Tourism

Market Orientation of National Tourism Organisations

 

This project investigates approaches to creating incentives for national tourism organisations (NTO) to become more market-oriented. The work is carried out by the Norwegian School of Economics and Business Administration and has benefited from financial support from the Ministry of Industry of Norway and from several OECD Member countries.

At the October 1999 meeting of the OECD's Tourism Committee, a preliminary report was examined and a number of suggestions were made for integration into the final report. This document was examined at the meeting of the Tourism Committee held on 3-4 July 2000.

The research methodology

Market research indicates that market-oriented organisations perform better in competitive markets. The international travel and tourism market is a market which has seen impressive growth, but there is increasing competition among countries and regions. NTO budgets have been cut in a number of countries worldwide. The research team examined ways to make more effective use of NTO resources.

The research team identified financing mechanisms, sources of funding and organisational ownership, which are thought to influence the market orientation of NTOs. The ultimate goal is to highlight both current "best practices" and provide some solutions which have not yet been implemented in national tourism administrations (NTA).

The policy-relevant factors analysed include:

  • Principles for determining NTO budgets (e.g.activity-based or performance-based).

  • Source of NTO funding/financing (e.g.public or private).

  • "Ownership" or organisational control of the NTO (non-profit government owned/controlled, non-profit tourism industry owned/controlled, or commercial/unlimited company).

The three main aspects examined are:

  • The market orientation of the NTO (e.g.use of information about tourism market trends, ability to disseminate this information to the tourism industry and to influence the suppliers of tourism products and services to im91e their products and services).

  • The ability to plan for and operate on a long-term basis.

  • The NTO's freedom and ability to make its own business decisions on a professional and market-strategic basis.

The preliminary results

The preliminary results, based on field research conducted in 1999 in 15 OECD countries, show how budgeting, funding source and ownership are perceived to affect market orientation, long-term focus and operational freedom. They suggest that consideration should be given to the following scenario:

  • The NTO budget should have a fixed component with a time horizon of more than one year.

  • The NTO should be allowed to transfer funds from one year to another.

  • In addition to the fixed portion, some part of the total budget should be performance based.

  • The NTO should be allowed, but not required, to sell projects to the tourism industry.

If implemented alone, this scenario may have both beneficial and adverse effects. The report 91ides an in-depth review of the suggested scenario.

The OECD agreed to return to these preliminary suggestions at a forthcoming session. If the final report and conclusions are ap91ed, the study will be disseminated.

Areas for further work

The project identified several issues for further work:

  • How should NTO performance be measured?

  • What fraction of the budget should be performance-based?

  • What should be the optimal level of an NTO-budget?

  • Tricky issues relating to ownership/organisational control.

  • NTOs lack links with productive organisational units. The responsibilities (division of labour) of national, regional and local marketing organisations and the responsibility of industry should be studied.

  • Internal NTO organisation and incentive systems.

 

 

 

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