Unit 4

TOURISM POLICY AND TOURISM PRODUCT

(created July 2015)

Unit topics• Defining product policy

• The product mix

• The product life cycle

• Product formulation in travel and tourism

• Tourism products - local and international

1. National Strategy The objective is Formulate an integrated sustainable tourism management plan for Central Philippines, identifying viable critical environmental, infrastructure and community-based projects to link and integrate the tourism development of the area.

Vision The 2006 State of the Nation Address envisaged the Central Philippines to be the country’s premium tourist destination on account of its range of natural attraction and cultural heritage.

Mission Government looking to tourism as the way forward. Internationally traded services with significant growth potential are few, tourism is being the main one.

Tourism Policy: The Philippines

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Image Source: http://www.fcarehmo.com.ph/newface/Providers/images/Visayas_With%20Name.jpg

Target is the Central Philippines The Visayas is the group of islands in the central Philippines, the largest of which are: Panay, Negros, Cebu, Bohol, Leyte, Samar, Siquijor, Biliran and Guimaras.

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image sources: 1. http://media.philstar.com/images/the-philippine-star/business/business-main/20141208/Philippine-agriculture.jpg 2. https://philippinemanufacturing.files.wordpress.com/2011/12/manu-22.jpg 3. http://2.bp.blogspot.com/-GLZCVv3eVGE/UF8afmsG1AI/AAAAAAAABXs/EeNs-Sv8xOI/s1600/DOTsite.jpg

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2. Destination Strategy To achieve the projected growth in tourist numbers and expenditures over the next decade, the Central Philippines will have to move to an investment-driven strategy. Outside of Cebu and Boracay, little investment has taken place in recent years in the Super Region’s tourism sector. The result is that the tourism industry is totally reliant on its natural attractions as the motivation for tourists to visit. But the natural attractions, though unique in many ways, are not sufficiently strong in themselves to attract the numbers required to support a significant tourism sector. This is a primary factor driven strategy and characterized by infrastructure inadequacies, limited investment in product, insufficient accommodation, medium to low quality product and inadequate airlift. To move on to the next stage of development require an investment driven strategy, with sustained investment in all aspects of tourism – infrastructures, utilities, new products, destination marketing, human resource development etc.

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1.Beaches 2.Nature and Adventure 3.Lifestyle (shopping,entertainment and dining) 4.Water Activities 5.Culture

The Philippine Tourism Products

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Product Development for the Central Philippines: 1.National Parks 2.Nature and Ecotourism Sites 3.Scuba Diving 4.Festivals and Events 5.Beach Resorts 6.Golf Courses 7.Yachting & Marinas 8.Cruise 9.Hiking/Trekking 10.Urban Attractions

Image source: https://www.google.com.ph/search?q=The+tourism+product+life+cycle&espv=2&biw=1149&bih=705&source=lnms&tbm=isch&sa=X&ei=Pm6fVbPlMNf_yQSS2ZXoCA&ved=0CAYQ_AUoAQ#imgrc=NCBTsGJ1JD0g2M%3A

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In 1980, Butler proposed that most tourist resorts go through a six stage model and he called this the tourism life cycle model.

It states that most tourist resorts start on a very small scale and get bigger and bigger until stagnation occurs.

The Butler’s Model is more commonly used today as the Tourism Area Life Cycle.

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A few hardy and adventurous people looking for something different in a holiday find a place that is special in terms of its culture, natural beauty, history or landscape. There may be no tourist services available and local people will not be involved in tourist money making activities.

Image Source: https://travelfoodguru.files.wordpress.com/2011/09/boracay-white-beach.jpg

Exploration

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Local people start to notice that there are increasing numbers of people coming to their local area. They start businesses to provide accommodation, food, guides, and transport.

Image Source: http://lazydogboracay.com/about-boracay/

Involvement

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Big companies start to see the emerging potential of the area as a tourist resort and therefore start to invest money in the region. They build large hotel complexes and sell package holidays (a package might include travel, accommodation, food and excursions). This makes the numbers of tourists swell dramatically and massively expands the number of job opportunities for people in the local region, in both tourist related jobs and in construction and services.

Image Source: http://mostbeautifulplaces.org/wp-content/uploads/boracay-island.jpg

Development

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The local economy is probably dominated by tourism at this stage, and many local people will make their money from this type of industry. However, this can remove people from other industries such as farming and fishing and these industries can suffer as a result. There will be continued building and expansion of the resort BUT some of the older buildings will start to become unattractive and a lower quality client base might result.

Image Source: http://www.boracayinformer.com/sites/default/files/styles/large/public/field/image/boracay%20events.jpg

Consolidation

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Competition from other resorts, rowdiness and a loss of the original features (e.g. if it had a great beach but that is now crowded and full of rubbish) can cause the resort to stop growing. The number of people going levels off then starts to decline, threatening local businesses and services.

Image Source: http://www.wheninmanila.com/boracay-island-highly-endangered-act-now-or-lose-it-forever/

Stagnation

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From the stagnation point onwards there are 2 basic possibilities: 1.Decline in various forms or rejuvenation (regrowth

of the resort) Decline can be slow or rapid, and regular visitors are replaced by people seeking a cheap break or day trippers.

2.Rejuvenation involves a cash injection from either a private company or the government, to create a new attraction within the original resort to boost its popularity.

Decline or Rejuvenation

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Image Sources: AsikAsik Falls in North Cotabato https://www.pinterest.com/pin/49258189644639541/ Siargao Island: http://kokairesortsiargao.com/wp-content/uploads/2014/09/surfing-siargao-e1395274464934.jpg Luboc River https://swrphome.files.wordpress.com/2011/09/d5100_20110710_651_hdr.jpg Enchanted Kingdom http://3.bp.blogspot.com/-gmSiCZ40ytw/TxI0kP-mYAI/AAAAAAAAEjQ/W-RuXt_bN5U/s400/enchanted_gcbig.gif

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Tourism Management and the Product Life Cycle

Product Life Cycle (PLC) was first developed in 1965 by Theodore Levitt in an article entitled “Exploit the Product Life Cycle” published in the Harvard Business Review on 1 November 1965. For a business, having a growing and sustainable revenue stream from product sales is important for the stability and success of its operations. The Product Life Cycle model can be used by consultants and managers to analyse the maturity stage of products and industries. Understanding which stage a product is in provides information about expected future sales growth, and the kinds of strategies that should be implemented.

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At the market introduction stage the size of the market, sales volumes and sales growth are small. Characterized by: 1. little or no competition 2. establish a market and build consumer demand 3. substantial research and development costs 4.Marketing costs may be high in order to test the

market, launch and promote the product, develop a market for the product, and set up distribution channels.

5. The market introduction stage is likely to be a period of low or negative profits.

Market Introduction Stage

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Some of the considerations in the introduction stage include: 1.Product development: research and development of

the basic technology and product concept, determining the product features and quality level.

2.Pricing: should penetration pricing or a skimming price strategy be used? A skimming price strategy might be appropriate where there are very few competitors.

3.Distribution: distribution might be quite selective until consumer acceptance of the product can be achieved.

4.Promotion: marketing efforts are aimed at early adopters, and seek to build product awareness and to educate potential consumers about the product.

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If the public gains awareness of a product and consumers come to understand the benefits of the product and accept it then a company can expect a period of rapid sales growth.

1.Costs reduced due to economies of scale 2.Sales volume increases significantly 3.Profitability begins to rise 4.Public awareness increases 5.Competition begins to increase with a few new players

in establishing market 6.Increased competition leads to price decreases

Growth Stage

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Some of the considerations in the Growth Stage include: 1.Product improvement: product quality might be

improved, additional features and support services added, and packaging updated.

2.Pricing: if consumer demand is high the price might be maintained at a high level.

3.Distribution: distribution channels might be added as consumer demand increases.

4.Promotion: promotion is aimed at a broader audience. A company might spend a lot of resources on promotion during the Growth Stage to build brand loyalty.

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When a product reaches maturity, sales growth slows and sales volume eventually peaks and stabilises. This is the stage during which the market as a whole makes the most profit. A company’s primary objective at this point is to defend market share while maximizing profit. 1.Costs are lowered as a result of production volumes increasing

and experience curve effects 2.Sales volume peaks and market saturation is reached 3.Increase in competitors entering the market 4.Prices tend to drop due to the proliferation of competing

products 5.Brand differentiation and feature diversification is emphasized

to maintain or increase market share 6.Industrial profits go down

Maturity Stage

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Some considerations for the mature product market include: 1.Product differentiation: increased competition in the

mature product market means that a company must find ways to differentiate its product from that of competitors. Strong branding is one way to do this.

2.Pricing: prices may be reduced because of increased competition. Firms in the market should be careful not to start a price war.

3.Distribution: distribution intensifies and incentives may be offered to encourage preference to be given over competing products.

4.Promotion: promotion will focus on emphasising product differences and creating/maintaining a strong brand.

A product enters into decline when sales and profits start to fall. The market for that product shrinks which reduces the amount of profit available to the firms in the industry. A decline might occur because the market has become saturated, the product has become obsolete, or customer tastes have changed. A company might try to stimulate growth by changing their pricing strategy, but ultimately the product will have to be re-designed, or replaced. High-cost and low market share firms will be forced to exit the industry.

1.Costs become counter-optimal 2.Sales volume decline or stabilize 3.Prices, profitability diminish 4.Profit becomes more a challenge of production/distribution

efficiency than increased sales.

Saturation or Decline Stage

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Some considerations for a declining market include: 1.Product consolidation: the number of products

may be reduced, and surviving products rejuvenated.

2.Price: prices may be lowered to liquidate inventory, or maintained for continued products.

3.Distribution: distribution becomes more selective. Channels that are no longer profitable are asked out.

4.Promotion: Expenditure on promotion is reduced for products subject to the Harvest and Divest strategies.

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As sales decline, a company has three strategy options: · Hold: maintain production and add new features and find new uses for the product. Reduce the cost of manufacturing (e.g. move manufacturing to a low cost jurisdiction). Consider whether there are new markets in which the product might be sold. · Harvest: continue to offer the product, reduce marketing expenditure, and sell possibly to a loyal niche segment of the market. · Divest: Discontinue production, and liquidate the remaining inventory or sell the product to another firm.

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The most important aspect of product life-cycles is that, even under normal conditions, to all practical intents and purposes they often do not exist. The dominant product life-cycle, that of the brand leaders which almost monopolize many markets, is therefore one of continuity. In the criticism of the product life cycle, Dhalla & Yuspeh state: “clearly, the PLC is a dependent variable which is determined by market actions; it is not an independent variable to which companies should adapt their marketing programs.

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Marketing management itself can alter the shape and duration of a brand's life cycle. Thus, the life cycle may be useful as a description, but not as a predictor; and usually should be firmly under the control of the marketer. The important point is that in many markets the product or brand life cycle is significantly longer than the planning cycle of the organisations involved. Thus, it offers little practical value for most marketers.

A components view of travel and tourism products

From two standpoints

The overall tourism product: The tourist product is to be considered as an amalgam of three main components of attractions, facilities at the destination and accessibility of the destination.

The product of individual tourist business: Individual service producers designing products ‘must define the service concept in terms of the bundles of goods and services sold to the consumer and the relative importance of each component to the customer.’

Components of the overall tourism product

There are five main components in the overall tourism product.

1. Destination attractions and environment- and the visitor activities they generate

▪ Natural attractions

▪ Built attractions

▪ Cultural attractions

▪ Social attractions

2. Destination facilities and service

▪ Accommodation units

▪ Restaurant, bars and cafes

▪ Transport at the destination

▪ Sports/interest/adventure/activity

▪ Other facilities

▪ Retail outlets

▪ Other services

3. Accessibility of the destination

▪ Infrastructure

▪ Equipment

▪ Government regulations

4. Images and perceptions of the destination

5. Price to the consumer

Components of specific products- The tourism business view

Three levels of tourism product

• The core product

• The formal product or tangible product

• The augment product

The Core ProductThe core product is the essential service or

benefit designated to satisfy the identified needs of target customer segments.

The Formal Product The formal or tangible product, which is

the specific offer for sale stating what a customer will receive for his money. It is a marketing interpretation that turns the core into a specific offer.

The Augmented ProductAugmented product comprises all the forms of

added value producers may choose to build into their formal product offers to make the experiences they provide more attractive than competitors’ offers to their intended customers.

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ActivityCountry Comparative: For each tourism product site a

Philippine Example and an Asia Pacific example then a global example.

Product Phillippines Asia Pacific World

Beach Boracay Phuket Maimi

National Park

Dining

Culture

Festival and Events

Hiking or Trekking

Diving

Water Activities

Golf Courses

Urban Attractions

References Tourism Policy: http://www.tourism.gov.ph/SitePages/tourismpolicy.aspx

Market Segmentation: http://www.hotelmule.com/html/83/n-3083.html

Tourism Life Cycle: http://www.goodfellowpublishers.com/free_files/fileTALC.pdf

Tourism Life Cycle: http://www.academia.edu/662383/THE_TOURIST_PRODUCT_LIFE_CYCLE

Tourism Product Life Cycle: http://anandasanyal.blogspot.com/2009/11/product-life-cycle_16.html

Philippine Tourism Products: http://itsmorefuninthephilippines.com/culture-6/

Dust Thani College Guided Lesson Plan

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