14 October, 2019

The future of DMOs - is it in the past?

Recently, critical voices have been questioning the role and works of Destination Management/ Marketing Organizations (DMOs). In exaggerated terms one could even speak of an increasing problem of legitimacy, in a sense “Who needs those organizations and why?” But to simply cold-swat DMOs is not the right thing to do. Rather one must question which tasks DMOs should and could take over in the future.

In the past, DMO had a broad foundation of their legitimacy

The tasks of DMOs - especially in the developed markets with competition between destinations and visitors in the driving seat - have been increasingly focusing on marketing in general and location promotion in particular. In some cases one can also observe efforts in the domain of product design and distribution, whereby product design has been equated with the – sometimes thematic - promotion of existing natural, cultural or built touristic resources. Distribution has consisted mostly of the digital preparation and distribution of information, with sometimes isolated booking options.

The legitimation for this way of working lays in the fact that there was a market failure with regard to the preparation and dissemination of information and therefore also the promotion of tourist products and services. In the age before digitization in general and the associated platform economies in particular, there was hardly any opportunity for individual providers to promote and distribute their services cost-effectively. Therefore, joint processes and organizations (such as DMO) operating such processes, were needed.

The game has been changing

What used to legitimize these organizations in the past is now no longer relevant today. There is simply no longer any market failure in before discussed domains any more. In addition, visitors themselves assume the role of promoters of products and services worthy of promotion against the following background: Tourism is a social phenomenon in the sense that different types of attraction points draw visitors with different needs. These visitors attract further visitors by disseminating their own experiences about these attraction points (e.g. via social media). By doing so, they essentially take over large junks of promotion.

Hence, tourist service providers and destinations are – at the end of the day - in the business of providing key resources for their visitors to tell their (own) stories. And their visitors are – at the end of the day - like ants: once an ant detects sugar (attraction point), it lays a pheromone trace (story) in order to inform other ants in the anthill (the peers of the visitors) about this sugar. They all follow suit until there is no more sugar (either the attraction point is gone or not attractive any more).
Once we take away information dissemination, promotion, and distribution: what remains?

The way out: An adapted portfolio of tasks for the DMO

Coordinating institutions or process leaders in tourism will also be needed in the future. But we should think about an adapted portfolio of tasks. Here we go.

DMOs are temporary residents’ service hub. Visitors are – before all – temporary residents in a destination. Therefore, most of the stationary services for visitors that DMOs have provided in the past should also be offered in the future. This applies in particular to such services that reduce visitor’s "pains" or even create "gains" in that they are not provided elsewhere or are not provided in the same quality yet. That can include, for instance, information services (maybe a tourist information becomes a visitor hub), logistical support (from people and luggage transport to child care facilities), and any additional type of on-site support for people who are just temporarily in a location.

DMO get involved in product and offer design. Another approach to the core of future legitimacy lies in another domain that must be rescued from the past into the future: Product and offer design (offer equating product with a price). This is where the marketing funnel actually begins - not only in tourism, by the way - and this is a domain where coordination skills and processes will continue to be needed in the future. In this future, however, product and offer development should imply less superficial and often unspecific thematic orientation but rather apply a strong differentiation along specific existing and/ or prospective visitor flows (and their spatial behavior; find more at St. Gallen Model for Destination Management). DMOs can take over the task of moderating associated processes (e.g. identifying and implementing visitor flows operation) and make sure that visitors communicate about their experiences they make.

DMOs help with creating and managing attraction points. For that, let us return to the social phenomenon of tourism. In short: attraction points generate demand. Potential visitors (and not suppliers or DMOs) determine what is attractive. If there are no attraction points, there is no demand. Many world-famous destinations are endowed with outstanding natural or cultural attractions (imagine Zermatt without the Matterhorn). Many, on the other hand, are not, which forces them to create artificial attraction points. These can be unlimited in time (e.g. theme park) or limited in time (e.g. event). The DMO can take on a leading role, especially when it comes to events, be it as moderator of the corresponding processes or even as producer in its own right.

DMOs enable service providers to make “good” marketing decisions. As a further measure, DMO should in the future consider to assume the task of enabling its service partners in in identifying and taking suitable marketing measures for themselves (ideally structured along visitor flows). DMOs are increasingly transforming themselves in this domain from a relieving to an enabling organization. In the future, "success" will be based less on direct DMO measures (in fact, these effects must be seriously questioned for various reasons) and more on indirect ones. The success of the destination is at least (or better: more than) the sum of the successes of its service providers.

DMOs help with increasing productivity. In order to improve productivity in a destination, it is appropriate to think increasingly in terms of areal synergies. Areal synergies are synonymous with allowing different but ideally complementary uses of space at the same location. For example, private uses of space (e.g. accommodation) can be combined with public uses of space (e.g. sports facilities), whereby associated synergy potentials can be exploited. The DMO can try to initiate such efforts itself or at least moderate the corresponding processes. Hereby, the DMO becomes a local or regional process manager.

DMOs become incoming operators. In order to improve the economic impact of tourism, an increased closing of value chains must be considered. In extreme cases, the DMO can become also an incoming operator, which creates appropriate packages based on clearly defined visitor flows. However, there are two things that need to be taken into account: On the one hand, visitor flows often begin and end outside destination boundaries, which in extreme cases requires a boundless view of one's own destination. On the other hand - for different reasons - not all visitors need and want packages. The learning curve - in relation to who needs and wants what types of packages, how does one create them and how are they distributed - will therefore be very steep for all participants.

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