What competition do you face on the European outbound tourism market?
The European outbound tourism market is a traditional market, where competition is fierce. European tour operators still hold strong positions. To secure your place on the market, you need to invest in long-term relationships with them. Obtain standards, certification and liability insurance for a competitive advantage. Another option is to target European travellers directly. A different and unique tourism offer gives you the best chance of success.
Although market entry barriers are relatively high, the European outbound tourism market offers interesting opportunities. Standards and certification are a good way to prove you meet European requirements. Trust is crucial. To successfully enter the market, you need to make the effort to forge long-term relationships.
Legislation and non-legal requirements raise market entry barriers
Technical barriers to enter the European outbound tourism market are virtually non-existent. However, although the Package Travel Directive doesn’t directly apply to non-European suppliers, European tour operators usually will impose its demands on you. This European directive protects travellers’ rights when booking package holidays. Its rules have become stricter in 2018, as an update of the directive came into effect.
This new version of the directive places the liability on tour operators for all services in the packages they sell. However, their liability insurance often does not cover damage caused by third parties. Therefore tour operators require suppliers to have their own liability insurance in place. Unfortunately, in many African, Asian and Latin American countries liability insurance that meets European standards is not (yet) available.
Europe’s new General Data Protection Regulation poses another legal barrier. To protect European citizens from privacy and data breaches, it sets strict rules for the processing and free movement of their personal data. It applies to any company processing such data, regardless of the company’s location. Because you generally need to collect some key personal data to provide tourism services, you must be familiar with this regulation and comply with it. Incompliance can result in hefty fines.
Important non-legal requirements focus on health and safety, sustainability and social responsibility. European tour operators generally require you to adhere to a code of conduct. To meet these requirements you can also commit to voluntary standards and apply for certification. This is becoming an increasingly common requirement.
Together, these requirements make the barriers to market entry quite high. Focusing on standards, certification and liability arrangements can give you a competitive advantage.
- For more information and tips, see our study about what requirements you must comply with to attract European tour operators and the ITC Standards Map.
- To familiarise yourself with the way tour operators list their requirements in contracts, see our study about supplier codes.
Professionalism and reliability are key
European tour operators are used to high quality products, clear communication and compliance. They look for professional, reliable partners. The main barrier for new entrants is becoming acquainted with them and gaining their trust. Doing business in the long-haul tourism market is all about building a relationship, which takes time.
You need to be willing to invest in long-term relationships for the best chance of success. Tourism companies in ‘new’ destinations generally find it easier to enter the market, as many buyers don’t have local partners there yet.
- Invest in continuous promotion. For example, repeatedly attend relevant tourism trade events in your European target market(s). Preferably with the same staff. This shows that you are a professional and reliable partner.
- Win European tour operators’ trust with good references to prove your competence. Also join (inter)national sector associations and networks.
- Keep your promises and quickly follow up on requests from European tour operators. They consider slow or lacking follow-up unprofessional, making it hard for them to trust you.
Factors that influence competition between tourism destinations are generally beyond your control. Nevertheless, you should be aware of your country’s strengths and weaknesses and use this to your advantage. Stay on top of economical and political developments in Europe that may influence your selected target markets. Act on them if necessary.
International substitutes are difficult to tackle
On an international level, entire destinations compete heavily with each other to attract tourists. Tourists choose a destination based on a mix of many factors. For example climate, safety, reputation, accessibility, price, value for money and the available attractions and activities. Influencing this is generally beyond the reach of local tourism companies like you.
The Travel & Tourism Competitiveness Index (TTCI) gives you insight into the competitiveness of your country as a tourism market. It is based on Enabling Environment, Travel & Tourism Policy and Enabling Conditions, Infrastructure and Natural & Cultural Resources. The higher the score, the more competitive a country is. The report is released every two years and shows you in what areas your country or region needs to improve.
For example, Latin America should keep improving security, create a more enabling environment and develop infrastructure. In South (East) Asia destinations should work on infrastructure, ICT readiness and visa policies. The main challenges for the Middle East and North Africa are exploiting natural and cultural resources, limited international openness and security perceptions. Sub-Saharan Africa should improve air connectivity, travel costs, visa policies and infrastructure.
Currently, the highest-ranking developing countries are China (4.72), Mexico (4.54), Malaysia (4.50) and Brazil (4.49). These top 30 ranked countries have strongly increased their scores since 2015, especially China and Mexico. Several other developing country destinations have also considerably improved their performance and are rapidly climbing the ranks.
- Identify and focus on your country’s key competitive advantages over other countries. Define travellers’ unique experience in your country.
- Use the TCCI to compare your country’s performance to others. In which areas does it score well? Emphasise this in your marketing message.
- Join forces with local tourism companies, governments and other stakeholders to improve competitiveness and strengthen your position. Specialise in a specific tourism segment to reduce competition. Costa Rica for example has specialised in nature tourism and is now an established nature tourism destination.
External substitution arises in times of crisis
In times of economic crisis, substitution in the tourism sector is often external. Consumers can only spend their money once. When they have less money to spend, luxury purchases like holidays are the first to be postponed. Or travellers replace a long-haul trip with a local holiday. Although Europe has come a long way in recovering from the recent recession, there are some uncertain factors. The effect of for example the Brexit on the British and European outbound travel market is unclear.
- Target European consumers with medium-high and high incomes as they are least affected by economic crises.
- Follow the economic and political developments in Europe so you can adjust your strategy accordingly.
Buyers have the power on the European outbound tourism market. Tour operators are under pressure to buy cheap. You can strengthen your position by specialising in a niche market or by innovating. Increasing opportunities for direct sales also add to supplier power.
Buyers are in control
The European outbound tourism market is a buyer’s market. Tour operators have a strong position in the distribution structure and are expected to hold on to it. This means their buyer power is high.
Online tourism has made it easier for travellers to do business directly with local tourism companies. This puts pressure on European tour operators to become more price sensitive. They invest heavily in product development, innovation and (new) distribution channels to keep up with customer demand. Adapting your product to tour operators’ requirements, both in composition and price, gives you the best chance of success.
- Be flexible and willing to adapt your product.
- Make sure European tour operators are able to find you. Invest in a professional, high quality and well maintained website, as well as online promotion like Search Engine Optimisation. List your company in tourism directories and make sure your countries’ embassies know you. Attend relevant tourism trade events in your European target market(s).
- Focus on joint product development with European tour operators. This intensifies your business relationship and makes it less attractive to switch suppliers.
- Partner with local inbound tour operators who are already successful on the European market. They have built a network and reputation and are familiar with European buyer requirements.
Specialisation and direct sales increase supplier power
European buyers can choose from a wide range of tourism companies offering similar products. Switching suppliers has fairly low barriers and costs. This limits supplier power.
Tourism companies that specialise in a specific niche market or offer innovative products generally have more power. You can also increase your bargaining position by bypassing European business partners. European travellers are becoming experienced travellers that increasingly contact local tourism companies directly. This offers you good opportunities.
- Work together with other local tourism companies to strengthen your bargaining position.
- Focus on a niche market or innovation to increase your bargaining position.
- Stand out from the competition in terms of quality: there is still a market for high-end tourism products.
- Monitor trends and developments in your European target market(s) and apply these to your product.
- Reach out to European travellers directly, for example through your website. Preferably integrate an online booking and payment tool into your website.
- Respond to enquiries within 24 hours. Both European travellers and tour operators will look for alternatives if they don’t receive a speedy reply.
- Target local and regional markets to increase your business opportunities and decrease dependency on European buyers.
Intensive local competition increases rivalry. Providing good quality products at an attractive price is a must. Innovative products that are unique will give you a competitive edge.
Local rivalry is especially high for standardised products
Competition is also fierce on a national level, with many local tourism companies within the same destination. Rising numbers of tourists are expected to further intensify rivalry.
Rivalry is especially fierce when it comes to standardised tourism products. Differentiation among these products is generally low, as local tourism companies mainly compete on price. New and innovative products may easily be copied, making it difficult to develop a differentiated and attractive product.
- Develop niche products that are difficult to copy. This distinguishes you from your competitors and reduces the degree of rivalry.
- Compete on quality, as well as on price. Make sure you provide products of good and consistent quality. If a European buyer is not satisfied with the quality, they may substitute you with a local competitor.
- Compare your company to your industry peers on product range, quality and price. Improve your product where possible.
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