Report in pdf format

Human resources development, employment and globalization
in the hotel, catering and tourism sector

Report for discussion at the Tripartite Meeting on Human Resources Development, Employment
and Globalization in the Hotel, Catering and Tourism Sector

Geneva, 2-6 April 2001

International Labour Office   Geneva

Copyright ©2001 International Labour Organization (ILO)

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Preface

The ILO is concerned with decent work. The goal is not just the creation of jobs, but the creation of jobs of acceptable quality. The quantity of employment cannot be divorced from its quality. All societies have a notion of decent work, but the quality of employment can mean many things. It could relate to different forms of work, and also to different conditions of work, as well as feelings of value and satisfaction. The need today is to devise social and economic systems which ensure basic security and employment while remaining capable of adaptation to rapidly changing circumstances in a highly competitive global market (ILO: Decent work, Report of the Director-General, International Labour Conference, 87th Session, Geneva, 1999, p. 4).

Contents

Preface

Abbreviations and acronyms used in the report

Introduction

1. General developments in the sector

1.1.Delimitation of the hotel, catering and tourism (HCT) sector
1.2.Tourism Satellite Accounts
1.3.Tourism economy
1.4.Employment in hotels and restaurants
1.5.Importance of international tourism
1.6. A changing tourism industry
1.7.Changing consumer preferences
1.8.Technology in tourism

2. Globalization 20

2.1. The driving forces of globalization impacting upon travel, hospitality and tourism

(a)Liberalization of air transport
(b)Liberalization of trade in services
(c)Economic integration
(d) Information and communication technologies in the HCT sector
(e)Emerging use of the Internet for marketing and sales

2.2.Consolidation strategies
2.3.Impact of technology on SMEs

3.Employment and working conditions

3.1.Composition of the labour force
3.2.Impact of new technology on skills requirements

(a)New technologies in restaurants
(b) New technologies and travel agencies

3.3.Salaries and wages
3.4. Job and income stability and staff turnover
3.5.Prevailing working conditions

(a)Working hours
(b)Reduction in workloads
(c)Accidents, violence and stress at the workplace
(d)The challenge of HIV/AIDS at the workplace
(e)Subcontracting

3.6.Non-standard employment and working conditions

(a)Casual staff
(b)Seasonal variations
(c)Advantages and disadvantages of non-standard forms of labour
(d)Measures to alleviate the negative impact of non-standard working arrangements

3.7.Employment effects of more recent forms of tourism

(a)Cultural tourism and ecotourism
(b)Negative effects of ecotourism
(c)Adventure tourism
(d)Rural or nature tourism

3.8.Policies to strengthen the tourism sector and the employment effects of such policies

(a)Regulatory and deregulatory measures
(b)Taxation of business in the hotel, catering and tourism sector
(c)Importance of SMEs in the HCT sector
(d)Support to small enterprises
(e)Access to credit
(f)Policies concerning the informal sector

3.9. Vulnerable groups

(a)Young people
(b)Women
(c)Child labour
(d)Migrant labour
(e)Undeclared labour

4. Human resource development 80

4.1.Introduction
4.2.Estimating labour productivity
4.3.New forms of work organization

(a)Flexible work
(b)Seasonal employment
(c)Multiskilling

4.4.New management methods
4.5.Career development

(a)New and changing occupational profiles
(b)Women’s careers
(c)Measures to promote career building in the enterprise
(d)Developing language skills
(e)Career enhancement through increased employee responsibility

4.6.Tourism education and training

(a)Recognizing the need for tourism education and training
(b)New skill requirements
(c)The importance of continuous training
(d)Learning for competencies
(e)Certification
(f)Providers of continuous education and training
(g)Private and semi-private institutions
(h) Training provided by the employer

4.6.Defining the training gap

(a)New techniques of training delivery
(b)Social dialogue on training

5.Social dialogue

5.1.Introduction
5.2.Organizations
5.3.Obstacles to workers’ organizing
5.4.Subcontracting and franchising
5.5.Workers’ representation at the enterprise level
5.6.Collective bargaining
5.7.Social dialogue plus: Community involvement
5.8.Regional social dialogue: The case of Europe
5.9.European Works Councils
5.10.Internationalization of information on labour issues
5.11.Social dialogue on tourism development policies

6.Summary and suggested points for discussion

Summary

Suggested points for discussion

Appendices

1.Tourism industry GDP, visitor exports and employment by country, 2000

2.Table 1: Hourly remuneration indices of hotel and restaurant personnel compared with socially similar occupations in other sectors: Male workers

Table 2: Hourly remuneration indices of hotel and restaurant personnel compared with socially similar occupations in other sectors: Female workers

Table 3: Male-female ratios for monthly or weekly earnings, weekly working hours and earnings adjusted for weekly working hours (E/H): Hotel and restaurant workers compared with socially similar occupations in other sectors

Tables

1.1A.Travel and tourism industry gross domestic product per region, 2000

1.1B.Travel and tourism economy gross domestic product per region, 2000

1.2. Tourism industry GDP, visitors’ exports and employment in selected countries, 2000

1.3. Hotels and restaurants: Total employment and paid employment by gender,
selected countries, 1998-99

1.4A.World’s top 15 receiving countries for international tourism: Arrivals

1.4B.World’s top 15 earners from international tourism

1.5. International tourism receipts by region

1.6. International tourism receipts by region: Market shares

2.1. Network economy and tourism industry

2.2. Changing roles and relationships in the electronic market space

2.3. The major types of Internet market structures in Africa

2.4. Major multinational hotel chains

2.5. Number of countries where companies operate

2.6. Technology utilized as a competitive method

2.7. Hotel industry mergers and acquisitions, 1995-99

2.8. Companies that manage the most hotels

2.9. Companies that franchise the most hotels

2.10.Cost and benefit analysis for developing Internet presence for small and
medium-sized tourism enterprises

2.11.Obstacles to the introduction of electronic data interchange (EDI)

3.1.Official hours of work in tourism in 13 European Union countries

3.2. Full-time and part-time employment in hotels and restaurants, European Union, 1995-97

3.3. Percentage of employees on fixed-term contracts in 13 European Union countries

3.4. The hotel and catering sector in the European Union in 1996 – Average size of
enterprises by employment and receipts

3.5. Occupations of children and young people in tourism

4.1. Tourism characteristic industries: Share of gross value added and employment

4.2. The hotel industry by global regions, 1995

4.3. The restaurant industry per region, 1997

4.4. Core occupations in hotels and restaurants

4.5. Types of training received

4.6. Bahia (Brazil): Composition of the labour force and training offered,
by occupational levels and minimum schooling

5.1. Trade union membership density in Europe’s hotel and restaurant sector
compared to McDonald’s

5.2. European Works Councils

Boxes

1.1. Selected tourism data: OECD countries with incipient Tourism Satellite Accounts

1.2. World Tourism Organization regions

2.1. Principles of liberalization in GATS

5.1. Employment and subcontracting in one Paris hotel

5.2. Communications and workers’ participation in a UK restaurant chain (Pizza Express)

5.3. African collective agreements

5.4. An international agreement on trade union recognition in the Accor Group

5.5.A living wage campaign in the hospitality sector of Los Angeles (United States)

5.6. Policies adopted in the EWC Compass Group

Abbreviations and acronyms used in the report

ASEAN	Association of South-East Asian Nations
BHA	British Hospitality Association
CSR	CSDComputerized reservation systems
CSD-7	United Nations Commission on Sustainable Development, Seventh Session, New York, 19-30 April 1999
ECF-IUF	European Committee of Food, Catering and Allied Workers’ Unions within the IUF
ECTAA	Group of National Travel Agents’ and Tour Operators’ Associations within the European Union
EDI	Electronic data interchange
EEA	European Economic Area
ETLC	European Trade Union Liaison Committee on Tourism
ETOA	European Tour Operators’ Association
ETUC	European Trade Union Confederation
EU	European Union
EWC	European Works Council
FERCO	European Federation for Contract Catering Organizations
FORCEM	Foundation for Continuous Training
GATS	General Agreement on Trade in Services
GDS	Global distribution system
HCT	Hotel, catering and tourism
HERE	Hotel Employees and Restaurant Employees International Union (also: HEREIU)
HOTREC	Confederation of National Associations of Hotels, Restaurants, Cafés and Similar Establishments in the European Union and European Economic Area
IATA	International Air Transport Association
ICFTU	International Confederation of Free Trade Unions
ICT	Information and communication technology
IHEI	International Hotel Environment Initiative
IH&RA	International Hotel and Restaurant Association
IRU	International Road Transport Union
ISIC	International Standard Classification of all Economic Activities
ISP	International service provider
IT	Information technology
IUF	International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations
MERCOSUR	Common Market of the Southern Cone
NAFTA	North American Free Trade Agreement
OECD	Organisation for Economic Co-operation and Development
PMS	Property management system
PTO	Public telecom operator
SIT	System of information technologies
SME	Small and medium-sized enterprise
TSA	Tourism Satellite Accounts
TUAC	Trade Union Advisory Committee to the OECD
UNCED	United Nations Conference on Environment and Development
UNCTAD	United Nations Conference on Trade and Development
UNEP	United Nations Environment Programme
UNI	Union Network International
UNICE	Union of Industrial and Employers’ Confederations of Europe
WTO/OMC	World Trade Organization
WTO/OMT	World Tourism Organization
WTTC	World Travel and Tourism Council

Introduction

This report has been prepared by the International Labour Office as the basis for discussions at the Tripartite Meeting on Human Resources Development, Employment and Globalization in the Hotel, Catering and Tourism Sector.

At its 273rd Session (November 1998) the Governing Body of the International Labour Office decided that the Meeting would be included in the programme of sectoral meetings for 2000-01. At its 274th Session (March 1999) the Governing Body decided that the purpose of the Meeting would be to exchange views on policies and methods of human resource development, employment creation and globalization in the hotel, catering and tourism sector; to adopt conclusions that include proposals for action by governments, by employers’ and workers’ organizations at the national level and by the ILO; and to adopt a report on its discussion. The Meeting may also adopt resolutions. The Governing Body also decided that the Meeting should be tripartite, that it should be composed of 75 participants and that the following 25 countries should be invited: Austria, Barbados, Brazil, Canada, China, Costa Rica, Dominican Republic, Egypt, France, Greece, India, Italy, Japan, Kenya, Republic of Korea, Lebanon, Mauritius, Morocco, Netherlands, Poland, Portugal, South Africa, Spain, Switzerland and the United States. In the event that a government declines the invitation, an alternate will be invited from the reserve list which was established at the same time: Argentina, Chile, Croatia, Hungary, Mexico, Namibia, New Zealand, Philippines, United Republic of Tanzania, Thailand, Tunisia, Turkey, Viet Nam, Zimbabwe. The Governing Body also decided that 25 Employer and 25 Worker participants would be appointed on the basis of nominations made by the respective groups of the Governing Body. They do not necessarily come from the above list of countries.

The Meeting is part of the ILO’s Sectoral Activities Programme, the purpose of which is to facilitate the exchange of information among constituents on labour and social developments relevant to particular economic sectors, complemented by practically oriented research on topical sectoral issues. This objective is being pursued inter alia by holding international tripartite sectoral meetings with a view to:fostering a broader understanding of sector-specific issues and problems; promoting an international tripartite consensus on sectoral concerns and providing guidance for national and international policies and measures to deal with the related issues and problems; promoting the harmonization of all ILO activities of a sectoral character and acting as the focal point between the Office and thesectoral ILO constituents; and providing technical advice and practical assistance to the latter in order to facilitate the application of international labour standards.

The report attempts to illustrate how the issues of globalization, employment and human resources development in the hotel, catering and tourism sector are linked to the strategic objectives of the ILO and to its overall conceptual framework of decent work. At its 87th Session (June 1999), the International Labour Conference agreed that in future the ILO should focus its work on four strategic objectives:

– to promote and realize fundamental principles and rights at work;
– to create greater opportunities for women and men to secure decent employment and income;
– to enhance the coverage and effectiveness of social protection for all; and
– to strengthen tripartism and social dialogue.

All of the ILO’s strategic objectives are closely linked to strengthening the social dialogue framework. Promoting a participatory process that gives a voice to those most directly involved in the world of work is an essential part of the conceptual framework of decent work. More especially, it provides the means of integrating the strategic objectives into a coherent approach for decent work initiatives with the full involvement of the social partners at the country level.

The report points to recent developments in the hotel, catering and tourism sector and highlights factors driving the internationalization of tourists’ travel and of tourism services, including information technologies, as well as the internationalization of hotel and tourism enterprises. Without neglecting the huge subsector of small and medium-sized enterprises, it describes typical features related to the composition of the labour force and to working conditions. It raises questions concerning the difficulties faced by the sector in attracting and retaining skilled workers in enhancing the skills of newcomers to the labour market in order to stabilize the sector’s labour force, while increasing the productivity of enterprises and the quality of services. Particular emphasis is put on new forms of management entailing new skills requirements, with a general tendency towards increased worker responsibility in an environment of flat hierarchies, multiskilling and teamwork. Some institutions, achievements and shortcomings of social dialogue in the hotel, catering and tourism sector are described in a perspective which also points to opportunities for increasing its scope and effectiveness. As for the causal relationships between globalization, employment and human resources development, it would be difficult on the basis of the available information to draw conclusions concerning such relationships more than is done here. On the other hand, other factors such as technological and educational progress or changes in tourism demand have also been highlighted.

Hard data on the hotel, catering and tourism sector are not easy to come by as it is rarely singled out from the services sector in general. Data specifically on tourism depend on accounting which covers a broad range of economic activities geared towards consumption by tourists. Only a few countries can provide systematically collected tourism data and little attention is given to labour issues.

The report draws on a wide variety of sources for information, including government institutions, intergovernmental organizations, trade unions, employers’ organizations, companies, international non-governmental organizations, and individual scholars. The sources used are certainly not exhaustive but probably quite representative.

The report was prepared by an ILO team composed of Dirk Belau, Senior Specialist on Hotels, Catering and Tourism, Sectoral Activities Department (coordinator), Tom Higgins and Rajendra Paratian, with contributions from external experts, Lionel Becherel, Chris Cooper, Auliana Poon, Laennert Rijken and Klaus Weiermair. Editorial assistance was provided by Bill Ratteree, Sectoral Activities Department. The report is published under the authority of the International Labour Office.

1. General developments in the sector

1.1. Delimitation of the hotel, catering and tourism (HCT) sector

When the ILO Governing Body created the ILO Industrial Committee for the Hotel, Restaurant and Tourism Sector, which subsequently became the Committee for the Hotel, Catering and Tourism Sector, the sector included:^[1]

1. hotels, boarding houses, motels, tourist camps, holiday centres;
2. restaurants, bars, cafeterias, snack bars, pubs, night clubs, and other similar establishments;
3. establishments ... for the provision of meals and refreshments within the framework of industrial and institutional catering (for hospitals, factory and office canteens, schools, aircraft, ships, etc.);
4. travel agencies and tourist guides, tourism information offices;
5. conference and exhibition centres.

Statistics are being organized according to the International Standard Industrial Classification of all Economic Activities (ISIC), the latest edition of which is ISIC Rev. 3. In that classification, the sectors most relevant for the ILO definition of the sector are Hotels and restaurants (division 55)^[2] and Activities of travel agencies and tour operators, Tourist assistance activities (class 6304).^[3]

Other organizations concerned with tourism, including governments, intergovernmental organizations and NGOs, often use much broader definitions of the term than that used by the ILO. They subsume under it all services and products consumed by tourists, including transport. In the ILO denomination of the sector, the part referring to “tourism” only covers travel agencies and tour operators. Hotels and catering, including restaurants, are considered by most organizations to belong to the “tourism characteristic industries” and therefore subsumed under tourism, although in some countries only a small part of their services is for tourists. However, the fact that the ILO definition of the sector thus differs considerably from the concept of tourism used by other organizations does not prevent most concerns about the development of tourism from being shared by those organizations. One such concern is the sector’s potential to provide employment. Nevertheless, the ILO’s focus on labour issues is unique as it includes all working and employment conditions in the HCT sector.

1.2. Tourism Satellite Accounts

As an economic concept, tourism is defined in “demand side” terms, as it comprises all services and goods consumed by tourists as well as all investments made to satisfy that consumption. A tourist has been defined by the United Nations as a traveller or visitor.^[4], ^[5] The credibility and international comparability of “tourism statistics” depend heavily on: (1) a consensus regarding the choice of “tourism characteristic industries”, i.e. those industries on which tourism demand has the most important direct impact, and an estimation of the “tourism ratio” of their output; as well as (2) the methods used to calculate the indirect effects on the output of many other industries. Statistical presentations differ in whether they include such indirect or induced effects in the measurement of tourism in the economy. Probably the most inclusive choice of industries is the one adopted by the World Travel and Tourism Council (WTTC), a private organization.^[6] It takes into account industries whose “tourism ratio” is low but whose products and services represent high value, such as the construction and operation of transport infrastructure.

The demand side nature of tourism is the basis of a methodology for Tourism Satellite Accounts (TSAs) developed by the World Tourism Organization and OECD and adopted by the United Nations Statistical Commission early in 2000.^[7] The ILO has been cooperating with those organizations in accordance with the mandate given to it by the Tripartite Meeting on the Effects of New Technologies on Employment and Working Conditions in the Hotel, Catering and Tourism Sector in 1997, with a view to providing a methodology for the production and presentation of tourism-relevant labour statistics to supplement the TSAs. A proposal has been formulated by the ILO for a tourism labour accounting system (TLAS) within that framework,^[8] based on its work on a general labour accounting system. A detailed “employment module” presenting labour-related issues was already attached to the TSA by the OECD, but this module does not provide the necessary framework for linking the different units, variables and classifications used when collecting labour statistics from many different sources.

Some early efforts towards TSA presentations have already been made by a number of pioneer OECD countries on the basis of figures from national accounts systems as required in the methodology adopted by the United Nations Statistical Commission in 2000. The World Travel and Tourism Council (WTTC) has been producing Tourism Satellite Accounts using a simulation method and based on a non-systematic variety of statistical sources.^[9] Relevant figures from some pioneer countries are presented in box 1.1. Because of differing definitions only very broad comparisons can be made between countries.^[10]

 

Box 1.1. Selected tourism data: OECD countries with incipient Tourism Satellite Accounts Shares of tourism, tourism characteristic industries, or hotels and restaurants in national economies: Mexico: 8.2% tourism New Zealand: 8.1% (3.4% direct; a further 4.6% indirect) Norway: 3% characteristic tourism industries, GDP Poland: 5.4% tourism characteristic activities Sweden: 3.3% tourism Austria: 3.1% hotels and restaurants United Kingdom: 2.9% main tourism-related industries (hotels, restaurants, bars, recreation activities, etc.) Contribution of hotels and restaurants or tourism characteristic industries in total tourism value added or total tourism consumption: Mexico: 49.9% hotels and restaurants, value added Norway: 66% characteristic tourism industries, consumption Poland: 8.4% tourism characteristic industries, value added Sweden: 23% hotels and restaurants, value added GDP tourism ratio of hotels and restaurants or characteristic tourism industries: Austria: 76.4% hotels and restaurants Norway: 43% characteristic tourism industries Distribution of tourism consumption: New Zealand: 47% spent by overseas visitors   39% spent by resident households travelling for recreation and pleasure   14% spent on work-related travel by business and government Norway: 32% non-residents’ consumption   49% resident households’ consumption   19% resident industries’ expenditure on business trips Sweden: 24% foreign visitors   50% resident households’ demand   26% business travel Employment in tourism as a share of total employment: France: 5.3% hotels and restaurants Mexico: 6% tourism industry (salaried jobs) New Zealand: 8.3 % direct (4.1%) plus indirect (4.2%) Norway: 3% tourism characteristic industries Based on: OECD: Measuring the Role of Tourism in OECD Economies: The OECD Manual on Tourism Satellite Accounts and Employment, Ch.13, TSA Experiences in Selected OECD Economies, Paris, 2000.

1.3. Tourism economy

The contribution of tourism activities to national GDPs, direct and indirect, varies by country and region as illustrated by the WTTC’s estimates (tables 1.1A and 1.1B).

Table 1.1A.Travel and tourism industry gross domestic product per region, 2000

Table 1.1B. Travel and tourism economy ¹ gross domestic product per region, 2000

The Caribbean is the most tourism oriented region in the world. It is estimated that in 2000, tourism employed 3.1 million people either directly or indirectly, thus accounting for 13.4 per cent of total employment. Direct employment in the tourism characteristic industries alone amounts to 5 per cent of total employment. Visitor expenditures contributed an estimated US$17 billion, or 18.4 per cent, to export revenues.^[11] Countries whose international tourism receipts exceed 5 per cent of GDP or 10 per cent of export revenues are considered to be “tourism countries” for the purposes of the World Trade Organization. Tourism-related portions of GDP estimated by the WTTC for a number of countries are shown in table 1.2. A table of all the countries covered by the WTTC is reproduced in Appendix 1.

Table 1.2.Tourism industry GDP, visitors’ exports and employment in selected countries, 2000

Tourism is expanding in almost all countries including the developing countries. In fact, mass tourism involving domestic and regional travel is becoming an important phenomenon in several developing countries of Asia, Latin America, the Middle East and Africa, where the proportion of the population actively participating in domestic and regional tourism is predicted to grow considerably. In particular, regional tourism originating from China is expected to change the Asian tourism industry profoundly within the next one to two decades.

1.4. Employment in hotels and restaurants

An overview of employment in hotels and restaurants is presented in table 1.3. The table shows data supplied to the ILO by a limited number of countries using the International Standard Industrial Classification of all Economic Activities, Revision 3 (1990), which allows a distinction to be drawn between hotels and restaurants and commerce in general. What is striking about the information given in table 1.3 is the high proportion of unpaid labour in the hotel and restaurant trade in some countries, including the industrialized countries. This reflects a large number of small entrepreneurs and their non-remunerated family members. In some countries, this proportion is increasing as paid employment is growing more slowly than total employment, although in general growth rates for both are high.

Table 1.3.Hotels and restaurants: Total employment and paid employment by gender, selected countries, 1998-99

1.5. Importance of international tourism

Tourism across national borders represents a variable but generally large proportion of total tourism. Especially in a number of developing countries a significant proportion of gross domestic product is generated by activities designed to satisfy international tourism, which thus represents an important export activity in many countries (see table 1.2 above). Globally, the World Tourism Organization (WTO) predicts that the number of international tourists will reach almost 1.6 billion by the year 2020 (as opposed to 565 million in 1995), and that international tourism receipts will exceed US$2,000 billion.^[12] The estimated growth of world international tourism arrivals of 4.5 per cent per annum will pose enormous challenges and opportunities for those regions and countries seeking to benefit from tourism while avoiding its negative impacts.

As shown in table 1.4A, the world’s top ten tourism destinations are France, Spain, United States, Italy, China, United Kingdom, Canada, Mexico, Poland and the Russian Federation. France welcomed 73 million visitors in 1999, followed by Spain with almost 52 million and the United States with 48.5 million.

Table 1.4A.World’s top 15 receiving countries for international tourism: Arrivals

The top ten tourism destinations in the world in terms of tourism receipts are the United States, Spain, France, Italy, United Kingdom, Germany, China, Austria, Canada and Greece. Table 1.4Billustrates this ranking. The United States earns the most from tourism, with total tourism revenues of US$74.4 billion in 1999, followed by Spain and France. Eventhough tourism is a global industry, the majority of receipts still accrue to the Americas and Europe, reflecting both the fact that closeness to origin of the travellers still matters and the fact that countries in these regions have had the time, resources and demand needed to develop their tourism industries.

Table 1.4B.World’s top 15 earners from international tourism

For many countries, international tourism is an indispensable source of foreign currency earnings. According to the World Tourism Organization, tourism is one of the top five export categories for 83 per cent of countries and the main source of foreign currency for at least 38 per cent of them.

In 1998, international tourism and international fare receipts (receipts related to passenger transport of residents of other countries) accounted for roughly 8 per cent of total export earnings from goods and services worldwide. Total international tourism receipts, including those generated by international fares, amounted to an estimated US$532 billion, surpassing all other international trade categories.

As a by-product of the rapid fall in the real costs of long-distance travel, the developing regions of the world participate fully in the worldwide growth of international tourism. However, market shares vary strongly from one county to another and within very short periods, reflecting the economic or security crises affecting different countries or regions. Tables 1.5 and 1.6 show the growth rates in receipts from international tourism in the different regions of the world as defined by the World Tourism Organization (see box 1.2) and their respective market shares. The table in Appendix 1 shows details for most countries, including preliminary figures for 1999.

Table 1.5.International tourism receipts by region (US$ billion)

Table 1.6. International tourism receipts by region: Market shares (%)

1.6. A changing tourism industry

Mass tourism in and from the industrialized countries is a product of the late 1960s and early 1970s. Since then a number of interrelated developments in the world economy, such as overall economic growth and various other socio-economic changes, government policies, technological revolution, changes in production processes and new management practices, have converted part of the industry from mass tourismto so-called “new tourism”. The latter connotes the idea of responsible, green, soft, alternative and sustainable tourism, and basically refers to the diversification of the tourism industry and its development in targeted, niche markets. Competition in the new tourism is increasingly based on diversification, market segmentation and diagonal integration.

The identification and exploitation of niche markets has also proven to be a great source of revenue within new tourism, suggesting that further diversification and customization can be expected in the years to come. Market segmentation – as exemplified by ecotourism, cultural tourism, cruise and adventure tourism – is clearly in evidence and is experiencing great success. New niche markets are constantly being identified in an attempt to diversify the industry further.

Customization has also begun to play an important role in the industry. Tourism players are attempting to gain a competitive edge by catering for the individual needs of clients. The tourism product has thus been transformed over time from being completely dominated by mass tourism to an industry that is quite diversified and caters more to the individual needs of its participants.

1.7. Changing consumer preferences

Today, new consumers are influencing the pace and direction of underlying changes in the industry. The “new tourists” are more experienced travellers. Changes in consumer behaviour and values provide the fundamental driving force for the new tourism. The increased travel experience, flexibility and independent nature of the new tourists are generating demand for better quality, more value for money and greater flexibility in the travel experience.

The new consumers also reflect demographic changes – the population is ageing, household size is decreasing and households have greater disposable income.

Changing lifestyles of the new tourists are creating demand for more targeted and customized holidays. A number of lifestyle segments – families, single parent households, “empty nesters” (i.e. couples whose children have left home), double-income couples without children – will become prevalent in tourism, signalling the advent of a much more differentiated approach to tourism marketing.

Changing values are also generating demand for more environmentally conscious and nature-oriented holidays. Suppliers will therefore have to pay more attention to the way people think, feel and behave than they have done hitherto.

In recent years the niche market has become an important factor in the tourism industry reflecting the need to diversify and customize the industry and ensure the sustainability of the product. The main niche markets (sports travel, spas and health care, adventure and nature tourism, cultural tourism, theme parks, cruise ships, religious travel and others) hold great potential and are developing rapidly.

The growth of the cruise tourism sector is an interesting case in point. Between 1980 and 1999, the cruise industry grew at an average annual rate of 7.9per cent.^[13] The Caribbean is the most important geographic market for the cruise industry, accounting for over half of all cruises taken in 1996. Since 1984, cruise visitor arrivals have increased every year except 1987 and 1989. In addition, between 1996 and 2000, the growth rate for cruise arrivals is expected to far exceed that of stay-over arrivals.

The rapid growth and development of the cruise tourism industry opens key opportunities but also poses a number of threats to their Caribbean destinations. The environmental and economic impacts of cruise tourism are increasingly the subject of discussion. Moreover, given the pace and magnitude of its development, the cruise industry is directly competing with land-based tourism and, as a result, poses a growing threat to hotels and other land-based resorts and businesses in the Caribbean.^[14]

1.8. Technology in tourism

On the demand side, consumer preferences for flexible travel and leisure services provide a strong impetus for new tourism. On the supply side, technology plays an important complementary role in engineering new tourism. The applications of technology to the travel and tourism industry allow producers to supply new and flexible services that are cost-competitive with conventional mass, standardized and rigidly packaged options. Technology gives suppliers the flexibility to react to market demands and the capacity to integrate diagonally with other suppliers to provide new combinations of services and improve cost effectiveness.

In the travel and tourism industry a whole range of interrelated computer and communication technologies is being introduced. The system of information technologies (SIT) comprises computerized reservation systems, teleconferencing, video text, videos, video brochures, computers, management information systems, airline electronic information systems, electronic funds transfer systems, digital telephone networks, smart cards, satellite printers, and mobile communications. Each technology component identified in the SIT – for example, computers – can be and usually is fully integrated with the other components. For example, computer-to-computer communications allow hotels to integrate their front offices, back offices and food and beverage operations. This internal management system for hotels can in turn be fully integrated with a digital telephone network, and they then together provide the basis for linkage with hotel reservation systems which can be accessed by travel agents through their computerized reservations terminals (CRTs). Computerized reservations systems have emerged as the dominant technology among others being diffused throughout the travel and tourism industry.

In the United States, travel agents are using satellite printers at corporate offices to issue tickets directly at the point of demand. Interactive automated ticket machines (ATMs) have also been introduced. These consist of a computer with an attached printer that enables passengers to research schedules and fares, make reservations, purchase tickets and obtain boarding passes without the intervention of a human agent.

The Internet is a global network connecting millions of computers. As of 1999, the number of Internet users was above 200 million worldwide, and that number is growing rapidly, involving more than 100 countries. It is estimated that there were 63 million World Wide Web users in Europe in 1999. The United Kingdom, with almost 13 million Internet users, currently registers the highest number of users among the European countries. Use of the Internet for travel booking and planning is increasing rapidly. The rapid diffusion of information technologies throughout the travel and tourism industry is expected to improve the efficiency of production and the quality of services provided to consumers, and to generate increasing demand for new services.

2. Globalization

2.1. The driving forces of globalization impacting upon travel, hospitality and tourism

(a) Liberalization of air transport

The air transport industry, which is located mainly in the industrialized regions and in the newly industrialized countries, is a key determinant in the development of tourism. It is expanding twice as fast as the general output of the world economy, with further growth potential expected over the next two decades. In the developing countries, air transport accounts for nearly 80 per cent of international tourist arrivals.^[15] In 1998, the industry provided 28 million jobs worldwide, and by 2010 the number of people travelling by air could exceed 2.3 billion each year, with over 31 million jobs provided.^[16]

Today, liberalization of air transport largely means market access for private carriers and cabotage rights. ^[17] The liberalization of air transport, traditionally pursued at the bilateral level, is now being carried to the level of multilateral trade agreements. The recent trend towards the liberalization of air transport notably through the proliferation of open skies agreements, has thus raised the issue of air transport liberalization as a discipline to be debated in the framework of the General Agreement on Trade in Services (GATS).^[18] Multi-bilateral negotiations are already under way on an open skies agreement between the European Union and the United States. If they succeed, 70 per cent of the world’s international air traffic will be covered by the agreement. It is expected in that case that the agreement will serve as a model for other international air services agreements.

The formation of international alliances is an important development in the field of aviation.^[19] Airline alliances have become widespread and are still evolving, with partnership relationships becoming more intertwined and complex. The major airlines in the Americas and Europe are the most active in securing alliance agreements. The main motivation behind such alliances is the need to minimize costs while maintaining the quality of global services and extending connections throughout the world. Alliances can take various forms including: cooperative arrangements; wide-ranging strategic alliances, most notably the so-called “mega-alliances”; groupings and concentrations at national level, as in the case of the United States; purchase or franchising of small regional companies by major operators to carry their customers to hub airports; and regional civil aviation markets.^[20]

Other trends which characterize the changes under way in the context of airline liberalization include: partial or full privatization and restructuring of government-owned airlines; partial foreign ownership of airlines; equity investment in foreign carriers; updating of airline alliances by cancelling outdated or non-performing agreements; airline consolidations at the national level; joint ventures, either between airline companies or between airline companies and equipment manufacturers or independent maintenance companies; and outsourcing with no provision of maintenance service.^[21]

Some results of airline liberalization

Recent privatization initiatives have ended the protection of national airlines by governments in a number of developing countries. However, the possibility of the market becoming dominated by a single private company is perceived as a serious risk. In some cases, developing countries that have liberalized their air transport sectors as part of a policy to promote tourism have found themselves dominated by one or two foreign airlines. Some bankruptcies and closures have taken place in countries where distressed national airlines were not or could not be rescued by governments. In this context, a review of the GATS annex on air transport services is intended to draw international attention to the need to design a system that enables developing countries to compete effectively in the world market for air transport.^[22]

With regard to the liberalization of air transport as a whole, the trend is increasingly for each State to choose its own pace of change, using bilateral, regional or multilateral mechanisms.^[23] In developed countries there has been a clear tightening of competition policies to prohibit governments from providing subsidies.^[24] It is well known that many bilateral agreements have resulted in inefficiency as they were based on market access restrictions, price control and protection of money-losing carriers.

Full liberalization of air services as implemented in 1997 in Europe boosted the development of “low-cost” services and their integration in the European aviation scene. Although these services still account for a rather small share of the passenger market, their marketing impact is increasingly being felt throughout the industry. It is estimated that around 25 per cent of passengers on United States domestic services use “low-cost” airlines, as compared to approximately 5 per cent in Europe. Another result of liberalization is that new route opportunities have opened up, stimulating new demands without tampering with major carriers’ shares and therefore creating new opportunities for fare reductions. Some major European flag carriers have already created their own “low-cost” airline subsidiaries (examples are British Airways/Go and KLM/Buzz). The low-cost market as it stands has considerable growth potential. Europe’s low-cost airlines are finding plenty of untapped markets. Both Ryanair and easyJet have placed orders for significant numbers of additional aircraft to almost double their capacity over the next four years to meet this new demand. The challenge for low-cost carriers is to strike the right balance between maintaining low costs, low prices and high aircraft utilization and establishing a presence at a certain minimum number of airports. A further development of the concept of the low-cost airline sector has been the advent of “seat-only” sales on charter airline flights, rather than as part of a package holiday. This has resulted, for example, in the formation of the European Leisure Group (ELG), an alliance of European charter and scheduled airlines.

(b)Liberalization of trade in services

Negotiations on tourism services and existing commitments under the GATS

The General Agreement on Trade in Services (GATS) became part of the “New World Trade Order” under the aegis of the World Trade Organization as established by the Uruguay Round in 1994. The functioning of GATS is based on the interplay of fundamental standards in commercial law, procedural regulations for their implementation and specific commitments in which member States document sector-specific limitations or concessions. GATS has universal coverage and includes a comprehensive definition of trade in services comprising four “modes of supply”. They are: cross-border movement of services; movement of consumers; commercial presence; and the presence of natural persons, and to these modes the three principles of liberalization enshrined in GATS as shown in box 2.1are to be applied. GATS thus provides a framework for the progressive liberalization of trade in services through commitments made by the World Trade Organization member countries concerning the abovementioned principles and their applications to one or more modes of supply. Future negotiations under GATS will provide an opportunity for developing countries to address trade barriers to their services.

The tourism sector had already undergone various forms of liberalization before the Uruguay Round. It is also considered to be one of the service sectors most liberalized through sector-specific commitments made by signatory States. The number of commitments by the World Trade Organization members made so far in tourism under the GATS is rated as the highest of all sectors. Of 127 GATS signatory States, only eight have not made commitments in tourism and travel-related services. In the hotels and restaurants subsector, which offers the greatest potential for far-reaching liberalization within tourism, it is mostly low and lower-middle-income economies (LIEs and LMIEs according to the World Bank classification) in Africa and Latin America that have liberalized market access for foreign investors in the “commercial presence” mode: 64 per cent of all signatory States belonging to the group of LIEs and 75 per cent of LMIEs, but only about half (48 per cent) of the group of high-income economies (HIEs) have “no restrictions” to that mode. On the other hand, it is not surprising that “presence of natural persons” is the least liberalized mode of supply: in 117 of the 119 countries signing commitments in travel and tourism-related services, there are restrictions on the movement of hotel staff. Sixty-eight countries refer to their non-sector-specific commitments which mostly offer only temporary stay for business visitors, intra-corporate transferees and professionals. This mode is the key starting point for future moves to shift liberalization away from declaring countries’ restrictive measures towards removing those measures.^[25] It is expected that the next round of GATS talks will have important repercussions on destinations in terms of tourism marketing, investment and ownership, training and other aspects affecting the structure of the industry.

The case for a more specific treatment of tourism services under the GATS has been the subject of debate since the conclusion of the Uruguay Round. Significantly, UNCTAD has come up with conclusions and recommendations with regard to the future round of negotiations on trade in tourism under the GATS,^[26] including a recommendation and a proposal for an annex on tourism services called for by the World Trade Organization.^[27] So far, tourism is not among the specific sectors referred to by the six annexes of the GATS and other related instruments. Only an ancillary service to tourism (airline computer reservation services), is included in an annex on air transport services.^[28]

Possible impact of GATS on air traffic services, tourism services production, free movement of people, market access and labour markets

Most air traffic services are not covered by the Agreement’s disciplines. The main organizations responsible for air transport are now examining ways in which the GATS could contribute to future air transport liberalization.^[29]

The GATS provides a framework for negotiating temporary entry of service personnel into the territory of other parties. The movement of natural persons is a necessary condition for developing countries’ participation in the world market for services. Developing countries have given priority to making commitments under the GATS relating to the movement of natural persons (mode 4 of the GATS), partly taking into account their competitive labour cost advantage. However, commitments in this mode are largely linked to commercial presence, and firms without such commercial presence are discriminated against by having to face visa restrictions such as the so-called economic needs test, which is discretionary and non-transparent. Those restrictions are serious barriers to trade in services and negate the opportunities for market access otherwise extended in the commitments. Increased movement of natural persons also raises the question of the need to strengthen international standards regarding the licensing, accreditation and certification of service providers. The World Tourism Organization, for example, is developing a range of quality standards to be applied at tourism destinations.

Recognition of diplomas and professional qualifications is another precondition for the movement of natural persons abroad. This calls for the harmonization of diplomas and mutual recognition agreements between countries. Several countries have notified mutual recognition agreements under GATS Article VII.4. It is hoped that the GATS will increase the recognition of qualifications across borders.^[30]

Considerations within the framework of the GATS may also become relevant for the migration to the richer countries of persons who overstay their tourism visas and take up work. Many of them work in hotels or restaurants where in some countries they form a significant proportion of the labour force. Globalization will give rise to increased migration pressures in the years ahead, as a recent ILO study has shown. The increased scale and diversity of global communications systems and their declining costs, which are rapidly narrowing telecommunications gaps, have helped to make international migration easier.^[31]

With regard to the movement of consumers, tourism is an example of the services sector where consumption abroad is particularly relevant. Nevertheless, the movement of tourists is in some instances constrained by the difficulties associated with the delivery of visas, hard currency regulations and insufficient availability or inadequacy of air transport services to and from tourist-receiving countries. GATS negotiations are expected to address these problems.

Specific commitments made under the GATS to encourage greater participation by developing countries in world services trade relate to three main areas: first, the strengthening of the domestic services capabilities of developing countries through access to technology on a commercial basis, which is normally achieved through the employment and training of local personnel in foreign-owned hotels; secondly, improving the access of developing countries to distribution channels and information networks. In the tourism sector, this means access to computerized information and reservation networks managed and owned by entities in the industrialized countries; thirdly, the liberalization of market access in sectors and modes of supply of export interest to them (GATS, Article IV). According to GATS Article XIX.2, developing countries can attach additional conditions to such access aimed at achieving the development objectives of Article IV, namely the strengthening of their domestic services capacity and improvement of their access to distribution channels and information networks.

The liberalization of services is likely to have both positive and negative impacts on the labour force in relation to wages and employment. Increased competition by better equipped hotel and restaurant companies from abroad may in the short term lead to job losses in local enterprises. However, foreign firms will employ local people, increasing local employment and contributing to a higher standard of living.

(c)Economic integration

The world economy is currently witnessing two distinct trends – globalization and regionalization – and within this context States as well as companies are pursuing a variety of different strategies in order to become more competitive. Shifting patterns of production and consumption across the world are also reflected in the rise of new international tourism destinations, particularly in the East Asia and Pacific region. This has given rise to increasing regional, intra-regional and interregional competition and to new challenges in terms of investment needs and human resources development, especially with regard to training and labour mobility.

The impact of trade blocs on the hotel, tourism and catering sector can be gauged by the strategies adopted to create an environment conducive to tourism development. The European Union has launched a wide range of initiatives and activities through a variety of programmes in such broad areas as sustainable development, dissemination of information, training and enterprise promotion.^[32]

The main thrust of social policy in the European Union is the improvement of labour market conditions with a special focus on those excluded from the labour market and the unemployed. European Union labour laws and social policy are having a positive impact on the tourism sector. Of importance here is the Maastricht Social Protocol which has benefited seasonal and part-time workers and small businesses. Other policies that have proved beneficial to the development of tourism include the free movement of workers across Europe, harmonization of qualifications and tax incentives for education and training.

The North American Free Trade Agreement (NAFTA) benefits the travel and tourism industry in many ways. It promotes demand for direct air and charter/tour bus travel in the region, guarantees that tourism companies will receive national treatment in all three countriesand maintains high quality of tourism services by encouraging the expansion of telecommunications links between the United States and Mexico.

MERCOSUR is, in economic terms, the world’s fourth largest trade bloc, covering a population of 205 million people. Economic integration, through the practice of free trade with no tariff or pre-tariff restrictions between the member States of the bloc, has led to increasing cross-border flows of labour, goods and investment. MERCOSUR’s concern is to tackle labour relations, employment and social security issues and the short-term negative effects of integration on labour in the member States.

Tourism development is a priority on the agenda of the Association of South-East Asian Nations (ASEAN). Its development strategy incorporates: promotion of sustainable tourism development; preservation of cultural and environmental resources; provision of transportation and other infrastructure; simplification of immigration procedures; and human resources development. A plan of action on ASEAN cooperation in tourism shows the emphasis that is being placed on investment in human resources development, with a special focus on tourism education and training with a view to upgrading the skills needed to meet the demand for improved service quality and professionalism in the tourism and travel industry and thereby sustain ASEAN’s overall competitive advantage. Cooperation in tourism education and training is being intensified through the sharing of resources, skills and training facilities provided by tourism training institutions through technical assistance and experts.

(d) Information and communication technologies in the HCT sector

Computerized reservation systems (CRSs)^[33] have been developed by large air carriers since the 1970s to process flight reservations, but have evolved and expanded over time to provide other air transport-related services. Each airline has its own CRS and they are interconnected through global distribution systems (GDSs)^[34]. A huge number of Internet on-line reservation systems act as a kind of virtual agent, most of them having direct links to one or several CRS/GDS.

The CRS and GDS systems have become the main distribution and marketing tool in the international tourism trade and have greatly enhanced the efficiency of travel agents’ business operations. They cater to the needs of different market segments, including management of air and land transport services, the hospitality sector and entertainment services, as well as other ancillary services which make commercial transactions and risk coverage feasible. As a result, they have become increasingly important and are extensively used by all suppliers of tourism services.

There is some concern that developing countries’ suppliers may well be left out because GDSs can present major barriers to entry owing to their unfavourable access conditions (their operational costs, problems of access for small service suppliers, the fact that they are owned by large air carriers).

A number of African and south Asian countries are poorly represented in these systems because of structural handicaps such as the low level of tourism development in general and their underdeveloped hospitality sector. The poor representation of small service suppliers in GDSs adversely affects the dissemination of information on their tourism products, thereby holding back their sale and marketing of tourism services. This leaves such suppliers, especially SMEs, at a competitive disadvantage compared with those who are represented in the major GDSs. GDSs in many developing countries, particularly in Africa, are established in the form of joint ventures with local partners – for example, the national carrier – but operate within a de facto monopoly. This leads to excessive user fees and hinders their potential for developing tourism.^[35]

Travel agents in developing countries are at a disadvantage with regard to the use of modern technology compared with their counterparts in developed countries because of poor information network infrastructure and the shortage of professionals to manage, operate and maintain the system. Human resources assume importance in the operation of GDSs and other electronic media, and this calls for staff training in mastering the systems and their application to marketing, through specific training programmes provided by both the public and private sectors.^[36]

(e) Emerging use of the Internet for marketing and sales

Deregulation, globalization and radical shifts in leisure and tourism behaviour on the demand side have driven the tourism industry towards information-oriented activities, as seen in the introduction of IT systems in a wide range of spheres in the tourism and leisure sector.

The increasing use of the Internet for destination marketing, direct sales and bookings has given rise to electronic tourism markets and at present tourism is among the most important application domains in the World Wide Web. Table 2.1 gives an overall picture of the so-called network economy and the tourism industry.

Table 2.1.Network economy and tourism industry

The development of websites has made possible the direct delivery of comprehensive travel information about tourism suppliers to potential travellers. Text-based websites with photos and graphics linked to websites of tourism suppliers at the destination is another innovative approach to marketing. Developing an effective travel website has now assumed importance for obvious reasons. International tourists are increasingly using the travel websites on the Internet that were launched by most international companies in the late 1990s. However, the real volume of Internet bookings can only be estimated and estimates from market research companies are contradictory. According to one estimate, between 33 and 50 per cent of Internet transactions are tourism based.^[37]. Available evidence show that as yet only a tiny percentage of business travellers are booking on-line. On-line sales in Europe, for example, represented only 0. 1 per cent of the European travel market, and in 1999 only 1 per cent of the world’s airline tickets, hotel and other bookings were purchased over the Internet, although the proportion of airline and other ticket sales through the Internet is expected to grow sharply over the next three to four years.^[38]

The Internet helps to make travel products globally accessible at much lower cost – without transaction costs and the costs of intermediaries – and has comparatively low entrance barriers with regard to financial resources and human know-how. For many suppliers, tourism marketing efforts are increasingly focusing on Internet users.

A new business environment and new ways of doing business have sprung up as a result of the accessibility and relatively low cost of the Internet which is bringing businesses and consumers, buyers and suppliers on-line. Internet and Internet protocol technology is the driving force behind the growth of e-business. The Internet will have repercussions on business in the areas of e-commerce, e-working and e-procurement.^[39] A recent global survey of more than 500 business leaders lends support to the idea that e-business will be a key factor in competitive advantage in the future.^[40]

In the sphere of air travel, attempts are frequently made to bypass traditional travel agencies by direct booking via the Internet or corporate implant offices. Customer demands are becoming more technology driven, such as the demand for professional travel and billing management in place of mere ticket issuing. Advances in technology in the hotels and tourism industry, as exemplified by readily available information to guests and employees, faster service delivery, shorter cycle times and more dynamic markets, also require prompt action from service suppliers if marketing opportunities are not to be lost. Strategies of growth and concentration through mergers and acquisitions are becoming increasingly important from the mediators’ perspective as a response to cost and performance pressures in international business travel. In addition, traditional kick-back contracts are increasingly being replaced with new performance-oriented arrangements.^[41]

All aspects of business are being reshaped by the Internet and its related technologies, intranets and extranets. Hospitality enterprises will need to focus on providing customers with real-time access to rates and product information. The Internet also provides hotels and restaurants with opportunities to redesign the way in which they interface with employees and suppliers.

The high growth in global commerce accompanied by the emergence of electronic commerce driven mainly by the Internet has raised concerns about the need to regulate cyberspace by setting standards to regulate the use of the Internet for all aspects of travel and other fast-growing categories of electronic commerce. The primacy of the rules of the network economy will significantly lower transaction and communication costs, thus allowing more flexible pricing. The regulation of the Internet through the enactment and implementation of cyber-laws and privacy standards will most probably be perceived as an encouraging initiative which will guarantee safety and security in Internet business transactions, especially in shopping and travel accommodation bookings, where the Internet is most frequently used.

As a way of managing the increasing volume of guest information, the introduction of data warehousing and data mining technologies is becoming increasingly important. Hoteliers and restaurateurs have already expressed marked interest in these technologies as means of exploiting the advantages which can be derived from, for example, increased guest loyalty and market share. By using data warehousing and data mining as well as the Internet, the hotel industry can provide higher levels of personalized services and value.^[42]

The Internet is turning out to be the most sought after amenity in hotel rooms,^[43] providing communications access, information, entertainment and education. It enables more self-service oriented transactions to take place, especially in the area of reservations booking.

Information technology impacts on all aspects of the hotel organization value chain and transcends all departmental and geographical boundaries. Decisions on technology-related issues need to be made at top management levels of companies, and this means that qualified information technology personnel are needed at those levels.

Another key issue is the source of investment capital required to fund information technology initiatives. Lack of capital seriously hinders the implementation of information technology and competition for fund sourcing.

The Internet has brought about some very significant technological changes that enhance its capabilities and viability and its potential to drive electronic commerce. Besides introducing new and innovative business models in both the business-to-business and business-to-consumer markets, the Internet has shortened the value chain and put pressure on all players, especially intermediaries, by giving rise to the so-called “disintermediation” process, that is, the elimination of intermediary organizations such as travel agencies and global distribution systems (GDSs). These intermediary organizations are gradually being replaced by new emerging intermediaries.^[44] Table 2.2 depicts the fundamental shifts in the electronic market-place.

Table 2.2.Changing roles and relationships in the electronic market space

On-line service and ticketless travel have significantly reduced the need for travel intermediaries, as a result of which travel agents in the United States, for example, have seen a reduction in commissions paid to them by airlines.^[45]

The use of information technology in the tourism industry is determined by such factors as the scale and complexity of tourism demand and the degree of expansion and sophistication of new tourism products. Tourism plays an important role in a significant number of developing countries, many of which enjoy a competitive advantage. Current changes in the hotel and tourism industry in the context of globalization, as described in this report, show that there are more opportunities in the field of e-commerce than in any other existing technology which developing countries can exploit to their advantage in order to improve the marketing of their tourism products. However, in the developing countries, tourism development is constrained by a number of factors which have been summarized by UNCTAD.^[46]

Computer software represents one of the largest segments of services delivered through the cross-border mode of supply, with a growing number of developing countries using the Internet both to market and to deliver these services. The Indian software industry is a case in point. Electronic commerce facilitates access to new markets, as well as being cost saving and time saving. However, its effectiveness depends to a large extent on the establishment of a sound telecommunications infrastructure; in most low-income countries, that infrastructure is inadequate.^[47] A wide range of factors prevent the great majority of developing countries from accessing foreign markets through the Internet. Those factors include monopoly pricing for long-distance telephony, uncertainty about the regulatory environment, lack of human resources, lack of awareness among developing country companies of the relevance of the digital economy, and the high cost of setting up, upgrading and redesigning a significant e-commerce site.^[48]

The status of the developing countries’ readiness for e-commerce is an important issue. Table 2.3illustrates the case of some Internet structures in Africa.

Table 2.3.The major types of Internet market structures in Africa

Providers of tourism services must also have the capacity to invest in or have access to the physical infrastructure for logistics services and information technologies. The major obstacle to increased use of e-commerce in developing countries is the lack of pervasive low-cost telecommunications,^[49] broadcasting, Internet services and associated infrastructures, especially in rural areas. At the same time there is a need to involve more hotel and tourism enterprises from developing countries in the actual use of information technologies and information networks.^[50] If African businesses fare better than consumers in terms of accessing e-commerce, they nevertheless face the same infrastructure problems, although progress has been made in the development of e-commerce activities.^[51]

The shortage of IT specialists on the market, especially in the developing countries, is a serious impediment, given the rapid growth in Internet use. The demand for IT skills is increasing and the need for retraining of existing employees in both the public and private sectors in hotels, tourism and catering is clearly felt.

One solution would be for developing countries to take advantage of forthcoming GATS negotiations to ensure access for their suppliers to the most important generating markets, and they could make use of certain mechanisms provided for in the GATS which might enhance the contribution of trade in services to development. They could also seek commitments with respect to the training of personnel and access to the distribution channels which are essential to tourism exports, as provided for in Articles IV and XIX of the Agreement.

2.2.Consolidation strategies

Since the mid-1990s, multinational hotel companies entering foreign markets have devised a wide range of management strategies or methods in response to competitive challenge such as the rapid development of information technology, sophisticated demands from well-informed and knowledgeable travellers and the rise of electronic business-to-business market-places and to seize the opportunities opened up by the network economy. Within each company, core competencies are being developed and renewed through rapid information technology development, international expansion and market cooperation, relationship management, development of customer-oriented products and services, structural re-engineering (involving, for example, organizational restructuring and continuous training of employees and management), new marketing initiatives and campaigns, and quality control.

The major multinational hotel chains involved in the industry are shown in table2.4 and the number of countries where particular companies operate is shown in table 2.5.

Table 2.4.Major multinational hotel chains

Table 2.5.Number of countries where companies operate

According to the IH&RA,^[52] multinational hotel companies have invested heavily in developing customer-oriented technology services and enhancing management information and operation systems. Table 2.6 illustrates these technology services.

Table 2.6.Technology utilized as a competitive method

Within the context of international expansion and market cooperation, companies have had recourse to a number of competitive methods which merit attention. The growing number of alliances is changing industry structures and the level of competition has shifted from the individual company level to alliance groups level.^[53] The last five years have witnessed nine major mergers and acquisition transactions in the international hotel market-place. For example, Hilton and Hilton International have merged their sales forces, integrated their logos and marketing efforts, and shared their reservation systems in a strategic alliance considered to be the largest since 1996. Hilton has also allied with Patriot American Hospitality for market expansion. Starwood has established a strategic alliance with Discovery Hotel Group in Asia to open Four Points Hotels in China. Choice International has done the same with Flag International in Asia.^[54]

There are other goals and objectives which strategic alliances can fulfil in order to assist multinational hotel firms in strengthening their market positions, improving partnership relations and supplying diversified products and quality services to their customers. These goals and objectives include: acquisition of new information and communication technology (Hyatt and Starwood with Microsoft’s Expedia, Hyatt with MSN network, Carlson and Bass with WizCom to link to global distribution systems); distribution of products and cross-marketing between food-service providers and hotels (Ramada with Bennigan’s Restaurants, Marriott, Hilton, Bass with Pizza Hut); distribution and cross-promotion of bank credit cards and financial services between banks and hotels (Bass Hotels and Resorts with Visa and American Express, Marriot with Visa and Chase Manhattan=s processing system, Hilton, Starwood, and Accor with American Express); consolidation of transportation and hotel services (Carlson and Bass Hotels and Resorts each with more than 20 airlines, Marriott with United Airlines, Starwood with British Airways and Alitalia, and Shangri-la with Canadian Airlines); co-promotion of hotels and films and media (Marriott, Choice Hotels and Cendant with new films, Bass with ESPN and Discovery Channel, and Best Western with Sci-Fi Channel and E-Entertainment Channel).^[55]

A list of hotel mergers and acquisitions between 1995 and 1999 is given in table2.7.

Table 2.7.Hotel industry mergers and acquisitions, 1995-99

Management contracts are popular competitive methods that are being used by international companies. A good example is that of Nikko Hotels International which through its expansion into Croatia acquired 21 management contracts in 1998.^[56] Some well established international companies provide their expertise by leasing out management teams to run local firms. The contracting company benefits from the knowledge and experience of the international company and from its reputation for quality and good service. Quoting figures from Ankomah (1991), Becherel and Cooper point out that in 1979, 72 per cent of all hotels insub-Saharan Africa operated under a management contract; in Asia the figure was 60 per cent, in Latin America 47 per cent, but only 2 per cent in Europe. It can be assumed that these proportions have increased with globalization. A list of companies that manage hotels is given in table 2.8.

Table 2.8.Companies that manage the most hotels

Franchising – a contractual agreement whereby one company allows another to sell and use its products for a fee^[57] – presents a number of advantages upon which many multinational hotel companies rely for their growth and expansion. From a local human resources perspective, franchising offers the advantage of recruiting local management and staff with the added benefit of the expertise of the franchiser and any good international practice. This method of market entry is favoured by some of the international hotel corporations. Their international reputation guarantees licensees a ready-made market. In Europe, for example, franchising accounts for 1.5 million jobs, the majority in France, Germany and the United Kingdom.Many franchise agreements have been signed in the past five years. What is more, companies which have not in the past espoused franchising as an expansion tool have started to use it to the full. This was the case with Hyatt and Marriott in 1995 and 1996.^[58] The number of hotels franchised by companies is listed in table 2.9.

Table 2.9.Companies that franchise the most hotels

Many joint ventures or partnerships were set up between 1995 and 1996. Some examples are: Choice International with Friendly Hotels in the United Kingdom; Cendant with Mark’s Hotel International’s cooperation agreement in India; Accor with NH Hotels in Spain, Starwood with Hotel Pelikan in Germany and Demeure Hotels in Europe; and Sol Melia with European Travel.^[59]

The emergence of branding is another new issue in the hotel industry which is linked to merger and acquisition activities. With the evolution of the hotel industry towards a more consumer-oriented service, it is the brand rather than the company which assumes importance. In the United Kingdom hotel industry, for example, branding has become very topical and operators are increasingly recognizing the value of brands in delivering profits. The brand is thus turning out to be a fundamental element in defining the market, so much so that it is the name of the brand under which a hotel trades that carries weight, rather than its ownership and management structure.^[60] The emergence of a multiplicity of new brand names worldwide in the last five years – Cendant’s Wingate Inn, Accor’s Studio 6, Hilton’s Garden Inn, and others – bears testimony to its increasing importance.^[61] All these developments indicate the extent to which new products and services – including the other new competitive methods and customer-oriented technologies mentioned earlier – that have been launched by multinational hotel companies are being developed in an attempt to sustain their respective competitive advantage.

Vertical integration is another strategy that plays a dominant role in particular segments of the tourism industry. For a long time, tour operators have been establishing backward and forward linkages in the areas of service production. Their backward integration includes hotels and charter airlines. These operators also control all stages of distribution via far-reaching forward integration of retail distributors and travel agencies, marketing and package tours sales. This is also true of airlines which extend their level of integration far into the field of primary tourism and travel-related services via their charter airlines which have interests in tour operators, retailers and travel agencies. By contrast, hotels and hotel chains hardly pursue vertical integration strategies at all.^[62]

Tour operators and travel agencies are becoming increasingly involved in the process of horizontal integration, which in the recent past has attracted attention through spectacular takeovers like that of Thomas Cook by the German LTU group in 1993, or through joint ventures. An expansionist strategy of diagonal integration is geared to the provision of the broadest possible array of tourism-related service markets by a company, with a view to cutting costs, making the most of synergies between individual markets and achieving systems gains. This includes, for example, the joint use of computerized reservation systems by carriers and travel agencies under the umbrella of a holding company or cooperation between credit card suppliers and tour operators or travel agencies offering the special insurance services of a holding partner.^[63]

In the accommodation industry, an impressive amount of consolidation took place in the 1980s, bringing more and more hotel brands under fewer and larger corporate umbrellas. Consolidation offers certain advantages such as cost reduction in the areas of reservation systems, loyalty programmes and staff training and other fixed costs associated with hotel management.^[64] Available figures reinforce the impression that the forces of consolidation are indeed gathering momentum.^[65]

In the institutional catering sector, franchising and management contracts are also used as management strategies by institutional food-service companies. Compass, which is among the largest institutional catering companies in the world, employing 125,000 workers in 44 countries, is a case in point. It owns, manages or franchises hotels (Forte, Meridien, Posthouse, Heritage and Travelodge). Its food service brands include Burger King, Sbarro, Upper Crust, Caffé Ritazza, Delimento, Little Chef and Harry Ramsdens. In Canada, the institutional catering sector is dominated by large international groups. Sodexho is the largest institutional catering company, employing 212,000 employees worldwide since it purchased the institutional catering services of Marriott – Marriott Services. Another example is Aramak, an American company which employ 140,000 employees in 11 countries based in North America and Europe.

One pertinent issue frequently referred to by the developing countries is the need to reduce the risk of “leakage”^[66] of foreign exchange earnings. The developing countries in particular are usually unable to make the most of the economic and development potential of tourism, firstly, because of the high import content of construction materials and equipment and consumable goods needed to cater to the needs of international tourism and, secondly, because of the repatriation of income and profits earned by expatriates. The latter is in fact a major obstacle to tourism development.

Nevertheless, a number of advantages can be derived from international companies in terms of capital investment and know-how and technology, management and marketing expertise, training and consultancy. For example, under the “Build Operate Transfer” model^[67], there may be conditions attached such as the requirement to train local staff or build facilities for the community. This enables countries lacking the skills base and expertise needed at all professional levels to run, develop and operate tourist establishments for an international clientele to benefit from the transfer of expertise and technology.

In a globalized economy, skills become an important determinant in competitiveness. The changing composition of the workforce and work patterns resulting from globalization processes in the industry have brought about new challenges in human resources development. Training policies in the hotel, tourism and catering sector will need to be reviewed in a new climate of empowerment and retention of staff. This is particularly the case in many parts of the world where there is an acute shortage of qualified staff to fill positions created by an expanding industry. An internationally focused human resources policy calls for a change in personnel policies and strategies which implies, among other things, management commitment to transnational strategies, the development of IT skills and procedures to support transnational operations in a number of ways such as knowledge and information transfer, and an awareness of the different national policies on health and safety, occupational standards, dismissal, discrimination and workers’ rights.

2.3. Impact of technology on SMEs

Globalization has brought about a range of opportunities and challenges which have put additional pressures on SMEs. In addition to having to cope with the effects of globalization, they need to adapt to new business conditions in terms of product positioning and product development facilitated by information technology, with all its potential benefits in terms of market access for SMEs. The potential of SMEs for achieving economies of scale is very limited and the use of computer reservation systems (CRSs) has not spread significantly, quite apart from the fact that SMEs are already disadvantaged because of their high average unit production costs. SMEs are forced by market conditions to install new systems and train their staff to use tourism-related technologybut find it difficult to invest in training or staff development, mainly because of limited investment resources and the fact that many SMEs in the hotel, tourism and catering sector are managed by a generation of staff have had no formal training in the sector.

In a globalized market, SMEs need to pursue new survival strategies. The tourism sector at the destination has to cope with the increasing problem of seasonality encountered by many coastal resorts. Competitive advantage then depends on organizational competencies and capabilities.

Local SMEs have to face a number of conditions imposed by large overseas companies. Large tour operators strongly influence the way in which hotels operate at their featured destinations and the prices that they charge, particularly in mass market beach resorts and in short season resorts (e.g. ski resorts); they may also impose conditions on local suppliers, such as compliance with environmental protection standards.

In developing countries, SMEs play an important role in employment creation but are hampered by low productivity levels, poor product quality and lack of access to credit and training. The impact of capital outflows from developing countries resulting from e-commerce is another issue which needs attention. The need to develop competition policy-related disciplines in this area is also clearly felt, in view of the need to establish safeguards to prevent abuse by dominant suppliers. Such issues arising from e-commerce might be addressed in future GATS negotiations.^[68]

The global hotel market encompasses a wide range of types of accommodation – full-service hotels, bed and breakfast inns, suites, self-catering short-term apartments and time-share properties. Distribution and intermediation are increasingly recognized as factors critical to the competitiveness and success of the tourism industry in general and of small and medium-sized tourism enterprises in particular. The latter need to develop effective distribution channels either to meet the needs of their independent clientele or to provide direct booking mechanisms to reduce their dependency on tour operators. Hospitality organizations and hotel chains already rely on customer bookings through the Internet. The challenge for tourism sector SMEs is to be able to compete for their market shares and take advantage of emerging opportunities and associated benefits to enhance their profitability and viability in the global market-place. Table 2.10 sets out the costs and benefits of developing an Internet presence for small and medium-sized tourism enterprises.

Table 2.10. Cost and benefit analysis for developing Internet presence for small and medium-sized tourism enterprises

SMEs in the tourism sector are constrained by the growing concentration and globalization of tourism supply. In addition, lack of professionalism and inadequate management and marketing skills, the absence of economies of scale and limited access to the necessary capital, human resources, marketing expertise and technology, over-reliance on a limited number of distribution partners and inadequate formal education or business training are among other deficiencies which put them at a competitive disadvantage. Overall, the inability to market their products adequately seriously affects their profitability and ability to survive in the globalized economy.^[69]

SMEs are highly reliant on existing distribution channels, namely, intermediaries such as tour operators, travel agencies, travel information centres and tourist guides. It can be argued that the gradual reduction of SMEs’ reliance on intermediaries will enable them to become more profitable, flexible and adaptable and to produce customized tourism products in order to satisfy niche markets. This will also require a rethink of all strategic and operational practices with regard to SME development, as well as development of entrepreneurs’ managerial skills and professionalism, training in marketing and management and on the use of information technology.

SMEs can benefit in a number of ways by applying information technology to develop their product, thereby enhancing their market position and increasing their profit margins. Information technology offers new management and business opportunities and can be applied strategically to gain competitive advantage, improve productivity and performance, facilitate new ways of managing and organizing, and develop new businesses. Although information technology entails risks and costs, its underutilization could increase the vulnerability of SMEs and aggravate any competitive disadvantage as greater use is made of IT systems, including CRSs, GDSs and the Internet, to locate and purchase tourism and accommodation products.^[70] With regard to electronic data interchange (EDI), for example, empirical evidence suggests that EDI is perceived by SMEs as too complex and cumbersome and that the initial investment is too high. The major obstacles to the introduction of EDI are summarized in table 2.11.

Table 2.11.Obstacles to the introduction of electronic data interchange (EDI)

Although SMEs play a major role in the international tourism and hotel industry, their vulnerability becomes quite obvious in the highly demanding business environment characterized by competition generated by globalization and the transformation of tourism demand. Globalization of the industry means that SMEs in the tourism sector compete in a multinational environment where only organizations capable of providing exceptional value or cost advantage will survive. The opportunity of achieving economies of scale in distribution channels, reservations, marketing, advertising, administration, personnel management, technology adaptation, new product development, training and bulk purchasing of raw material and equipment, has been instrumental in the creation of major hotel chains, international consortia, management contracts and multinational franchising companies, and has placed the independent operator at a disadvantage. The overall trend in the hotel industry appears to be towards a gradual but steady switch from independently owned and operated hotels to hotel chains. SMEs seem to be the weakest and most vulnerable members of the industry and will need to seek competitive advantages if they are to compete and maintain their market share in an increasingly globalized economy.

^[1] ILO, Document GB.214/IA/5/5, Geneva, Nov. 1980.

^[2] “This class includes the provision on a fee basis of short-term lodging, camping space and camping facilities ... Examples of activities included here are those usually offered by hotels, motels, inns, school dormitories, residence halls, rooming houses, guest homes and houses, youth hostels, shelters, etc.” Amongst the excluded activities is “Rental of long-term furnished accommodation (e.g. apartment hotels)” classified in division 70 (Real estate activities). United Nations: International Standard Industrial Classification of all Economic Activities, Statistical Papers, Series M, No. 4, Rev. 3, New York, 1990, p. 113. Industry representatives also count apartment hotels and furnished rooms under their field of activity.

^[3] “... [this] includes furnishing travel information, advice and planning, arranging tours, accommodation and transportation for travellers and tourists, furnishing tickets, etc. Also included are tourist assistance activities not elsewhere classified, such as carried on by tourist guides”. United Nations: International Standard Industrial Classification of all Economic Activities, op. cit., p. 115.

^[4] “Tourism comprises the activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes.” The “persons” referred to are termed “visitors”, that is “any person, who travels to a place, outside his/her usual environment for a period not exceeding 12 months and whose main purpose of visit is other than the exercise of an activity remunerated from within the place visited”. United Nations and World Tourism Organization: Recommendations on tourism statistics, United Nations, SeriesM, No. 83, New York 1994, pp. 9, 20, quoted in WTO: Tourism Satellite Account (TSA): The conceptual framework, part of the conference report on the Enzo Paci, World Conference on the Measurement of the Economic Impact of Tourism (Nice, France, 15-18 June 1999).

^[5] “Expenditure made by, or on behalf of, the visitor before, during and after the trip and which expenditure is related to that trip and which trip is undertaken outside the usual environment of the visitor.” “A ‘visitor’ can be either a same-day traveller or a tourist, while a ‘visit’ or ‘trip’ encompasses travel undertaken for business purposes or for personal reasons (not necessarily for leisure). Some forms of travel are excluded, namely that undertaken by migrants, diplomats and military personnel when taking up appointment. Commuter travel is also excluded because it is considered to be part of the ‘usual environment’.” OECD: Measuring the Role of Tourism in OECD Economies: The OECD Manual on Tourism Satellite Accounts and Employment, Paris, 2000, p.16.

^[6] “Travel & Tourism is a collection of products (durables and non-durables, consumer and capital) and services (activities) ranging from airline and cruise ship fares, to accommodations, to restaurant meals, to entertainment, to souvenirs and gifts, to immigration and park services, to recreational vehicles and automobiles, to aircraft manufacturing and resort development.” World Travel and Tourism Council (WTTC): Tourism Satellite Accounting Research, Estimates and Forecasts for Governments and Industry, Year 2000, London, 2000, published as a CD-ROM.

^[7] United Nations Statistical Commission: Report on the thirty-first session (29 February-3 March 2000), Economic and Social Council, Official Records, 2000, Supplement No. 4, Documents E/2000/24, E/CN.3/2000/21.

^[8] ILO, Bureau of Statistics: Developing a labour accounting system for tourism: Issues and approaches, Geneva, 2000.

^[9] World Travel and Tourism Council (WTTC): Tourism Satellite Accounting Research, Estimates and Forecasts for Governments and Industry, op. cit.

^[10] OECD: Measuring the Role of Tourism in OECD Economies, op. cit., Ch. 13.: The OECD Manual on Tourism Satellite Accounts and Employment, Ch. 13.

^[11] WTTC: Tourism Satellite Accounting Research, Estimates and Forecasts for Government and Industry, op. cit.

^[12] World Tourism Organization (WTO): Tourism 2020 vision, A new forecast, Executive Summary, Madrid, 1999, p. 3.

^[13] Cruise Lines Industry Association (CLIA): The cruise industry: An overview, marketing edition, CLIA, New York, 1999.

^[14] A. Poon: Tourism, technology and competitive strategies, Oxford, UK, Redwood Books, 1993.

^[15]UNCTAD: Report of the Expert Meeting on Strengthening the Capacity for Expanding the Tourism Sector in Developing Countries, with Particular Focus on Tour Operators, Travel Agencies and Other Suppliers, Trade and Development Board – Commission on Trade in Goods and Services and Commodities, Expert Meeting on Strengthening the Capacity for Expanding the Tourism Sector in Developing Countries with particular Focus on Tour Operators, Travel Agencies and Other Suppliers, Geneva, 8-10 June 1998, TD/B/COM.1/17, TD/B/COM.1/EM.6/3, 7 July 1998 (subsequently referred to as UNCTAD, 1998a); UNCTAD: International trade in tourism-related service: Issues and options for developing countries, Trade and Development Board – Commission on Trade in Goods and Services and Commodities, Expert Meeting on Strengthening the Capacity for Expanding the Tourism Sector in Developing Countries with particular Focus on Tour Operators, Travel Agencies and Other Suppliers, Geneva, 8-10 June 1998, TD/B/COM.1/EM.6/2, 8 Apr. 1998 (subsequently referred to as UNCTAD, 1998b).

^[16] IATA: The economic benefits of air transport, 2000 edition(prepared for Air Transport Action Group (ATAG)).

^[17] Cabotage is the right of an airline company of one country to embark passengers, mail and goods in another country and carry them to another point in the same country for a fee or for a leasing contract. Cabotage introduces competition between domestic and international carriers and is one of the most debated points in the whole issue of air transport liberalization.

^[18] See the section “Liberalization of trade in services” below.

^[19] UNCTAD, 1998b, op. cit.

^[20] World Trade Organization, Council for Trade in Services: Air transport services, Background Note by the Secretariat, S/C/W/59, 5 Nov. 1998 (subsequently referred to as WTO/OMC 1998a).

^[21] See, inter alia, ICAO Journal: Annual Civil Aviation Report, 1998, Vol. 54, No. 6, July-Aug. 1999; WTO/OMC, 1998a, op. cit.

^[22] UNCTAD: Analysis of experiences in selected services sectors, Note by the UNCTAD Secretariat, Trade and Development Board, Commission on Trade in Goods and Services, and Commodities, Fourth Session, Geneva, 20-24 September 1999, TD/B/COM.1/28, 17 Aug. 1999 (subsequently referred to as UNCTAD, 1999).

^[23] World Trade Organization, Council for Trade in Services: Tourism services, Background Note by the Secretariat, S/C/W/51, 23 Sep. 1998 (subsequently referred to as WTO/OMC 1998b).

^[24] WTO/OMC 1998a, op. cit.

^[25] J.Seifert-Granzin; D.S. Jesupatham: Tourism at the crossroads: Challenges to developing countries by the New World Trade Order, epd-Entwicklungspolitik, Equations, Tourism Watch (ZEB), Frankfurt am Main, 1999, p. 35.

^[26] See UNCTAD, 1998b, op. cit.

^[27] See also World Trade Organization: Tourism negotiations under the General Agreement on Trade in Services (GATS), a paper presented in Geneva, 12 July 1999 (version 1.4 revised on 30Sep. 1999).

^[28] However, the issue of GATS and tourism is widely covered in the relevant literature (for example, World Tourism Organization: Seminar on GATS Implications for Tourism, Milan, 2-3December 1994, WTO Seminar and Conference Proceedings, WTO, Madrid, 1995; Travel and Tourism Analyst, No. 3, 2000: “The GATS and its impact on tourism”, Travel and Tourism Intelligence, London, 2000).

^[29] UNCTAD has identified major implications of the inclusion of air traffic rights in the GATS. See UNCTAD, 1998b, op. cit.

^[30] UNCTAD, 1999, op. cit.

^[31] P. Stalker: Workers without frontiers – The impact of globalization on international migration, Lynne Rienner Publishers, ILO, Geneva, 2000.

^[32] This paragraph and the remaining ones under this section draw on L. Becherel and C. Cooper: Human resources development, employment and globalization in the hotel catering and tourism sector, Paper commissioned by the ILO, Geneva, 2000.

^[33] The term computerized reservation systems (CRS) denotes electronic airline reservation systems used for managing flight and seat inventories for sales and operation purposes. Global distribution systems (GDSs) denote a network of one or more CRS for distributing product offers and functionalities of the participating networks in different countries in the world. In addition to airline products other products such as accomodation, car rental, cruises or tour operator products are included. CRS/GDS denotes both the technical systems and the companies operating the systems. CRS/GDS represents one of the major players in the tourism value chain, since they provide the main electronic link between huge supplier groups and the travel agent community. They provide the following main functions: maintenance of and search facilities for flight schedules and availability; information about other travel and tourism products and their availability, such as package holidays, car rentals or ferries; reservation and selling; ticketing; maintenance of user information; maintenance and search facilities for fare quotes and rules; management functions both for travel agents and airlines. (See H. Werthner and S. Klein: Information technology and tourism – A challenging relationship, Springer Computer Science, Springer-Verlag, Vienna, 1999.)

^[34] GDSs can be accessed by travel agents to find information on all airline companies and service providers in the system. The main tourism distribution networks are highly concentrated and, to a great extent, dominated by American and European airlines. The four main GDSs are: Galileo International created by United Airlines, British Airways, Alitalia, Swissair, KLM and Olympic Airways; Sabre, established by American Airlines; Worldspan, created by Delta, TWA and Northwest in association with the Asian carriers’ GDS, Abacus; Amadeus/System One, set up by the European airlines Air France, Lufthansa, Iberia and SAS. One hundred and fifty thousand travel agencies worldwide are connected to GDSs. The geographical location and concentration of GDSs determines their importance for airlines. Choosing the right GDS is a critical factor in tourism marketing. (See Becherel and Cooper, op. cit.; and UNCTAD, 1998a, 1998b, op. cit.)

^[35] UNCTAD, 1998b, op. cit.

^[36] UNCTAD, 1998a, 1998b, op. cit.

^[37] Werthner and Klein, 1999, op. cit. United States, Germany, Japan and the United Kingdom account for 79 per cent of the world’s present Internet population (WTO/OMT website, 2000). The Internet has currently about 115 million users worldwide and 329 million users are forecasted by 2002, among whom 80 million will be based in Europe. See P. Curry and F. Alpert: “The impact of the Internet on consideration sets – The case of international tourist destinations”, in D. Buhalis and W.Schertler (eds.), Information and communication technologies in tourism, 1999, Proceedings of the International Conference in Innsbruck, Austria, 1999, Springer Computer Science, Springer-Verlag, Vienna, 1999, pp. 77-87.

^[38] UNCTAD: Electronic commerce and tourism – New perspectives and challenges for developing countries, Trade and Development Board, Commission on Enterprise, Business Facilitation and Development, Background Report for the Expert Meeting on Electronic Commerce and Tourism, Geneva, 18-20 September 2000.

^[39] E-commerce involves on-line selling and managing the organization’s relationship with the customer and includes marketing and gathering information about the customer. E-working relates to the organization’s internal processes and covers areas such as product development, training, financial planning and recruitment. E-procurement concerns the organization’s relationship with its suppliers and includes product sourcing, purchase process management and account payable management (see Travel and Tourism Analyst No. 3, 2000: “E-business models in the travel industry”, Travel and Tourism Intelligence, London, 2000).

^[40] Travel and Tourism Analyst, idem.

^[41] With regard to the forces driving the Internet towards becoming a travel market, see W. Schertler and C. Berger-Koch: “Tourism as an information business: The strategic consequences of e-commerce for business travel” in D. Buhalis and W. Schertler (eds.): Information and communication technologies in tourism, 1999, op. cit., pp. 25-35.

^[42] A typical hotel marketing database usually contains personal data, planning data and global sales information about every customer or prospect. Personal services may include: customer loyalty programme; personal attention and recognition programmes to attract new customers; direct marketing used as a sales promotion tool, as a means of targeting specific customers or as a means of selling directly; cross selling and line extension programmes to identify customers who could be interested in other products of the company. See M.A. Robledo: “DBM as a source of competitive advantage for the hotel industry”, in: D. Buhalis and W. Schertler (eds.): Information and communication technologies in tourism, 1999, op. cit., pp. 36-45.

^[43] These amenities include an array of new in-room technologies utilized as competitive methods, such as: in-room computer installations, audiovisual devices, teleconference and videoconference and other customer-oriented technologies such as electronic guest room safes and bars, working rooms, electronic concierges and featured-added websites.

^[44] For a description of the main on-line booking services and their companies, see Werthner and Klein, op. cit., Ch. 5.

^[45] IATA predicts that by 2010 the majority of airline tickets will be electronic, with 80 per cent of tickets issued in the United States in electronic form. Travel agents continue to face difficult times owing to the reduction in commissions and the fast growing competition from an alternative product distribution via Internet and direct airline sales. The trend towards lowering of commissions paid to travel agents for the sale of their tickets by major airlines worldwide continues – base commission rates are cut and caps on commission payments established.

^[46] These are: generally weaker bargaining position towards international tour operators; long distances and less than acute or no competition in high air fares; global distribution systems and computer reservation systems owned by large international airlines; and an increasingly competitive global tourism sector where natural competitive advantages are becoming less significant (UNCTAD, 2000a, op. cit.).

^[47] Sixty-five per cent of total households in the world do not have a telephone, and in low-income countries there are 2.5 lines per 100 people, as compared to 54 lines per 100 people in developed countries. Ninety-six per cent of Internet host computers are found in high-income countries (UNCTAD, 1999, op. cit.). It is worth noting in this context that the key generating regions of international tourism in the world are also those where penetration of the Internet is the highest. The United States, Germany, Japan and the United Kingdom account for 80 per cent of all Internet users in the world (Becherel and Cooper, op. cit.).

^[48] UNCTAD, 1999, op. cit.

^[49] UNCTAD’s Expert Meeting on Electronic Commerce and Tourism (18-20 September 2000) made two recommendations along these lines: improve Internet access and telecommunications infrastructure in order to participate in e-commerce and e-tourism; liberalize telecommunications and Internet services in order to attract new investment, reduce prices and improve quality of service. UNCTAD: Expert Meeting on Electronic Commerce and Tourism Geneva (18-20 September 2000), Outcome, Draft No. 1, Recommendations, July 2000 (subsequently UNCTAD, 2000b).

^[50] The state of e-commerce in Africa and an agenda for action are discussed in UNCTAD: Building confidence – Electronic commerce and development, UNCTAD/SDTE/MISC.11, 2000 (subsequently referred to as UNCTAD 2000c). See also UNCTAD, 2000b, op. cit.

^[51] “… some countries are already showing strong interest in the adoption of e-commerce. As would be expected these are largely confined to the better developed economies of Botswana, Egypt, Mauritius, Morocco, Namibia, South Africa, Tunisia and Zimbabwe” (UNCTAD, 2000c, op. cit., p.79).

^[52] IH&RA: 2nd White Paper on the Hotel Industry, July 2000.

^[53] Werthner and Klein, op. cit.

^[54] Hotels’ Giants Survey 2000, op. cit.

^[55] IH&RA, July 2000.

^[56] IH&RA, July 2000, op. cit.

^[57] In return for the use of the know-how or rights received, the licensee/franchisee usually promises to: produce the licensor’s products covered by the rights; to market these products in an assigned territory; and to pay the licensor some amount related to the sales volume of such products.

^[58] Becherel and Cooper, op. cit.; IH&RA, July 2000, op. cit.

^[59] IH&RA, July 2000, op. cit.

^[60] Travel & Tourism Analyst, No. 2, 2000: “The impact of branding on the UK hotel industry”, Travel & Tourism Intelligence, London, 2000.

^[61] For example, “brand equity is increasingly powerful in accommodation industries. In Canada, 76per cent of Canadian hotel rooms in properties with over 100 rooms are branded. The ability of brands to flag customers is important to investors”; J. Stamos: A status report on the Canadian hotel sector, prepared for the ILO Tripartite Meeting on Human Resources Development, Employment and Globalization by the Hotel Employees and Restaurant Employers International Union, Canadian Regional Office, Montreal, Jan. 2000, p. 5.

^[62] Seifert-Granzin; D.S. Jesupatham, op. cit.

^[63] Seifert-Granzin; D.S. Jesupatham, ibid.

^[64] Hotel Association of Canada: Consolidation – Doing more with less, 1999.

^[65] At the end of 1998, the largest hotel companies in the world all had 100,000 rooms or more. Today, there are only nine companies whose room counts exceed the 100,000 barrier. Yet, in 2000, those nine giants now control 2.98 million of the world’s hotel rooms, while in 1999 the ten biggest companies controlled a smaller amount, 2.84 million: see Hotels’ Giants Survey 2000, op. cit., pp.3-4.

^[66] This is “the process whereby part of the foreign exchange earnings generated by tourism, rather than being retained by tourist-receiving countries, is either retained by tourist-generating countries or remitted back to them. It takes the form of profit, income and royalty remittances; payments for the import of equipment, materials, and capital and consumer goods to cater for the needs of international tourists; the payment of foreign loans; various mechanisms for tax evasion; and overseas promotional expenditures” (UNCTAD, 1998a, p. 6, op. cit.).

^[67] This model allows developing countries with shortages of development capital to develop an economic sector by mobilizing foreign capital and expertise by inviting foreign firms to build hotels in resorts and operate them for a number of years. This can be regarded as an ideal arrangement from the point of view of transferring expertise and technology to the host country.

^[68] See UNCTAD, 1999, op. cit.

^[69] With regard to key issues related to SMEs and SMEs in the tourism industry and barriers to their development, see also inter alia G. Evans and M. Peacock:“A comparative study of ICT, tourism and hospitality SMEs in Europe”, in D. Buhalis and W. Schertler (eds): Information and communication technologies in tourism 1999, op. cit. See also D. Buhalis and C. Cooper: “Competition or cooperation? Small and medium-sized tourism enterprises at the destination”, in Embracing and Managing Change in Tourism, International case studies edited by E. Laws, B.Faulkner and G. Moscardo, 1999.

^[70] Nevertheless, only 39 per cent of independent properties currently receive Internet bookings, by comparison with 51 per cent and 46 per cent for hotel chains and management companies respectively (see D. Buhalis and W. Schatter (eds), 1999, op. cit.). See also D. Buhalis: “Strategic use of information technologies in the tourism industry”, in Tourism Management, Vol. 19, No. 5, pp.409-421, 1998.

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