1. Study on the competitiveness of the EU tourism industry International conference Tourism Industry – Employment and Labour Market Challenges Prague, 10 June 2009

2. 2 Aim of the study Asses the ability of EU tourism enterprises to achieve sustained success versus non-EU competitors  1. Analysing the competitive performance of the industry and how production factors and dynamics of the sector influence the competitive performance of the industry 2. Screening of the framework conditions including regulatory and other framework conditions.  Conclusions on competitive position of Tourism Industry and main challenges in order to improve competitiveness

3. 3 Scope of the study

4. 4 General description of the tourism industry (economic importance, location of key industry clusters, growth markets, etc.) and general description of trends and developments → the tourism industry as a whole In depth analysis of productivity, profitability, regulatory and other constraints and a strategic outlook → focus on accommodation and tour operators and travel agents as sub-sectors

5. 5 Key challenge 1 Fragmented industry with a very divers range of companies, mainly concentrated in ‘Old Europe’ Different sub-sectors hotels, airline companies, travel agents, tourist boards,... Difference in size of the companies SME versus bigger players Differences between Member States New Member States versus Old Member States Linkages to many other industries Culture, Nature, Transport, Urban Planning, etc. The business reality and problems are not the same across the industry, within any one sub sector or between the Member States.

6. 6 Key challenge 2 Dominance of micro enterprises in the sector 90% of companies employ < 10 persons might even be an underestimation → micro-enterprises form the backbone of the industry. Many micro-enterprises run often successfully by ‘selfmade’ (wo)men Lack of capitalising on opportunities Problem of ensuring the continuation + transfer of knowledge i mproving professionalism of these enterprises critical to improve the competitiveness of the industry. major challenge to reach these firms and improve their access to support systems, guidance and advice.

7. 7 Key challenge 3 Strong seasonal nature of EU tourism business Strong seasonality pattern with significant implications for the businesses operating in that sector: Impact on the income of the owner of the business Impact on the employees that work in those companies Inefficient use of infrastructure With e.g. temporary work and use of student workers, the industry tries to cope with highly irregular business pattern Problem for industry or problem of industry?

8. 8 Key challenge 4 Difficulty in attracting and keeping personnel Tourism industry as a job creator People with a weaker position in the labour market BUT in tourism industry as well as in other industries Anti social working hours? Temporary working contracts? Low financial remuneration? Limited career prospects? Mismatch supply and demand in education? → bad image of the sector as employer? → difficulties in attracting the necessary skills → a high turnover in personnel

9. 9 Key challenge 5 Low labour productivity tourism related industries under strong pressure to improve labour productivity Growth in labour productivity in the EU tourism industry lower than in other regions worldwide (regulatory framework is different as well) Competition in factor markets (e.g. for labour and capital) with other EU sectors that are more productive and thus can offer better remuneration Is low labour productivity in different sub-sectors major barrier to improve competitiveness? accommodation: low labour productivity, but relatively high profitability TO& TA : higher labour productivity, but profitability is much lower both types of companies have very different cost structures. differences in labour productivity and profitability certainly need further research.

10. 10 Key challenge 6 Lack of innovation to provide answers to different challenges EU tourism industry faced with a number of challenges that need to be addressed in order to improve competitiveness, but innovative solutions to tackle challenges largely missing at the moment: Still strong focus on price to compete. Not enough attention for creation of value added for customers. Few innovative initiatives to reduce seasonality. Limited approach to differentiated markets. Tourism businesses pay little attention to climate change issues. Eco-innovation – high on the research agenda of many other industries – has hardly entered the tourism industry.

11. 11 Key challenge 7 Focus of industry strongly on intra-European and outbound tourism, little consideration of inbound tourism intra-European travellers and outbound tourists, but what about i nbound tourists? European travel market is largely a mature one Non-European regions promising as source markets → industry might need to focus more on inbound tourism.

12. 12 Key challenge 8 Active involvement of public sector, but what is exact role? Public sector is active in many stages of ‘tourism production process’. provide necessary infrastructure (airports, railroads, motorways) promote destinations through national tourist boards directly supply services to industry ( museums, nature parks, … ) create regulatory framework for tourism companies → Governments, regional authorities and local authorities have a significant role to play in further development of tourism industry in Europe. How should this role be optimally defined to create the best synergies between public and private initiatives? In some Member States regional, rather than national, authorities are responsible for tourism promotion.

13. 13 Key challenge 9 Acces to finance is an overall issue for the tourism industry, but especially in times of crisis it becomes a major challenge. Travel demand is elastic - it tends to exceed the growth of overall economy in good times, it contracts more severely when the economy is suffering in bad times. Tourism is often seen as a vulnerable industry with factors beyond the control of businesses operating in the industry: e.g. 9/11, SARS, swine flu epidemic, political instability, disaster, …. → Acces to finance will remain a major challenge in order to deal with innovation, investments in quality etc.

14. Thank you! For more information: Raf Myncke IDEA Consult Kunstlaan 1-2, bus 16 1210 Brussels Belgium Tel: +32 2 609.53.07 E-mail: raf.myncke@ideaconsult.be