourism administration cannot operate like

companies: the administrations and companies are institutions of a completely

different nature” (Fayos-Solà 1996 ).

Thus, once the orientation of a certain form of governance has been understood,

50

and the goals of each member are declared, collaboration among public sector and

private sector must be done. Tourism arena has become too complex and

competitive to maintain “public sector intervention dissociated from the specific

requirements of tourism enterprises. Total quality management and efficiency in

tourism enterprises and regions, in a context of greater financial austerity, often

require a partnership of the private, public and voluntary sectors to develop new

tourism policy programmes” (Fayos-Solà E. 1996).

In this “new” context, the tasks of each actor and the functions to be undertaken,

have to be re-planned, passing from a pure public management view of destinations

(lasted until the end of 80s) to the public-private partnership (PPP) view.

In terms of structure/form of governance, it has been proved that some

organizational structures are more suitable than others to stimulate and implement

public-private partnerships. In particular, decentralization, thus the application of

the principle of subsidiarity (explicitly or implicitly), is generally considered a basic

element. As a matter of fact, PPP has to be used from the supply side in order to

solve problems that cannot be solved by the public authority alone. It has a strategic

role to innovate thus to increase quality (PPP and principle of subsidiarity are

analyzed in Chapter 6).

The fact that decentralization is a very important condition for effectiveness of

tourism policy is not only proved by the above mentioned fact that supply in tourism

is local and so local authorities are obviously more effective in monitoring, managing

and coordinating, but also by the benchmarking that can be done among

governmental structures of all the OECD countries.

What emerges from this analysis is a quite clear drawing: in the big majority of OECD

countries, in particular in Europe, central responsibility for tourism sector is assigned

to a department under a wider ministry that normally is economic, development,

industry Ministry. This, for central government functions. Then, concerning actual

development and implementation of strategies, lower territorial levels are

responsible.

51

Conclusion

Governance is a very broad and complicated concept. However it is fundamental to

understand in order to approach public policy. Governance effectiveness is based on

Governance quality and it is a prerequisite for management effectiveness.

Governance can be evaluated according to the Good Governance Principles. There

are different territorial levels in which governance can be analyzed (National,

Regional and Urban). Another important variable in the analysis of Governance is the

institutional structure. It can be considered as a proxy variable to analyze

Governance. Finally, Governance can have a fundamental role in the development of

Innovation.

Bibliography

Beritelli, P., Bieger, T., Laesser, C., (2007), ‘Destination Governance: Using Corporate Governance

Theories as a Foundation for Effective Destination Management’, Journal of Travel Research, 2007.

Fayos-Solà, E., (1996),’ Tourism Policy: a midsummer night’s dream?’, Tourism Management, 1996.

Hall, C., M., (2008), Tourism Planning policies, processes and relations, Harlow, Prentice Hall.

Lockwood, M., (2009), ‘Good governance for terrestrial protected areas: A framework, principles and

performance outcomes’, Journal of Environmental Management.

Nordin, S., Svensson, B., (2005), The Significance of Governance in Innovative Tourism Destinations,

Paper presented at the 55th

AIEST Congress, Brainerd, USA, 2005

OECD (2010), Tourism Trends and Policies, OECD, Paris.

Ritchie, J.R. B., Crouch, G.I., (2003), The Competitive Destination A sustainable tourism perspective,

CABI, Oxon.

UNWTO, (2010), Survey on Destination Governance, Evaluation Report, Madrid 2010.

52

6. THE DECENTRALIZATION OF TOURISM POLICY

Academics are still discussing whether Central Governments are really effective or

not. There is a certain scepticism concerning it, in particular when tourism policy is

the object of this discussion (Jenkins 1997).

Certainly, the role of the State, in particular the central State, but not only, has

changed a lot in the last decades. The meaning of sovereignty has been interpreted

in new ways causing “tremendous transformation” (Peters and Pierre 2001).

Many are the reasons for this change. Among them, the need and pressure for free

market and trade thus liberalization and the important process of deregulation that

has been developed in western countries, assume a relevant role.

“Nevertheless, even given demands for “smaller government” in much of the western

world, market failure still provides a number of rationales for state economic

intervention” (Hall 2008).

So, on one hand, society asks for laissez-faire approach and freedom, on the other

hand, it asks for a State that acts as guarantor, facilitator, and stimulator of the

economy.

Moreover, UNWTO affirms that “we have moved to a world where success depends

on the close synergy of interests among business, society and government” (UNWTO

2000).

Given the above mentioned concepts, it is possible to approach the topic of this

chapter: Decentralization.

Decentralization means to decline certain functions to lower territorial, thus

governmental, levels, moving the policy making process closer to people.

Decentralization is considered as the solution/product of what has been expressed

above and in particular it means three fundamental concepts:

- More Coordination;

- More Collaboration (PPP);

53

- More Innovation and Efficiency.

Coordination is a basic element for policy effectiveness and it means also the

possibility of coexistence and potential collaboration of different types of sectors,

actors, interests. This becomes crucial when we remember the fact that “there is no

other industry in the economy that is linked to so many diverse and different kinds of

products and services as is the tourism industry” (Edgell 1990).

Thus, the intrinsic nature of tourism sector, requires a high level of coordination.

Decentralization is considered as the most suitable and effective way to satisfy that

need (coordination). Neither the top-down approach nor the bottom-up approach

are the right integrated approaches towards tourism. On the contrary the right one

seems to be the interactive or collaborative approach that “requires participation

and interaction between the various levels of an organization or unit of governance

and between the responsible organization and the stakeholders in the planning

process” (Hall 2008).

Moreover it has to be reminded that “there is a serious weakness in the machinery of

government dealing with tourism in its co-ordination, and co-operation with

operators either state or privately owned. Government policies or lack of them

suggest an obsolescence in public administration devoted to tourism” (Licktorish et

al. 1991).

So, coordination can take different forms. It can be horizontal coordination (e.g.

among governmental institutions at the same level), vertical (e.g. among

governmental institutions at different levels, e.g. regional and local), but also

administrative (to find agreements on how to reach certain goals) and policy

coordination (to find agreements on the goals). Development of coordination is a

time consuming activity that can lead to inefficiency but, if it is successfully

implemented, it ensures better results thanks to the agreements and “the ownership

of the plan and process, felt by all the stakeholders” (Hall 2008).

This last concept introduces the second benefit deriving from decentralization:

Collaboration.

54

Collaboration can be intended as the sharing of the same goals by the public and

private sectors. As it has been mentioned above, the role of governments has

changed during last decades and this process has influenced every sectors.

In particular, “in countries at high levels of economic development, there is arguably

less need for public-sector support of the tourism industry. Nevertheless, it is

generally recognized that, for tourism to develop in a sustainable manner, an

appropriate physical, regulatory, fiscal, and social framework is required” (World

Economic Forum 2009).

So governments seem to maintain the function of guarantor of suitable framework

conditions. At the same time, private sector creates Public Private Partnerships (PPP)

with public authorities in order to share interests and join competencies.

“Although the level and success of public-private partnerships (PPPs) in different

countries varies sharply, their role and importance in Travel & Tourism has

increasingly been recognized by industry and governments” (World Economic Forum

2009).

Moreover, a survey conducted by UNWTO, reveals that 98% of respondents (actors

from tourism sector) considers PPPs as “very important” or “important” for tourism

competitiveness (UNWTO 2000).

Collaboration in general, thus both in its pure public nature (among public actors) or

mixed (public and private actors) can be developed in two ways: project based or

institutionally.

In the first case, partnerships are created to reach the goals of a precise project,

hence at the end of the project itself, partnership has to be considered formally

closed. The second case, on the contrary, bases collaboration on legal instruments

such as laws or regulations. This method is often considered unsuitable because

bureaucracy makes the process too slow and inefficient and this is in complete

contrast with the final objective of collaboration and, in particular, PPPs.

As a matter of fact, as it as been expressed above, the third main benefit of

decentralization is more Innovation and Efficiency.

Decentralization means more competition among sub-national levels (e.g. regions).

Competition is the “motor of innovation” (Keller 2006), but, at the same time,

55

innovation can be implemented and developed only with resources that are too

scarce in a too fragmented environment. Put in other words, competition creates

innovative ideas, cooperation permits to connect actors, raising funds and sharing

goals, so that those innovative ideas are realized. This is the essence of the so-called

Coopetion.

In addition, in case of PPPs, the presence of the private sector should be a guarantor

for efficiency, thanks to the nature of private sector itself. As a matter of fact, private

industry’s main goal is to make profits. The level of profits is certainly a function of

cost efficiency, so PPPs are considered a tool, not only to increase effectiveness of

the results of a certain project, but also to rise efficiency level.

So, looking at the above mentioned concepts, it is possible to understand the inter-

related benefits of decentralization: a process that leads to a level of coordination

(among different levels and actors) that becomes a basis for cooperation. These two

items, linked together, generate coopetion, motor of innovation and efficiency.

But, obviously, decentralization is not just positive. It can lead easily also to negative

externalities. In particular, it can increase the disparities among sub-national

territories.

Poorer regions, for example, can suffer enormously with a decentralized system,

being less powerful than others. So, it can be affirmed that the first basic element to

develop a right form of decentralization is the total consensus/agreement of all the

sub-national territories. Moreover, sub-national territories have to share and agree a

form of solidarity among them (richer regions and poorer ones).

Decentralization can be developed in different ways. It can be the direct output of

the form of organization of the entire state: this is the case of federal states, where

decentralization is the essence of state organization in itself. At the same time, it can

be planned for certain functions instead of others. Put in other words, sub-national

territories, can have full or part of the power in a certain field or upon a certain

function. This method is normally established by the Constitution of a nation or by

particular laws.

However, the legal principle that defines this “functional decentralization” is the so-

56

called Principle of Subsidiarity.

This is a philosophical principle before than legal. It is based on the belief that

individuals have an intrinsic value, or dignity, that is much more important than the

one of every kind of social cluster, State included. This basic meaning pushes it close

to the original idea of liberalism. However, it is admitted that individuals cannot

develop acting only individually.

So, the Principle of Subsidiarity, suggests that every issue should be solved by the

smallest possible social organization, maintaining thus the policy planning and

making process as close as possible to people. Higher (bigger) levels of organization

are recognized in the role of assistants of smaller ones and they should not carry out

functions that could be developed more effectively by smaller organizations.

This is a basic principle, expressed also in the Maastricht Treaty (1991), for the EU

constitution.

Conclusion

Global trends and changes in society’s needs have led to relevant changes of

Government roles and to the interpretation of its functions.

In particular, the constant request for ‘smaller governments’ seems to induce to the

development of diverse forms of Decentralization. The main benefits that can derive

from it are: Coordination, Cooperation and more Innovation and Efficiency.

At the same time, Decentralization can create negative externalities such as

disparities among different sub-national territories. Thus, in order to develop the

right form of decentralization, so to maximize its benefits, sub-national territories

must agree with this, founding their relations on a certain form of solidarity.

Decentralization can be developed through the entire organization of the State (e.g.

Federal State) or through the implicit or explicit application of the Principle of

Subsidiarity.

Bibliography

Edgell, D.L., (1990) International Tourism Policy, Van Nostrand Reinhold, New York.

Fondazione per la Sussidiarietà (Vittadini, G. eds), (2007), Che cos’è la sussidiarietà: un altro nome

della libertà, Guerini e associati, Milano.

57

Hall, C.,M., (2008), Tourism planning: policies, processes and relationships, 2nd edition, Prentice Hall,

Harlow.

Keller,P., (2006), ‘Toward an innovation oriented tourism policy’, in: OECD, Innovation and Growth in

Tourism, Paris.

UNWTO, (2000), Public-Private Sector Cooperation: Enhancing Tourism Competitiveness, Madrid.

World Economic Forum, (2009), The travel & Tourism Competitiveness Report 2009, WEF, Geneva.

58

7. THE MONITORING AND EVALUATION OF TOURISM POLICY

Problems concerning monitoring and evaluation of public policies

“Evaluation consists of any process which seeks to order preferences” (Hall 1982). It

tries to establish whether a public policy has achieved (or is achieving) the stated

goals, how (efficiently) and why (O’Faircheallaigh & Ryan 1992).

Two common beliefs about public policy evaluation are that it has to be carried out

after implementation and that its scope is to provide a technically correct analysis.

However, evaluation can (and should) take place also before and during the

implementation phase and it has to take into consideration how it will be used by

decision-makers (Hall & Jenkins 1995). Moreover, the authors state that the success

or failure of a policy depends on many factors and then it is reductive to evaluate it

only according to the objectives established. These factors are the features of the

policy planning (for example the presence of clear or ambiguous objectives), the

process of implementation itself (bureaucracy, uncontrollable forces etc.) and the

impact of unexpected forces that change public needs.

Rossi, Freeman and Write (Rossi et al. 1979) explain evaluation in four phases:

- First of all a government action is the consequence of a need.

- The progress and implementation of a policy need monitoring.

- Specification of outcomes and impacts.

- Efficiency of tourism policy and related opportunity costs.

Therefore the evaluation of a policy can be comprehensive or non-comprehensive

(depending on whether it includes or not the abovementioned phases) and it can be

summative (if its scope is to help in deciding whether to continue or not with a

specific policy) or formative (if its scope is to give information on how to improve it)

(Pal 1992).

59

Concluding, it can be affirmed that “Policy evaluation should occur throughout the

policy process” and that it “ is concerned with trying to determine the process and

impact of policy in real-life political conditions” (Hall & Jenkins 1995).

Monitoring in tourism

Monitoring is the action of collecting data of a phenomenon according to specific

indicators. Usually these are statistic accounts that monitor arrivals, overnights,

tourist expenditure, public expenditure, employment etc. A good monitoring system

is essential for a good evaluation of tourism policies. Monitoring systems used in

tourism are (Vahnove 2005):

- Tourism statistics: regular collection of data on volumes about arrivals,

overnights, expenditure etc.

- TSA: it analyses the several effects tourism have on the economy taking into

consideration both its demand and supply aspects.

- Tourism and holiday surveys: their aim is to collect information about the

behaviour of tourists (an example is the T-MONA used in Austria).

- Swiss Tourism Barometer: it was created due to the lack of reliable data in

the sector. It is based on the voluntary cooperation of different actors

involved in tourism supply.

In addition to constant monitoring tools, it is necessary to establish particular

monitoring systems suitable for the measurement of a tourism policy. In fact, it is

important to analyse a tourism policy also during its process of implementation and

not only at the end (Hall & Jenkins 1995).

Evaluation in tourism

Evaluation methods are those analytical frameworks that measure the performance

of a certain policy according to appropriateness, efficiency and effectiveness. The

importance of the evaluation is given by the fact that it enables to understand if a

policy has been designed and implemented in the best possible way for the

achievement of the related objectives (OECD 2010). Therefore, it is possible to

improve the quality of public actions in the future.

60

Evaluation usually relies on quantitative data monitoring, however, it is also

important to take into consideration qualitative information, for example concerning

the impacts on local communities and individuals. In OECD countries the use of TSA

(Tourism Satellite Account) is quite widespread and its use has been improving in the

last years. However, this method is a static account and it is not suitable for the

measurement of changes happening to different variables of the tourism system

(e.g. an increase in demand or an increase in price). The Nottingham University

Business School (UK) and the Tourism Research Cooperative Centre in Australia are

perfecting a model based on TSA, but that uses the principles of the Computable

General Equilibrium Models. This method can be used for an evaluation of a tourism

policy, but there are some difficulties in applying it, both because its application is

quite new and because of the difficulties in identifying inputs and outputs necessary

for its implementation (Box 2).

In general, tourism evaluation methods have usually relied on the analysis of inputs

and outputs, and only recently the abovementioned CGE model has been applied to

tourism. Input-output methods are for example the Cost-Benefit analysis, which is

generally used in the decision about the undertaking of a specific public project. The

main difficulties are in calculating all the benefits and costs a specific project can

have since it includes externalities, shadow prices, non-marketable outputs etc.

Other uses of input-output models concerning the public sector are those related to

efficiency (Afonso, Schuknecht & Tanzi 2003; Mandl, Dierx & Ilzkovitz 2008). In these

two papers, data about inputs and outputs are used to create a production

possibility frontier benchmarking different European countries. The methods used

are the Date Envelopment Analysis and the Stochastic Frontier Analysis. However,

there are several difficulties in applying these methods to the tourism sector. First of

all because it is more difficult to select the inputs and outputs of a single sector

instead of the whole public sector; second, the benchmarking with other nations

might be not very reliable. The problems in analysing inputs, outputs and efficiency

are covered in sections 8.3 and 8.4.

61

BOX 2

“TPF” Model

The building of this model concerns the establishments of different actors (markets,

production sectors and demand groups) that are interlinked with specific rules. Every

change in the economic framework (taxes, prices, technology, population etc.)

stimulate the reaction of the actors, who produces indirect and induced effects to

the economic variables of the model and therefore to the other actors. This so-called

“TPF” or “Tourism Policy Forecasting” model has been created to facilitate the

assessment of the tourism economic impact, the analysis of tourism policies and the

prediction of tourism trends (Blake et al. 2001) and is based on the TSA and CGE

models. According to the authors, this method can be applied also to the analysis of

a tourism policy through the performance of “what if” simulations (Blake et al.

2001). However, this method can only be useful when the inputs and the outputs of

a policy (or policy instrument) are quantitatively measurable and have a specific

effect on a certain variable of the model. Therefore, while it can be easier to

evaluate the effects of changes in taxation and investment incentives, it is more

difficult to apply the model to regulations, promotional campaigns etc. In order to

evaluate the impact of a promotional campaign, for example, it is necessary to

estimate the increase of tourism expenditure due to the campaign, for example. This

would allow calculating the effects that a certain campaign can have on the whole

system. However, the main difficulty is the assessment itself of the direct effects (or

outputs) produced by the campaign.

A benchmark analysis of national tourism sectors is the ranking made by the World

Economic Forum. It is a competitiveness ranking whose variables are the regulatory

framework, the business environment and infrastructure, and the resources of about

130 countries. Since the improvement of these elements is mainly due to

government actions, their higher or lower ranking throughout the years can be used

as a starting point to evaluate policies. However, this ranking does not consider the

public expenditure or inputs, thus it is not possible to assess the efficiency.

62

Nowadays, the methods used for policy performance measurements are still weak. It

is necessary to involve the different stakeholders of the sector in order to establish

measurable goals and objectives and to identify appropriate key performance

indicators. This would allow a more objective measure of a policy and the ability to

review it periodically in order to improve its efficiency and effectiveness.

Conclusion

Monitoring and evaluation are essential for the implementation of a tourism policy.

They should be carried out before, during and after the implementation. A good

monitoring system should support the evaluation phase and then it should be based

on specific key performance indicators. The analysis of these indicators helps the

decision-makers in evaluating the process and the effects of a policy. However, an

evaluation based only on the attainment of objectives is not exhaustive. In fact,

several elements can influence the planning phase, the implementation phase and

the outcomes. The design of a policy does not depend only on public needs but it is

influenced by power, values and interest groups (chapter 2). The implementation

process depends also on the functioning of governance and the impacts depend also

on exogenous forces. Moreover, the design itself of the policy affects the results

(ambiguous or incoherent objectives undermine the results of a policy). Evaluation

has to take into consideration the fact that a tourism policy is not an economic

choice, but it is a political decision.

Bibliography

Afonso, A., Schuknecht, L., Tanzi, V. (2003), ‘Public Sector Efficiency: an International Comparison’,

Working paper no. 242, European Central Bank, Frankfurt.

Blake, A., Durbarry, R., Sinclair, M.T. and Sugiyarto, G., (2001), Modelling Tourism and Travel Using

Tourism Satellite Accounts and Tourism Policy and Forecasting Models, Discussion Paper, Tourism and

Travel Research Institute. (Unpublished)

63

Hall, C.M. (2008), Tourism Planning: Policies, Processes and Relationships, 2nd edition, Prentice Hall,

Harlow.

Hall, C.M., Jenkins, J.M. (1995), Tourism and Public Policy, Routlege, London.

Hall, P. (1982), Urban and Regional Planning, 2nd

edn, Penguin, Harmondsworth.

Mandl, U., Dierx, A. and Ilzkovitz, F. (2008), ‘The effectiveness and efficiency of public spending’,

Economic papers, 301, European Commission, Brussels.

O’Faircheallaigh, C. and Ryan, B. (1992), eds Program Evaluation and Performance Monitoring: An

Australian Perspective, Macmillan, South Melbourne.

Pal, L.A. (1992), Public Policy Analysis: An Introduction, Nelson Canada, Scarborough.

Rossi, P.H., Freeman, H.E., and Wright, S.R. (1979), Evaluation: A Systematic Approach, Stage, Beverly

Hills.

OECD (2010), Tourism Trends and Policies, OECD, Paris.

Vanhove, N. (2005), The Economics of Tourism Destinations, Elsevier.

World Economic Forum (2009), The Travel & Tourism Competitiveness Report 2009, WEF, Geveva.

64

8. TOURISM POLICY REVIEW: PROPOSAL OF AN ANALYTICAL FRAMEWORK

The objective of the research, explained in the introduction, is to create an

instrument to overcome the lack of a standard framework to analyse tourism

policies in different countries. The creation of a standard framework implies several

difficulties to overcome. First of all the evaluation of public policies cannot be

objective and precise; second, the evaluation of the policy of a specific sector is even

more complicated both to measure and to benchmark.

The framework is the result of three analyses:

- Study of the dynamics of public intervention in tourism (chapters 1 to 6).

- Theory of public policies (chapter 7).

- Analysis existing frameworks and methods used to evaluate in general the

public sector and in particular public sectorial policies (IEA for environmental

policies).

The core of the framework (figure 8) is composed by the principles of a public policy,

its goals and the measurement of efficiency, effectiveness and good governance.

However, it is useful to start from the analysis of the overall context that affects

tourism and tourism policies. The study of global trends, the economic environment

and the structural organization are made in order to evaluate the relevance of the

goals established in the tourism policy through a SWOT analysis. In fact, the goals of

a policy should be made according to the strengths, weaknesses, opportunities and

threats related to the overall context. In addition to this, the direct link between the

tourism policy box and the goals means that it is important also to analyse the

coherence of the basic principles of the policy with the established goals.

After having evaluated the coherence and relevance of goals, the analysis of

strategies undertaken or planned to reach the objectives has to be carried out. This

leads to the very phase of implementation of these strategies with the use of several

instruments, which means the use of certain inputs that through governance

65

processes are transformed into actions, outputs and outcomes. The implementation

process, and above all the final outcomes, are influenced by the overall context and

this aspect has to be carefully considered when evaluating the policy according to its

efficiency and effectiveness. As efficiency it is meant the relation between inputs

and outputs, while effectiveness is evaluated to give an idea about to what extend

the pre-established goals have been reached.

Figure 8: Analytical framework for tourism policy review.

66

8.1 Overall Context

Figure 9: Analytical framework for tourism policy review: overall context.

As it is possible to see in the figure above, the overall context is composed of four

main items: the Global Context, the National Economic Context, the Institutional and

Structural Context and finally the Vision and Basic Principles of Tourism Policy.

The purpose of this section is to provide the relevant information about all the

dimensions that impact on tourism sector of the nation that is going to be analyzed.

8.1.1 Global Context 5

There is no sense in evaluating something without considering its context. As a

matter of fact, every kinds of business, company, industry, sector, destination, thus

policy, lies within certain contexts that have to be considered, analyzed and

elaborated in order to fully understand the “object” of our analysis.

5 The entire description of the global context (8.1.1) is based on the concepts expressed by Olsen et al. 2008.

67

The first and wider context that has to be audited is the global context or remote

environment.

M. Olsen defines it as “the environment that is far removed from the day-to-day lives

of people and managers” (Olsen et al. 2008) but that can be considered the main

source of changing forces that, slowly, will affect every elements of our society. This

context has to be considered in its global dimension and not just in a “reduced”

dimension. It is divided into five sub-categories:

1. Economic environment

2. Political environment

3. Socio-cultural environment

4. Technological environment

5. Ecological environment

Each sub-category is characterized by trends that are those to be considered

carefully in order to predict future impacts. The careful study and analysis of these

trends is a fundamental tool to design and plan future actions and, to discover

threats and opportunities of the future and to reduce risks of future negative

externalities.

Thus, all these activities prevent a company as well as a destination from the

consequences of not anticipating the future and monitoring the change. The above

mentioned consequences are effectively expressed in the “parable of the boiling

frog.”

The global context can be described according to three dimensions that are:

1) Uncertainty, “the degree of change occurring in the environment and the rate

of that change” (Olsen et al. 2008). This dimension doesn’t express whether

change exists or not, but if change is continuous or not. Hence change is

always present, but it can be somehow constant or extremely discontinuous.

However, uncertainty “continues to grow as the world moves towards

greater globalization” (Olsen et al. 2008).

2) Complexity is defined by the quantity and diversity of variables characterizing

68

the environment. Each environment can have different degrees of

complexity.

3) Munificence, finally, is the last dimension of an environment. It “refers to the

amount of potential capacity for growth that exists in a certain environment”

(Olsen et al. 2008).

Thus, a careful scanning activity of the global context, has to be considered as

fundamental. It has to be done for all the sub-categories, in order to understand

where, the object of our analysis (national tourism policy in our case) lies. This piece

of information is extremely valuable in particular to assess if a certain national

tourism policy is aligned with the global trends it lives in or not.

With the intention of avoiding any risks of doubt or inaccuracy, Box 3 lists some

examples of trends could be considered nowadays for each sub-category.

Box 3

- Global economic trends: rising productivity and competitiveness of developing

countries such as China or India and consequences for tourism sector;

recovery from economic crisis; rising of oil price...

- Global socio-cultural trends: growing multi-ethnicity of society; more and more

sharing of information through the use of social networks...

- Global political trends: enlargement of EU towards eastern countries,

increasing deregulation...

- Global technological trends: spread of public wifi areas, online booking use,

development of nanotechnologies...

- Global ecological trends: rising global temperature, growing need of

alternative energy sources...

These were few examples of global trends that an industry, a sector, as well as a firm

or a destination (at any territorial level), have to consider before taking decisions

and design strategies.

69

8.1.2 National economic context

After the analysis of global trends, the study focuses on a closer environment in

which tourism operates. The national economic context can seems overlapping with

the economic environment described in the previous section (8.1.1). However, it has

been decided to exclude from the global economic trends the study of those

economic conditions that concern specifically the nation and that have a more direct

influence on tourism.

Tourism and the national economic context have a bidirectional relation. On one side

tourism is influenced by the economic conditions of a country (and those of origin

markets) and on the other side tourism has a certain impact on the economy of that

country (it creates employment and income). The first point deals with the economic

conditions in which tourism has to operate (macroeconomic conditions, tourism

friendly framework conditions and market) and its analysis is necessary in order to

identify strengths, weaknesses, opportunities and threats (SWOT analysis) related to

the sector. The second point relates to the importance of tourism in the economy

and it is useful in order to understand the role this sector has in the whole economy.

Macroeconomic conditions

Porter defines the macroeconomic stability a prerequisite for economic prosperity

and this is the primary role of governments (as well as providing stable legal, social

and political institutions) (Snowdon & Stonehouse 2006; Porter 1998). As

abovementioned, tourism contributes to the macroeconomic conditions of a

country, but it cannot influence them directly. National income and employment, for

example, influences the role of domestic tourism in the sector, which is a good

stabilizer above all in moments of recession. Of course, also the macroeconomic

conditions of countries of origin of international tourism are important, but this

topic is analysed afterwards in the section “Market”, where the evolution of demand

is taken into consideration.

The indicators to include in this section are:

- growth (increase of GDP and per capita GDP)

70

- unemployment

- price stability (exchange rates and inflation)

- public debt

- fiscal policy

These indicators have an influence on the profitability of tourism related firms. For

example, limited growth reduces domestic demand, high public debt reduces the

budget the government can spend for the sector, an onerous fiscal policy reduces

the competitiveness of firms and a strong currency reduces the price

competitiveness of the sector. These conditions create opportunities, weaknesses,

threats and opportunities that a public policy has to consider in the establishment of

goals and strategies. For example, if the prices are high compared to other nations, it

is important to improve the quality of the offer, since the nation cannot compete on

prices. Value added has to be created increasing the willingness to pay of visitors

(quality of services) instead of reducing prices.

Tourism friendly framework conditions

Tourism friendly framework conditions have a more direct influence on the

competitiveness of a sector and then require special attention from policy makers.

They differ from macroeconomic conditions because they are related to the

production of public goods instead of being economic indicators of national well-

being.

As a matter of fact, tourism friendly framework conditions are public goods (or quasi

public goods) produced by the State not specifically for tourism sector, but for

several economic sectors (health sector, infrastructures etc…). However they have

an important relevance on tourism sector, and in particular for the private sector. In

fact, macro economic conditions are only a prerequisite for prosperity but firms are

also affected by the quality of the framework conditions in which they compete

(Porter 1990). As a matter of fact, competitiveness is given by the firm itself with its

management and characteristics, but, at the same time, it is also given by the

conditions of the environment in which the firm competes. This is the reason why it

71

is extremely important to analyze macroeconomic conditions of a country and

framework conditions affecting a certain sector (tourism in our case).

It has been decided to consider the pillars defined by The World Economic Forum as

the main framework conditions affecting tourism sector. Thus these are the public or

quasi public goods that a State should provide in order to make tourism as

competitive as possible. The World Economic Forum establishes a competitiveness

ranking of countries each year both in general and specifically for tourism sector.

The Framework conditions are divided in three main sub-indexes, composing the

final tourism competitiveness index (mean of the values of these three sub-indexes):

1) Regulatory framework

2) Business environment and infrastructures

3) Human, cultural and natural resources

Each sub-index is composed by several pillars as shown in the figure below.

Moreover each pillar is composed by many variables. Every item (pillars and

variables) is ranked with respect to the 133 countries considered by World Economic

Forum.

In the analysis presented in the next chapter, the framework conditions will be

analyzed according to this model. The rank of every sub-index will be compared with

the one of Italy’s main competitors (France and Spain) and the same thing will be

done for every pillar. Moreover, concerning Italy, the worst variables (those ranked

below the position of the pillar they are part of) will be listed as the ones to be

improved.

The figure below shows the sub-indexes (red) and the pillars of each one. Variables

are not listed because of their number (73).

72

Figure 10: Pillars and sub-indexes of the T&T competitiveness report.

The scores given in the WEF’s report can be used to better understand the quality of

each element. It has been decided to exclude the element “Price Competitiveness”

because it is more related to macroeconomic conditions (exchange rates, inflation,

fiscal policy etc.) and it is a reflection of the productivity of firms and the other

conditions of the business environment.

The analysis of tourism friendly framework conditions through a SWOT analysis

allows to identify the real needs and then the objective a relevant tourism policy

should have.

Market

As “market” it is meant the closest environment that can affect the profitability of

the actors in tourism. The elements are part of those considered by Ritchie and

Crouch in the competitive microenvironment of destinations (see figure 11).

73

Figure 11: The competitive microenvironment adapted from Ritchie & Crouch 2003.

In this section the elements to be analysed are:

- Tourism and hospitality enterprises: particularly important is to describe the

number of accommodation facilities, their capacity, frequency of kinds of

structures (B&B, hotels, youth hostels, camping etc.) and typology (stars). It is

also useful to provide some measure of performance in the last years, for

example the occupancy rate. If government provide the data necessary, it

would be interesting to have a look also on other suppliers such as

restaurants, bars, retailers etc. Usually this firms are SMEs in Europe, and

then a particular attention should be paid on the difficulties this firms has in

the country in question in financing renovations, rejuvenation, enlargement

etc.

- Transportation enterprises: air and ground infrastructure has already been

described in the previous section. The aim of this part is to look at the

enterprises operating on these infrastructures, that is to say the analysis of

74

air traffic and companies flying to and from the country and the ground

transportation services (railways, non urban bus connections etc.).

- Market intermediaries: structure, kinds and quantity of travel agencies and

an analysis of the major tour operators connected with national tourism

(sometimes there are studies on the position of a country in the tour

operators’ product sold in relation to other countries).

- Demand: domestic and inbound, arrivals, overnights, behavior (kind of trip,

motivation, destination chosen etc.) and major markets of origin. It is also

important to study the evolution of demand (and its characteristics) over

time.

Economic importance of tourism

The economic importance of this sector gives an idea on the role it has for the

national economy and it is also an indicator of the performance if it is analysed

historically. The more important it is, the more it is strategic to preserve its role in

the economy. However, this does not mean that there is the need for state

intervention, because intervention is required in case such an important sector faces

some problems that the private actors cannot solve. The indicators to be used for

this analysis are:

- Tourism share of GDP: this is the comparison between the value added of

tourism and the value added of the other sectors of the national economy.

Dividing tourism GDP by employees it is possible to have a measure of

productivity and compare it with that of other sectors.

- Tourism share of employment: this information describes the contribution of

tourism to generate employment.

- Tourism balance of payments: the contribution of tourism to the balance of

services can be see on one side as how it contributes to the overall deficit or

surplus and on the other side as the share of tourism exports on the total

exports of a country.

These are the most important indicators to be analysed, however other indicators

can be taken into consideration, such as the domestic tourism share of final

75

consumption. The quality of these indicators depends on the quality of data supplied

by the statistical system of a country. In this case, an appropriate Tourism Satellite

Account is extremely important in order to have a more precise measure of the

economic importance of tourism.

Public Expenditure in Tourism sector

In order to have a complete picture of the economic national context, relevant for a

national tourism policy review, it is fundamental to know the level of expenditure of

public bodies involved in the process. This is not only relevant for an economic

efficiency evaluation, but also to understand the allocation/distribution of resources.

Thus this section includes NTA expenditure, Regional and local expenditure, public

tourist enterprises expenditure, expenditure by cost categories (allocation).

8.1.3 Institutional and structural context

The institutional and structural context is the third fundamental element to be

considered to understand deeply the overall context of a certain nation.

It is composed by three main concepts:

- Legal foundations

- Structure

- Governance

These items include not few controversial aspects in particular if the objective is to

analyze and evaluate them. As a matter of fact, firstly, they are mutually dependent,

thus it is difficult to assess them separately. Secondly, they are not easily assessable

objectively; it is very likely to run up against subjective points of view. This is also

due to the fact that it is not possible to measure them numerically, in a quantitative

way. Nevertheless they have to be measured through qualitative indicators. Finally

the positive evaluation of one of these elements doesn’t imply the good functioning

of the others elements (this is particularly related to the relation between formal

76

structure and governance quality).

However, given the importance of the above mentioned concepts, it is fundamental

to analyze them one by one, using the appropriate evaluation indicators.

Legal foundations are the basic sources that describe and legitimize a certain field or

function within the State organization. Thus, in our case, Tourism has to be analyzed

according to the position that it occupies in the legal framework. Legal sources are

the ones that assign the legal power for decision making process, define the

governmental bodies responsible for tourism sector, declare implicitly the priority of

the State concerning tourism and finally put the basis to draw the structure. So it can

be affirmed that the law sets some constraints within which the policy has to fit.

The structure is nothing else that the organizational chart of bodies and functions

that define the position of every body in a certain policy. It is important to analyze

and understand the structure because it represents the relations and hierarchy that

exist among the actors and bodies, relevant in the decision making process. It

underlines not only the distribution of functions among political levels but also

among territorial levels.

The structure is tool that permits the analysts to figure out possible overlapping of

functions (if more than one body do the same function, a situation of inefficiency

can be faced), moreover the structure can be used to diagnose the problem of

coherence or incoherence between structure and legal foundations, structure and

governance, and structure and policy. Finally it can be used as a tool to predict

efficiency in the governmental process (the more are the bodies involved and the

connections among bodies, the more likely is the possibility for governance process

to be inefficient).

Concerning all the results that a careful structure analysis can produce, it is often

affirmed that the organizational chart can become a sort of proxy variable to

evaluate governance. In reality, it is not completely true because many more

variables influences governance. This is explained in the next paragraph. Both, legal

foundation and structure, do not require any particular form of measuring, however

77

it is of basic importance their careful study and assessment.

Governance has been already defined in chapter 5, however it refers to the process

in which decisions are taken and implemented within certain conditions that should

be guaranteed as favorable as possible by the governance itself. The concept of

governance and its intangibility, creates not few problems for its objective

evaluation and measuring, however, as affirmed by OECD “ how government

activities are measured, matters. Given the size of government and its role in the

economy, the contribute of government to national economic growth is of great

significance, especially when looking at change rates over time. [...] measuring

government activity is important because of the size of its activities and the

consequent need to understand what it is achieving with the very significant

expenditure” (OECD 2009).

Given the controversial nature of the debate upon the topic of measuring

governance, it has been decided to consider the position of World Bank, one of the

most authoritative actors in this field. The World Bank in “A decade of measuring the

quality of governance, Governance matter 2007” suggests the use of six aggregate

indicators to measure quality of governance (Worldwide Governance Indicators).

These are listed below:

- Voice and accountability: “the extent to which a country’s citizens are able to

participate in selecting their government, as well as freedom of expression,

freedom of association, and a free media”

- Political stability and absence of violence: “perceptions of the likelihood that

the government will be destabilized or overthrown by unconstitutional or

violent means, including domestic violence and terrorism”

- Government effectiveness: “the quality of public services, the quality of the

civil service and the degree of its independence from political pressures, the

quality of policy formulation and implementation, and the credibility of the

government’s commitment to such policies”

- Regulatory quality: “the ability of the government to formulate and implement

78

sound policies and regulations that permit and promote private sector

development”

- Rule of law: “the extent to which agents have confidence in and abide by the

rules of society, and in particular the quality of contract enforcement, the

police, and the courts, as well as the likelihood of crime and violence”

- Control of corruption: “the extent to which public power is exercised for

private gain, including both petty and grand forms of corruption, as well as

“capture” of the state by elites and private interests”

(The International Bank for Reconstruction and Development / The World Bank

2007)

It can be easily deduced from the definitions that, even if these indicators want to

provide a clearer and more systematic way to measure governance, they do not

avoid completely the difficulty to assess that. In fact the indicators themselves are

not so easily measurable, being dependent from many variables. However there are

on line sources, worldwide recognized, where to find these values (they will be

quoted in the case study of Italy). Moreover, the merit of these indicators is to

provide “smaller” points of view in order to evaluate a wide concept such as

governance. They should be seen as windows from where to look at the big picture

of governance.

Another important tool to evaluate governance is given by the Good Governance

Principles, explained in chapter 5.

8.1.4 Vision and Basic principles of tourism policy

It can be defined as “a set of regulations, rules, guidelines, directives and

development/promotion objectives and strategies that provide a framework within

which the collective and individual decisions, directly affecting tourism development

and the daily activities within a destination, are taken” (Ritchie and Crouch 2003).

Given the definition, it has been decided to take into consideration two main

elements:

79

- Vision: It is the element that “provides the more functional and more inspirational

portrait of the ideal future that the destination hopes to bring about in some defined

future” (Ritchie and Crouch 2003). Vision, can be characterized by a more idealistic

or more pragmatic character. It is also due to the maturity of the destination (more

mature destination tends to have vision whose meaning is to maintain the already

gained position instead of aspire for something more. e.g. read box 4).

- Basic principles: these are the general aims, tourism policy and strategy should

look at. These are normally more pragmatic than the vision (which is more idealistic).

In order to avoid lack of clarity, box.2 defines vision and basic principles for Swiss

tourism policy.

Box.4

In “strategie de croissance pour la place touristique suisse, 2010” it is possible to

read vision and basic principle of tourism policy of Switzerland. I can be considered a

particular case because vision doesn’t look at the future, but tends to be oriented to

the past, expressing the will of maintaining the already gained position “to be an

attractive and profitable place.” The basic principles to support this vision are:

1) High degree of competitiveness;

2) Profitable enterprises system;

3) Quality and sustainability.

It has to be clarified that Vision and Basic principles, very often, are not mentioned

clearly or even miss completely. However it is extremely important that a certain

policy is built on clear values and objectives. Tourism policy should also influence the

planning strategy. As a matter of fact, the objectives of a certain policy, during its

planning process (see 8.2), have to be coherent and oriented to vision and basic

principles.

80

8.2 Planning phase: SWOT analysis, Goals, Strategies

Figure 12: Analytical framework for tourism policy review: planning phase.

Once the global context scanning has been completed, the analysis of the national

tourism policy continues with the second step: the SWOT analysis.

It is a very common and multifunctional tool whose main goal is to underline

strengths, weaknesses, opportunities and threats of a certain field or object of study.

It can be applied for existing companies that want to change strategies, business

plans etc...

In this case, SWOT analysis is applied to “break up” the overall context.

As a matter of fact, according to the logic of the analytical framework, this

instrument serves as a “bridge” or link between the overall context with all its

components and the goals defined by the policy is going to be analyzed.

By definition, a good policy should reduce or, at least, control the weaknesses of the

system it acts in, exploiting the opportunities. The tool that policy uses to express its

aims is the Goal, that normally are more than one. Thus, from an evaluative point of

81

view, the SWOT analysis permits to judge if the goals of a certain policy are aligned

or, as affirmed by Van Doren (2006), relevant, for the characteristics of the context

and the sector, the policy refers to. Moreover it has to be considered that a “good”

tourism policy, should produce goals that take into consideration also the vision and

basic principles of tourism policy explained in 8.1.4.

The last element composing the planning phase is composed by the Strategies.

These are the plans in which, the actions that have to implemented, are described.

Once the actions are implemented, they should reach the defined goals (see

paragraph 8.3).

In order to be realistic, and to catch a comprehensive view of a policy, it has to be

kept in mind that both, planning phase and implementation phase, are not always

focused just on effectiveness of a certain strategy with its actions. In reality, very

often, the need for consensus plays a very significant role. Thus, it implies that it is

possible to face situations in which goals, strategies and actions are well planned in

terms of relevance for characteristics and needs of the overall context and sector.

However the outputs of actions, or just the inputs allocated to implement a certain

action, are completely insignificant for the purpose these are made for. The only one

goal they are defined and implemented is, in reality, to gain consensus.

82

8.3 Implementation

Figure 13: Analytical framework for tourism policy review: implementation phase.

The implementation phase can be compared to the so-called “production process”

of the public sector (OECD 2008), which includes inputs, actions, outputs and

outcomes. Therefore it is the phase in which the strategies are transformed in

practical things.

Inputs

Inputs represent the investment of public sector for the production of certain

outputs. They are both financial (capital) and non financial (for example human

labour). However, it is easier to calculate them all in financial terms in order to

evaluate the allocation of public spending to the production of different public

services (Mandl, Dierx & Ilzkovitz 2008). In the public sector it is sometimes difficult

to obtain precise data on spending, above all if the study has to be made at a

disaggregated level (Estache et al. 2007), that is to say knowing the expenditure for

83

different inputs. In fact, measuring the allocative efficiency of public spending (in this

case efficiency means the optimal mix of inputs) is almost impossible.

Governance

Governance influences the efficiency of the whole public production process. The

principles of good governance have been already explained in the section 8.1.3. Due

to the difficulties in measuring the efficiency of a policy (explained in the section

8.4), sometimes it is useful, instead, to undertake an “ex-ante” method of

evaluation. Put another way, since it difficult to measure the outputs, we assume

that the efficiency of production can be indirectly foreseen by evaluating the

production process itself.

Actions

The actions are the tools necessary for the transformation of strategies into practice.

A strategy can be implemented by several actions, which have the final aim to

achieving the objectives of a policy.

Outputs

Outputs are the “final products of public sector organizations” (OECD 2009). It is

important to measure them in order to evaluate efficiency and effectiveness of a

public action and then to correct the actions to be taken in the future. The data used

to measure the outputs is financial (value and prices) and non financial (volumes).

However, it is not easy to measure the outputs of a public sector since often it

produces non-market outputs whose monetary value is difficult to define. This is

why, when there is a lack of measurement tools, public administrations uses inputs

costs to give a value to the outputs. However, this method is useless if we want to

measure efficiency. An alternative is to use volumes and compare them over time

through the use of performance indicators (Mandl, Dierx & Ilzkovitz 2008).

An important issue is that usually public products are measured according to the

provision, but also the consumption of users should be taken into consideration

since it is an indicator of quality and value (OECD 2009). Another point to underline

is that sometimes it is quite impossible to measure the outputs because they are

intangible, as in the case of regulations. In this case it is better to measure the

processes of generating and managing them and the outcomes of such regulations

(OECD 2009).

84

Outcomes

Outcomes “are those events, occurrences, or conditions that are the intended or

unintended results of government actions” (OECD 2009). They are different from the

outputs because they are not the direct consequence of government actions but

they are the result of a mix of government outputs and environmental factors (good

governance and events described in the overall context). They “reflect the

effectiveness of different kinds of policy measures” (Mandl, Dierx & Ilzkovitz 2008),

since several outputs leads to one outcome.

Outcomes can be considered as the measure of the goals of a policy, considering

that very often a public policy goal has a qualitative nature and not quantitative. To

avoid misunderstandings, if a public policy goal is “redistribution”, the outcome of a

certain number of actions, implemented to reach that goal, is the degree of

distribution that has been reached.

Their measurement allows policy makers to create a frame of vision for future policy

decisions (OECD 2009). However, on one side it is difficult to define the effects of

several outputs on an outcome since these last ones are not solely the result of

government activities. An additional difficulty in measuring them, is the fact that

usually they can be measured only in the long-term. Moreover, sometimes outcomes

can only be measured in general terms since a specific indicator is not present.

85

8.4 Evaluation

Figure 14: Analytical framework for tourism policy review: evaluation.

In 2006, Governments of OECD countries spent between 30% and 54% for public

policies. The relevance of this data should make people think about the extreme

importance of the evaluative phase of a policy.

The two measures that public policy evaluation is based on are Efficiency and

Effectiveness, however measuring them is not an easy task.

As a matter of fact, the main problems related to the measurement of efficiency and

effectiveness are the difficulties in defining inputs and outputs since “many public

services are interlinked” (Mandl, Dierx & Ilzkovitz 2008). Moreover, the

measurement of efficiency and effectiveness, is based on the availability and

transparency of information and data which is not, in reality, so common. The

challenge is bigger when the purpose is to evaluate and measure efficiency and

effectiveness of a specific sector, like tourism, where the outcomes depend on many

86

different sectorial policies.

Figure 15: Evaluation phase in details.

Efficiency

Efficiency is basically defined as the ability to maximize the potential use of certain

inputs, thus to produce the maximum level of output for the given inputs.

This is the reason why efficiency can be determined by the input-output ratio of a

production possibility frontier (Mandl, Dierx & Ilzkovitz 2008).

The more outputs are produced using a certain amount of inputs, the more efficient

the action is. In economics this is called “technical efficiency”, therefore the purpose

is not to look at the optimal mix of inputs (allocative efficiency) but to look at the

position that a certain input-output ratio has, compared with the so-called

production possibility frontier. It is the frontier made by the “best practices”. It is

based on the idea that the most efficient countries create a frontier that all the other

countries should focus and aspire to. Obviously, the frontier can change (shift) once

a certain country becomes more efficient than the previous frontier itself. This

method is called DEA (Data Envelopment Analysis), and the frontier is, hence,

composed by the best input-output ratio of the different countries included in the

sample. However, the results of this method depend on the variables used for inputs

87

and outputs and on the composition and size of the sample itself. An alternative

approach is the parametric “Stochastic Frontier Analysis” based on econometrics. In

this case, the frontier is created by a functional form that can include also exogenous

variables.

Even if these methods are commonly used and tested, the comparison of different

countries creates not few problems, since there are differences in measurement

techniques, different definition of inputs and outputs and the lack of appropriate or

available data (Mandl, Dierx & Ilzkovitz 2008). In addition to this, the boundaries

between public sector and private production are different across countries and this

creates problems in the benchmarking process.

Moreover, it has to be kept in mind that effectiveness is not just a quantitative

measure of the output, but it should be comprehensive also of a qualitative

evaluation. This makes the simple input-output ratio an easily misleading tool.

So it can be derived that benchmarking is not a real evaluative tool, but its aim is to

make policy makers reasoning about processes and contexts in order to explain why

performances are different (OECD 2009).

In the calculation of efficiency, inputs can be defined as the public expenditure that

can be divided in different government levels, bodies or functions (expenditure for

promotion, restoration etc.). Outputs, on the other side have to be established

according to the inputs chosen. Moreover there are differences if we look at the

efficiency of different instruments or the overall efficiency of a policy sector.

Considering all the difficulties described in the previous paragraphs, a method that

can be used to evaluate efficiency is to use some ex-ante measures to assess

efficiency. This method is based on the hypothesis that efficiency in public policy can

exist only thanks to some “framework conditions” such as:

- Performance-oriented budgetary planning (Mandl, Dierx & Ilzkovitz 2008)

- Simple organizational structure with clear responsibilities (Mandl, Dierx &

Ilzkovitz 2008)

- Human resources management aiming to flexibility, performance

remuneration and performance evaluation (Mandl, Dierx & Ilzkovitz 2008)

- Use of ICT tools that aim to reducing administrative costs and improving

service quality (Mandl, Dierx & Ilzkovitz 2008)

88

All these elements are considered in, and deals with, the box “Governance” in the

figure 15. Ex ante efficiency evaluation suggests that “good governance” have more

chances to implement efficiency-oriented policies thus optimal input-output ratios.

In conclusion, the possible methods to measure and evaluate efficiency in public

policies are:

- Historical analysis of inputs (expenditure) of different government levels for

specific actions or instruments in comparison with historical data on outputs

produced by the instruments themselves.

- Quantitative methods such as DEA and Stochastic Frontier Analysis

(benchmarking among different nations or regions)

- Input-output ratio of the instruments for which data are available (in monetary

and volume terms). In this case it is only possible a qualitative analysis of

supposed efficiency, with the help of best practices (for example best

practices among regions).

- Analysis of ex-ante measures of efficiency. In this case, instead of assessing the

efficiency of the process comparing inputs and outputs, the elements pre-

defined as the determinants of efficiency are analysed. The more efficient the

process, the more outputs are produces.

Effectiveness

Effectiveness is the measure of the extent to which a certain goal is achieved. Thus,

“Effectiveness relates the inputs or the outputs to the final objectives to be achieved,

i.e. the outcome” (Mandl, Dierx & Ilzkovitz 2008). As already affirmed for efficiency,

also the measurement of effectiveness implies several problems. First of all,

considering the definition of outcomes (section 8.3), the degree to which a goal is

achieved through several actions does not depend just form the outputs, but also

from other external variables. Thus, this implies that the measurement of

effectiveness given by the comparison between outputs and outcomes is not always

very significant. Secondly, as already mentioned, policy goals have usually a

qualitative nature, which means they cannot be clearly defined by performance

indicators. This is the second reason why the evaluation of effectiveness is

89

controversial and it risks, to some extent, to lose objectivity. Moreover, the role of

consensus in public policy planning has to be kept in mind. As a matter of fact,

sometimes strategies and actions are designed more with the purpose of gaining

consensus than being really effective. Finally, it is clearly different the measurement

and evaluation of effectiveness for a certain action than the evaluation of the whole

policy. All things considered, the methods to evaluate effectiveness are the

following:

- Outputs-Goals comparison: for those actions whose inputs and outputs are

quantitatively measurable, effectiveness can be simply evaluated comparing

outputs with the goal that those actions wanted to reach. However, few

actions have these characteristics of measurability.

- Cost-effectiveness: this method relates inputs with outcomes, considering

hence the inputs as the tangible prove of implemented actions. This is due to

the fact that it is not always so easy how certain amount of inputs is spent.

However, if inputs are interpreted as abovementioned, the comparison

between outcomes and inputs is a strategic way to evaluate effectiveness.

This method is particularly useful applied to time series analysis. For

example, it is possible to consider the yearly regional expenditure in a certain

period and compare it with a performance indicator such as share of arrivals,

with respect to total national arrivals, in the same period. However it has to

be considered that tourism expenditure during a year, normally, produces its

effects more in the following years than in the one in which the expenditure

has been done.

- Ex Ante Measures: it is possible to apply the Ex Ante evaluation method also to

the analysis of policy effectiveness. In particular it can be developed both for

the analysis of certain instruments and for an entire tourism policy.

Concerning the first one (instruments), effectiveness can be evaluated ex-

ante, analysing the technical characteristics of a certain policy instrument.

For example, a promotion campaign to improve the image of a country can

be evaluated, using marketing theory, according to the characteristics

themselves of the instruments used, namely their quality. This method is a

sort of technical evaluation and thus it can be made by experts. On the

90

contrary, concerning the second one (entire policy), according to the OECD,

several factors affect the effectiveness of tourism policy. Some of them can

be analyzed before policy implementation in order to predict its

effectiveness. These are the following (OECD 2010):

o Planning tourism for long run: the fact that long run goals, a clear

and shared vision and a comprehensive strategic planning for the

future are present and clearly expressed in a national tourism policy,

is an element that underline how structured and planned is that

national tourism policy. This is fundamental for its effectiveness.

o A whole government approach: given the horizontal nature of

tourism sector, coordination among different fields, thus institutions,

of the entire national policy, is another extremely significant factor for

tourism policy effectiveness.

o Collaboration and coherence among level of governments: this

concept is similar to the one above, even if, in this case, coordination

is vertical (among different levels of government). Contrasting actions

(lack of coherence), at different governmental levels, can negatively

affect policy effectiveness.

o Industry engagement: as affirmed in chapter 6, collaboration

between public and private sector is nowadays considered essential

for strategy effectiveness.

o Outcomes, Evaluation and performance measurement: the

presence of pre-determined indicators for measurement of policy

performances makes effectiveness more and more likely since it

allows to correct the policy during its implementation phase and to

better understand past mistakes.

Bibliography

Estache, A., Gonzalez, M., Trujillo, L. (2007), "Government Expenditures on Education, Health and

InfrastructureL A Naïve Look at levels, outcomes and efficiency", City University London, Department

91

of Economics, Discussion Paper Series 07/03.

OECD (2009), Measuring Government Activity, OECD, Paris.

Olsen, M., West, J., Tse,E., “Strategic Management in the hospitality industry”, Upper saddle river,

2008.

Mandl, U., Dierx, A. and Ilzkovitz, F. (2008), ‘The effectiveness and efficiency of public spending’,

Economic papers, 301, European Commission, Brussels.

Porter, M.E. (1990), The Competitive Advantage of Nations, Free Press, New York

Porter, M.E. (1998) ‘Clusters and the new economics of competition’, Harvard Business Review, 76(6):

77-90.

Ritchie, J.R.B. and Crouch, G.I. (2003), The Competitive Destination/A Sustainable Tourism Perspective,

CABI, Oxon

Snowdon, B. and Stonehouse, G. (2006) ‘Competitiveness in a globalised world: Michael Porter on the

microeconomic foundations of the competitiveness of nations, regions, and firms’, Journal of

International Business Studies, 37: 163-175

The International Bank for Reconstruction and Development / The World Bank “ A decade of

measuring the quality of governance, Governance matter 2007, Worldwide Governance Indicators

1996-2006” 2007

WEF (2009), Travel & Tourism Competitiveness Report 2009, Geneva

92

9. APPLICATION OF THE FRAMEWORK: THE CASE OF ITALY

In this chapter the framework established and presented in chapter 8 is applied to

the case study concerning Italy. As mentioned in the introduction of this work, the

application of the framework wants to give a complete and structured picture of the

Italian tourism policy and on the other side it allows to figure out weaknesses of the

framework itself. This analysis is carried out following step by step each point in the

order presented in the previous chapter.

9.1 Overall Context

9.1.1 Global Context

These are the changes that affect tourism and can be identified in five categories.

However, considering that boundaries among these categories are not in reality so

clear, it is not possible to present the trends divided strictly by category. It will be

specified how each trend influence different categories.

The following trends have been identified as the most important forces that can

influence tourism in the next future.

Economic crisis: it has affected the disposable income of travellers reducing tourism

flows from the second half of 2008. It has affected more international tourism than

domestic one, more business travellers than leisure ones, more hotels than other

kinds of accommodation and more the air industry than other kinds of

transportation. However, the foreseen recovery is an opportunity that can award

those prepared to exploit it.

New emerging markets: the increasing wealth of developing countries is causing an

increase of tourism demand from these countries. The most important emerging

markets are China, India, Russia and Brazil. The travellers from these countries are

constantly growing and it can be foreseen a boom in arrivals in the next future. Just

93

to give an idea of the potential of these markets, the number of Chinese arrivals in

Italy doubled from 2004 to 2007 reaching 1.314.727 in 2007.

Increase of global competition: as discussed previously, the developing countries

enjoy several advantages such as lower labour costs, pristine environments etc.

These elements, linked with easier and cheaper mobility, has increased competition

for destinations in developed countries.

Shorter and more frequents trips: as shown by Eurostat, EU residents have

increased short trips both domestic and outbound since 1998. On the other side long

trips (more than 4 nights) have decreased by 8% in the same period.

Increased demand for quality: the more and more international clientele has made

the request for quality services and experiences more widespread. In addition to

this, developed countries have to compete with developing ones focusing on quality

instead of costs.

Online booking: online booking of tourist services has experienced a boom in the

last few years and it is forecasted a continuous growth in the next future. Form 2006

to 2008, the purchase of tickets made by Italian travellers increased by 98%; the

hotel booking increased by 112% and vacation packages by 220%. Moreover, the

exponential use of ICTs is leading to the so-called “knowledge economy”. Put

another way, more and more people are aware of useful information for the choice

of their vacation.

Climate change: it has the power to affect to different extents tourism destinations.

It can affect heavily the environment conditions and then they can change tourists’

behaviour.

Growing sensitivity to sustainable tourism products: this trend has to be considered

in its broad sense, thus it does not concern only environmental sustainability but

also social and economic issues. As a matter of fact, this trend is leading to the

creation of new niche markets such as nature tourism, sport tourism, social tourism,

wine and food tourism, thermal tourism etc.

94

These are only some of the most important trends, however tourism policy should

consider also other more specific trends, for example the development of new

technologies, enlargement of EU toward East, which can strongly influence the

tourism sector.

9.1.2 National Economic context

Macroeconomic conditions

Growth: the table below shows the percentage growth of the Italian GDP, compared

with its main competitors.

Table 1: Real GDP growth rate, percentage change on previous year (Source: EUROSTAT)

As it can be observed in the chart, from 2000 to the end of 2007, Italian GDP has

grown less than GDP of Spain and France. From 2008 to 2009 its percentage

decrease is worse than its tourist competitors.

Since the national GDP is a picture of the economic wellbeing of a nation, its lower

rate of growth, compared to some competitors, affects negatively domestic tourism.

Figure 16: Real GDP growth rate, percentage change on previous year (Source: EUROSTAT)

95

Unemployment: this is another important indicator of the macro economic

conditions of a country. Italy, as shown in figure below, has a lowest level of

unemployment, with respect to its main competitors, starting from 2002.

Figure 17: Unemployment rate (Source: EUROSTAT)

Price stability: inflation is extremely relevant, considering that affects directly

tourism expenditure of foreign tourists. However, in order to be more significant, it

has to be compared with exchange rate value of the country of origin of the arrivals

considered. The impact on tourism can be analyzed considering the World Economic

Forum data on “price competitiveness in Travel and Tourism industry”. It is extremely

significant to notice that Italy is at the 130th place in the ranking of 133 countries

(W.E.F. 2009). However it is quite normal that developed countries are less

competitive in terms of prices, also countries such as France or Spain occupy very

low positions (respectively 132nd and 96th). Moreover, price competitiveness can be

also analyzed for different categories. This type of analysis underlines positive trends

concerning Italy and its tourism sector. For example, prices for transport service

have grown by 9% in 2009 with respect to 2005. It is positive if compared with the

data of EU 16 that is 12.8%. The same positive trend (Italy vs EU 16) characterizes

prices for package holidays (4.6% vs 11.9%) and restaurants and hotels (8.8% vs

11.6%).

96

Figure 18: Price stability (Source: ISTAT)

Public dept: a high level of public debt means lower possibilities to finance public

policies. Italy, compared to other European countries has a significantly higher level

of debt.

Figure 19 public debts of some European countries as percentage of GDP (Source: EUROSTAT).

According to the CIA World Factbook, Italy has the 6th largest world debt. This

situation limits a lot the possibilities of intervention, especially in tourism, also in

order to respect the stability pact signed with the other countries of the European

Union. As a matter of fact, the Italian Government has recently decreased the

budget of each ministry by 10%.

97

Fiscal policy: it affects the economic competitiveness of a country and it represents

the attitude of a country concerning its approach towards national welfare. The

chart below shows the pressure of taxation in Italy, France and Spain. It is the value

of the total amount of taxes compared to GDP.

The level of pressure is not a negative indicator per se, but it has to be compared

with the level of services a country is able to provide. However, a high level of

taxation influences the price of goods and services and impacts different industries.

These two elements have to be considered together in order to have a clearer idea

about the competitiveness of a country in attracting foreign investors.

Details about the fiscal policy concerning tourism companies will be covered in the

section about tourism friendly framework conditions.

Figure 20: Pressure of taxation in Italy, France and Spain (Source: European Commission)

Tourism friendly framework conditions

This section is based on the categories presented by W.E.F. for tourism

competitiveness. Each framework condition will be analyzed separately. However,

the structure of analysis follows that one proposed by the W.E.F., described in the

previous chapter (three sub-indexes, each one composed by several pillars, each one

composed by several variables). The ranking of each item (sub-indexes, pillars and

98

variables) is defined according to the position in the ranking with respect to the 133

countries but also according to a score (minimum 0, maximum 7) that corresponds

to the position. For example, in the final ranking of tourism competitiveness, Italy is

28th, France 4th and Spain 6th. Each position corresponds also to a score: Italy (4,78),

France (5,34), Spain (5,29). It is important to specify that while in the written part

Italy is described according the ranking, the graphs are designed according to the

scores (this is due to the fact that a lower position corresponds to an higher

numerical value, while, considering scores, higher positions correspond to higher

score).

Regulatory framework: ranking 28 (France 8th; Spain 29th). It includes the following

pillars.

Figure 21: Regulatory framework, scores given by the WEF (from 0 to 7).

Policy rules and regulations: Italy occupies the 71st place concerning this

category. Just to give an idea of the meaning, France is at the 25th place and

Spain at the 74th. This category is composed by several variables. The most

problematic ones in Italy are: rules of foreign direct investments (122nd),

transparency of government policy making (111th), strong foreign ownership

restrictions (106th) and costs to open a start-up (81st).

Environmental sustainability: The place occupied by Italy for this category is the

51st. France is 4th and Spain the 31st. Considering variables of this category, the

99

Italian weak points in environmental sustainability are: sustainability of travel

and tourism industry development (119th) and CO2 emissions (93rd), threatened

species (68th) and enforcement of environmental regulations (64th).

Safety and security: Italy is at the 82nd place, while France and Spain are

respectively at the 55th and 66th place. The most negative result is in the variable

“road traffic accidents” (107th).

Health and Hygiene: it is quite a good ranking since Italy is 27th. France is 9th and

Spain 35th. The variable that lowers the average of the pillar is “hospital beds”

(43rd), which means availability of beds with respect to the population.

Prioritization of travel and tourism: it means the importance that tourism has in

the political agenda. Italy is 51st, France 21st and Spain is 4th. Considering the

variables forming this pillar, the worst values are assigned to “Effectiveness of

marketing and branding” (108th) and to “Government prioritization of travel and

tourism industry” (107th). Also “Travel and tourism government expenditure” is

lower that the average position (61st).

Figure 22: Pillars of the Regulatory Framework (scores), adapted from WEF.

Business environment and infrastructure: ranking 26th (France 7th; Spain 8th). It

includes the following pillars.

100

Figure 23: Business environment adapted from the WEF (scores)

Air transport infrastructure: Italian ranking is 27th, while France is 5th and Spain

10th. The variables to be improved are the “International air transport network”

(89th), “quality of air transport infrastructure” (78th), “airport density” (69th) and

“departures per 1000 population” (42nd).

Ground transportation infrastructure: Italy is 40th, France is 3rd and Spain is 20th.

It is extremely significant that all the variables but one are below the average

ranking of the pillar. These are: quality of ground transport network (99th),

quality of port infrastructure (95th), quality of roads (55th) and quality of railroad

infrastructure (52nd).

Tourism infrastructure: Italy is 3rd, France is 14th and Spain is 1st. This pillar is the

one in which Italy performs better. In this case there is no negative variable even

if they are lower that the ranking of the pillar.

ICT infrastructure: Italy is 25th, France is 19th and Spain is 31st. considering this

pillar, the variable to be improved is the “Extent of business internet use” in

which Italy is the 83rd.

Price competitiveness (fiscal policy in the tourism sector): has already

mentioned in the macroeconomic conditions, Italy, as the other developed

countries, is not very competitive in price. Here, since we are talking about

framework conditions supported by the public sector, it has been decided to

include only the variable with which a state can directly influence prices: tourism

101

fiscal policy6. Italy applies a VAT of 10% on both to hotels and restaurants. These

rates are below the averages of the European competitors chosen in the study

(Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Greece,

Ireland, Italy, Luxemburg, Holland, Portugal, Spain and Sweden), which are 10,4%

for hotels and 14,6% for restaurants (2007). However, Spain applies on both

sectors a 7% rate, while France applies a 5,5% rate on hotels and from July 2009

the same rate is applied also for restaurants (in 2007 it was 19,6%). The study of

Manente M. shows the effect of a hypothetical reduction of VAT in Italy (for

hotels and restaurants) from 10% to 5%. The effects of this reduction can

increase the consumption of hotels and restaurants of about € 1,5 billion, the

consumption of other tourist goods of € 2,7 billion and the investments of € 0,5

billion. The overall effect on the employment will be an increase by 3,8% (about

100 thousand more labour units). The study shows also that the initial loss of

government tax revenue is in part compensated by the increases of taxes due to

the increased consumption and investment.

Figure 24: Pillars of the Business Environment (scores), adapted from WEF.

Human, cultural and natural resources: ranking 22nd (France 11th; Spain 5th). It

includes the following pillars.

6 CISET-CONFTURISMO-CONFCOMMERCIO, (2007), Mara Manente ed, Politiche

fiscali per il turismo ed effetti macroeconomici, CONFTURISMO.

102

Figure 25: Human, cultural and natural resources, adapted from the WEF (scores).

Human resources: this pillar is divided in to two sub-pillars that are “Education

and training” and “Availability of qualified labour”. Concerning human resources

Italy is 41st, while France is 23rd and Spain is 31st. In particular the below-average

variables for Italy in this pillar are: hiring and firing practices (133rd, last position),

extent of staff training (109th), quality of the educational system (84th) and HIV

prevalence (73rd).

Affinity for travel and tourism: this pillar concerns the attitude of the country

toward tourism in general. Italy is 71st, France 55th and Spain 48th. Concerning

Italy, the most negative variables in this case are “Tourism openness” (94th) and

“Attitude of population toward foreign visitors” (78th).

Natural resources: Italy occupies the 90th position, while France the 39th and

Spain the 30th. This pillar does not refer just to the endowment of natural

resources but to how they are used, managed and valorized. Thus the variables

that have to be improved are the surface of “protected areas” (91st) and, even if

slightly above the pillar average, “Quality of the natural environment” (87th).

Cultural resources: Italy is 5th, France is 7th and Spain is 1st. As it can be observed

this pillar is extremely positive. It has to be underlined that Italy is the first

country in terms of number of World Heritage cultural sites.

103

Figure 26: Pillars of the Human, Cultural and Natural Resources (scores), adapted from WEF.

The following charts show the performance of Italy in the different pillars of the

three sub-indexes. The red line settles the mean of the scores Italy obtained for the

sub-index. Therefore, those pillars performing under the mean are those in which

efforts should be devoted for improvement.

Figure 27: Italian Regulatory Framework, adapted from WEF.

104

Figure 28: Italian Business Environment, adapted from WEF.

Figure 29: Italian Human, Cultural and Natural Resources, adapted form WEF.

Market

As already explained, this section presents numbers and characteristics of the Italian

tourism market. Thus it is divided in: Tourism and hospitality industry,

Transportation enterprises, Market intermediaries, Demand.

Supply

Tourism and hospitality industry: This category includes the whole hospitality

industry together with food and beverage industry, discos, theme parks, wellness

105

centres and cultural activities. The following two graphs shows national capacity of

hospitality industry. Figure 30 shows the number of establishments by type. On the

other hand Figure 31 shows the number of beds by type.

Figure 30: Number of Hotels and other types of accommodation in Italy 2000 and 2007 (Source: ISTAT)

Figure 31: Beds of Hotels and other types of accommodation in Italy 2000 and 2007 (Source: ISTAT)

The category ‘other types of accommodation’ includes house rental, farmhouses,

B&B, campings and holiday villages. It is possible to notice that hotel beds grew by

20% from 2000 to 2009, while other typologies beds grew by 15%. A very significant

data is referred to B&B and farmhouses. In fact B&B increased from 10278 to 20437

from 2005 to 2009. In the same period, the number of farmhouses increased from

11758 to 15217.

106

Within the hotel category, 2 and 3 stars account for the majority of establishments

as shown in the table and graph below.

Table 2: Number of hotels by typology in 2007 (Source: ISTAT)

Figure 32: Distribution of Hotel typology (Source: ISTAT)

A significant indicator of performances of the hotel sector is the occupancy rate. In

the figure below it is possible to notice a drop from 2001 to 2003. From 2003 to 2007

it slightly increases again without reaching the level of previous years. Occupancy

rate is strictly related to another data that is seasonality. It will presented in the

section ‘Demand’.

107

Figure 33: Occupancy rate of Hotels in Italy from 2000 to 2007 (Source: ISTAT)

Table 3: Number of other tourist services (Source INFOCAMERE)

The other components of the tourism industry are the ones in the table above.

Transportation enterprises: this category includes the following systems:

Railway system: in 2007 the railway network has increased by 0,2% reaching

16335 km. However, the competitiveness of long and medium distance trains has

diminished since the number of passengers has decreased by 1,6%. This is in part

due to the development of low cost carriers. The load factor of 55% has

remained almost unchanged from 2000 to 2007. Concerning punctuality, trains

that arrive within 15 minutes of delay are the 88% of medium and long distance

trains, and 96% of regional trains. However, the range 0-15 is too wide to be

significant for a proper evaluation of punctuality.

Road system: the length of the total road network in 2006 amounts to 175442

km with an increase of just 8,3% from 1990. Out of the total network, in the

108

same period the highway system has increased by 6%. The high seasonality of

utilization and the limitations of the network cause congestion during July and

August. In addition to this, Italy is one of the European countries with the highest

rate of road accidents (EUROSTAT).

Navigation system: given the geographical characteristics of Italy the maritime

transportation is extremely important. In 2006 it registered 86 million of

passengers. The number of passengers has increased by 9% from 2005 to 2006.

This performance is the best in Europe followed by Greece (5%) and France

(2,3%).

Air transportation system: the total number of airports is 100, of which 49 are

communitarian international airports. In 2008 the number of passenger

increased by 170% from 1990 with a yearly increase of about 6%, reaching 133

million passengers. Already in 2007 low cost carriers passengers amounted to

26% (ENAC). The distribution of airports on the national territory is quite

homogenous, even if the majority of infrastructure is concentrated in the

northern part.

Market intermediaries: classic tourism market intermediaries are Tourist agencies

and Tour operators. In Italy, in 2008, market intermediaries amount to 11578

companies. They grew with respect to 2007 even if online booking has increased

more and more. As a matter of fact, according to this new trend, a new form of

market intermediary is the ‘online tourist agency’.

Demand:

The figures below show domestic and international demand in Italy from 2000 to

2007. In 2007 total arrivals amounted to 96,2 millions. Out of them, 53,3 millions

were domestic and 42,9 were international. As it can be observed, both types of

arrivals grew though the years, however, overnights grew less. This is due to the

value shown in Figure 36 that is Length of Stay. It is very significant because it shows,

on average, how many days domestic and international tourists stay in Italy. It could

be also used as a proxy variable for the quality of the experience in the country,

109

however, the drop shown in the figure is also due to the general trend of more

frequent and shorter trips.

Figure 34: Domestic and international arrivals (millions) in Italy from 2000 to 2007 (Source: ISTAT)

Figure 35: Domestic and international overnight stays (million) in Italy from 2000 to 2007 (Source: ISTAT)

110

Figure 36: Domestic and international length of stay (days) in Italy from 2000 to 2007 (Source: ISTAT)

The two figures below show the distribution of international arrivals by country of

origin and the respective expenditure in 2007. This data is very significant to

understand Italian most important markets, their needs and also to plan future

promotional campaigns.

Figure 37: Distribution of international arrivals by country of origin in 2007(Source: Banca d’Italia)

111

Figure 38: Distribution of expenditure of international arrivals by country of origin in 2007(Source: Banca

d’Italia)

As already explained before, the importance of emerging nations as origin market of

tourist is an opportunity to be exploited. In fact, the international visitors in Italy

from developing countries have been increasing more than visitors coming from

OECD countries (Figure 39). It is important to look at those markets in order to

balance the almost stagnant demand from developed countries and the increasing

competition of emerging destinations.

Figure 39: Percentage increase of International visitors to Italy form OECD countries and resto of the world

(Banca d’Italia).

Another important analysis of demand is motivation. The main motivation of foreign

tourists for coming in Italy is obviously leisure (57,6%), followed by business travel

112

(17,5%), visiting relatives and friends (10,2%) and study (9,6%). According to the

expenditure of foreigners, international demand can be divided into: cultural

holidays (31,5%), business travel (21,9%), beach holidays (12,9%), visiting relatives

and friends (8,8%) lake holidays (4,6%), mountain holidays (3,7%) and other

(16,5%)7.

Box. 5

Education and Training

The increasing need in tourism sector of quality and competitiveness, requires very

qualified professionals and well trained labour forces. This can be afforded only

through the development of prestigious universities and demand oriented

vocational training. At the moment, tourism university studies are more theoretical

than market oriented. Moreover there is a complete lack of studies about business

management (such as business schools). Tourism university studies, to this day, in

Italy, are perceived and considered as second-class studies. This, also, does not help

to create incentives to the right development of this field of studies. Moreover, this

is strengthened by the fact that the same university title is assigned for every types

of tourism study in Italy. The lack of clarity in the contents of university degrees (mix

of economics, languages, culture, management at different extents) makes for the

business more difficult the recruitment of graduated people in tourism.

7 Source: Banca d’Italia.

113

Economic importance of tourism8

Tourism value added: in 2007 the added directly activated by tourist consumption

accounted to € 47,7 million, with an average yearly increase of 2,6% from 2005;

considering also the indirect effects, the total value added was more than € 73

million. The part activated by consumption of international visitors accounts to one

third of the total value added. The total tourism GDP represented 4,8% of the

national GDP (CISET and IRPET calculation). Even if the value added increased in the

last years, its share of the national GDP has slightly decreased from 5,1% of 2004.

Also the productivity of labour has decreased constantly from 2000 to 2006, from €

32200 per employee, to 28000.

Figure 40: Percentage of direct and indirect value added activated by tourism consumption divided by sectors,

2007 (Source: CISET and IRPET).

The pie chart above, shows the dispersion of the value added activated by tourism

(total value added of € 73 million) in different sectors. It can be observed that the

most important effects are those concerning hotels and restaurants, commerce and

house rental.

8 The entire chapter is based mainly on data provided in the chapter “Il turismo

nell’economia italiana”, written by Prof. Mara Manente (CISET), in the book

“Rapporto sul Turismo Italiano”, ed Becheri, E. (2009).

114

The decrease of tourism valued added share of GDP and the labour productivity can

be in part attributable to the increased productivity of new sectors in developed

countries.

Tourism employment: in 2007 employment directly activated by tourist

consumption accounted to 1.631 thousands labour units, and the total (direct and

indirect effects) accounted to 2.444 thousands units, that is to say 9,4% out of the

total national employment. The trend has been positive in the last years, and this

shows the importance of tourism in the creation of employment. Hotels and

restaurants generate about one third of tourism consumption (total activation),

followed by commerce, agriculture and recreation.

Figure 41: Percentage of direct and indirect employment activated by tourism consumption divided by sectors

2007 (Source: CISET and IRPET).

Balance of payments: tourism balance of payments has always be a positive figure in

the balance of services. Its surplus in 2007 was of about € 11,8 billion and it has been

very important in order to decrease the overall deficit of the whole balance of

services (thanks to tourism only € -5,9 billion in 2007). As it can be observed in the

graph below, the surplus of the tourism balance remained quite constant from 2000

to 2007.

115

Figure 42: tourism balance of payments (CISET elaborations; source: “Relazione Generale sulla Situazione

Economica del Paese 2007”).

The following chart demonstrates that tourism balance has a good performance

compared to other services and this gives an additional idea on the importance of

this sector for the Italian economy. In fact, its surplus is at the level of that one of

textile and clothing and it is far better than commercial, food farming (which receive

a lot of support from the state) and oil.

Figure 43: tourism balance and main entries of the commercial balance (CISET elaborations; source: “Relazione

Generale sulla Situazione Economica del Paese 2007”).

116

Public expenditure in tourism sector

The public expenditure of the tourism sector can be divided according to different

administrative levels. However, since the regions are the most important public

actors in tourism, it has been decided to concentrate on them.

The following table shows the expenditure of the whole public administration (sum

of the different administrative level) and the share of central administration

expenditure. It can be seen that the share of central administration expenditure is

quite low. In fact, the main part of contribution comes from the regions and other

local public administrations.

Table 4: Total expenditure (billions of Euros) of different levels of tourism administration and share of central state contribution (Ministry of Economic Development budget).

ENIT is the institution in charge of the promotion of Italian tourism. The following

table analyses the sources of revenue of ENIT, which, of course, can be considered

the expenditure of this body.

Table 5: sources of revenues of ENIT from 2007 to 2009 (ENIT Report, May 2010).

Regions have the main responsibility in tourism policies issues according to the

national law. The chart below gives an historical view to the total expenditure of

regions for tourism purposes.

117

Figure 44: Total expenditure of regions from 2000 to 2007 (Source: “Rapporto sul turistmo Italiano” XVI edizione).

Since the effects of regions expenditure have to be considered in the medium and

long term, it is useful to analyse their expenditure aggregating several years. The

following table sum the expenditure for tourism from 2001 to 2006 for each region.

Table 6: Total expenditure of regions, sum of the years from 2001 to 2006 (Source: “Rapporto sul turistmo Italiano” XVI edizione).

118

Out of the total expenditure of regions from 2001 to 2006, the most important entry

is promotion. As it can be observed in the chart below, the average expenditure of

promotion in Italian regions is 39% of the total expenditure, followed by

accommodation facilities and tourism organizations.

Figure 45: Tourism expenditure of regions from 2001 to 2006 by type of expenditure (Source: CONFTURISMO, “La spesa delle regioni per il turismo”)

9.1.2 Institutional and structural context

1) Legal Foundations: First of all it has to be specified that in Italian Constitution

there is no explicit reference to the tourism sector. However the most relevant

part for tourism is the so-called 5th title. It includes the articles from the number

114 to the number 133. These 19 articles define the rules for regions, provinces

and municipalities and the rules for their relations with the central State. In

particular it is defined the division of power according to the matters. Some

matters are under the exclusive control and power of the central State, some

others are ‘concurrent matters’, that means that both central State and regions

have the power. Then it is declared that the regions have exclusive power on all

the other matters that are not explicitly mentioned in the lists below. Thus, being

tourism not mentioned, regions have the exclusive power on it. However there

are several matters that directly impact on tourism among the exclusive and

concurrent matters (e.g. protection of the environment, transportation networks,

119

organization and promotion of cultural activities).

Moreover the definition of government bodies is exclusive power of central State,

thus the central State can create also central government bodies for tourism even

if it is exclusive regional matter. So, even if state responsibility in tourism has an

implicit character, tourism can contribute to objectives that are explicitly

mentioned in the constitution. Above all, employment and economic

development.

Concerning the “interpretation” of the role of tourism in the national context, the

fundamental law is the L. 135/2001. This law defines tourism sector, its

importance in the national economy and some of the institutions, and the

functions they carry out. However the majority of rules concerning tourism policy

are within the Regional Tourism Laws. Each region is free to define its own

regional tourism law and they are not so homogeneous.

- Structure: As explained in the previous chapter, the structure is the organizational

chart of institutions involved in the national tourism policy. The structure is

presented in the figure below:

Figure 46: Organization chart of Italian institutions involved in tourism (Source: adapted from OECD).

120

The responsibility for tourism sector at the central level (National Tourism

Administration-NTA) was assigned under the Presidency of the Council of Ministers in

2006 with the creation of a Department for development and competitiveness of

tourism. Since 2009, the Government created a Minister of Tourism without

portfolio, in charge for coordination of the department. The other bodies are:

1) Division for the tourism development and management

Its functions (those below in the chart) are: to promote national and international

tourism investments (national tourism development); to provide aids in the planning

process of European funds (financing of tourism sector); to manage general and legal

affairs; to create measures to support tourism demand and to lower seasonality

(support to tourism demand).

2) Division for programming and coordination of tourism policies Its functions

(those below in the chart) are: to develop national tourism strategies (national

tourism policies); to develop statistics of tourism sector through the national tourism

observatory (fundamental function for tourism policy planning process); to manage

international and EU relations.

Box 6

Tourism statistics

Data collection of tourism statistics is carried out by several institutions. ISTAT gather

information concerning accommodation (offer and movement) and about domestic

tourism behaviour. The Bank of Italy provides information about tourism flows

across the national borders. The National Tourism Observatory conducts surveys and

collect some of the data provided by ISTAT and The Bank of Italy. Other providers of

information are CISET, ENIT, IRPET, CONFTURISMO, MAE (Ministry of Foreign

Affairs), FEDERALBERGHI, the chamber of commerce, the regions, the provinces and

some municipalities.

It is clear that the collection of statistical information is quite fragmented and for

professionals it is not an easy task to find the information needed. The National

Observatory of Tourism is already collecting some of the information offered,

121

however it should extend the sources, first of all with the other public entities that

provide information (ENIT, regions and provinces). Moreover, sometimes the

information provided diverges according to the institution, for example data about

overnights provided by ISTAT and The Bank of Italy is quite different, due to different

definitions.

In addition to this, Italy has not an official Tourism Satellite Account, but it is

extremely important both for the monitoring of tourism and the development of

effective tourism policies.

Another point to be improved is that ISTAT does not consider the rental of private

houses or accommodation in own houses as part of tourism statistics. In fact, the

phenomenon is underestimated, since studies shows that flows generated by these

kinds of accommodation is greater that the flows generated by official

accommodation establishments (Becheri 2009).

3) National Tourism agency (ENIT): it is the body in charge for international

promotion of Italy as a whole. It is supervised by the department and it develops

activities together with local authorities and other actors involved. Thus it is

responsible for the development and maintenance of the brand “Italia”.

4) Tourism Policy Committee: its main function is coordination among different

institutions and actors. It is, in fact, composed by different ministries (Foreign Affairs,

Economy and Finance, Economic Development, Innovation in Public Administration,

Environment, Transport and Regional Affairs), representatives from the regions,

provinces and municipalities and finally professional national associations in the field

of tourism. It is chaired by the Minister of Tourism.

- Governance: As explained in the previous chapter, governance is a very difficult

element to analyze and evaluate. However, it has been considered that World Bank

indicators are the most suitable and proper to use. That’s why it has been decided to

use them.

The table below shows the six indicators (Voice and accountability, political stability,

governance effectiveness, regulatory quality, rule of law, control of corruption) and

122

their respective values in 2000, 2004 and 2009 in Italy. The value is expressed in

percentile. The Percentile rank indicates the percentage of countries worldwide that

rate below the selected country. Hence, higher values indicate better governance

ratings. So for example the value of ‘Voice and accountability’ in 2009 is 81,5. This

means that 81,5% of the countries worldwide perform worse than Italy in 2009. The

cells have different colors to show the percentile range. The Figure 47 shows the

different ranges. It can be observed in the table that Italy is within yellow and light

green that means between 50th-75th percentile and 75th-90th percentile. However, it

can be significant to compare Italy to other countries at the same level of

development so to understand better.

Figure 47: Percentile ranges legend (Source: World Bank)

The graphs below show the comparison between Italy and France and Spain in 2009.

In Figure 48 France is represented by the bars above and Italy those below for each

Table 7: Italian governance indicators in 2000,2004,2009 (Source: World Bank)

123

indicator. It can be easily observed how France performs better in every indicator,

remaining always within 75th-90th and 90th-100th percentile.

Figure 48: Governance indicators of France and Italy in 2009 (Source: World Bank)

Figure 49 shows the comparison between Spain (bars above) and Italy (Bars below).

Even if the level of Spain is significantly lower than France, all the indicators, a part

from one, ‘Political Stability’, have higher values than Italy.

Figure 49: Governance indicators of Spain and Italy in 2009 (Source: World Bank)

124

9.1.4. Vision and Basic Principles of tourism policy

This is the last section forming the ‘Overall Context’. Concerning Italy, it can be

affirmed that there are not explicit vision and basic principles to “inspire” tourism

policy. It is not mandatory to define a vision, but nevertheless it can be extremely

useful to direct and coordinate all the goals at different governmental levels in the

same direction. Thus the lack of these elements could be considered as a weakness

of the tourism policy system. It should be reminded that in 2007 and 2008 the

“Progetto sistema turismo Italia” was presented in its two editions by its creator

“The European House Ambrosetti”. The purpose was to define common macro goals

for tourism policy and destination management. However this attempt failed.

125

9.2 Planning Phase

9.2.1 Swot Analysis

Strengths

1. Low unemployment rate: From 1998 to 2008 unemployment decreased by

4%, becoming the lowest compared with France and Spain.

2. Quality and Size of Tourism Infrastructures: this is related to the quality and

quantity of accommodation services and other tourist services. Italy is the 3rd

for competitiveness for tourism infrastructures (WEF). Moreover it is the 1st

in terms of quantity of hotel beds in Europe.

3. Health and Hygiene: Italian health service is considered of excellent quality.

In particular it is the 1st for access to improve sanitation and to drinking water

(WEF).

4. Accessibility: The air, ground and maritime infrastructures are quite

developed in particular concerning the air and maritime ones.

5. Comparative advantage: Italy enjoys a strong comparative advantage

because of the possibility to offer some of the top world attractions and, in

addition, an heterogeneous natural and cultural environment. This allows to

maintain high level of yearly arrivals even if the framework conditions are not

very competitive.

6. Number of World Heritage Cultural Sites: Italy is the first country worldwide

for quantity of W.H.C.S. (42).

7. Brand perception: According to the country brand index, the brand “Italy”

occupies the 4th place worldwide (2008). In particular it takes the 1st place

concerning ‘art and culture’ and ‘fine dining’. Moreover it takes the 2nd place

for ‘history’ and ‘ desire to visit/visit again’. The brand “Italy” includes also

products such as fashion industry in which Italy is perceived extremely

creative (2nd place for ‘creativity industry exports’, WEF).

126

8. SMEs: Italian hotel and restaurant market is formed mainly by SMEs with less

than nine employees. This allows to personalize tourist experience and often

to be more flexible and quality oriented, even if not standardized.

Weaknesses

1. GDP growth: In the last years Italian GDP grew less than those of its main

competitors and, during the economic crisis, it decreased more than the

others.

2. Public dept: Italy has the 6th largest public dept in the World. This reduces

the possibilities of public expenditure of economic development and of

reduction of the pressure of taxation.

3. Low Price Competitiveness: Italy is the 130th country among 133 for price

competitiveness according to the WEF.

4. Policy rules and regulations: Italy is the 71st country for friendly business

rules. In particular this is the cause of the very low rate of foreign

investments.

5. Quality of education: The tourism education system is not market oriented

and reveals several weaknesses in vocational training. It is ranked 84th by

WEF, staff training is 109th.

6. Hiring and firing processes: Italy is the last country according to the WEF

concerning these practices.

7. Sustainability: Italy is not very competitive concerning eco-friendly

strategies. In fact, it is 119th for “T&T sustainable development” and 91st for

the surface of “protected areas” (WEF).

8. Prioritization of tourism: in spite of the economic importance of tourism,

Italian policy does not consider tourism as a priority. Italy ranks 107th for

127

“Government prioritization of T&T” and 108th for the “Effectiveness of

marketing and branding” (WEF).

9. VAT: the VAT on hotels and restaurants is higher than Italy’s main

competitors (Spain and France) and this creates additional price

disadvantages and reduces the revenues for the owners (less incentives for

investments).

10. SMEs: even if the quantity of SMEs has been considered as a strength, it

presents also several weak points. In particular the difficulties in funding

processes, thus in innovation and standardization of quality.

11. Governance: World Bank governance indicators reveal very low

performances compared with countries at the same level of development.

Moreover, it is ranked 111th by the WEF for the “Transparency of government

policy making”. According to “Transparency International”, Italy ranks 67th for

the level of corruption, far away from countries at the same level of

development (only Greece performs worse).

12. Lack of vision and basic principles: As already observed, the lack of vision

and basic principles is considered a weakness in terms of coherence in

defining the objectives of different government levels.

Opportunities

1. New emerging markets: the fast development of BRIC countries is an

opportunity since they can become important origin markets for Europe. It is

fundamental to exploit this opportunity in order to balance the stagnant

growth of tourists coming from consolidated markets and the increased

competition at the global level.

2. Online market: the online reservation and collection of information have

been booming in the last years. Therefore the quality of information provided

online and the usability of online facilities for booking is essential for both the

128

reputation and the choice of a destination. In addition to this, this trend gives

the opportunity to manage the destination with a central reservation system

that can provide similar services of an incoming tour operator. This allows

overcoming some of the market intermediaries (retaining more value added

in the destination) and managing better the destination according to market

rules rather than law enforcement.

3. Niche markets: this trend shows the increasing interest for alternative types

of tourism. Examples are social tourism, ecotourism, wine and food tourism,

sport tourism etc. In particular, Italy can better exploit its potential in wine

and food to exploit this segment before other competitors in gastronomy

(e.g. France) moves before. This gives also the opportunity to create

synergies among tourism, wine & food industry and agriculture. A good

practice of wine tourism has been developed in Australia. These markets can

be used to reduce seasonality.

4. Economic importance of tourism: tourism value added is about 5% of

national GDP, the tourism sector creates 9.4% of national job places (total

effects) and the tourism balance of payments presents an important surplus

for the balance of services. This is an opportunity for improving the

government prioritization of tourism.

5. Development of Southern part of Italy: Relevant disparities still exist

between south and rest of Italy in terms of development. Southern regions

have a big tourism potential that is still only partially exploited.

Threats

1. Global competition: The increasing globalization impacts strongly also on

tourism sector. Emerging countries are more and more competitive enjoying

low labour costs. For Italy there is a high risk of losing market share.

129

2. Increasing demand for quality: A supply system formed mainly of SMEs can

have difficulties in offering homogeneous and guaranteed levels of quality.

3. Length of stay: Length of stay in Italy is decreasing constantly. This creates

big problems of profitability and congestion, many people visit the same

places in the same period in shorter time. If the organization supply does not

adapt to this trend, Italy risks losing part of the market.

4. Climate change: It is a global trend that is affecting the environmental

stability of several destinations. At the moment it has the biggest impacts on

winter mountain tourism. Italy has to manage this situation, planning

strategies to face it.

5. Terrorism: International safety is threatened by a new age of terrorism.

Safety will be always more important in particular in big public places

(airports, stations…). If a country will result unable to guarantee safety, it

could risk losing tourism market share.

130

9.2.2. Goals and Strategies

National tourism policy does not present general goals but only specific objectives

strictly linked to the instruments/actions used to reach them. Moreover, as already

mentioned, Vision and Basic Principles miss completely. Thus it is not possible to

verify the coherence of the specific goals with more general guidelines.

The specific goals of Italian tourism policy are defined in the document “Patto per il

Turismo”, presented in spring 2010. However there is no official document that

explains a wider strategy for national tourism development. Given the specificity of

goals, the strategies tend to coincide with the actions. Thus each goal will be

presented with the respective strategy/action to reach it. Moreover each goal will be

evaluated in terms of alignment with the results of the SWOT analysis. This means

that the goals of a policy have to be in line with the results of the ‘overall context’

analysis. In addition, the goals, will be evaluated in terms of alignment with the basic

characteristics of tourism sector in general that can impact a tourism policy. These

are the following:

Characteristics

1) Horizontal sector: Need for coordination and cooperation

2) Competition is first of all among destinations (importance of brand and

attractions)

3) Seasonality (occupancy rate, seasonal unemployment, congestion, friction)

4) Environmental pollution

5) Creates several market failures (rational for State intervention)

6) Intangible product (experience economy): Need for reliable information

It is fundamental to underline that the evaluation of a strategy/action in term

of alignment with the overall context analysis and for the characteristics of

tourism sector, IS NOT an evaluation of quality (effectiveness and efficiency)

131

and appropriateness of the instrument. This type of evaluation will be

developed in the section 9.4 “Evaluation”.

132

Goal Strategy/Action Description Alignment Aligned to: SWOT reference

Higher government prioritization of Tourism

Creation of Minister and new governmental structure

On the 8th

May of 2009 the President of Republic assigns to Michela Brambilla the role of Minister of Tourism through a decree.

Aligned Weaknesses: point 8

Too boost tourism economy through public investments

Allotment of € 118 millions for tourism projects

Co-financing tool for excellent projects in tourism with particular focus on reducing seasonality (incentives to niche markets)

Aligned Opportunities: point 3

Characteristic: point 3

Decrease seasonality “Buoni Vacanza” € 5 millions budget to incentive weaker categories (poorer families, young people, old people, handicapped) to travel during low season periods.

Aligned Opportunities: point 3

Characteristics: point 3

To reduce the SMEs financial problems

“Italia & Turismo” € 3 billions loans with favourable conditions specifically for tourism firms. Development in partnership with several banks.

Aligned Weaknesses: point 10

Improvement of tourism training

“MOTUS” Funds for training and Internships within hotels offered to unemployed people from 6 region of south Italy.

Aligned Opportunities: point 5

To increase promotion abroad

“Italia much more”; “Yes Italia”; broadcasts and banners

“Italia much more” is a promotional video that has been shown also in the international channel “Yes Italia”, a thematic channel focusing on the diffusion of the Italian image abroad. The broadcasts and banners were focused on: US, Canada, UK, Germany, Austria, Switzerland.

Aligned Strengths: point 7

Weaknesses: point 8

Characteristics: points 2,5

Creation of a competitive national tourism website

“Italia.it” Tourism national website for information about attraction and supply

Aligned Opportunities: point 2

Characteristics: point 6

To increase coordination Tourism Committee Assembly composed by different ministries (Foreign Affairs, Economy and Finance, Economic

Aligned Weaknesses: point 8

133

Development, Innovation in Public Administration, Environment, Transport and Regional Affairs), representatives from the regions, provinces and municipalities and finally professional national associations in the field of tourism. It is chaired by the Minister of Tourism

Characteristics: point 1

Improvement of Cooperation

“Comitato ristretto” The minister together with the three main professional association in tourism sector (Federturismo, Confturismo, Assoturismo) form this committee for development and promotion of different tourism products

Aligned Characteristics: point 1

Other general or not specified goals…

Unclear actions The Government programme “Patto er il turismo” lists other actions that are not clearly related to respective goals. Moreover they are quite vague and it is impossible to verify their “quality”and reliability.

X X

These are the main goals and actions presented in the tourism policy program of the Government. The evaluation of each instrument

concerning effectiveness, efficiency and appropriateness (significance in terms of impacts) is developed in section 9.4.

134

9.3 Implementation phase

Considering that the tourism policy programme presented in the previous section is

in its initial phase (has been implemented less than one year ago), in this section, it is

possible to present just the financial inputs. However it has great significance for the

analysis of efficiency that is developed in section 9.4.

It has to be specified that costs presented below are those available online from

several sources (mainly national newspapers). This is due to the low rate of

transparency of official sources (supported also by WEF evaluation and World Bank

governance indicators) and to the limits of the authors of this research in collecting

official data (International institutions, such as OECD, that are normally in charge for

national policy reviews, have much easier access to official data).

Inputs (Euros) Function

15.500.000 Minister budget composed by the following cost entries:

378.360 Transportation of the Minister

2.900.000 Planning of re-launching activities for national tourist image (Not specified

activities)

3.000.000 Implementation of re-launching activities for national tourist image (Not

specified activities)

75.000 Functioning for secretary of World Ethics of Tourism

72.653 Functioning of offices and interpreters

22.000 Entertainment expenses

85.000 Experts consultancy

8.600.000 Re-creation of “Italia.it”

33.838.624 Budget of ENIT 2010 (This budget includes also “Italia much more”, broadcasts, banners and

“magic Italy”)

5.115.198 “Buoni Vacanza”

135

118.000.000 Co-financing tool for excellent projects in tourism.

The Costs presented above are those related to the central government and

institutions of national tourism policy. However, the main amount of expenditure for

tourism policy is the regional one, being them the main actors in terms of tourism

policy. The purpose of this work is anyway to analyze national tourism policy at the

central level, without focusing on the several differences among regional policies.

9.4 Evaluation

This is the most important section because it sums-up all the elements analyzed

previously. It has been thought that the best way to structure this section is to

evaluate the policy from three different perspectives:

1) Technical evaluation of instruments: This concerns the likeliness of both

effectiveness and efficiency of each instrument.

2) Ex-ante measures of efficiency.

3) Ex-ante measures of effectiveness

Technical evaluation of instruments

It is important to underline that this is a theoretical ex-ante technical evaluation,

thus it means that it cannot take into consideration the quality and the extent of

implementation of each instrument. In particular the unavailability of data about the

results of implementation limits the possibility to understand whether the

instrument has been designed just for consensus or in order to be effective.

Goals Strategy/Action Technical evaluation

Higher Creation of The creation of the Minister responds

136

government

prioritization of

Tourism

Minister and new

governmental

structure

to the need of coordination in tourism

sector at a central level. Considering

the economic importance of tourism,

the creation of a specific minister can

be considered appropriate.

Too boost tourism

economy through

public investments

Allotment of € 118

millions for

tourism projects

In general it can be considered a good

measure. However, the intervention of

government is justified/evaluated

depending on the system of allotment

of these resources. In fact, these have

to be distributed in order to give

incentives to highly innovative projects

(see INNOTOUR in Switzerland). Among

the criteria chosen for the allotment of

these funds in 2010, innovation is not

one of the most relevant.

Decrease

seasonality

“Buoni Vacanza” There are several doubts about the real

effect on the reduction of seasonality.

Seasonality is much more affected by

weather and social constraints than

prices. In addition to this, the flow that

this instrument is able to generate is

insignificant to decrease seasonality

(about 10.000 coupons cannot

influence the seasonality of created by

more than 90 million arrivals).

To reduce the

SMEs financial

problems

“Italia & Turismo” This measure is focused on the problem

of financing of SMEs, thus it can be

considered an adequate measure.

However, State contribution and the

137

favourable conditions are not clear,

thus the real appropriateness of this

instrument cannot be evaluated.

Improvement of

tourism training

“MOTUS” It is a measure for improving the

employment in tourism addressed to a

thousand of people. However, the

needs for training and education in

tourism have to be addressed with a

more structured and long-run

approach. It is even more important

since MOTUS is particularly focused on

the Southern part of Italy. Thus it can

be concluded that MOTUS is just a small

initiative compared to the real needs of

southern regions and education system.

To increase

promotion abroad

“Italia much

more”; “Yes Italia”;

broadcasts and

banners

The image of a country is a public good,

than a certain government intervention

is required. However, it is not possible

to evaluate both efficiency and

effectiveness. Doubts about their real

effectiveness emerge from the low

ranking of WEF, in fact Italy is 108th for

the effectiveness of marketing and

branding, compared with the high level

of expenditure for tourism promotion.

Creation of a

competitive

national tourism

website

“Italia.it” This is the second version of the same

website that was created between 2004

and 2008 that, in spite of € 45 million of

public funds, failed. The new website

was created with € 8,6 million,

138

however, it still have a low visibility

(ranked above 4500 in Italy and above

184.000 abroad). This means that it has

a low ranking for the search engine

systems. In addition to this, there is a

redundancy of information among

different websites (enit.it, Italia.it,

italiamuchmore.com) that on one side

can mislead the tourist and on the

other side is cost inefficient.

In conclusion, the promotion of the

national image online is a public task

since it is a public good. However, this

should concentrate more on the image

communication rather than trying to

provide a tool for the complete

organization of the journey.

To increase

coordination

Tourism

Committee

This is related to the need for a whole

governmental approach to tourism.

However, this is only described in terms

of the function this committee has. Its

effectiveness depends on how the

coordination inside this committee is

organized and carried out and the

frequency with which this instrument is

used.

Improvement of

Cooperation

“Comitato

ristretto”

Engagement of the tourism industry is

considered fundamental for a proper

tourism policy. However, its

effectiveness has to be evaluated in the

139

same way described for the tourism

committee.

Other general or

not specified

goals…

Unclear actions “Patto per il Turismo” explains several

other activities that the Government is

going to implement. Nevertheless these

are just mentioned without any

description of the steps to do for the

implementation, the resources needed

and related objectives. Thus they

cannot be included in the technical

evaluation. Anyway this lack of clarity

impacts negatively the technical

evaluation of the structure of the

tourism policy programme (Ex-ante

measure for effectiveness evaluation).

Ex-ante measures of efficiency

Despite theory of efficiency evaluation, it is very difficult to apply classical

inputs/outputs ratio in a national tourism policy audit. This is the reason why ex-ante

measures have been considered the most suitable way to assess it. The first measure

is ‘performance oriented budgetary planning’: since the tourism Minister has been

named less than one year ago, performance oriented budgetary planning will be able

to start just starting from next year. However the fact that the Minister initial budget

was increased by 24 times creates some doubts upon the performance orientation.

Moreover a very significant data concerning performance orientation is showed by

the relationship between promotion yearly budgets (inputs) and the WEF ranking for

‘effectiveness of marketing and branding’ (outputs). An additional indicator for

public policy efficiency can be the lack of clear and measurable objectives. As a

matter of fact, if goals are not well defined, it can be very difficult to allocate the

right quantity of resources. Thus inefficiency is much more likely. There is only one

140

clear action concerning performance orientation among the tourism institutions. It is

the agreement between the Minister of Tourism and the Minister for public

administration innovation for the application of a monitoring system to ENIT.

The second ex-ante measure is ‘simple organizational structure with clear

responsibilities’. The organizational chart of tourism central institutions gives a clear

idea of the correspondence between bodies and tasks (who does what). However

there are some functions that still remain unclearly assigned between regions and

the central State.

The third ex-ante measure is ‘human resources management aiming to flexibility,

performance remuneration and performance evaluation’. According to the Global

Competitiveness Index (WEF), Italy ranks 130th for ‘Flexibility of wage

determination’, 90th for ‘Rigidity of employment’ and 129th for ‘Hiring and firing

practices’ among 139 countries worldwide. Even if this is about the private sector, it

is unlikely that public sector is performing better that the private one concerning this

type of indicators.

The fourth ex-ante measure is ‘use of ICT’. Italy is slightly above the European mean

of number of e-government services. Moreover from 2007 to 2008 the quantity

(terabyte) of online data of public administrations has grown by 24%. From this data

we can suppose a quite good level of ICT use in public administrations. Nevertheless

the level of transparency remains quite low (119th for ‘Transparency of government

policy making’, WEF).

The last ex-ante measure is ‘Governance quality’. Considering the World Bank

governance indicator presented in section 9.1.2, Italy is significantly disadvantaged

with respect to European countries at the same level of development. Moreover

WEF indicators in the Global competitiveness index show low ranks in ‘Favoritism in

decisions of Government officials’ (115th) and ‘Wastefulness of Government

spending’ (108th). This gives another tool to foresee the potential efficiency of public

administration.

141

Ex-ante measures of effectiveness

Also in this case, ex-ante measures are the most suitable way to assess effectiveness.

This is due, not only to the unavailability of complete data, but also to the fact that

there are not yet final outcomes to compare with initial goals. Moreover it is

inappropriate to compare tourism policy inputs (at the central level) with wide

outcomes such as arrivals, value added and employment, in order to define a final

evaluation of effectiveness of a national tourism policy.

The first ex-ante measure of effectiveness is ‘Planning tourism for long run’. Italian

national tourism policy lacks Vision, Basic principles thus general guidelines. This is

the first relevant missing point in the planning process of a tourism policy because

the absence of a common direction risks creating contrasting strategies,

undermining effectiveness of the policy process. Another element that contrasts

with a good long run planning is that goals are not linked to clear strategies.

Moreover goals measurement is not specified as well as the level of performance to

be reached within the goal itself (e.g. if the goal is to improve coordination, it should

be clarify how to measure this improvement and the planned level of improvement).

Finally, every strategy should be composed by different actions. For each of them it

is fundamental to specify inputs, timing, responsibilities and steps necessary for a

good implementation.

The second and third ex-ante measures are ‘A whole government approach’ and ‘

Collaboration and coherence among levels of government’. The creation of the

Tourism Committee can significantly improve both vertical and horizontal

coordination since it is composed by different ministries, representatives of regions,

provinces and municipalities, and representatives of the main professional

associations in tourism. A proper use of this instrument can increase consistently the

effectiveness of the national tourism policy.

The forth ex-ante measure is ‘Industry engagement’. The participation of

professional associations to the Tourism Committee and to the “Comitato ristretto”

142

proves the willingness of engaging the industry in policy decisions. Nevertheless, one

of the most important indicators of industry engagement is the quantity of PPP

created in the field of tourism. Unfortunately, there are no official data about PPP on

the whole national territory. Anyway, there are no relevant PPP at the central level

(such as About France, ex Maison de France).

The fifth ex-ante measure is ‘Outcomes, evaluation and performance

measurement’. First, the lack of an official TSA makes more uncertain the planning

phase of a tourism policy. Second, there is no specific monitoring and evaluating

system to evaluate the tourism policy in during the implementation phase.

Therefore, for decision makers it is very difficult to correct actions during their

implementation and to improve future tourism policies.

Conclusion

Italy presents several factors that influence negatively competitiveness of tourism

sector. As a matter of fact, on one side, macroeconomic conditions limit consistently

the opportunities in term of public spending, on the other side, the low quality of the

majority of framework conditions decreases the possibility to be competitive for the

tourism sector and its industries. Nevertheless, the attractiveness of Italy remains

very high thanks to its comparative advantage created by some of the top world

attractions, history and image perception. Thus Italian Governments should focus on

the increase of tourism competitiveness through the upgrading of framework

conditions, basic for tourism development. Moreover, effectiveness and efficiency of

tourism policy can be improved through a better structuring of tourism policy

programmes and an improvement in governance processes.

Bibliography

CISET-CONFTURISMO-CONFCOMMERCIO, (2007), Mara Manente ed, Politiche fiscali per il turismo ed

effetti macroeconomici, CONFTURISMO.

CNIPA, (2008), Relazione annuale sullo stato dell’ICT nella Pubblica Amministazione Centrale.

143

Presidente del Consiglio dei Ministri, (2009), DPCM 15 Maggio 2009 (Conferimento incarico e delega

di funzioni del Presidente del Consiglio di Ministri in material di Turismo al Min. senza portafoglio On.

Michela Vittoria Brambilla).

ENIT (ufficio studi programmazione e marketing), (2010), ENIT report.

Mercury, (2009) Becheri, E.ed, XVI Rapporto sul Turismo Italiano: 2008-2009, Franco Angeli, Milano.

Ministero dell’Economia e delle Finanze, (2009), Una analisi degli indicatori di performance delle note

preliminari 2008-2009.

Ministro del Turismo, (2010), Onorato il “Patto per il turismo” del governo.

OECD (2010), Tourism Trends and Policies, OECD, Paris.

Presidenza del Consiglio dei Ministri, Dipartimento per lo sviluppo e la competitività del Turismo,

(2010), Decreto per la concessione di contributi per lo sviluppo di progetti in materia di turismo 2010.

Protocollo d’intesa tra il Ministro per la Pubblica Amministrazione e l’Innovazione e il Ministro del

Turismo, 2009.

Touring Club Italiano, (2009), Annuario del Turismo e della Cultura: 2009, TCI, Milano.

World Economic Forum, (2009), Travel & Tourism Competitiveness Report 2009, WEF, Geneva.

World Economic Forum, (2010), The global competitiveness report: 2010-2011, WEF, Geneva.

144

CONCLUSION

The evaluation of a public policy implies several problems and considerations since it

is not a mere economic decision, but it is a political process. In fact, its planning and

implementation is not only based on the best economic outcome, but it is influenced

by several factors, such as the pressure of interest groups, values and the dynamics

of governance in a certain political process. Moreover, when the analysis is applied

to a single sector, the evaluation is even more complicated. This is due to the fact

that both the inputs and the outcomes cannot be clearly separated from those of

other sectorial policies. On one side the expenditure for other sectors have a great

impact of such a horizontal topic (tourism) and on the other side the outcomes are

the result of different sectorial policies and are heavily affected by exogenous

factors happening in the economic and global context.

The objective of the presented study is to define a framework to analyse national

tourism policies in the most structured, clear and complete way. Nevertheless, it has

been observed that it is not always possible to apply rigid schemes because of both

peculiarities of certain policies and transparency and availability of official data. For

example, during the evaluation of efficiency and effectiveness it was not possible to

apply classical analytical schemes (input-output ratio and the goal-outcome

comparison). However, ex-ante measure analysis proved to be an adequate

alternative instrument as a proxy for the evaluation of efficiency and effectiveness.

Given the complexity of a national tourism policy, this study does not pretend to be

all-comprehensive of every single element composing this policy; however, the aim

was to give a frame with all the main elements for an objective and useful

evaluation. Moreover, the entire study focuses on the effort to provide a judgement

as objective as possible without incurring in a partisan political evaluation. However,

it has been considered that a too general judgement could result in a simple

description rather than an evaluation, which is a useful tool to reduce risks and

negative impacts of a policy.

145

There are two main limitations to the application of the framework proposed. First,

the quality of the results of the practical framework application depends on the

quantity and quality of official data. The lack of a structured tourism policy (lack of

vision, measurable objectives or key performance indicators) makes more difficult to

fully apply the model (description of coherence, outputs etc.). Second, the analysis

of the tourism sector has, to some extent, some contradictions with the nature of

the tourism sector itself. As a matter of fact, the horizontal nature of the tourism

policy creates difficulties in isolating it from other sectorial policies. Nevertheless, its

“isolation” is a prerequisite for its evaluation. This is an additional reason why

nations should develop Tourism Satellites Accounts and clearly define tourism policy

programmes.

Future research should aim to applying this framework to other countries in order to

figure out other limits of this model. Moreover, the evaluation concerning the

structure of the tourism policy (developed in our research) should be integrated with

the evaluation of the effective results of a certain policy both during its

implementation and ex-post.

146

BIBLIOGRAPHY

Afonso, A., Schuknecht, L., Tanzi, V. (2003), ‘Public Sector Efficiency: an International Comparison’, Working paper no. 242, European Central Bank, Frankfurt.

Arrow, K. J. (1951, 2nd ed., 1963), Social Choice and Individual Values, Yale University Press, New Haven.

Beritelli, P., Bieger, T., Laesser, C., (2007), ‘Destination Governance: Using Corporate Governance Theories as a Foundation for Effective Destination Management’, Journal of Travel Research, 2007.

Bieger, T. (2000),’Destination management e finanziamenti’, in Pechlaner, H. and Weiermair, K. (2000) eds Destination Management: fondamenti di marketing e gestione delle destinazioni turistiche, Touring Editore, Milano.

Blake, A., Durbarry, R., Sinclair, M.T. and Sugiyarto, G., (2001), Modelling Tourism and Travel Using Tourism Satellite Accounts and Tourism Policy and Forecasting Models, Discussion Paper, Tourism and Travel Research Institute. (Unpublished)

CISET-CONFTURISMO-CONFCOMMERCIO, (2007), Mara Manente ed, Politiche fiscali per il turismo ed effetti macroeconomici, CONFTURISMO.

CNIPA, (2008), Relazione annuale sullo stato dell’ICT nella Pubblica Amministazione Centrale.

Costa, P., Manente, M. (2000), Economia del turismo: Modelli di analisi e misura delle dimensioni economiche del turismo, Touring Editore, Milano.

Edgell, D.L., (1990) International Tourism Policy, Van Nostrand Reinhold, New York.

ENIT (ufficio studi programmazione e marketing), (2010), ENIT report.

Estache, A., Gonzalez, M., Trujillo, L. (2007), ‘Government Expenditures on Education, Health and Infrastructure: A Naïve Look at levels, outcomes and efficiency’, City University London, Department of Economics, Discussion Paper Series 07/03.

Fayos-Solà, E., (1996), ‘Tourism Policy: a midsummer night’s dream?’, Tourism Management, 1996.

Fondazione per la Sussidiarietà (Vittadini, G. eds), (2007), Che cos’è la sussidiarietà: un altro nome della libertà, Guerini e associati, Milano.

Hall, C.M. (2008), Tourism Planning: Policies, Processes and Relationships, 2nd edition, Prentice Hall, Harlow.

Hall, C.M., Jenkins, J.M. (1995), Tourism and Public Policy, Routlege, London.

Hall, P. (1982), Urban and Regional Planning, 2nd

edn, Penguin, Harmondsworth.

Jenkins,W. (1978) Policy Analysis: a Political and Organizational Perspective, Martin Robertson,

London.

Keller, P, Bieger, T.,(2007), ‘Productivity and Tourism’, in: Keller, P., Bieger, T. (Ed.), Productivity and Tourism, Berlin.

Keller, P. (2000),’Le organizzazioni turistiche nazionali a una svolta’, in Pechlaner, H. and Weiermair, K.

147

(2000) eds Destination Management: fondamenti di marketing e gestione delle destinazioni turistiche, Touring Editore, Milano.

Keller, P. (2000), ‘Globalization and Tourism’, in: W.C. Gartner and D.W. Lime, Trends in Outdoor Recreation, Leisure and Tourism, CABI Publishing, New York, pp. 287-297.

Keller, P. (2004), ‘The future of small and medium size enterprises in tourism’, in: AIEST, Vol. 46 St. Gallen, pp. 7-21

Keller, P. (2005), ‘A new look on global tourism’, in: Trigo, L.E. et al., Turismo Brasileiro, Analises regionais e globais do Turismo brasilerio, Sao Paolo 2005.

Keller, P. (2006), ‘Toward an innovation oriented tourism policy’, in: OECD, Innovation and Growth in Tourism, Paris.

Keller, P. (2008), ‘New paradigm for international tourism policy’, in: OECD, Tourism in OECD Countries 2008, Paris, and pp. 11-26.

Keller, P. (2008), ‘Structural Changes and Challenges for Tourism Management’, in: Change Management in Tourism, ESV, Berlin pp. 31-39.

Keller, P. (2009), Destination marketing, 3rd

Advance in Tourism Marketing Conference, Bournemouth, September 2009.

Keller, P., Smeral, E. (1997), Increased International Competition: New Challenges for Tourism Policies in European Countries, Background Paper, World Tourism Organisation (WTO), Madrid.

Kerr, R.W. (2003), From Tourism Public Policy, and a Strategic Management of Failure, Elsevier.

Koch, K. (2000), The shareholder concept in the field of tourism, 2nd

Summit of Tourism, Chamonix-Mont-Blanc.

Lee, C.C., Chang, C.P. (2008), ‘Tourism development and economic growth: At closer look at panels’, Tourism Management, Vol.29.

Leiper, N. (2007), ‘Why ‘the tourism industry’ is misleading as a generic expression: The case for the plural variation, ‘Tourism industries’’, Tourism Management, 29.

Lockwood, M., (2009), ‘Good governance for terrestrial protected areas: A framework, principles and performance outcomes’, Journal of Environmental Management.

Mandl, U., Dierx, A. and Ilzkovitz, F. (2008), ‘The effectiveness and efficiency of public spending’, Economic papers, 301, European Commission, Brussels.

Mercury, (2009) Becheri, E.ed, XVI Rapporto sul Turismo Italiano: 2008-2009, Franco Angeli, Milano.

Ministero dell’Economia e delle Finanze, (2009), Una analisi degli indicatori di performance delle note preliminari 2008-2009.

Ministro del Turismo, (2010), Onorato il “Patto per il turismo” del governo.

Nordin, S., Svensson, B., (2005), ‘The Significance of Governance in Innovative Tourism Destinations’, Paper presented at the 55

th AIEST Congress, Brainerd, USA, 2005.

O’Faircheallaigh, C. and Ryan, B. (1992), eds Program Evaluation and Performance Monitoring: An Australian Perspective, Macmillan, South Melbourne.

148

OECD (2009), Measuring Government Activity, OECD, Paris.

OECD (2010), Tourism Trends and Policies, OECD, Paris.

Olsen, M., West, J., Tse,E., (2008), Strategic Management in the hospitality industry, Upper saddle river.

Pal, L.A. (1992), Public Policy Analysis: An Introduction, Nelson Canada, Scarborough.

Porter, M.E. (1990), The Competitive Advantage of Nations, The Free Press, New York.

Porter, M.E. (1998) ‘Clusters and the new economics of competition’, Harvard Business Review, 76(6): 77-90.

Porter, M.E. (2007), ‘Clusters and Economic Policy: Aligning Public Policy with the New Economics of Competition’, White Paper, HBS. Institute for Strategy and Competitiveness.

Porter, M.E. (2008), ‘The Five Competitive Forces that Shape Competition’, in Porter, M.E. (2008), On competition, Harvard Business Press, Boston.

Porter,M.,Ketels,C.,Delgado,M, (2007), ‘The Microeconomic Foundaions of Prosperity: Findings from the Business Competitiveness Index’, in The Global Competitiveness Report 2007-2008, Word Economic Forum

Presidente del Consiglio dei Ministri, (2009), DPCM 15 Maggio 2009 (Conferimento incarico e delega di funzioni del Presidente del Consiglio di Ministri in material di Turismo al Min. senza portafoglio On. Michela Vittoria Brambilla).

Presidenza del Consiglio dei Ministri, Dipartimento per lo sviluppo e la competitività del Turismo, (2010), Decreto per la concessione di contributi per lo sviluppo di progetti in materia di turismo 2010.

Protocollo d’intesa tra il Ministro per la Pubblica Amministrazione e l’Innovazione e il Ministro del Turismo, 2009.

Ramesh, H. (1995) Studying public policy: Policy cycles and policy subsystems ,Oxford, (Italian edition).

Ritchie, J.R.B. and Crouch, G.I. (2003), The Competitive Destination/A Sustainable Tourism Perspective, CABI, Oxon.

Rossi, P.H., Freeman, H.E., and Wright, S.R. (1979), Evaluation: A Systematic Approach, Stage, Beverly Hills.

Smeral, E. (1998), ‘The impact of globalization on small and medium enterprises: new challenges and for tourism policies in European countries’, Tourism Management, Vol. 19, No. 4, pp. 371-380.

Snowdon, B. and Stonehouse, G. (2006) ‘Competitiveness in a globalised world: Michael Porter on the microeconomic foundations of the competitiveness of nations, regions, and firms’, Journal of International Business Studies, 37: 163-175.

Solow, R. (1970), Growth Theory: an Exposition, New York: Oxford University Press.

Stiglitz, J.E. (2000), Economics of the Public Sector – 3rd ed., Norton, New York.

The International Bank for Reconstruction and Development / The World Bank, (2007) A decade of measuring the quality of governance’, Governance matter 2007, Worldwide Governance Indicators 1996-2006.

149

Touring Club Italiano, (2009), Annuario del Turismo e della Cultura: 2009, TCI, Milano.

UNWTO, (2000), Public-Private Sector Cooperation: Enhancing Tourism Competitiveness, Madrid.

UNWTO, (2010), Survey on Destination Governance, Evaluation Report, Madrid 2010.

Vanhove, N. (2005), The Economics of Tourism Destinations, Elsevier.

WEF (2009), Travel & Tourism Competitiveness Report 2009, Geneva.

World Economic Forum (2009), The Travel & Tourism Competitiveness Report 2009, WEF, Geveva.

World Economic Forum, (2010), The global competitiveness report: 2010-2011, WEF, Geneva.