PRODUCT IMPROVEMENT OR INNOVATION:
WHAT IS THE KEY TO SUCCESS IN TOURISM?
by Klaus Weiermair
Professor and Head of the Center for Tourism and Service Economics University of Innsbruck
This paper is built like a three–layered club house sandwich with the first layer providing some theoretical and conceptual insights regarding expected innovation behaviour in tourism based on available material in tourism and industrial economics. The second layer will provide empirical insights and/or testing regarding the causes and consequences of innovation and product development in tourism based on recent empirical research carried out at the Center for Tourism and Service Economics, University of Innsbruck, and interviews carried out by the author both in Europe and North America with various larger national and global tourism firms, e.g. tour operators, airlines and theme parks. Finally the last layer will draw some conclusions and discuss research results with respect to issues and prospects in tourism policy making.
Relevance and importance of innovation and product development in tourism It is probably fair to say that most sectors of economic activity in Western economies have undergone strong technological changes moving towards IT–based flexible manufacturing with global outsourcing, creating the “.com” or “new economy”, which very much fits with what Schumpeter described as the creative destruction of existing institutional arrangements and patterns of exchange in order to create new wealth through innovation. His vision also included an increased willingness to take calculated risks by new or “real” entrepreneurs (Schumpeter, 1934). Even though much innovation emanates or originates from the service sector, there has so far been relatively little discussion as to its importance and prevalence in tourism. A priori one should expect that innovation and product development (or differentiation) should constitute unique selling propositions and a strategy towards gaining new markets (Bullinger 1999). Even though the services and tourism sector have become very mature markets requiring innovation and/or new tourism attractions (Weiermair 2001, Keller 2002), the actual situation of the tourism industry is to be rather characterised by minor almost only cosmetic changes in product offerings interceded by an ever increasing number of crises (Iraq war, September 11, SARS etc.). Already ten years ago Poon (1993) noted: “The tourism industry is in a crisis – a crisis of change and uncertainty; a crisis brought on by the rapidly changing nature of the tourism industry itself. (…) The industry is in metamorphosis – it is undergoing rapid and radical change. New technology, more experienced consumers, global economic restructuring and environmental limits to growth are only some of the challenges facing industry.”(Poon, 1993, p. 3)
© OECD, 2004
In the past decade, destination management has also only barely adjusted to completely change environmental and competition structures and processes. Existing destination strategies can no longer satisfy market requirements (Weiermair 1998). Especially small-sized and fragmented alpine tourism companies must face increasing competition (Smeral 2003) and are confronted with declining numbers of tourists (Bartaletti 1998); this holds also true for coastal tourism. In the future the tourism industry’s challenge is to provide increased value for money either through innovation–driven cost reducing changes in production and marketing processes or through product changes providing more varied tourism experiences for quality-conscious and saturated multi-option customers. (Weiermair, 2001; Weiermair, 2003). Next to such niche strategies the tourism industry will have two big future markets to work with:
− The rise of the ageing population in most western economies and − China, which will become the largest importer of tourism by the year 2010. In what is to follow in my...
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