23 January, 2018

The WEF Tourism Competitiveness Report: Measuring the non-Measurable?!

This article discusses the Travel and Tourism Competitiveness Index of the World Economic Forum in the context of existing research on this topic as well as from a methodological perspective. A positive ranking can be achieved when ranking the tourist competitiveness of individual countries, however, a critical examination of the procedure is appropriate. Main criticisms are in particular the missing embedding of the report into the existing research, the lack of traceability (rationalization) of the selection and weighting of the measured variables (which is partly arbitrary and demonstrably ignores important quantities), the type of data collection (survey and hard data) and their amalgamation. For this reason, the results may only be noted with a critical eye. This is particularly true for Switzerland, which has lost its appeal - despite having been in first place for some time - due to its price disadvantage. (©Christian Laesser. All rights reserved.)


The subject of competitiveness in tourism and destinations has long been of interest. For example, The Economist in its January 10 issue, 1998, noted:

There may be more tourists to go round, but there is also more competition between destinations as cities, countries, and continents latch on to the charms of tourist revenue. … Like all consumer products, tourist destinations must persuade their customers that they have some combination of benefits which no one else can offer. Destinations are trying every bit as hard as airlines and hotels to establish themselves as brands, using all the razzamatazz of modern marketing. Every place tries to make the most of what it has got.

Theories, measurement models and the like can help to deal with this complex task. In recent years, the pool of research results on the competitiveness of destinations has increased and today there are a number of approaches to measuring them. A recent contribution to this topic comes from the WEF (World Economic Forum), which, with the help of its TTCI (Travel and Tourism Competitiveness Index), attempts to compile a ranking of not less than 133 countries. The claim of the TTCI is high, argues nevertheless the WEF in its first publication in 2007 that…

...cross-country analysis of the drivers of competitiveness in travel and tourism provides useful comparative information for making business decisions and adding value to governments wishing to improve their travel and tourism environments.

Such a claim naturally attracts considerable interest and can be disputed. Therefore it is necessary to critically question the reliability, validity and scientific basis of the TTCI.

Competitiveness in tourism is a widely and controversially discussed subject.

Since the early 1990s, various scientific and practical publications have dealt with competitiveness in tourism and the competitiveness of destinations. Essentially, we can distinguish three categories of work.

In a first group are works that try to diagnose the competitive position of destinations. The second group of works focusses on some specific aspects of competitiveness of destinations, such as positioning, management systems, marketing, price competitiveness, etc. The work in a third group seeks to provide general models and theories on the competitiveness of destinations develop. This also includes the TTCI of the WEF, which makes it opportune to contextualize it briefly in relation to this existing work.

Thematically, this discussion builds on a distinction between comparative (based on the economists Smith and Ricardo) and competitive (based on Porter) advantages. It is attested that competitiveness of destinations is based on so-called resource endowments (in other words, what is available on resources, in principle the original offer or the so-called First Nature), but also on the ability to make use of these resources in a sustainable way. At the resource level, for example, a distinction is made between natural, cultural-historical, created and tourism-supporting resources. Destination management is then the second pillar in such a model.

The WEF Travel and Tourism Competitiveness Report
tries to contribute to this discussion.

Since 1979, the WEF has been evaluating the competitiveness of countries every year. The results of this evaluation are published by the organization in the form of ranking lists. Over the years, this can be used to derive shifts or changes in the relative position of individual countries. More recently (2006), a Global Competitiveness Index (GCI) has been introduced, with the aim of simplifying this comparison and, in particular, distilling it into a few criteria. This index is essentially based on publicly available data (i.e., hard data) and an opinion poll of executives, and comprises a total of 9 domains. It is fair to say that these Competitiveness Reports are a core element of WEF's success.

Based on the success of the product described above, the WEF has been producing the Travel and Tourism Competitiveness Report annually since 2007. This report lifts the work for the GCI by expanding it with tourist data, while integrating the work of the World Travel and Tourism Council Competitiveness Monitor (WTTC). The result is the Travel and Tourism Competitiveness Index (TTCI), which is based on a total of 14 pillars or domains, which in turn are then grouped into three sub-indices.

According to the first issue, the goal of the TTCI is

...to provide a comprehensive strategic tool for measuring the factors and policies that make it attractive to develop the Travel & Tourism sector in different countries… [and] to improve the industry's competitiveness in their national economies, thereby contributing to national growth and prosperity.

As with the GCI, each of the variables in this index is either measured on the basis of hard data or based on an opinion poll with executives.

According to the WEF, the validity of the TTCI seems to be given in that a correlation analysis between the TTCI values and tourist arrivals or tourist revenues yields values of 0.77 and 0.84, respectively, i.e a correlation between the variance of the two dependent variables with that of the TTCI. However, correlation does not mean causality, because the approach lacks the necessary theoretical foundation.

The WEF’s TTCI is a good start with plenty of room for improvement.

First, it should be noted that the development of the TTCI has been and is supported by various international organizations, including: by the UNWTO, IATA, WWTC, various airlines, financial institutions and major tourist groups. For this reason, it is also understandable that the results meet with a broad interest. And some countries such as mine, Switzerland, could be all the happier that it regularly floats on top in the TTCI ranking, even if we lose global market share and, in particular, are currently being hammered by the currency-induced price disadvantage. This conflictual relationship between the competition index and reality makes a closer look comment meaningful.

(1) The scientific basis of the index. The Index was developed by the WEF in collaboration with consultants of Booz Alan Hamilton and the support of data partners (such as IATA, UNWTO, WTTC), with feedback from several industry partners. There is no information on the scientific basis of the construction of the index. There are neither references nor implicit information that any of the numerous scientific papers have been incorporated into this work. This is at least regrettable.

(2) Comparability of national tourism competitiveness. No country is in exactly the same tourist competition as the other, for two reasons: First, each country has different tourist objectives, depending on the existing tourist positioning and the general development goals. We can therefore not assume that every country wants to maximize tourist arrivals and revenues, especially as this type of maximization does not necessarily result in positive economic value added. Consequently, the measurement of country-specific competitiveness would have to be designed in such a way that it measures their ability and capacity to achieve their own specific objectives.

(3) Positioning and marketing. Large developed countries with different tourist areas can offer tourist services to a large number of different target groups. However, this makes little sense for small and/or less developed countries. In fact, the vast majority of countries are forced to concentrate on very few target groups. For this reason, competitiveness should not be measured in isolation in the context of countries, but in the context of destinations and their tourist target groups. Different attributes would then be rated differently for each target group (e.g. for MICE, winter sports, round trips, etc.).

(4) Suitability of the measurements. The list of variables is substantial. However, from the perspective of existing research, important measures were not or not sufficiently included. These include: Assessment of tourist locations in relation to key markets (accessibility argument), very limited coverage of destination development, policy, management and marketing factors (only two out of a total of 75 variables), as well as very limited coverage of tourist core resources such as physiography, climate, culture and history, etc. (only 2 of the total of 75 variables).

(5) The weighting of the measurements. The TTCI weights all variables equally. This implies that all variables are equally important and that the disregarded are meaningless. Example: The number of telephone lines per 100 inhabitants or the number of ATMs accepting Visa cards is equivalent to the quality of the air traffic infrastructure or expenditure of a country in favor of tourism. This is a little realistic approach. However, now that initial research results on potential weights of individual variables are known, it would be worth considering including them. In addition, it would be necessary to review the sensitivity of the ranking as a function of the weights in order to find out how stable the TTCI ultimately is.

(6) A survey among executives. First, it should be noted that just under half of the index is based on these same survey results. Precisely for this reason, various question marks are appropriate for various reasons: (1) There is no information on sample sizes, representativeness or suitability of subjects for this survey. (2) The subjects are always asked about the state in their own country; this approach carries dangers of distortion. (3) It is further assumed (naively) that different executive cultures interpret the same scales of measurement. This is clearly not the case, as various research results show. While the scale of the hard data is fully exhausted, this is certainly not the case with the survey data. As a result, the hard data is clearly overvalued (and its availability essentially determines the construction of the TTCI).

Reaching Out

I critically assessed the TTCI in this thought. Nevertheless, let me point out that the efforts to define such a measurement definitely deserve support. I also conclude that there is still plenty of research necessary for the selection of diagnostic variables and their contextual weighting. Hence, the path to finding a truly valid measurement construct that can then be used not only diagnostically but also for planning purposes will be an arduous but interesting endeavor.

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