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Tourism’s Importance for Growth Highlighted in World Economic Outlook Report

• All Regions
• 10 Nov 2023

Tourism has again been identified as a key driver of economic recovery and growth in a new report by the International Monetary Fund (IMF). With UNWTO data pointing to a return to 95% of pre-pandemic tourist numbers by the end of the year in the best case scenario, the IMF report outlines the positive impact the sector’s rapid recovery will have on certain economies worldwide.

According to the World Economic Outlook (WEO) Report , the global economy will grow an estimated 3.0% in 2023 and 2.9% in 2024. While this is higher than previous forecasts, it is nevertheless below the 3.5% rate of growth recorded in 2022, pointing to the continued impacts of the pandemic and Russia's invasion of Ukraine, and from the cost-of-living crisis.

Tourism key sector for growth

The WEO report analyses economic growth in every global region, connecting performance with key sectors, including tourism. Notably, those economies with "large travel and tourism sectors" show strong economic resilience and robust levels of economic activity. More specifically, countries where tourism represents a high percentage of GDP   have recorded faster recovery from the impacts of the pandemic in comparison to economies where tourism is not a significant sector.

As the report Foreword notes: "Strong demand for services has supported service-oriented economies—including important tourism destinations such as France and Spain".

Looking Ahead

The latest outlook from the IMF comes on the back of UNWTO's most recent analysis of the prospects for tourism, at the global and regional levels. Pending the release of the November 2023 World Tourism Barometer , international tourism is on track to reach 80% to 95% of pre-pandemic levels in 2023. Prospects for September-December 2023 point to continued recovery, driven by the still pent-up demand and increased air connectivity particularly in Asia and the Pacific where recovery is still subdued.

Related links

• Download the News Release on PDF
• UNWTO World Tourism Barometer
• IMF World Economic Outlook

Category tags

Related content, international tourism reached 97% of pre-pandemic level..., international tourism to reach pre-pandemic levels in 2024, international tourism to end 2023 close to 90% of pre-p..., international tourism swiftly overcoming pandemic downturn.

Travel, Tourism & Hospitality

Global tourism industry - statistics & facts

What are the leading global tourism destinations, digitalization of the global tourism industry, how important is sustainable tourism, key insights.

Detailed statistics

Total contribution of travel and tourism to GDP worldwide 2019-2034

Number of international tourist arrivals worldwide 1950-2023

Global leisure travel spend 2019-2022

Editor’s Picks Current statistics on this topic

Leading global travel markets by travel and tourism contribution to GDP 2019-2022

Travel and tourism employment worldwide 2019-2034

Further recommended statistics

• Basic Statistic Total contribution of travel and tourism to GDP worldwide 2019-2034
• Basic Statistic Travel and tourism: share of global GDP 2019-2034
• Basic Statistic Leading global travel markets by travel and tourism contribution to GDP 2019-2022
• Basic Statistic Global leisure travel spend 2019-2022
• Premium Statistic Global business travel spending 2001-2022
• Premium Statistic Number of international tourist arrivals worldwide 1950-2023
• Basic Statistic Number of international tourist arrivals worldwide 2005-2023, by region
• Basic Statistic Travel and tourism employment worldwide 2019-2034

Total contribution of travel and tourism to gross domestic product (GDP) worldwide in 2019 and 2023, with a forecast for 2024 and 2034 (in trillion U.S. dollars)

Travel and tourism: share of global GDP 2019-2034

Share of travel and tourism's total contribution to GDP worldwide in 2019 and 2023, with a forecast for 2024 and 2034

Total contribution of travel and tourism to GDP in leading travel markets worldwide in 2019 and 2022 (in billion U.S. dollars)

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Number of international tourist arrivals worldwide from 2005 to 2023, by region (in millions)

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• Premium Statistic Global hotel and resort industry market size worldwide 2022-2023
• Premium Statistic Most valuable hotel brands worldwide 2023, by brand value
• Basic Statistic Leading hotel companies worldwide 2023, by number of properties
• Premium Statistic Number of hotels in the construction pipeline worldwide 2024
• Premium Statistic Number of hotel rooms in the construction pipeline worldwide 2024
• Premium Statistic Countries with the most hotel construction projects in the pipeline worldwide 2024

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Number of hotel rooms in the construction pipeline worldwide as of the first quarter of 2024

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Countries with the highest number of hotel construction projects in the pipeline worldwide as of the first quarter of 2024

• Premium Statistic Airports with the most international air passenger traffic worldwide 2023
• Premium Statistic Market value of selected airlines worldwide 2024
• Premium Statistic Global passenger rail users forecast 2017-2028
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• Premium Statistic Number of users of car rentals worldwide 2020-2029
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• Premium Statistic Carbon footprint of international tourism transport worldwide 2005-2030, by type

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Market value of selected airlines worldwide as of May 2024 (in billion U.S. dollars)

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Carbon footprint of international tourism transport worldwide 2005-2030, by type

Transport-related emissions from international tourist arrivals worldwide in 2005 and 2016, with a forecast for 2030, by mode of transport (in million metric tons of carbon dioxide)

Attractions

• Premium Statistic Leading museums by highest attendance worldwide 2019-2022
• Basic Statistic Most visited amusement and theme parks worldwide 2019-2022
• Basic Statistic Monuments on the UNESCO world heritage list 2023, by type
• Basic Statistic Selected countries with the most Michelin-starred restaurants worldwide 2023

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Leading amusement and theme parks worldwide from 2019 to 2022, by attendance (in millions)

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Online travel market

• Premium Statistic Online travel market size worldwide 2017-2028
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• Basic Statistic Market cap of leading online travel companies worldwide 2023
• Premium Statistic Estimated EV/Revenue ratio in the online travel market 2024, by segment
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Selected trends

• Premium Statistic Global travelers who believe in the importance of green travel 2023
• Premium Statistic Sustainable initiatives travelers would adopt worldwide 2022, by region
• Premium Statistic Airbnb revenue worldwide 2017-2023
• Premium Statistic Airbnb nights and experiences booked worldwide 2017-2023
• Premium Statistic Technologies global hotels plan to implement in the next three years 2022
• Premium Statistic Hotel technologies global consumers think would improve their future stay 2022

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• Premium Statistic Travel and tourism revenue worldwide 2020-2029, by segment
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Outbound tourism visitor growth worldwide from 2020 to 2022, with a forecast until 2025, by region

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A new itinerary for the tourism industry

McKinsey spoke with more than 5,000 travelers across geographies and generations as part of a recently published survey  that reveals clear differences in behaviors, motivations, and expectations among a diverse set of tourists. On this episode of The McKinsey Podcast , McKinsey’s Margaux Constantin  and Jasperina de Vries speak with editorial director Roberta Fusaro about data that can help travel and tourism companies tailor their offerings and realize more bookings, higher satisfaction, and, ultimately, repeat visitors.

In our second segment, from our CEO Insights series , McKinsey senior partner Kurt Strovink  shares an approach to help CEOs connect with stakeholders—a relationship that’s prized but too often elusive.

This transcript has been edited for clarity and length.

The McKinsey Podcast is cohosted by Lucia Rahilly and Roberta Fusaro.

What motivates travelers to hit the road?

Roberta Fusaro: We’re here to talk about the way we travel today, specifically about a piece of research that McKinsey did with more than 5,000 travelers from China, Germany, the United Arab Emirates, the United Kingdom, and the United States.

We asked them about the motivations, behaviors, and expectations behind their travel experiences. One of the more interesting findings from the report is that travel isn’t just of “interest,” and I’m putting that word in air quotes. It’s becoming a priority for a range of consumers, including me. Margaux, why is this so?

Margaux Constantin: We clearly see that for people all over the world, travel has never been so top of mind . And that might be because of more than just the pandemic. About two-thirds of the people we interviewed said they’re more interested in travel than ever before.

If you take the younger generations, that number is even higher: 76 percent have never been so keen to travel. But that’s something that we’ve seen happening over the past decade, where there’s been a shift from spending on possessions to spending on experiences, particularly for the younger generations. Maybe the pandemic was a bit of a catalyst. But that really comes from a much longer cyclical trend in the industry.

Roberta Fusaro: What differences did you see among travelers of different ages? What matters most to Gen Z, for instance?

Jasperina de Vries: Gen Zers are interesting because travel has become a top priority for them. In fact, last year, millennials and Gen Zers took an average of nearly five trips versus less than four for Gen Xers and baby boomers.

The number-one consideration we clearly see for Gen Zers when selecting a destination is experiencing something new. For the younger generations, there’s a real draw toward using travel as a means to interact with different cultures and explore the unknown.

That makes international travel increasingly appealing for these younger generations. International travel feels more within reach for them. The cost has come down, especially with the abundance of low-cost airline seats. Travel has also become more convenient. It’s easy for them to get oriented in a destination before they travel. Mobile connectivity overseas has become cheaper. It’s easy to translate things when you get there.

Social media is also helping younger generations shape their ideas about faraway destinations when they’re thinking about their next trip. And 92 percent of younger travelers reported that they were influenced by social media, in that sense. Social media makes the world feel smaller and bigger at the same time.

Roberta Fusaro: What about Gen X and boomer travelers?

Jasperina de Vries: For the older generations, the number-one travel motivator is friends and family—to either visit them or travel with them. That motivator is put far ahead of visiting a new place or going to a place that everybody’s talking about.

Older generations are also very strategic about how they spend. Only 7 percent of the baby boomers we surveyed will go all out when they travel. But that doesn’t mean that they’re unwilling to spend, because baby boomers do spend three times more on travel than Gen Z.

They are willing to make their trip easy and convenient. They are willing to spend to make things less burdensome. They’re willing to travel in the offseason. They’re less likely to try and save by taking longer or connecting flights. And they are almost twice as likely as younger generations to cut expenses when needed, but they place emphasis on the quality of their accommodations.

Margaux Constantin: What’s interesting is that baby boomers spend three times more on travel than Gen Z. But Gen Z spends a much higher share of its disposable income on travel. That’s the big paradox here.

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The role of technology in travel.

Roberta Fusaro: How do different generations incorporate technology into their travel plans?

Margaux Constantin: What we see with older generations is quite a bit of fatigue with technology in the travel process and a feeling that if you’re not a digital native, the steps of traveling have become quite challenging. That may or may not be correlated with the fact that they tend to visit destinations they’re more familiar with, that they have been to already, rather than explore new destinations. So they can rely a bit less on those tools.

What that means is that travelers still like to have a digital and analytics-informed travel journey and travel process, but that doesn’t have to get in the way of human interaction. What we see with older generations is frustration that every site or attraction you try to go to now [involves] a machine that they’re struggling to interact with or to get the right information from. And that’s where some of the disconnect can happen.

Traveler priorities across different global markets

Roberta Fusaro: The survey also gets into some of the differences among travelers in different markets. We’re looking at travelers in China, the US, the Emirates, and some Europeans. What did you see there? What are travelers in different markets more or less likely to prioritize?

Margaux Constantin: What’s quite interesting here is despite the world becoming more globalized or feeling like it’s become more globalized, the differences in travel preferences across those markets remain really strong.

If you start with the Chinese travelers, they are changing a lot. There is still a very large chunk of that market that wants to prioritize these iconic travel experiences, these famous bucket list [trips]. About 69 percent of our Chinese respondents want that bucket-list-type holiday. For North American and European travelers, it’s only 20 percent.

At the same time, we also see in the Chinese market a real enthusiasm and passion, fueled by the pandemic, of rediscovering their domestic heritage and traveling much closer to home. We see the Chinese domestic-travel market growing at about 12 percent in the coming years and overtaking, very quickly, the United States as the world’s largest domestic-travel market.

If you compare this with travelers from the United Arab Emirates, there is also a strong preference, closer to the number of Chinese travelers, to visit iconic destinations. But what they’re really after are active, sport-heavy holidays—being outdoors, hiking, and doing some sort of exercise. On the other end, Europeans and North Americans are a lot more homogeneous in their preferences; 40 percent see their vacations as a way to just get away from it all, which is two times higher than the share of Chinese or UAE-based respondents. And, of course, the best way to get away from it all is the traditional beach holiday, which remains the top destination for those markets.

Seven traveler archetypes

Roberta Fusaro: As part of the research, you identified seven clusters of travelers, all of whom share a lot of the same attitudes and motivations toward travel. These include sun-and-beach travelers, culture-and-authenticity seekers, strategic spenders, trend-conscious travelers, cost-conscious travelers, premium travelers, and adventure seekers. Let’s tick through each and the preferences embedded within them.

Jasperina de Vries: This is my favorite topic for two reasons. One is that these personas are intriguing. And two, there’s an especially key insight for travel players on going to the next level of customer understanding or guest understanding, in a similar way as we’ve done here in the research.

We used machine learning to identify clusters of our respondents with similar behaviors and attitudes and then looked at the key differentiators between these groups. There are seven in total. One cluster is the culture-and-authenticity travelers. They love to sightsee, they prioritize new destinations, and they’re willing to spend on experiences.

That contrasts with, for example, the strategic spenders, who are very careful about splurging on experiences and who also try to save on accommodations and flights. Another one that I would highlight is the trend-conscious jet-setters, who are ready to spend and who are very attentive to recommendations from friends and social media. These travelers would prioritize the more iconic or popular destinations.

But a key learning for players in the sector is to use the data to better understand the exact traveler archetype that you are trying to attract and learn how to meet their needs.

And in this sector, companies don’t always interact with their guests every day, as they do in, say, retail. But, still, our clients are surprised by how much they do know about their customers and how much privileged insight they have. Our research was based on 5,000 respondents. But imagine it’s hundreds of thousands or even millions of customers you have touched and what you can learn from them.

Using data to tailor travel experiences

Roberta Fusaro: Let’s pretend I own a company that organizes travelers around large safari expeditions and sightseeing experiences. How could I use the information in this report to boost sales or engagement?

Jasperina de Vries: I hope that the research opens up the aperture for many players in the industry , like the safari provider, to think more deeply about the different pockets of demand out there and to build up their understanding of the pockets that they have not yet been specifically targeting.

And this is the other point: it’s important to build out the understanding of your customer base and, from that, think through how that allows you to adjust your marketing approach.

One of my clients, for example, is looking to increase direct bookings. That’s something that many of our listeners will try to pursue. What my client does is look at a cluster of guests that already has a high degree of direct bookings. That cluster is made up of relatively similar people, but there are also people in that cluster who do not yet book direct.

The good thing is they look like those who do. And it’s relatively easy to nudge them into the type of behavior that you would ideally see, which is booking direct versus booking through an OTA [online travel agency]. And you can do the same with upselling and cross-selling, for example. This is more straightforward than you think, and it’s driven by the customer data you have today.

It’s important to build out the understanding of your customer base and, from that, think through how that allows you to adjust your marketing approach. Jasperina de Vries

Margaux Constantin: Adding further to this notion of the travel safari company, and being a bit more focused on older generations, because they do spend more than younger generations. They spend three times more. But if you start thinking, “Maybe there is a new market in the younger generations and Gen Z because they are willing to spend disproportionately on experiences,” then you could engineer experiences for them. They might come on a low-cost flight, and they might stay in cheaper accommodations, but they will spend the $500 entrance fee to go gorilla tracking and have that experience.

There are these pockets of high willingness to spend. And that means you may also want to rethink your accommodation offering to be cheap without feeling cheap. It’s a lot about smaller rooms, shared rooms, but also high-quality shared spaces, high-quality open spaces, coworking spaces where people can mingle. We’re starting to see some players propose interesting things there.

Roberta Fusaro: How much of that is happening within the ecosystem?

Margaux Constantin: A lot of our clients are not sufficiently mining all the insights they have on what their travelers need. And there are so many more insights they could get. But a lot of our clients are also not sufficiently reactive or agile enough to act on those insights.

So what you’re describing is an example of such an action. But it could also be to launch certain promotional packages, which is easier, or redo parts of your website, which is also easier. The translation to action remains slow.

It usually takes three years to build a hotel. In those three years, how do you keep evolving your builds to meet the evolving needs of your travelers or, at least, build things in a way that gives you enough agility once the property opens?

Jasperina de Vries: But, to your point, Roberta, in the ecosystem orchestration , we don’t see a lot of syncing up among players yet. But there is an increasing eagerness to grow tourism destinations, because folks are seeing that it’s important to build out full itineraries to make the most out of that first stay so that the traveler takes away a positive experience and goes back home and talks about it. It’s important for growing markets to build everything out in sync. And we see a lot of eagerness among stakeholders to get there. It’s easier said than done, of course.

New opportunities

Roberta Fusaro: Are new businesses  springing up out of this renewed zest for travel?

Jasperina de Vries: For this year, we expect that tourism will be a full 9 percent of global GDP. So it’s creating a lot of new economic activity. And there is a lot of opportunity for stakeholders who can cater to the preferences of new travelers.

Roberta Fusaro: Some travel companies  struggle with their data strategies. If you’re somewhere in the middle of the journey with your data strategy, are there things that you can do right now to start to understand customers better?

Jasperina de Vries: Hospitality clients are surprised by how much they can do with the data and privileged insights they already have as first parties versus intermediaries. For example, we helped one company build out something basic to start with: sending out three types of messages to customers based on a best guess of their propensity to travel to a particular destination.

We sent one set of customers an email about news from that destination and included a convenient travel offer for them. The second group we wanted to convince, so we sent them an email before their next estimated travel date and included a more price-sensitive offer. And for the third group of customers, who we think might not be highly likely to travel but who could be tempted, we tried to attract them with a special offer.

So this is not about building out a full set of email journeys and cross-channel journeys. This can start really small and still be effective.

Memorializing trips through social media

Roberta Fusaro: Jasperina, you’d mentioned the use of social media among Gen Z travelers. I’m curious about this idea of memorializing the travel experience and how providers and players in the tourism ecosystem could think about that differently.

Margaux Constantin: In our research, we see that more than 70 percent of travelers say they’ve posted photos of their vacation on social media in a very systematic way. And, of course, for younger generations, that share is north of 95 percent. It’s absolutely become the norm.

Then, if we go back to the times of even ancient Greece, you will find various ways of capturing travel memories in some shape or form. As we mentioned earlier, more than 90 percent of Gen Z travelers will be influenced by social media posts when deciding to visit a certain place, especially posts they see from friends and families or from celebrities they trust.

That creates several opportunities for the industry. Definitely everything related to social media  strategy, influencer strategy, encouraging folks who come to visit to repost about the hotel, repost about the attraction, repost about the destination, is key, given how big this is in the consideration funnel of travelers.

But this is also creating opportunities for new businesses to emerge in this space of journaling, if you like. And we see microblogging platforms trying to give travelers a different way of sharing with friends and family outside of the traditional social media platforms, which is also interesting.

Roberta Fusaro: I’m feeling bad for the seaside sketch artist who you would walk up to, and they would sit there with their pen . . .

Margaux Constantin: Actually, that one, probably, has never been a bigger celebrity. There is so much they can do on social media, even if they have limited drawing skills. There’s a big career as an actor in that space.

The impact of gen AI

Roberta Fusaro: Jasperina, you mentioned the use of generative AI [gen AI] on the back end of travel experiences. Are there other applications of gen AI that you could see going forward?

Jasperina de Vries: We saw in the survey that about a quarter of travelers have tried using AI or gen AI to plan a trip, and 80 percent said that they would be interested in trying to use AI or gen AI to plan a trip. So, there’s an expectation that the use will grow.

We also see that the first versions of gen-AI-based travel planners  can only do so much. So this is definitely an evolving space that still needs time. But it is quickly evolving.

And we talked about some of the use cases there. The gen AI piece that can come in is, for example, about making it easier to create marketing content. Going forward, we should also be mindful of the role that AI and technology plays and the implication it has on the workforce.

What we continue to see for hospitality and tourism is if there’s one sector where the human touch and the tech enablement of that remains so important, it’s hospitality because this is a moment in time for all travelers, where they are keen to experience something new and they also want to be taken care of. And so we expect that frontline staff, travel advisers, etcetera, will continue to have an important role in that travel or booking experience , empowered by technology.

If there’s one sector where the human touch and the tech enablement of that remains so important, it’s hospitality because this is a moment in time for all travelers, where they are keen to experience something new and they also want to be taken care of. Jasperina de Vries

Destination overload

Roberta Fusaro: We’ve been talking a lot about growth in the market. Is there something that the service providers or players in the tourism ecosystem have to be aware of, given all this fast growth?

Margaux Constantin: The growth is not very evenly spread. What we tend to see is if you take the 15 destinations today that have the highest concentration of visitors per square kilometer, these are also the destinations that I expect to see the fastest growth of visitors in the coming years, so anything leading to 2030 from 20 percent further growth, all the way to 86 percent for places like Marrakesh and Morocco.

At the same time, travelers say that when there’s just a bit too much of a crowd, it has a highly negative impact on their travel. Seventy percent of our respondents mentioned negative experiences related to overcrowding in their travel in the last 12 months.

So as we grow, we really need to put in place the right measures and be very thoughtful  about how we ensure that visitors have the best travel experiences they can—whether it’s in more rural, quiet areas, but also in some of the most visited places—and really keeping that strong visitor experience.

Why CEOs must connect with stakeholders

Lucia Rahilly: Next up, senior partner Kurt Strovink says CEOs understand the importance of connecting with stakeholders, but too few know how to do it.

Laurel Moglen: Stakeholders, like investors, customers, the media, and employees, all want to hear from CEOs on a wide range of issues. Kurt, through your conversations with CEOs, how important is it for CEOs to engage with the public?

Kurt Strovink: It’s very important, and it’s becoming more important as time goes on. Communications and stakeholder engagement is one aspect that many CEOs are less prepared for, relative to what it takes. It’s not something they’ve necessarily encountered in previous roles before becoming CEO. And the enormity of the number of stakeholders, the balance between them, and how to manage and negotiate this is something that I think dawns on new CEOs quite quickly.

Our own research suggests that 58 percent of CEOs think that external affairs is a top priority for them. But only 12 percent feel that they’re handling it really well. I would also say some of the leading CEOs, those who have become skilled at being a CEO over time and some of who we’ve profiled in our book CEO Excellence , have also drawn attention to this priority. 1 Carolyn Dewar, Scott Keller, and Vikram Malhotra, CEO Excellence: The Six Mindsets That Distinguish the Best Leaders from the Rest , New York: NY, Scribner 2022.

Satya Nadella, the CEO of Microsoft, has talked about how important it is to be able to manage multiple constituents in the world—team members, employees, customers, governments. As a CEO, you need to create that sort of continuous balance between multiple constituents.

Laurel Moglen: What’s the best way for leadership to adapt to this priority?

Kurt Strovink: In terms of how to adjust to this priority, we’ve tried to synthesize our perspectives into an approach called EDGE. It’s an acronym that encompasses four ideas for CEOs to understand what’s important.

The first idea is expanded . CEOs must think about themselves as a bridge to the outside world. They must recognize that they’re kind of public in all their comments at all moments. That’s a different mentality than thinking about yourself as a personal leader inside of a company, where your words won’t travel as far.

The second idea is distinctive , by which we mean do only what the CEO can do or try to think about those things that can’t be delegated. There are many things that you can have other people do on your behalf, but some of the communication needs to be from the CEO seat itself.

The third idea is growth oriented . Some of the best communicators and stakeholder balancers think a lot about growth in their communications. It’s something that’s ever present in the way that they interact with the outside world. It’s part of how they emphasize the upside of their companies, their contribution to the world.

The fourth and final idea is engagement . This means going beyond influencing stakeholders to try to truly inhabit the mindsets that they have, meet them on their own terms, and work from there.

This is one way to think about four important best practices that we think of in the context of communications with different constituent groups and to adapt to them.

Laurel Moglen: As leaders incorporate all that EDGE means into their communications platforms, what strategies have you seen work for them?

Kurt Strovink: I have seen a few strategies that work for CEOs and a few markers for progress as CEOs become more excellent on this dimension. I often will observe a CEO’s narrative itself—the way they talk about what they’re doing, what they’re here to do, what their company’s purpose is, how they engage their own employees—and I will listen for how proprietary that vocabulary is and how authentic it is to them. And we often find that CEOs who become skilled at this will have certain terms that they put more weight into, certain things that become meaningful. So this idea of the singular narrative with proprietary language is hard to encourage anybody to do, but we notice it as a distinctive strength.

I also find that CEOs need creative ways to enrich this narrative over time, to have it take in additional elements of what happens around them. They must repeat this narrative, sometimes more than they’d like to in different settings. They should find energy and enthusiasm and vitality in doing that authentically. It’s very important to see yourself as a real communicator of this message in broadcast and in narrowcast forms. The former CEO of US Bancorp, Richard Davis, said the holy grail for him was to have 12 people on a management team who were equal voices and equal storytellers.

What that means is that there are people who can speak for the team, for the company, not just for themselves. Sometimes, you see CEOs who develop enough of a narrative that they get another dozen people on their management team to really make it theirs and sound similar themes.

These CEOs create propagation that’s much greater inside the company and outside the company because they have other people and their management team who are fully resonant with those messages.

One last thing that I’ll share from our work with CEOs is what we call the four Ws: “who” “why,” “what,” and “when.”

You have to think about “Who you are?” or “Who do you want to be?” You’re really thinking about the identity of the organization separate from the initiatives and activities that are under way.

You also have to think about the why. “Why is it there?”

This gets us to the what. “What is the purpose?” or “What’s a larger mission that motivates?” This leads you to think about the series of things you’re doing. And that ladders down into many aspects of strategy, initiatives, and the like.

Lastly, you think about the timing, the execution of the plans, which is summarized by the when.

But I do see a failure mode in CEOs. They’re very good about the what and the when, though maybe not as thoughtful as they could be about the who and the why.

And in self-propelled organizations, especially organizations of high talent, there’s tremendous latent potential in deeper dialogues about the “who” and the “why.”

I would encourage all CEOs to think about all four Ws evenly as they think about building some of these messages, these narratives of meaning, and as they chart the course to figure out what they’re solving for with so many different constituencies.

Kurt Strovink is a senior partner in McKinsey’s New York office, Margaux Constantin is a partner in the Dubai office, and Jasperina de Vries is an associate partner in the Amsterdam office. Lucia Rahilly is the global editorial director of McKinsey Global Publishing and is based in the New York office, and Roberta Fusaro is an editorial director in the Boston office.

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Tourism and Competitiveness

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The tourism sector provides opportunities for developing countries to create productive and inclusive jobs, grow innovative firms, finance the conservation of natural and cultural assets, and increase economic empowerment, especially for women, who comprise the majority of the tourism sector’s workforce. Before the COVID-19 pandemic, tourism was the world’s largest service sector—providing one in ten jobs worldwide,  almost seven percent of all international trade and  25 percent of the world’s service exports —a critical foreign exchange generator.  In 2019 the sector was valued at more than US$9 trillion and accounted for 10.4 percent of global GDP.

Tourism offers opportunities for economic diversification and market-creation. When effectively managed, its deep local value chains can expand demand for existing and new products and services that directly and positively impact the poor and rural/isolated communities. The sector can also be a force for biodiversity conservation, heritage protection, and climate-friendly livelihoods, making up a key pillar of the blue/green economy. This potential is also associated with social and environmental risks, which need to be managed and mitigated to maximize the sector’s net-positive benefits.

The impact of the COVID-19 pandemic has been devastating for tourism service providers, with a loss of 20 percent of all tourism jobs (62 million), and US$1.3 trillion in export revenue, leading to a reduction of 50 percent of its  contribution to GDP  in 2020 alone. The collapse of demand has severely impacted the livelihoods of tourism-dependent communities, small businesses and women-run enterprises. It has also reduced government tax revenues and constrained the availability of resources for destination management and site conservation.

Naturalist local guide with group of tourist in Cuyabeno Wildlife Reserve Ecuador. Photo: Ammit Jack/Shutterstock

Tourism and Competitiveness Strategic Pillars

Our solutions are integrated across the following areas:

• Competitive and Productive Tourism Markets. We work with government and private sector stakeholders to foster competitive tourism markets that create productive jobs, improve visitor expenditure and impact, and are supportive of high-growth, innovative firms. To do so we offer guidance on firm and destination level recovery, policy and regulatory reforms, demand diversification, investment promotion and market access. 
• Blue, Green and Resilient Tourism Economies. We support economic diversification to sustain natural capital and tourism assets, prepare for external and climate-related shocks, and be sustainably managed through strong policy, coordination, and governance improvements. To do so we offer support to align the tourism enabling and policy environment towards sustainability, while improving tourism destination and site planning, development, and management. We work with governments to enhance the sector’s resilience and to foster the development of innovative sustainable financing instruments.
• Inclusive Value Chains. We work with client governments and intermediaries to support Small and Medium sized Enterprises (SMEs), and strengthen value chains that provide equitable livelihoods for communities, women, youth, minorities, and local businesses. 

The successful design and implementation of reforms in the tourism space requires the combined effort of diverse line ministries and agencies, and an understanding of the impact of digital technologies in the industry. Accordingly, our teams support cross-cutting issues of tourism governance and coordination, digital innovation and the use and application of data throughout the three focus areas of work.

Tourism and Competitiveness Theory of Change 

Examples of our projects:

• In Indonesia , a US$955m loan is supporting the Government’s Integrated Infrastructure Development for National Tourism Strategic Areas Project. This project is designed to improve the quality of, and access to, tourism-relevant basic infrastructure and services, strengthen local economy linkages to tourism, and attract private investment in selected tourism destinations. In its initial phases, the project has supported detailed market and demand analyses needed to justify significant public investment, mobilized integrated tourism destination masterplans for each new destination and established essential coordination mechanisms at the national level and at all seventeen of the Project’s participating districts and cities.
• In Madagascar , a series of projects totaling US$450m in lending and IFC Technical Assistance have contributed to the sustainable growth of the tourism sector by enhancing access to enabling infrastructure and services in target regions. Activities under the project focused on providing support to SMEs, capacity building to institutions, and promoting investment and enabling environment reforms. They resulted in the creation of more than 10,000 jobs and the registration of more than 30,000 businesses. As a result of COVID-19, the project provided emergency support both to government institutions (i.e., Ministry of Tourism) and other organizations such as the National Tourism Promotion Board to plan, strategize and implement initiatives to address effects of the pandemic and support the sector’s gradual relaunch, as well as to directly support tourism companies and workers groups most affected by the crisis. 
• In Sierra Leone , an Economic Diversification Project has a strong focus on sustainable tourism development.  The project is contributing significantly to the COVID-19 recovery, with its focus on the creation of six new tourism destinations, attracting new private investment, and building the capacity of government ministries to successfully manage and market their tourism assets.  This project aims to contribute to the development of more circular economy tourism business models, and support the growth of women- run tourism businesses.  
• Through the Rebuilding Tourism Competitiveness: Tourism Response, Recovery and Resilience to the COVID-19 Crisis initiative and the Tourism for Development Learning Series , we held webinars, published insights and guidance notes as well as formed new partnerships with Organization of Eastern Caribbean States, United Nations Environment Program, United Nations World Tourism Organization, and World Travel and Tourism Council to exchange knowledge on managing tourism throughout the pandemic, planning for recovery and building back better. The initiative’s key Policy Note has been downloaded more than 20,000 times and has been used to inform recovery initiatives in over 30 countries across 6 regions.
• The Global Aviation Dashboard  is a platform that visualizes real-time changes in global flight movements, allowing users to generate 2D & 3D visualizations, charts, graphs, and tables; and ranking animations for: flight volume, seat volume, and available seat kilometers.  Data is available for domestic, intra-regional, and inter-regional routes across all regions, countries, airports, and airlines on a daily, weekly, or monthly basis from January 2020 until today. The dashboard has been used to track the status and recovery of global travel and inform policy and operational actions.

Traditional Samburu women in Kenya. Photo: hecke61/Shutterstock.

Featured Data

We-Fi WeTour Women in Tourism Enterprise Surveys (2019)

• Sierra Leone  |  Ghana

Featured Reports 

• Destination Management Handbook: A Guide to the Planning and Implementation of Destination Management  (2023)
• Blue Tourism in Islands and Small Tourism-Dependent Coastal States : Tools and Recovery Strategies (2022)
• Resilient Tourism: Competitiveness in the Face of Disasters  (2020)
• Tourism and the Sharing Economy: Policy and Potential of Sustainable Peer-to-Peer Accommodation  (2018)
• Supporting Sustainable Livelihoods through Wildlife Tourism  (2018)
• The Voice of Travelers: Leveraging User-Generated Content for Tourism Development  (2018)
• Women and Tourism: Designing for Inclusion  (2017)
• Twenty Reasons Sustainable Tourism Counts for Development  (2017)
• An introduction to tourism concessioning:14 characteristics of successful programs.  The World Bank, 2016)
• Getting financed: 9 tips for community joint ventures in tourism . World Wildlife Fund (WWF) and World Bank, (2015)
• Global investment promotion best practices: Winning tourism investment” Investment Climate  (2013)

Country-Specific

• COVID-19 and Tourism in South Asia: Opportunities for Sustainable Regional Outcomes  (2020)
• Demand Analysis for Tourism in African Local Communities  (2018)
• Tourism in Africa: Harnessing Tourism for Growth and Improved Livelihoods . Africa Development Forum (2014)

COVID-19 Response

• Expecting the Unexpected : Tools and Policy Considerations to Support the Recovery and Resilience of the Tourism Sector (2022)
• Rebuilding Tourism Competitiveness. Tourism response, recovery and resilience to the COVID-19 crisis  (2020)
• COVID-19 and Tourism in South Asia Opportunities for Sustainable Regional Outcomes  (2020)  
• WBG support for tourism clients and destinations during the COVID-19 crisis  (2020)
• Tourism for Development: Tourism Diagnostic Toolkit  (2019)
• Tourism Theory of Change  (2018)

Country   -Specific

• COVID Impact Mitigation Survey Results  (South Africa) (2020)
• COVID Preparedness for Reopening Survey Results  (South Africa) (2020)
• COVID Study  (Fiji) (2020) with   IFC

Featured Blogs

• Louise Twining-Ward and Alba Suris , Bridging the Tourism Data Divide: New Tools for Policymaking
• Fiona Stewart, Samantha Power & Shaun Mann ,  Harnessing the power of capital markets to conserve and restore global biodiversity through “Natural Asset Companies”   | October 12 th  2021
• Mari Elka Pangestu ,  Tourism in the post-COVID world: Three steps to build better forward  | April 30 th  2021
• Hartwig Schafer ,  Regional collaboration can help South Asian nations rebuild and strengthen tourism industry  | July 23 rd  2020
• Caroline Freund ,  We can’t travel, but we can take measures to preserve jobs in the tourism industry  | March 20 th  2020

Featured Webinars

• Destination Management for Resilient Growth . This webinar looks at emerging destinations at the local level to examine the opportunities, examples, and best tools available. Destination Management Handbook
• Launch of the Future of Pacific Tourism. This webinar goes through the results of the new Future of Pacific Tourism report. It was launched by FCI Regional and Global Managers with Discussants from the Asian Development Bank and Intrepid Group.
• Circular Economy and Tourism . This webinar discusses how new and circular business models are needed to change the way tourism operates and enable businesses and destinations to be sustainable.
• Closing the Gap: Gender in Projects and Analytics .  The purpose of this webinar is to raise awareness on integrating gender considerations into projects and provide guidelines for future project design in various sectoral areas.
• WTO Tourism Resilience: Building forward Better. High-level panelists from Sri Lanka, Costa Rica, Jordan and Kenya discuss how donors, governments and the private sector can work together most effectively to rebuild the tourism industry and improve its resilience for the future.
• Tourism Watch
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Launch of Blue Tourism Resource Portal

How global tourism can become more sustainable, inclusive and resilient

A sanitary mask lies on the ground at Frankfurt Airport Image:  Reuters/Ralph Orlowski

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Stay up to date:, the great reset.

• Tourism rose to the forefront of the global agenda in 2020, due to the devastating impact of COVID-19
• Recovery will be driven by technology and innovation – specifically seamless travel solutions, but it will be long, uneven and slow
• Success hinges on international coordination and collaboration across the public and private sectors

Tourism was one of the sectors hit hardest by the global pandemic. 2020 was the worst year on record for international travel due to the global pandemic, with countries taking decisive action to protect their citizens, closing borders and halting international travel.

The result was a 74% decline in international visitor arrivals, equivalent to over $1 trillion revenue losses , and an estimated 62 million fewer jobs . The impact on international air travel has been even more severe with a 90% drop on 2019 , resulting in a potential $1.8 trillion loss. And while the economic impact is dire in itself, nearly 2.9 million lives have been lost in the pandemic.

The path to recovery will be long and slow

Countries now face the challenge of reopening borders to resume travel and commerce, while protecting their populations’ health. At its peak, the World Tourism Organization (UNWTO) reported in April 2020 that every country on earth had implemented some travel restriction , signalling the magnitude of the operation to restart travel.

Have you read?

Tourism industry experts fear long road to recovery, how we can prioritize sustainability in rebuilding tourism, covid-19 could set the global tourism industry back 20 years.

Consequently, the path to recovery will be long and slow. The resurgence of cases following the discovery of new variants towards the end of last year delivered another disappointing blow to the travel industry. Any pickup over the summer months was quashed following a second wave of lockdowns and border closures . Coupled with mixed progress in the roll-out of vaccination programs, I predict that we will not see a significant rebound in international travel until the middle of this year at best.

Others echo my fears. The International Air Transport Association (IATA) forecasts a 50.4% improvement on 2020 air travel demand, which would bring the industry to 50.6% of 2019 levels . However, a more pessimistic outlook based on the persistence of travel restrictions suggests that demand may only pick up by 13% this year, leaving the industry at 38% of 2019 levels. McKinsey & Company similarly predict that tourism expenditure may not return to pre-COVID-19 levels until 2024 .

How to enhance sustainability, inclusivity and resilience

Given its economic might – employing 330 million people, contributing 10% to global GDP before the pandemic, and predicted to create 100 million new jobs – restoring the travel and tourism sector to a position of strength is the utmost priority.

The Great Reset provides an opportunity to rethink how tourism is delivered and to enhance sustainability, inclusivity and resilience. We must also address the challenges – from climate change and “ overtourism ” to capacity constraints – that we faced before the pandemic, while embracing traveller preferences, as we rebuild.

A 2018 study found that global tourism accounted for 8% of global greenhouse gas emissions from 2009 to 2013 ; four times higher than previous estimates. Even more worryingly, this puts progress towards the Paris Agreement at risk – recovery efforts must centre around environmental sustainability.

Furthermore, according to a study on managing overcrowding, the top 20 most popular global destinations were predicted to add more international arrivals than the rest of the world combined by 2020 . While COVID-19 will have disrupted this trend, it is well known that consumers want to travel again, and we must address the issues associated with overcrowding, especially in nascent destinations, like Saudi Arabia.

The Great Reset is a chance to make sure that as we rebuild, we do it better.

Seamless solutions lie at the heart of travel recovery

Tourism has the potential to be an engine of economic recovery provided we work collaboratively to adopt a common approach to a safe and secure reopening process – and conversations on this are already underway.

Through the G20, which Saudi Arabia hosted in 2020, our discussions focused on how to leverage technology and innovation in response to the crisis, as well as how to restore traveller confidence and improve the passenger experience in the future .

At the global level, across the public and private sectors, the World Economic Forum is working with the Commons Project on the CommonPass framework , which will allow individuals to access lab results and vaccination records, and consent to having that information used to validate their COVID status. IATA is trialling the Travel Pass with airlines and governments , which seeks to be a global and standardized solution to validate and authenticate all country regulations regarding COVID-19 travel requirements.

The provision of solutions that minimize person-to-person contact responds to consumer wants, with IATA finding that 85% of travellers would feel safer with touchless processing . Furthermore, 44% said they would share personal data to enable this, up from 30% months prior , showing a growing trend for contactless travel processes.

Such solutions will be critical in coordinating the opening of international borders in a way that is safe, seamless and secure, while giving tourists the confidence to travel again.

Collaboration at the international level is critical

The availability of vaccines will make this easier, and we have commenced our vaccination programme in Saudi Arabia . But we need to ensure processes and protocols are aligned globally, and that we support countries with limited access to vaccinations to eliminate the threat of another resurgence. It is only when businesses and travellers have confidence in the systems that the sector will flourish again.

In an era of unprecedented data and ubiquitous intelligence, it is essential that organizations reimagine how they manage personal data and digital identities. By empowering individuals and offering them ways to control their own data, user-centric digital identities enable trusted physical and digital interactions – from government services or e-payments to health credentials, safe mobility or employment.

The World Economic Forum curates the Platform for Good Digital Identity to advance global digital identity activities that are collaborative and put the user interest at the center.

The Forum convenes public-private digital identity collaborations from travel, health, financial services in a global action and learning network – to understand common challenges and capture solutions useful to support current and future coalitions. Additionally, industry-specific models such as Known Traveller Digital Identity or decentralized identity models show that digital identity solutions respecting the individual are possible.

The approach taken by Saudi Arabia and its partners to establish consensus and build collaborative relationships internationally and between the public and private sectors, should serve as a model to be replicated so that we can maximize the tourism sector’s contribution to the global economic recovery, while ensuring that it becomes a driver of prosperity and social progress again.

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Understanding the Travel and Tourism Sector: A Business Perspective

The world of business is inextricably linked with the realm of travel and tourism. From corporate travel arrangements to the operation of hospitality giants, this sector plays a pivotal role in the global economy.

The travel and tourism industry is not merely about vacations and leisure; it encompasses a diverse array of activities, services, and businesses that fuel economies, create jobs, and shape the way we explore the world.

In this article, we will embark on a journey to understand the intricacies of the travel and tourism sector from a business standpoint. We will explore its significance in the global economy, delve into the core components of the industry, examine the economic impact, and discuss emerging trends and challenges.

Moreover, we will shed light on the business aspects of travel, highlighting the key players, revenue streams, and marketing strategies that drive success.

But why should business professionals, beyond those directly involved in tourism, care about this sector? The answer lies in the fact that travel and tourism intersect with nearly every industry. Whether you’re in finance, technology, healthcare, or any other field, understanding how this sector operates can unlock opportunities for growth, collaboration, and innovation.

So, fasten your seatbelts and prepare for a journey through the multifaceted world of travel and tourism, where business meets exploration and economic growth meets wanderlust.

Travel and Tourism

Travel and tourism refer to the activities, services, and industries associated with people traveling to and staying in places outside their usual place of residence for leisure, business, or other purposes.

The Core Components of Travel and Tourism

At its heart, the travel and tourism sector comprises several key components, each playing a unique role in the industry’s ecosystem. Understanding these components is crucial for any business professional aiming to navigate this dynamic sector effectively.

Here are the primary elements:

1. Accommodation: Accommodation providers are the backbone of the tourism industry. They include hotels, resorts, vacation rentals, and even unconventional options like Airbnb. These establishments cater to travelers by offering a place to stay, ranging from budget to luxury.

2. Transportation: Travel relies heavily on transportation. This segment encompasses airlines, cruise lines, railways, car rental services, and public transportation systems. Efficient transportation networks are vital for connecting travelers to their destinations.

3. Food and Beverage: Dining experiences are an integral part of any trip. This category includes restaurants, cafes, food trucks, and bars. Culinary tourism, where travelers explore local cuisine, has become a significant trend within this segment.

4. Travel Agencies: Travel agencies and tour operators serve as intermediaries between travelers and service providers. They help plan itineraries, book accommodations, and arrange transportation, making the travel process more convenient.

5. Attractions and Entertainment: Tourist destinations offer various attractions, from historical sites and museums to theme parks and natural wonders. Entertainment options such as theaters and music venues also contribute to the overall travel experience.

6. Travel Technology: In the digital age, technology has transformed the way people plan and experience travel. Online booking platforms, travel apps, and services like TripAdvisor have reshaped the industry’s landscape.

7. Tourism Services: This category includes a range of services such as travel insurance, currency exchange, and visa assistance. These services ensure that travelers are prepared for their journeys and can navigate any unforeseen challenges.

8. Destination Management: Local governments and organizations play a pivotal role in managing and promoting tourist destinations. They invest in infrastructure, marketing, and sustainability efforts to attract visitors.

The Economic Impact of Travel and Tourism

From a business perspective, it’s essential to grasp the significant economic impact of the travel and tourism sector. This industry is a global economic powerhouse that generates jobs, fosters investment and drives economic growth.

Here are some key statistics to illustrate the significance of travel and tourism :

• Job Creation: Travel and tourism directly support over 330 million jobs worldwide, accounting for 1 in 10 jobs globally.
• Contribution to GDP: In 2022, the travel and tourism sector contributed 7.6% to global GDP, highlighting its substantial economic footprint.
• Investment Magnet: This sector attracts investments in infrastructure, hotels, transportation, and more, further stimulating economic activity.
• Foreign Exchange Earnings: Tourism often serves as a vital source of foreign exchange earnings for many countries, boosting their balance of payments.
• SME Growth: Small and medium-sized enterprises (SMEs) play a significant role in the sector, benefiting from the opportunities created by tourism-related businesses.

The economic interplay between tourism and other industries is intricate.

For instance, the hospitality sector relies on agriculture for food supplies, airlines depend on the aerospace industry for aircraft and tourist destinations often collaborate with local artisans and businesses to promote cultural experiences.

In the business world, recognizing the economic clout of travel and tourism can open doors for collaboration, investment, and innovation. Many companies, even those seemingly unrelated to tourism, can find ways to tap into this lucrative market.

Emerging Trends and Challenges

The travel and tourism sector is continuously evolving, driven by changing consumer preferences, technological advancements, and global events. Business professionals must stay attuned to these trends and challenges to adapt and thrive in this dynamic industry.

Here are some notable developments:

1. Sustainable Tourism: Travelers increasingly prioritize eco-friendly and sustainable practices. Businesses that adopt green initiatives not only reduce their environmental footprint but also attract environmentally conscious travelers.

2. Digital Transformation: The digitalization of travel services has reshaped how consumers plan and book trips. Online platforms, artificial intelligence, and data analytics are instrumental in personalizing travel experiences.

3. Health and Safety: Recent global health crises have heightened travelers’ concerns about safety and hygiene. Businesses must implement robust health and safety measures to regain consumer trust.

4. Shifts in Travel Behavior: The pandemic has brought about changes in travel behavior, with a focus on remote and nature-based destinations. Companies need to adapt their offerings to cater to these evolving preferences.

5. Regulatory Challenges: Navigating complex regulations, including visa requirements and health protocols, can be a challenge for travel businesses. Staying informed and compliant is crucial.

6. Geopolitical Factors: Political instability and international relations can significantly impact the tourism industry. Businesses must be prepared to adapt to changing geopolitical landscapes.

The Business of Travel and Tourism

Understanding how businesses operate within this sector is essential for both industry insiders and entrepreneurs looking to tap into this thriving market.

Role of Businesses in the Travel Sector

Businesses play a pivotal role in shaping the travel and tourism landscape. Whether you’re a hotel chain, an airline, a tour operator, or a travel agency, your role is multifaceted, encompassing everything from customer service to marketing and sustainability initiatives.

• Customer-Centric Approach : At the heart of every successful travel and tourism business is a deep commitment to customer satisfaction. Travelers today expect exceptional service and unique experiences. From the moment a traveler starts planning their trip to the time they return home, businesses must focus on providing top-notch services, personalized recommendations, and seamless experiences.
• Innovation and Adaptation : The travel industry is highly competitive and constantly evolving. Successful businesses in this sector are those that innovate and adapt to changing trends. This could mean embracing digital technology, offering eco-friendly options, or creating new and exciting travel packages.

Business Models and Revenue Streams

To thrive in the travel and tourism sector, businesses employ various revenue models tailored to their specific niches. Here are a few common business models:

• Hospitality and Accommodation : Hotels, resorts, and vacation rentals rely on room bookings and additional services such as dining, spa treatments, and event hosting to generate revenue.
• Airlines and Transportation : Airlines make money through ticket sales, baggage fees, in-flight services, and partnerships with other travel-related businesses. Transportation services like taxis, trains, and cruise lines have similar revenue structures.
• Tour Operators and Travel Agencies : These businesses profit from organizing and selling travel packages, tours, and experiences. Commissions, booking fees, and tour sales are primary income sources.
• Online Travel Agencies (OTAs) : OTAs like Expedia and Booking.com aggregate information from various travel service providers and earn commissions on bookings made through their platforms.

Customer Experience and Service Excellence

In the digital age, the travel and tourism sector is driven by customer reviews and recommendations. Travelers share their experiences online, influencing the choices of others. Therefore, providing exceptional customer service is paramount. Here are some strategies to achieve service excellence:

• Personalization : Tailor recommendations and services to individual preferences.
• Seamless Booking and Travel : Make the booking process simple and provide support throughout the journey.
• Feedback and Improvement : Collect customer feedback and use it to enhance services continually.
• Crisis Management : Be prepared to handle unexpected situations, such as flight cancellations or health emergencies, with professionalism and empathy.

Marketing and Promotion Strategies

Effective marketing is essential for attracting travelers to your business. Here are some strategies commonly used in the travel and tourism industry:

• Digital Marketing : Utilize online channels such as social media, search engine optimization (SEO), email marketing, and paid advertising to reach a global audience.
• Content Marketing : Create engaging content, including blog posts, videos, and travel guides, to inspire and inform potential travelers.
• Partnerships : Collaborate with influencers, other businesses, and tourism boards to expand your reach and access new markets.
• Sustainability Promotion : Highlight your commitment to sustainable and responsible travel practices, as eco-conscious travelers seek eco-friendly options.

The business of travel and tourism is a multifaceted realm that demands a relentless focus on customer satisfaction, innovation, and responsible practices.

Success in this sector requires a deep understanding of your niche, a commitment to service excellence, and strategic marketing efforts. As the travel industry continues to evolve, businesses that can adapt and offer unique, memorable experiences will undoubtedly thrive in this exciting and ever-changing market.

Key Players in the Travel and Tourism Industry

As we dive deeper into the business of travel and tourism, it’s crucial to recognize the key players that shape this industry. These players, ranging from airlines to accommodation providers and travel agencies, contribute to the diverse ecosystem of travel and tourism.

Understanding their roles and significance is essential for anyone interested in this dynamic sector.

Airlines and Aviation

Airlines are the lifelines of global travel. They provide the means for travelers to reach their destinations quickly and efficiently. Here’s an overview of their role in the industry:

• Passenger Transportation : Airlines transport millions of passengers daily, connecting cities and countries across the globe. They generate revenue through ticket sales, baggage fees, and in-flight services.
• Cargo Services : Airlines also play a pivotal role in transporting goods and cargo, contributing significantly to international trade and logistics.
• Global Networks : Major airlines operate extensive global networks, allowing travelers to reach virtually any corner of the world.

Hotel Chains and Accommodation Providers

The hospitality sector, including hotels, resorts, and vacation rentals, is another cornerstone of the travel and tourism industry. Here’s how they contribute:

• Lodging : These businesses offer lodging options, from budget-friendly to luxury, catering to diverse traveler preferences.
• Dining and Services : Many hotels provide dining options, spa services, event hosting, and recreational facilities, enhancing the guest experience and generating additional revenue.
• Destination Attraction : Iconic hotels and resorts often become attractions in themselves, drawing travelers to specific destinations.

Tour Operators and Travel Agencies

Tour operators and travel agencies specialize in creating and selling travel packages and experiences. Their roles include:

• Curating Experiences : They design itineraries and packages that offer unique and immersive travel experiences, from adventure tours to cultural excursions.
• Booking and Logistics : These businesses handle the logistics of travel, including accommodations, transportation, and activities, streamlining the process for travelers.
• Expertise : Tour operators and travel agencies provide expert guidance, helping travelers navigate complex travel decisions.

Destination Management Companies

Destination management companies (DMCs) focus on specific regions or destinations. Their roles encompass:

• Local Expertise : DMCs have in-depth knowledge of their respective destinations, enabling them to offer specialized services and experiences.
• Customized Services : They work closely with travel planners and agencies to tailor experiences for groups and individuals.
• Sustainability : DMCs often play a vital role in promoting responsible tourism practices within their destinations.

Online Travel Agencies (OTAs)

Online travel agencies have become a dominant force in the industry, leveraging digital platforms to connect travelers with various travel services. Here’s what they do:

• Aggregation : OTAs aggregate information from airlines, hotels, and other travel service providers, offering a wide array of choices to travelers.
• Booking Platforms : They provide convenient booking platforms, allowing travelers to book flights, accommodations, and more in one place.
• Reviews and Recommendations : OTAs often feature user reviews and recommendations, influencing traveler decisions.

Understanding the roles of these key players in the travel and tourism industry is essential for anyone considering entering this sector.

Each player contributes uniquely to the travel experience, from transportation to accommodation and beyond. Successful businesses often collaborate with multiple stakeholders to offer comprehensive and memorable travel experiences to their customers.

Travel and Tourism Post-COVID-19

The travel and tourism industry, like many others, faced unprecedented challenges during the COVID-19 pandemic. Lockdowns, travel restrictions, and health concerns brought international travel to a standstill. However, the industry has displayed remarkable resilience and adaptability.

Let’s explore how the sector is recovering and adapting in a post-pandemic world.

Impact of the Pandemic on the Industry

• Travel Restrictions : Stringent travel restrictions, including border closures and quarantine requirements, severely impacted international travel. Airlines faced a sharp decline in passenger numbers.
• Hospitality Struggles : Hotels and accommodation providers experienced a dramatic drop in occupancy rates. Many temporarily closed or adapted to offer quarantine and isolation services.
• Cruise Industry Challenges : Cruise lines faced significant setbacks due to onboard outbreaks. The industry had to reimagine health and safety protocols.
• Shift to Domestic Travel : With international travel restrictions, many travelers turned to domestic and regional destinations, boosting local tourism.
• Digital Transformation : The pandemic accelerated the adoption of digital technologies for contactless bookings, health monitoring, and communication.

Recovery and Adaptation Strategies

The travel and tourism industry is rebounding, thanks to a combination of factors:

• Vaccination Campaigns : Widespread vaccination campaigns have increased traveler confidence, making international travel safer.
• Health and Safety Protocols : Airlines, hotels, and other businesses have implemented robust health and safety measures to reassure travelers.
• Flexible Booking Policies : Many travel companies introduced flexible booking and cancellation policies to accommodate changing travel plans.
• Sustainability Focus : There’s a growing emphasis on sustainable and responsible tourism, with businesses integrating eco-friendly practices.
• Digitalization : The industry continues to embrace digital technologies, offering contactless experiences and personalized services.
• Collaboration : Stakeholders across the industry are collaborating to rebuild and promote destinations.

Future Outlook and Resilience

The travel and tourism industry is poised for recovery and growth in the coming years. Here’s what the future may hold:

• Pent-Up Demand : Many travelers postponed their plans during the pandemic, leading to pent-up demand for leisure and business travel.
• Sustainable Travel : Sustainable and eco-conscious travel is gaining momentum. Travelers are increasingly choosing destinations and businesses committed to environmental responsibility.
• Tech Integration : Technology will continue to play a significant role, with advancements in AI, mobile apps, and data analytics enhancing the travel experience.
• Health and Safety : Health and safety measures will remain a priority, with businesses maintaining rigorous protocols.
• Remote Work and Travel : Remote work trends may encourage a blend of work and leisure travel, with more extended stays in diverse locations.
• Resilience Planning : The industry is developing resilience plans to better handle future crises and disruptions.

The travel and tourism industry’s ability to adapt and innovate in the face of adversity demonstrates its resilience. As it recovers and evolves, it offers promising opportunities for businesses and travelers alike.

The key to success lies in embracing change, prioritizing safety, and delivering exceptional experiences that meet the evolving needs of travelers in a changing world.

Sustainable Tourism and Responsible Business Practices

In a world increasingly concerned about the environment and social responsibility, the travel and tourism industry is under scrutiny to adopt more sustainable and responsible practices.

Let’s delve into the importance of sustainable tourism and how businesses can contribute to a greener and more ethical travel sector.

Environmental and Social Responsibility

• Reducing Carbon Footprint : The travel industry is a significant contributor to greenhouse gas emissions. Airlines, for example, are exploring biofuels and more fuel-efficient aircraft to reduce their carbon footprint.
• Preserving Natural Resources : Eco-conscious travelers seek destinations that protect and preserve natural resources. Businesses can contribute by implementing eco-friendly initiatives like energy-efficient facilities and waste reduction programs.
• Conservation Efforts : Supporting local conservation projects and wildlife protection initiatives can be a part of responsible tourism. This can involve financial contributions or active participation.
• Respecting Local Cultures : Responsible tourism respects and celebrates local cultures and traditions. It involves engaging with local communities in a respectful and sustainable manner.
• Community Involvement : Businesses can support the communities they operate in through job creation, fair wages, and community development projects.

Sustainable Tourism Certifications and Initiatives

• Eco-Certifications : Numerous certifications, such as EarthCheck and Green Key , help businesses showcase their commitment to sustainability. These certifications often involve rigorous audits of a company’s environmental practices.
• Zero-Waste Initiatives : Some hotels and resorts aim to become zero-waste establishments, recycling and repurposing nearly all their waste.
• Wildlife Conservation : Tour operators and businesses can partner with wildlife conservation organizations to promote ethical wildlife experiences.
• Local Sourcing : Restaurants and hotels can prioritize local sourcing of food and materials, reducing transportation-related carbon emissions.
• Plastic Reduction : Many businesses are eliminating single-use plastics and opting for sustainable alternatives.

Benefits of Responsible Tourism for Businesses

• Competitive Advantage : Travelers increasingly seek sustainable and responsible options. Businesses that embrace these practices gain a competitive edge.
• Cost Savings : Sustainable practices often lead to cost savings through reduced energy and resource consumption.
• Enhanced Reputation : Businesses committed to responsible tourism build a positive reputation and attract like-minded customers.
• Legal Compliance : Adhering to eco-friendly and ethical standards ensures compliance with evolving environmental and social regulations.
• Long-Term Viability : By protecting the environment and supporting local communities, businesses contribute to the long-term viability of their destinations.
• Guest Satisfaction : Eco-conscious travelers appreciate businesses that share their values, leading to higher guest satisfaction and loyalty.

The travel and tourism sector’s future hinges on sustainable and responsible practices. Businesses that prioritize environmental and social responsibility not only contribute to a healthier planet but also position themselves for long-term success in an industry undergoing profound changes.

As a business professional, understanding and adopting these practices can be a strategic advantage in a world where ethical considerations increasingly influence consumer choices.

Hostile Takeovers

In a hostile takeover, the acquiring company pursues the target company despite the target’s resistance. Hostile takeovers often involve aggressive tactics, such as tender offers directly to shareholders or attempts to replace the target’s board of directors.

Case Studies: Successful Businesses in Travel and Tourism

To gain deeper insights into the strategies and approaches that have propelled certain businesses to success in the travel and tourism sector, let’s examine a few notable case studies.

These examples showcase how innovation, adaptability, and a customer-centric approach can make a significant impact in this dynamic industry.

Airbnb: Revolutionizing Accommodation

Airbnb, founded in 2008, has transformed the hospitality sector. This online marketplace connects travelers with unique accommodations offered by hosts worldwide. What sets Airbnb apart?

Key Success Factors:

• Platform Model : Airbnb operates as a platform, allowing hosts to list their properties and travelers to book them. This asset-light model means Airbnb doesn’t own properties, reducing capital requirements.
• User Reviews : User-generated reviews and ratings build trust among users. Travelers can make informed choices based on the experiences of previous guests.
• Personalization : Airbnb’s recommendation engine suggests accommodations based on user preferences, enhancing the customer experience.
• Diverse Offerings : From treehouses to castles, Airbnb offers a wide range of unique accommodations, appealing to travelers seeking authentic experiences.
• Host Community : Airbnb invests in building a strong host community, providing support and resources to hosts.

Cross-Border Mergers and Acquisitions: Global Expansion

Cross-border M&A transactions involve companies from different countries coming together. These deals offer opportunities for global expansion but also present unique challenges.

Booking.com: Data-Driven Booking

Booking.com, founded in 1996, is a global online travel agency. It leverages technology and data to simplify travel booking.

• Vast Inventory : Booking.com offers a wide range of accommodation options, from hotels to vacation rentals. This extensive inventory caters to diverse traveler preferences.
• User Experience : The platform’s user-friendly interface and transparent booking process contribute to its popularity.
• Data Analytics : Booking.com uses data analytics to understand traveler behavior, enabling personalized recommendations and pricing strategies.
• Global Reach : With a presence in over 220 countries and territories, Booking.com serves a global audience.
• Instant Confirmation : Providing real-time booking confirmation enhances the customer experience.

Delta Air Lines: Customer-Centric Air Travel

Delta Air Lines, a major U.S. carrier founded in 1924, is known for its customer-centric approach.

• Reliability : Delta prioritizes operational reliability, minimizing flight cancellations and delays.
• Fleet Upgrades : Investing in a modern and efficient fleet enhances the passenger experience and reduces operating costs.
• Customer Service : Delta emphasizes excellent customer service, and its efforts are reflected in high customer satisfaction ratings.
• Global Alliances : Participation in global airline alliances expands route networks and offers travelers more choices.
• Innovation : Delta embraces innovation, introducing features like biometric boarding and in-flight entertainment options.

These case studies highlight the diverse strategies and approaches that have driven success in the travel and tourism sector. From disruptive online marketplaces to data-driven booking platforms and customer-centric airlines, businesses that prioritize innovation, customer experience, and adaptability are well-positioned for growth.

By studying these examples, business professionals can gain valuable insights into the industry’s evolving landscape and identify opportunities to innovate and excel in their own travel and tourism endeavors.

Lessons Learned from Industry Leaders

The travel and tourism sector offers a treasure trove of lessons for business professionals across various industries. Let’s distill some key takeaways from the successes and innovations of industry leaders:

1. Customer-Centricity Is Paramount

Whether you’re running an airline, hotel, or travel agency, prioritizing the customer experience is non-negotiable. Happy and satisfied customers become loyal patrons and brand advocates. Invest in personalized services, efficient booking processes, and responsive customer support.

2. Embrace Technology and Data

Technology is a game-changer in the travel industry. From data analytics that inform pricing strategies to mobile apps that enhance on-the-go experiences, leveraging technology can set your business apart. Be open to adopting new tools and systems that improve efficiency and customer satisfaction.

3. Diversity and Choice Matter

Offering a diverse range of products or services can attract a broader audience. In the travel sector, this means providing various accommodation types, transportation options, and tour packages. Embrace diversity to meet the unique preferences of your customers.

4. Transparency Builds Trust

Transparency in pricing, policies, and terms and conditions builds trust with customers. Hidden fees and ambiguous policies can lead to dissatisfaction. Clear communication and honesty go a long way in establishing credibility.

5. Sustainability Is the Future

Sustainability and responsible tourism are becoming central to the industry’s ethos. Travelers are increasingly conscious of their environmental impact. Consider eco-friendly practices and promote responsible tourism. It’s not only good for the planet but also a selling point for your business.

6. Innovate or Stagnate

Innovation is the lifeblood of the travel and tourism sector. Whether it’s introducing new services, improving efficiency, or enhancing the customer journey, staying ahead requires a commitment to innovation. Monitor industry trends and be open to creative solutions.

7. Globalization Expands Reach

Participating in global networks and alliances can expand your business’s reach. Collaborate with international partners to offer customers a wider range of options. Globalization also provides resilience in the face of economic fluctuations.

8. Resilience Is Crucial

The industry has weathered numerous storms, from economic crises to health emergencies. Building resilience into your business plans, such as having contingency measures for crises, is essential. Flexibility and adaptability are key.

9. Community and Culture Matter

Embrace the culture and communities where your business operates. Engage with local communities, respect their traditions, and contribute positively. This fosters goodwill and can lead to meaningful partnerships.

10. Continuous Learning Is a Competitive Advantage

The travel and tourism sector is ever-evolving. Continuous learning and staying informed about industry trends and regulations are essential. Attend conferences, workshops, and industry events to network and gain insights.

Incorporating these lessons into your business strategy can set you on a path to success in the dynamic and rewarding world of travel and tourism. By combining innovation, customer focus, and a commitment to sustainability, you can thrive in an industry that promises new horizons and unforgettable experiences for travelers worldwide.

The travel and tourism sector represents a dynamic and resilient industry with a significant impact on the global economy. As a business professional, understanding the nuances and opportunities within this sector is paramount. In this comprehensive guide, we’ve explored the multifaceted world of travel and tourism, delving into its significance, components, trends, and challenges.

We’ve seen how the industry intersects with business, offering a wide array of opportunities for entrepreneurs and established enterprises alike. Whether you’re considering venturing into travel-related ventures or seeking to enhance an existing business through tourism, the sector holds immense potential.

Key takeaways from this exploration include:

• The Economic Powerhouse : Travel and tourism contribute significantly to GDP, job creation, and foreign exchange earnings in many countries. This sector’s resilience is evident through its ability to rebound from crises.
• Diverse Components : The industry encompasses hospitality, transportation, attractions, travel services, and more, creating a rich tapestry of business opportunities.
• Trends and Challenges : Emerging trends like sustainable tourism and digital transformation offer avenues for innovation. Yet, challenges such as health concerns and environmental responsibility must be addressed.
• The Business of Tourism : Customer-centricity, technology adoption, transparency, and sustainability are vital principles for success in this sector.
• Key Players : Airlines, hotel chains, tour operators, and online travel agencies are among the key players shaping the industry’s landscape.
• Post-COVID-19 Era : The pandemic prompted significant shifts in travel behavior. Recovery strategies and adaptability are critical for businesses in the post-COVID-19 world.
• Sustainable Tourism : Responsible practices not only benefit the environment but also appeal to conscious travelers and can drive business success.
• Lessons from Industry Leaders : Customer-centricity, innovation, transparency, and resilience are valuable takeaways from successful travel and tourism businesses.

As the world evolves, so do the travel and tourism opportunities. By staying informed, embracing innovation, and aligning with sustainability, you can position your business for success in an industry that promises both profitability and the chance to create unforgettable experiences for travelers around the globe.

Now, armed with insights from this guide, you’re better equipped to navigate the exciting and ever-changing world of travel and tourism, contributing to its growth and shaping its future. Bon voyage!

• United Nations World Tourism Organization (UNWTO). (2022). Tourism Highlights 2022 Edition. Link
• World Travel & Tourism Council (WTTC). (2022). Economic Impact Reports. Link
• International Air Transport Association (IATA). (2022). IATA Economics. Link
• Deloitte. (2022). Travel, Hospitality, and Leisure Reports. Link
• Statista. (2022). Statistics and Market Data on Travel and Tourism. Link
• McKinsey & Company. (2022). Travel, Logistics & Transport Infrastructure. Link
• Booking.com. (2023). Link
• TripAdvisor. (2023). GreenLeaders. Link
• The New York Times. (2023). Travel and Tourism. Link
• National Geographic. (2023). Sustainable Travel. Link
• The World Bank. (2023). Tourism. Link
• World Tourism Organization (2022). Global Code of Ethics for Tourism. Link

Tumisang Bogwasi

2X Award-Winning Entrepreneur | Empowering Brands to Generate Leads, Grow Revenue with Business Strategy and Digital Marketing | Founder, CEO of Fine Group

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Dynamic capabilities in tourism businesses: antecedents and outcomes

• Original Paper
• Open access
• Published: 27 June 2022
• Volume 17 , pages 1645–1680, ( 2023 )

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• Hang T. T. Nguyen   ORCID: orcid.org/0000-0002-1843-5104 1 ,
• Hanh Song Thi Pham 2 &
• Susan Freeman 3  

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This paper examines dynamic capabilities as a second-order construct and the antecedents and outcomes of dynamic capabilities. Analyzing data collected from 242 tourism firms in Vietnam, this paper finds a positive influence of firms’ human capital, organizational learning, environmental dynamism, and digital marketing on the dynamic capabilities. Dynamic capabilities have a significant and positive impact on these firms’ competitive advantage. The paper contributes to ongoing efforts to measure dynamic capabilities and explore the micro-foundations of dynamic capabilities.

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1 Introduction

Dynamic capabilities refer to the ability of an organization to sense changes and seize opportunities, greater risk awareness, and the ability to take appropriate actions, make changes, and reconfigure and re-adjust the current business structure, operations, and routines (Michaelis et al. 2020 ; Nyamrunda and Freeman 2021 ; Teece et al. 1997 ). Despite a large amount of literature on dynamic capabilities conducted for more than two decades, empirical evidence is confined within manufacturing or innovation industries where the extensive application of advanced technology and rapid changes in technology are widely accepted as crucial features (Easterby-Smith et al. 2009 ; Jiang et al. 2019 ). Notably, research on dynamic capabilities in the service industries, especially in tourism sector, is limited. Meanwhile, tourism is considered a promising area in the context of economic development, environmental and socio-cultural changes, employment opportunities, new consumer values, the spread of technical knowledge, and the development of new markets and products (Dogru and Bulut 2018 ; Webster and Ivanov 2014 ). Businesses in the tourism industry need even more research attention, now that they are facing the challenges and disruptions the COVID-19 pandemic poses for the industry globally.

According to Teece and Pisano ( 1994 ), dynamic capabilities often arise in a fast-changing environment; it is, therefore, a highly contextual and contingent concept. This means that such capabilities can be understood better if they are linked to the business environment in which they take place. For example, in the manufacturing industry, especially the high-end technology-related industries, innovation is faster and more visible than in service industries (Snyder et al. 2016 ; Taques et al. 2020 ). Therefore, research on dynamic capabilities is conducted primarily in manufacturing enterprises where the process, output, and operations are more easily identifiable as dynamic capabilities (den Hertog et al. 2010 ). However, the results drawn from manufacturing industries may not be applicable to the service sector in general and the tourism sector specifically. This is because of significant differences between the manufacturing and service industries, such as the greater need for manufacturers to buy and maintain physical assets and inventory or the discrepancies in managing internal projects to address the growing needs of customers and suppliers (Biesenthal et al. 2019 ). Despite evidence of innovation embedded in the processes and procedures offered to customers in service delivery (Gustafsson et al. 2020 ; Taques et al. 2020 ), the service sector remains under-researched.

This research, therefore, aims to gain new insights into the understanding of dynamic capabilities in the service industries and, more specifically, in the tourism sector. Accordingly, this study considers the following research question: How can dynamic capabilities be measured in tourism firms, and what are the determinants and outcomes of dynamic capabilities?

This research makes two main contributions to the dynamic capabilities literature. First, this study improves the knowledge regarding the measurement of dynamic capabilities. Such capabilities are not easy to quantify (Barrales-Molina et al. 2014 ). The debate on how to measure them is ongoing (Biesenthal et al. 2019 ; Laaksonen and Peltoniemi 2018 ). Adapted from the dynamic capabilities construct suggested in Fainshmidt and Frazier’s ( 2017 ) and Wilden et al.’s ( 2013 ) studies of different industries, this research has modified and validated the measurement of the second-order dynamic capabilities construct for tourism businesses . While other studies have, for methodological reasons, measured the different clusters of capabilities that belong to dynamic capabilities as first-order constructs, a second-order model helps to explain better the covariance more parsimoniously with fewer parameters (Chen et al. 2005 ; Rindskopf and Rose 1988 ). Given the specific features of the tourism sector in terms of the scope and activities inherent within each cluster of dynamic capabilities and the original dynamic capabilities definition by Teece et al. ( 1997 ), a modified second-order construct is needed to test whether dynamic capabilities are covert in tourism firms and how best to reflect the features of such capabilities. We argue that with three group parameters corresponding to sensing, seizing, and reconfiguring, it is better for these capabilities to covary directly with dynamic capabilities and better reflect the nature of dynamic capabilities defined by Teece et al. ( 1997 ). Moreover, this second-order construct further reduces the number of first-order constructs in the main research model, improving the precision of the measurement model while still reflecting the nature of the dynamic capabilities view.

Second, this research is one of few pioneering studies of the dynamic capabilities at the firm level in the tourism sector of an emerging economy. Although much important work has been carried out on examining dynamic capabilities in hospitality settings, such as Pattanasing et al. ( 2021 ) and Krupskyi and Grynko ( 2018 ), several questions remain for the rest of the tourism sector. For example, a study by Nieves and Haller ( 2014 ) examines dynamic capabilities in the Italian hotel sector. However, to the authors' knowledge, no study has been conducted in the broader tourism industry. Therefore, this study is the first to provide a comprehensive view of dynamic capabilities and the different determinants as micro-foundations for dynamic capabilities in tourism firms.

We first discuss the theoretical background for dynamic capabilities and the different antecedents and outcomes. We then outline the quantitative design and methods to measure dynamic capabilities and test hypotheses empirically. Next, we present the empirical results and discuss the findings. Finally, we offer theoretical contributions, address the study’s limitations, and provide future research directions and managerial implications.

2 Theoretical background

2.1 dynamic capabilities.

‘Dynamic capabilities’ are defined in the literature in various ways. Some scholars perceive them as underpinning processes and routines that facilitate the development of firms (Eisenhardt and Martin 2000 ; Winter 2003 ; Zott 2003 ). Others view operational issues as existing at multiple levels of the organization, such as operating portfolios of projects which require several operational capabilities to achieve short-term and long-term objectives (Dasari et al. 2015 ). Some construe them as activities (Ali et al. 2012 ; Teece 2014 ). A further group of scholars views dynamic capabilities as resources, assets, or the organization itself. In this study, we agree with Teece’s ( 2018 ) view regarding the nature of dynamic capabilities. Teece ( 2018 ) contends they are not resources, which thus need to be distinguished from dynamic capabilities even though the dynamic capabilities view (DCV) is an extension of the resource-based view (RBV). This view avoids confusion with the organizational assets or resources that form the core of dynamic capabilities. Our study adopts the definition of dynamic capabilities originally suggested by Teece et al. ( 1997 , p. 516) as “the firm’s ability to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments.”

In tourism research, DCV is applied as the theoretical framework in a number of research projects. Most research focuses on the hotel sector (Fraj et al. 2015 ; Leonidou et al. 2015 ; Marco-Lajara et al. 2017 ). Others focus on tourism innovation (Sainaghi et al. 2017 ; Verreynne et al. 2019 ) and competitive advantage (Evans 2016 ; Nieves and Haller 2014 ), especially eco (Leonidou et al. 2015 ) and green competitive advantage and management (Mittal and Dhar 2016 ) in tourism SMEs (Brida et al. 2016 ). Most research utilizes DCV as a theoretical lens to view and explain competitive advantage, the sustainability of competitive advantage, performance, or firms' innovation. As such, little research analyzes how dynamic capabilities and their micro-foundations are manifested in tourism firms.

Dynamic capabilities can be viewed as a combination of all capabilities relating to sensing, seizing, and reconfiguring/transforming and not as a single independent capability of each (Nyamrunda and Freeman 2021 ). According to Byrne ( 2010 ), the higher-order model represents a seemingly distinct hypothesis, and associated constructs can be gauged by one or more common underlying higher-order construct(s). Furthermore, the second-order factor model is more parsimonious and provides error-free estimates of both general and specific factors (Chen et al. 2005 ). Therefore, we argue that a second-order (higher-order) factor model is more precise than a first-order model in measuring dynamic capabilities. In addition, the higher-order three-factor model of dynamic capabilities provides insights into how the three first-order factors contribute to overall dynamic capabilities.

2.2 The antecedents of dynamic capabilities

2.2.1 human capital.

According to the RBV, physical, human and organizational assets can be used to implement value-creating strategies (Barney 1991 ). These resources can be configured and reconfigured in ways that cannot be matched or imitated easily by competitors (Barney 1991 ; 2001 ). The relationship between an organization's human capital and dynamic capabilities is described as micro-foundational (Nyamrunda and Freeman 2021 ).

Human capital refers to the knowledge, skills, and attributes embodied in individuals that can be used to yield professional services (Coppin 2017 ; Pennings and Lee 1998 ). The micro-foundational literature on the influence of human capital on the operation of organizations highlights that firms with employees of high levels of knowledge and experience will have more capabilities to identify the resource base and will understand the requirements to execute the alterations needed to better cope with an ever-changing environment (Gerrard and Lockett 2018 ; Kallmuenzer et al. 2019 ; Nyamrunda and Freeman 2021 ). Employees' implicit and explicit knowledge will determine an organization’s ability to solve problems or create new knowledge (Cross and Baird 2000 ; Salvato and Vassolo 2018 ). Augier and Teece ( 2009 ) argue that a firm's success is dependent on having highly skilled employees with abilities to harmonize, unite, and incorporate the firm’s resources. Hence, the role of people in the organization as the determinant of dynamic capabilities should be taken into account (Singh and Rao 2016 ). Rothaermel and Hess ( 2007 ) find that human intellectual capital underpins the building of dynamic capabilities that enable firms to adapt to radical technological changes. Nyamrunda and Freeman ( 2021 ) go further by developing a conceptual model that shows how strategic sensitivity, resource fluidity, and leadership unity entrenched in micro-foundational activities influence the relational dimensions (i.e., communication, social bonds, and knowledge), which builds trust in small business cross-border buyer–seller relationships to sustain dynamic relational capability.

The arguments therefore indicate that a higher level of knowledge, skills, and experiences endows individuals with an exceptional ability needed to acquire and apply new and valuable knowledge. It thus encourages the renewal of a firm's resource base. Accordingly, the following hypothesis is proposed:

Human capital directly and positively impacts the dynamic capabilities of tourism firms.

2.2.2 Organizational learning

An organizational learning culture refers to “one in which learning is recognized as absolutely critical for business success; in such an organization, learning has become a habitual and integrated part of all organizational functions” (Marquardt 2002 , p. 27). From a strategic perspective, the development of an organizational learning culture should, ideally, start with every member of the organization and then spread to the whole organization until it is embedded in the organizational structure, processes, and routines (Cheung and Zhang 2020 ; Hirst et al. 2009 ). Learning is a particular type of process that is fundamental to the growth and evolution of dynamic capabilities (Bowman and Ambrosini 2003 ; Eisenhardt and Martin 2000 ; Zollo and Winter 2002 ). Other scholars like Winter ( 2003 ) and Easterby-Smith and Prieto ( 2008 ) state that the learning process enables the creation and modification of dynamic capabilities. Therefore, it is reasonable to propose that organizational learning affects the development of dynamic capabilities in firms . Moreover, organizations with a better learning organizational culture have better learning mechanisms, and organizational members are more able to embrace, learn, and practice new knowledge (Day 1994; Huber 1991 ).

It is suggested that organizational learning supports dynamic capability. An organization’s core capabilities are interwoven with the organizational learning process (Ciborra and Andreu 2001 ; Pu and Soh 2018 ). It is argued that dynamic capabilities are influenced by organizational learning mechanisms, including knowledge accumulation, articulation, codification, and the learning culture (Zollo and Winter 2002 ) . A study by Hung et al. ( 2010 ) found that dynamic capabilities mediate the relationship between organizational learning culture and organizational performance. In our study, however, we consider organizational learning culture to be one of the determinants that influence the level of dynamic capabilities in the organization. The following hypothesis is therefore proposed:

Organizational learning culture has a direct and positive impact on the dynamic capabilities of tourism firms.

2.2.3 Digital marketing

Digital marketing refers to leveraging the unique capabilities of new interactive media to produce new forms of interactions and connections between consumers and marketers (Chaffey and Ellis-Chadwick 2019 ). It also refers to incorporating interactive media with the different components of the marketing mix (Kannan and Li 2017 ; Parsons et al. 1998 ). A study by Tallon and Pinsonneault ( 2011 ) identifies the mediating role of firm agility on the impact of strategic information technology alignment on business performance. Dynamic capabilities are considered integral in transforming external technologies into firms’ renewed technological resources (Abrate et al. 2020 ; Li-Ying et al. 2016 ).

Internet technology has impelled many entrepreneurs to participate in a thorough evaluation of how their firms assemble, integrate, employ, and distribute information to customers, employees, and supplier networks whilst continuing innovative in their capacity to generate business models and deliver value effectively and efficiently to all (Guo et al. 2018 ; Hunt and Madhavaram 2019 ; Kraus et al. 2019 ). All these activities are part of the dynamic capabilities that organizations possess. More specifically, Roberts and Grover ( 2012 ) find that firm agility (i.e., customer sensing and responding capabilities) influences firm performance, but in different ways. While customer sensing capability positively influences firm performance, customer responding capability has the reverse impact. Furthermore, recent digital technology development as a result of the Covid-19 pandemic and interruptions to supply chains has helped firms put dynamic capabilities into practice more readily than ever before, allowing more efficient collaborations and interactions between organizations and their stakeholders (Coreynen et al. 2020 ; Warner and Wäger 2019 ). Such efficient collaborations also help organizations facilitate new types of innovation, shape more strategies, reach more customers, and extend organizations' networks (Sambamurthy et al. 2003 ).

In addition, evidence from the literature below shows that digital technology is beneficial for all sensing, seizing, and reconfiguring activities. Digital technology application in marketing activities, such as Web services, data warehousing, digital market intelligence, or customer relationship management, helps leverage dynamic capabilities (El Sawy et al. 2010 ; Overby et al. 2006 ; Zhang et al. 2013 ). With the support of digital technology, organizations can perform transactions, exchange information, and facilitate real-time integration with customers and suppliers more quickly and continuously. Consequently, more innovative digital products and services can be generated (Wheeler 2002 ). Regarding sensing capabilities, digital technology provides tools for organizations to obtain market intelligence by analyzing customer perceptions and communicating with prospective customers (Frasquet et al. 2013 ). As for seizing capabilities, digital platforms support the information flows between different stakeholders and enable firms to share and stream their complex processes (Rai et al. 2006 ). Finally, for reconfiguring capabilities, digital tools help firms to produce more abundant tacit knowledge, coordinate diverse knowledge management activities between geographically dispersed individuals, allow the precise replication of specific tasks with workflow arrangements with a reduced number of mistakes, and advance the prototyping process (Matarazzo et al. 2021 ; Vaccaro et al. 2009 ).

Hence, this research proposes the following.

The application of digital marketing has a direct and positive impact on the dynamic capabilities of tourism firms.

2.2.4 Environmental dynamism

To identify environmental dynamism, this research refers to the concept developed by Miller and Friesen ( 1983 ) in considering three factors. The first dimension is the industry's rate of change and innovation and the unpredictability and uncertainty of competitors’ and customers’ actions (Schilke 2014 ). The second dimension is the ‘hostility’ or level of threat posed by the industry, and the final dimension is the heterogeneity or level of complexity of the organization’s target markets (Azadegan et al. 2013 ) . Environmental dynamism is thus considered to be: (1) the rate of change and innovation in the sector and the unpredictability and uncertainty of competitors and customers’ actions; (2) the level of threat posed by the industry; and (3) the level of complexity of the target markets (Mikalef et al. 2020 ). Environmental dynamism is a causal condition for dynamic capabilities (Gelhard et al. 2016 ). The influence of dynamic capabilities depends on external settings (Eisenhardt and Martin 2000 ) and equates with the dynamism of the environmental conditions (Gelhard et al. 2016 ; Li and Liu 2014 ).

Following this line of argument, the level of external dynamism directly influences the strategies adopted by firms. It is influential in reconfiguring directions, business models, and routines in order to adapt to changes in the industry, targeted markets, competitors, policies, or technology (Warner and Wäger 2019 ; Wilden et al. 2013 ). Therefore, it is imperative to examine the effect of external dynamism on the dynamic capabilities of organizations. Given that firms in the tourism sector are affected “very quickly by environmental variables, changes in customer preferences, high competition, etc.,” it is essential to “examine the effects of obtaining, transforming, exploiting, and using external information on firm performance” (Kale et al. 2019 , p. 281). The recent shock and disruptions caused by the COVID-19 pandemic to businesses have pointed to the importance of external dynamism in prompting the formation dynamic capabilities of an organization and, therefore, the necessary capabilities to respond to a fast-changing environment quickly (Breier et al. 2021 ; Jiang and Wen 2020 ). It is hence proposed that:

External dynamism factors have a direct and positive influence on the dynamic capabilities of tourism firms.

2.3 The outcomes of dynamic capabilities–competitive advantage

Discussions on the outcomes of dynamic capabilities focus on improving organizational performance (Augier and Teece 2009 ; Wilden et al. 2013 ). When evaluating this relationship to performance, numerous criteria and indexes can be used, of which the two most common are the financial performance and strategic performance of organizations in gaining a desirable position in markets to achieve the set goals. Competitive advantage is regarded as a “superior market position” (Weerawardena 2003 , p. 21) that organizations possess to provide the market with superior products or services while attaining market dominance (Hunt and Morgan 1995 ). Previously, a firm’s primary objective was to achieve superior financial performance. Financial indicators were considered the sole and vital measures of an organization’s performance (Barney 1991 ). Financial performance is often specified by indicators such as profits and return on investment (Hunt and Morgan 1995 ). However, the firm's success cannot rely on using exceptional financial performance as a sole indicator of competitive advantage (Barney 1991 ; Day and Wensley 1988 ). From an RBV, the organization attains superior financial performance when it has superior skills or resources (Arbelo et al. 2020 ). This results in positional advantages and superior performance outcomes regarding relative profits and market share (Seyoum 2020 ).

Consequently, by nature, competition involves constant attempts by firms to obtain a comparative advantage in the resources they possess, which will yield a marketplace position of competitive advantage (Hunt and Morgan 1996 ). This will result in superior financial performance (Hunt and Morgan 1995 ). Porter ( 1991 , p. 96) argues that a firm succeeds when it gains a “superior and sustainable performance… relative to the world’s best rivals”. Therefore, in evaluating the competitive position of an organization, it is necessary to look at both financial performance and marketplace position. This study thus defines ‘competitive advantage’ as the ‘superior market position’ an organization possesses to provide the market with superior products and services. These superior products and services then result in a positional advantage and superior performance outcomes with respect to profits and market dominance (Hunt and Morgan 1995 ; Jantunen et al. 2018 ; Porter 1991 ).

Research on the tourism industry discusses competitive advantage from the perspective of the RBV (Liu 2017 ; Molina-Azorin et al. 2010 ). The different resources for competitive advantage from the RBV include knowledge (Fraj et al. 2015 ; Thomas and Wood 2014 ), leadership capabilities (Sainaghi et al. 2017 ), innovation capabilities (Kale et al. 2019 ), and/or location (Denicolai et al. 2010 ; Molina-Azorin et al. 2010 ). Recent research by Verreynne et al. ( 2019 ) focuses more heavily on green competitive advantage and sustainable competitive advantage. There is a strong and compelling argument by Evans ( 2016 ) on how to facilitate innovation for sustainable competitive advantage.

Dynamic capabilities are important for tourism firms because the industry is now facing changes in all aspects of the service process, with rapid technological digitalization as the main factor. Some examples of technological advancements that are revolutionizing the industry are mobile technology, big data, the Internet of Things, blockchain, 5G technology, and augmented reality, to name just a few. The transformation that tourism companies need to focus on is not merely on changing the travellers’ experience but also on reforming the whole system, leading to significant innovation or even the creation of new business models. Such changes in technology and market trends require companies operating in the tourism industry to develop the dynamic capabilities to rapidly identify, transform, reform business processes, or create new operation models. All these activities will require ordinary capabilities needed for daily operations and using existing resources (Qaiyum and Wang 2018 ; Schriber and Löwstedt 2020 ) and superior capabilities such as dynamic capabilities to identify resources to execute the innovative initiatives at a higher level. As such, Nieves et al. ( 2016 ) argue that innovation in tourism services is based on capabilities for developing knowledge and learning and that the dynamic capabilities approach is a valuable framework for investigating innovation in the industry (Camisón and Monfort-Mir 2012 ). Innovation in tourism is also suggested on the basis of service design and service processes, rather than merely product innovation (Gomezelj 2016 ).

By reconfiguring current resources, organizations that possess dynamic capabilities will have a more positive impact on the firm's competitive advantage (Eisenhardt and Martin 2000 ; Teece and Pisano 1994 ). In a study by Schilke ( 2014 ), the influence of dynamic capabilities on competitive advantage was found to be contingent on the level of external dynamism. Dynamic capabilities are considered key to acquiring a competitive advantage in strategic management (Agwunobi and Osborne 2016 ; Li and Liu 2014 ). They are also the critical antecedents driving the innovation-based competitive advantage process (Chatzoglou and Chatzoudes 2018 ; Muhic and Bengtsson 2019 ; Salunke et al. 2019 ), determinants for achieving a competitive advantage (Nieves and Haller 2014 ), and a handy tool for organizations to gain a competitive advantage, even in a highly volatile environment (Monteiro et al. 2019 ; Schwarz et al. 2020 ). Therefore, the following hypothesis is proposed:

Dynamic capabilities have a direct and positive impact on the competitive advantage of tourism firms.

Figure  1 summarises the relationships between dynamic capabilities and their antecedents and outcomes.

The antecedents and outcome of dynamic capabilities in tourism businesses

3.1 The research context

Vietnam is used as the research context for this paper. It is one of Southeast Asia’s most picturesque countries, attracting an increasing number of travelers to its lush mountains, dynamic cities, and sandy beaches before COVID-19. Tourism in Vietnam has a vast potential for development, and it remains an attractive destination despite the pandemic challenges. Footnote 1 The World Economic Forum ( 2019 ) places Vietnam 63rd among 140 economies for tourism competitiveness, one of the top ten most improved economies, and the fastest improving nation in the Association of South East Asian Nations (ASEAN) (Calderwood and Soshkin 2019 ). According to the World Economic Forum ( 2017 ), Vietnam is predicted to be one of the top ten destinations for travel from 2016 to 2026 (Crotti and Misrahi 2017 ). These figures demonstrate the rapid and dynamic growth of the tourism sector in Vietnam and the opportunities it provides.

3.2 The sample and data collection

The research population was determined as Vietnamese domestic tourism companies. According to official figures from the Vietnam National Administration of Tourism, in 2017, there were 824 hospitality businesses from 3 stars and above and 1430 tourism companies nationwide (VNAT 2018 ). The sample size was determined as per the rule of thumb suggested in multivariate analysis literature (Hair et al. 2014 ). Specifically, there are 42 items developed for our measurement model. According to the criterion suggested by Hair et al. ( 2014 ) for choosing the expected sample size, a subjects-to-items ratio should be from 5 to 20 to ensure possible identification of the proposed statistical model. This means a sample N ranging from 210 to 840 was acceptable for running CFA and SEM in this study. Given the time constraints and financial resources for data collection, 1,000 questionnaires were distributed with a usable target response rate of at least 21% (to yield at least N = 210). After the sampling criteria, target population and sample were identified, this research utilized different sampling methods to optimize the response rate.

The sampling techniques used to collect data consist of convenient sampling, stratified sampling, and snowball sampling to represent different types of businesses in the tourism sector and represent the three key regions of Vietnam (the North, the Centre, and the South). The data collection was undertaken in three stages. The first stage utilized convenient sampling conducted at the national and international tourism fairs in Vietnam's two biggest cities: Ho Chi Minh City (in March 2017) and Hanoi City (in April 2017). This technique generated 112 responses from both events.

The second stage involved stratified sampling whereby the number and contact details of travel and hospitality businesses were taken from the Vietnam National Agency for Tourism (VNAT) statistics section. The percentage of each province’s businesses over the total national number (1,578 travel companies and 1,577 hospitality addresses across 63 provinces) was calculated, and the subsequent numbers of tourism firms required in those provinces were determined. Resource constraints meant that half this number would be required. The calculation showed that 500 questionnaires should be distributed to 53 representative provinces (as there are ten provinces with less than 0%). Therefore, 500 pre-paid postal questionnaires were sent and administered from March to May 2017. This technique did not generate a reasonable response rate even with follow-up calls where possible. Only 10 responses were returned out of 500 distributed questionnaires.

During the first and second stages of sampling, it became apparent that the response process was prolonged and limited. Therefore, we decided to initiate the third stage combined with these two stages. Snowball sampling was employed based on our professional contacts from colleagues, friends, and relatives who recommended managers/directors in tourism firms they knew personally. Therefore, unused questionnaires from convenience sampling were used for the snowball samples. After a respondent completed a questionnaire, we asked if they knew someone who could answer the questionnaire like what they had done. This tactic worked well, and 125 responses were generated using this sampling technique.

In total, 247 responses were received using all three sampling techniques. A paper questionnaire was primarily used unless participants requested an online version for their convenience, in which case they were sent the same version created on Google. This approach ensured the questionnaire was sent to the right respondents and not to online groups and forums where we could not control the number of questionnaires distributed and thus calculate the response rate. Overall, 247 responses to 1,000 disseminated questionnaires meant the response rate was 24.7%.

To ensure the integrity of the research and the voluntary nature of the participation, we did not give financial incentives to the respondents to respond to the survey. After deleting three responses with a missing (incomplete) rate of more than 30% and two unengaged responses, 242 were deemed usable. This represented a response rate of 24.2%, within the acceptable response rate (13.8–56.2%) for academic research on organizations (Baruch and Holtom 2008 ).

3.2.1 Respondent selection

The ideal informants in this study were deemed to hold the position of deputy head of a department and above in the business's management team. These key informants are argued to have experience and access to important information regarding the operation of the business and possess specialized knowledge of the tourism sector.

Given these considerations, the key informants selected for this study were senior and accessible informants across the organizations. They were also considered more reliable and provided standardized information given their seniority (Marshal 1996 ). Although multiple respondents may reduce the common method variance (Malhotra et al. 2017 ), it was not strictly conducted in this study as numerous businesses are small entities with fewer than five members in their organization. In such cases, one key informant was sufficient. Furthermore, because the key informants were asked to assess relationships between phenomena in the organization rather than the organization per se, they were qualified to evaluate these relationships with a high degree of accuracy and reliability.

3.3 Measures

Twelve items from the original scales adapted from previous studies were removed in this research because of low factor loadings (less than 0.6), of large standardized residual covariance (larger than |2.58|) (Byrne 2010 , p. 77), and the high correlation with other indicators simultaneously. Details of the removed items and reasons for such removal are in Supplementary Information 1.

3.3.1 Dynamic capabilities

Based on the definition suggested by Teece ( 2007 , 2012 ) and Teece et al. ( 1997 ), dynamic capabilities in this study comprise three clusters of capabilities: sensing, seizing, and reconfiguring.

3.3.1.1 Sensing

Sensing measures the extent to which organizations sense changes (market changes, policy changes, technology changes, competitor changes, customer changes) in the internal and external environments. This study specifically measures the extent to which tourism firms respond to macro and micro changes that influence the operation of the business. It denotes an ability to carry out internal scanning to identify changes that businesses need to address. According to Nieves and Haller ( 2014 ), sensing capabilities is an endogenous variable that consists of four items.

3.3.1.2 Seizing

Seizing refers to the ability of organizations to capture efficiently and effectively, the opportunities identified through sensing by taking advantage of current tangible and intangible resources, routines, processes, and assets. The tool for measuring seizing was adapted from Fainshmidt and Frazier ( 2017 ), which was originally taken from Wilden et al. ( 2013 ).

3.3.1.3 Reconfiguring

Reconfiguring refers to the ability to continuously renew or reconfigure the current state of firms. The measurement for reconfiguring capabilities was adapted from Fainshmidt and Frazier ( 2017 ), where reconfiguring is also an endogenous variable.

According to Byrne ( 2010 ), second-order CFA is a statistical method utilized to confirm the theorized construct in a study loads onto a certain number of underlying sub-constructs or components . Therefore, using a second-order factor model is more appropriate than a first-order model. This is because the second-order model represents a seemingly distinct hypothesis, and associated constructs can be gauged by one or more common underlying second-order constructs (Byrne 2010 ). Moreover, the second-order three-factor model of dynamic capabilities explains how the three first-order factors contribute to overall dynamic capabilities.

3.3.2 Human capital

The measures were adapted from Nieves and Haller ( 2014 ), albeit with some modifications in wording and the removal of one item as recommended by the experts. These experts are practitioners and researchers in Vietnamese tourism. The removed item was ‘Our employees are widely considered the best in our industry’. It was eliminated because both experts said it was difficult for management to evaluate the phrase 'in our industry'. Even though all businesses are in the same industry, each organization operates within a small and different segment of the large tourism industry, such as in budget tours, luxury tours, hospitality, and accommodation, among others. Therefore, it would be impossible for the management to evaluate their employees without being biased. In the study by Nieves and Haller ( 2014 ), human capital is confirmed to positively affect the development of dynamic capabilities such as sensing, learning, integration, and coordination. The skills, knowledge, abilities, and experience of people in an organization are vital for the effective and efficient operation of the business. Such qualities, embedded in people’s thoughts and actions, are the intangible capital from which organizations can benefit.

3.3.3 Organizational learning

Questions on organizational learning culture were adopted partly from the Dimensions of Learning Organization Questionnaire (DLOQ) designed by Marsick and Watkins ( 2003 ). In their research, Marsick and Watkins ( 2003 ) measured organizational learning at three levels: individual level, team or group level, and organizational level. Although the items are comprehensive, it was impossible to adopt all 43 statements in this study. Therefore, based on a study by Hung et al. ( 2010 , p. 292), we selected six key statements to describe the learning culture at an organizational level. The reliability of learning as an organizational level construct was confirmed in Hung et al.’s ( 2010 ) study as 0.88.

3.3.4 Digital marketing

This study adopted items relating to the two constructs (i.e. customer-related marketing activities, field-sales and channel member-related marketing activities) developed by Prasad et al. ( 2001 , p. 106) because the other two constructs (i.e. marketing research-related and management communication activities) have not been well applied in Vietnam and were not recommended by the industry experts following an in-depth questionnaire discussion. Therefore, the final items comprised four customer-related marketing items (the first four items), four field-sales items, and channel member-related marketing activities (the last four items).

3.3.5 Environmental dynamism

The items for environmental dynamism are developed by Jansen et al. ( 2006 ) to measure the extent to which an organization’s external environment is characterized by harsh competition, demonstrated in the number of rivals and areas in which there is competition. This variable is empirically tested by Gelhard et al. ( 2016 ) as a mediator between dynamic capabilities and strategic performance.

3.3.6 Competitive advantage

Competitive advantage in this study is a construct comprising two dimensions of strategic performance (qualitative dimension), measured by the first three items, and financial performance (quantitative dimension), measured by the last three items (Fainshmidt and Frazier 2017 ; Schilke 2014 ). Both strategic and financial performance was measured in comparison to the competition. As cited in Schilke ( 2014 , p. 188), these two performance dimensions were adapted from Jap ( 1999 ) and Weerawardena ( 2003 ).

All items were quantified by a 7-point Likert scale in which ‘0’ meant ‘strongly disagree’ and ‘6’ meant ‘strongly agree’. Respondents were key informants who held a management position in the organizations and were directly involved in the decision–making process.

3.4 Questionnaire formation

The questionnaire was first prepared in English. To ensure the measures in both the source (English) and target (Vietnamese) versions were similar, standard translation and backward translation procedures were applied (Brislin 1970 ). The final English version was translated into Vietnamese (by a qualified translator). The Vietnamese version was then back-translated by other suitably qualified and experienced researchers working in strategic management and tourism management disciplines. Most of the corrections made were related to enhancing the explanations of items and further clarification in the introduction to the questionnaire. After correcting and clarifying the changes, another Vietnamese version was reviewed and refined to modify the wording to make it less technical and more understandable to potential Vietnamese respondents. The questionnaire was then sent to nine senior Vietnamese researchers in the UK and Vietnam to check whether further changes were required.

Before commencing the data collection, the questionnaire was sent to three experts working in the tourism sector to assess whether there were any possible misunderstandings and lack of coherence in the terminologies used in the industry. Each of these experts had over 15 years of experience working in the tourism sector and tourism training. They suggested that greater clarification was required to make the questionnaire more specific to the tourism industry. For example, it was agreed that ‘service’ should be clarified as a ‘tourism service’ so that respondents could quickly grasp the question's meaning. The final questions used for a survey are presented in Appendix 6. .

4 Data analysis and results

4.1 sample characteristics and measurement model.

General information on the organizations studied is presented in Table 1 .

We validated the measurement models by performing CFA for six constructs. Items were restricted to load only onto their priori specified factor and were allowed to correlate with one another. We refined the measurement model by removing indicators with factor loadings lower than 0.6 and then re-running the CFA. Footnote 2 A summary of the average variance extracted and the construct reliabilities of the final measurement model is presented in Table 2 . The overall fitness indices suggest a good fit for the measurement model (χ 2  = 569.869; df = 383; p  = 0.000; χ 2 /df = 1.558; CFI = 0.94; TLI = 0.93; RMSEA = 0.048). Each item significantly loads onto its respective construct ( p  < 0.001) with values ranging from 0.64 to 0.89. Each construct has high composite reliability (ranging from 0.76 to 0.91), exceeding the usual 0.70 benchmarks (Hair et al. 2014 ). Convergent validity is satisfactory as the standardized loading for each item and the average variance extracted (AVE) both exceed the 0.5 thresholds recommended by (Hair et al. 2014 ). The internal consistency of the multi-item scales is also satisfactory as the composite reliability (CR) of each exceeds the 0.7 cut-off recommended by Hair et al. ( 2014 ). The details of the CFA model and results can be found in Supplementary Information 2.

Table 3 shows the correlation matrix and means for all constructs of the model.

We then examined the possibility of common methods bias following Podsakoff et al. ( 2003 ) by performing Harman’s one-factor test in two steps (Aguirre-Urreta and Hu 2019 ). First, all the variables were entered into an exploratory factor analysis. As a result, no single factor emerged that accounted for the majority of the variance (ranging from 28.63 to 50%). We, therefore, concluded that there is no common factor. Second the standardized regression weights ( β ) of the two models–with and without Common Latent Factor – were compared. If the differences between the two coefficients had been larger than 0.2, this might have indicated common method bias. However, the results suggested that common method bias was not a concern and was unlikely to confound the interpretations of our results. The matrix that indicates discriminant validity is presented in Table 4 .

4.2 Hypothesis testing results

Table 5 presents the path analysis results using SEM on the whole sample. This shows our baseline model was a good fit (χ 2  = 784.167; df = 393; p  = 0.000; χ 2 /df = 1.995; CFI = 0.89; TLI = 0.88; RMSEA = 0.064).

The Chi-squared results (χ 2 /df = 1.995 < 3) and RMSEA (< 0.07) show a good fit. However, CFI and TLI were slightly below the suggested level of at least 0.92 with N < 250 and m ≥ 30 (Hair et al. 2014 , p. 584), suggesting a mediocre fit. Theoretical support is required to specify the model and achieve an ideal fit. Furthermore, it is important that the model specifications best approximate the theory to be tested rather than increase model fit (Hair et al. 2014 ). Byrne ( 2010 ) also emphasizes that fit indexes do not reflect the plausibility of a model and that judgments do depend on researchers. We adopt Mai et al.’s ( 2021 , p. 11) “best-to-fit-a-specific purpose thinking” while testing and evaluating the models to determine the best performing fit indicators and cut-off values.

As shown in Table 5 , within the model the positive impacts of Human Capital (β = 0.354; p  = 0.000), Organizational Learning (β = 0.404; p  = 0.000), Environmental Dynamism (β = 0.447; p  = 0.000), and Digital Marketing (β = 0.188; p  = 0.017 < 0.05) were supported. Therefore, H1, H2, H3, and H4 are confirmed. Regarding the antecedents that influence Dynamic Capabilities, Environmental Dynamism has the most substantial influence (β = 0.447), followed by Organizational Learning (β = 0.404), Human Capital (β = 0.354), and Digital Marketing (β = 0.188).

The empirical results also provide statistical support for the positive impact of Dynamic Capabilities on Competitive Advantage (β = 0.366; p  < 0.001). Thus, H5 is confirmed.

The full results of the baseline model are displayed in Fig.  2 below.

Structural Equation Modelling results

4.3 Robustness check

For robustness check, we conducted a model variation test by selecting 200 cases out of the overall sample of 242. SEM was applied to a sub-sample of 200 initial observations from the entire sample, the results of which are reported in Table 5 . The fit indices of the robust check model are also satisfactory (χ 2  = 736.219; df = 393; p  = 0.000; χ 2 /df = 1.873; CFI = 0.882; TLI = 0.869; RMSEA = 0.066). The results presented in Table 6 are consistent with those reported in Table 5 , suggesting that our findings are robust.

4.4 Testing alternative models and mediation analysis

Alternative models were built by adding further direct paths between variables to assess whether each alternative model was better than the hypothesized model and whether the hypothesis test results held. Four additional paths were added, and the new models were run. The results are presented in Table 7 .

Comparing the fitness of the alternative models with the baseline model (χ 2  = 784.167; df = 393; p  = 0.000; χ 2 /df = 1.995; CFI = 0.89; TLI = 0.88; RMSEA = 0.064), all the fitness indexes are somewhat equal to or below those of the baseline model and generate only a minimal difference. Hence, these additional paths and alternative models were not selected. Accordingly, it can be concluded that the current research model was the most appropriate and the hypothesis test results were robust.

Nevertheless, the alternative models still passed the acceptable threshold for the fitness indices and indicated the potential mediation effect of dynamic capabilities. We subsequently conducted further tests to determine whether dynamic capabilities mediate the relationships between antecedents (Human Capital, Organizational Learning, Environmental Dynamism, Digital Marketing) and the outcome (Competitive Advantage). Following Zhao et al.'s ( 2010 ) procedure, we used bootstrapping Footnote 3 (with 5,000 resamples and 95% confidence intervals) of the direct and indirect effects in AMOS 21. The bootstrapping procedure provided associated p-values for each path.

The direct and total effects of each path are shown in Table 8 . The results show that dynamic capabilities have a full mediation impact on the relationship between Digital Marketing and Competitive Advantage and direct-only non-mediation, in line with Zhao et al. ( 2010 ). Even though there is no indirect effect, this should not be viewed as a failure because a significant direct effect signifies undiscovered mediators (Zhao et al. 2010 ). This is because dynamic capabilities are a second-order construct that might weaken the impact of each subset of capabilities (sensing, seizing, and reconfiguring). We suggest that the mediation impact might be more apparent if each subset of dynamic capabilities is tested separately as a mediator in the relationships between antecedents and the outcome.

5 Discussion

5.1 theoretical contributions.

By successfully operationalizing the measurement model for dynamic capabilities as a second-order construct, this study addresses the challenge facing firms within the tourism context. This result contributes to the theory of dynamic capabilities and the relevant framework by Teece and Pisano ( 1994 ). Previous studies usually measure dynamic capabilities as a single-dimensional construct (Hawass 2010 ; Verreynne et al. 2016 ) even though, by nature, dynamic capabilities is a multidimensional construct (Laaksonen and Peltoniemi 2018 ; Nyamrunda and Freeman 2021 ).

Furthermore, this study has investigated the antecedents and outcomes of dynamic capability both internally and externally at the organizational level, namely, at the firm level. In contrast to existing literature that predominantly focuses on the dynamic capabilities of manufacturing and hi-technology businesses, this study draws from the dynamic capabilities view as the theoretical framework to provide new insights into which factors and how they contribute to the dynamic capabilities of a key service – tourism – at the level of the firm.

Our results demonstrate that dynamic capabilities in tourism firms are influenced primarily by environmental dynamism that occurs outside organizations, followed by the organizational learning culture, human capital, and the application of digital marketing within the organization. This significance level suggests that organizations are alert to the importance of fluctuations in the external environment that may affect their ability to sense and seize changes and reconfigure their processes, routines, and activities to keep pace with external dynamism. This finding reflects the reality in Vietnam – a dynamic market–which is evaluated as one of the world's most attractive tourist destinations (World Economic Forum 2019 ) and predicted to be one of the most sought-after international tourist places in post-Covid-19 pandemic. Footnote 4 Previous research by Li and Liu ( 2014 ) shows that environmental dynamism is an important determinant of dynamic capabilities. Other studies, however, do not explicitly claim that environmental dynamism is an antecedent of dynamic capabilities.

Instead, they affirm it as an important factor that influences the relationship between dynamic capabilities and organizational performance (Castiaux 2012 ; Drnevich and Kriauciunas 2011 ), provided the right dynamic capability (either sensing, seizing, or reconfiguring) is applied appropriately in line with different levels of environmental dynamism (Li et al. 2019 ; Piening and Salge 2015 ; Teece 2007 ). A recent study by Maldonado-Guzmán et al. ( 2017 ) finds that the external environment is the barrier most likely to limit the innovative capabilities of SMEs in the service sector in Mexico. The current shock caused by the COVID-19 pandemic to economies is likely to radically affect the different capabilities of organizations to adapt and innovate to respond to the new ‘normal’ (Papadopoulos et al. 2020 ; Seetharaman 2020 ).

An organizational learning culture has been recognized as one of the key antecedents of dynamic capabilities for Vietnamese tourism organizations. Hung et al. ( 2010 ) find that dynamic capabilities mediate the influence of organizational learning culture on organizational performance and that the organizational learning culture impacts dynamic capabilities. Knowledge resources and learning mechanisms in organizations positively influence dynamic capabilities, while the learning mechanism mediates the relationship between knowledge resources and dynamic capabilities (Chien and Tsai 2012 ). The influence of organizational learning culture on dynamic capabilities identified in our study confirms the importance of a learning process in organizations and further enhances the scholarly discussion of the same topic in previous studies. For example, studies by Bendig et al. ( 2018 ) argue that a firm’s knowledge-based capital is part of the micro-foundation of dynamic capabilities and firm leaders indirectly influence organizational dynamic capabilities by creating individual learning conditions. The study by Linden et al. ( 2019 ) discusses the contribution of ‘knowing’ in practice to developing dynamic capabilities.

Our results confirm that the level of knowledge, skills, and abilities among employees significantly impacts the development of dynamic capabilities in Vietnamese tourism organizations. The results are consistent with Nieves and Haller's ( 2014 ) research that uses a sample of Spanish firms in the hotel industry and Kale et al.’s ( 2019 ) research about tourist accommodation establishments. Furthermore, our finding supports the strategic management literature on tourism by pointing out that micro-foundation factors (such as people) are the drivers for dynamism, advancement, progress, or improvement in organizations (Biesenthal et al. 2019 ; Marzo and Scarpino 2016 ). Thus, this research provides conclusive support for the claim by Rothaermel and Hess ( 2007 ) and more recently in the qualitative study of smaller firms in transitional economies by Nyamrunda and Freeman ( 2021 ) that investigations of the adaptation (i.e., sensing, seizing, and reconfiguring) of firms without considering human intellectual capital is inappropriate and incomplete. Our results reinforce previous theoretical work on the important role of human capital in organizations (Macher and Mowery 2009 ; Nieves and Haller 2014 ; Xing et al. 2020 ). As such, our results provide empirical evidence for further research on the role of micro-foundational factors (i.e., individuals) in organizations as determinants of dynamic capabilities.

The effect of digital marketing applications on dynamic capabilities is weaker than that of human capital. Prior studies suggest that technology significantly facilitates and enables a firm’s agility and adaptability (Chakravarty et al. 2013 ; Vogel and Güttel 2013 ). Our finding shows the contrast for tourism firms. It is the human factor that facilitates dynamic capabilities, regardless of which technology is used in the firm. Nevertheless, our results coincide with those of Singh and Rao ( 2016 ), Biesenthal et al. ( 2019 ), and Nyamrunda and Freeman ( 2021 ), who find that intellectual capital has a strong effect on dynamic capabilities and contributes significantly to the integration and reconfiguration of such capabilities.

This study validates the significant relationship between dynamic capabilities and an organization's competitive advantage. The results show a consistently positive impact of dynamic capabilities on competitive advantage. Previous studies find a similar linkage between dynamic capabilities and outstanding performance of organizations (Ferreira et al. 2020 ; Ojha et al. 2020 ; Ringov 2017 ). The outcomes of this research and the studies mentioned above collectively reinforce the ideas of Teece ( 2014 ) that dynamic capabilities do not operate alone and must be combined with effective strategizing to yield a competitive advantage. Dynamic capabilities are thus a source of competitive advantage (Salvato and Vassolo 2018 ) and affect the performance of organizations through the influence of different levels of environmental dynamism (Protogerou et al. 2012 ). Schilke’s ( 2014 ) mixed-methods study shows that dynamic capabilities are associated with a competitive advantage in moderately dynamic rather than stable or highly dynamic environments. Schilke ( 2014 ) demonstrates that the level of external dynamism influences this relationship. The positive influence dynamic capabilities exert on organizational performance forms part of the literature on organizational capabilities, demonstrating that it is a critical source of organizational performance (Wernerfelt 1984 ). With competitive advantage as the source of superior performance (Porter 1985 ), the results of this study indicate that the relationship between dynamic capabilities and organizational performance also contributes to the literature on organizational capabilities and performance. Strong dynamic capabilities must be integrated with a good strategy to achieve substantial performance (Teece 2014 ).

The mediation analyses confirm no mediating effects of dynamic capabilities on the direct relationship between human capital and competitive advantage, organizational learning and competitive advantage, and environmental dynamism and competitive advantage. However, as Table 8 indicates, although the indirect effects between these antecedents and competitive advantage are insignificant, the total effect of this relationship is significant. Thus, the mediation effect of dynamic capabilities exists but is too mild (as can be seen from the VAF values) to produce a significant relationship between the first three antecedents and competitive advantage. This suggests sufficient statistical power to detect the full effect but not enough to detect the effect when decomposed into its parts (Loeys et al. 2015 ). Taken together, the mediation effects of dynamic capabilities are too small to detect.

5.2 Managerial implications

Our study provides useful insights to managers looking to enhance their tourism business and the development of the tourism sector. Specifically, it points to the importance of the external environment in the operations of tourism organizations. The external environmental dynamism is even more important in emerging economies like Vietnam, where the changes are intense and continuous. Additionally, the clients’ demands in a developing country for new products and services require the volumes of products and services to be delivered to change fast and often. Therefore, managers in organizations should evaluate the environment to ensure they adopt the most suitable strategy to support their company’s operations.

Moreover, managers should build a learning culture in which people are willing to share their ideas and facilitate the learning process. This action may enhance the organization’s capabilities to change and cope with new developments in the market. In conjunction with improving the quality of new recruits, creating a positive learning culture within organizations will ensure that tourism companies have better quality human capital, thus supporting their sustained success.

Furthermore, in terms of the low influence of digital marketing on dynamic capabilities found in this study, the costly investment to digitalization for both SMEs and large tourism firms should be questioned. Even though digital marketing was ranked fourth in the order of influence on dynamic capabilities, managers in tourism firms need to expend considerably more effort in improving their cyberspace presence to attract more customers. The implication for the application of digital marketing is becoming more important, given the latest movement to more digitalization in the tourism sector and changes in tourist behavior for safety because of COVID-19 (Talwar et al. 2022 ).

5.3 Limitations and future research directions

Some limitations of this study have implications for future research. First, various control variables might have been omitted that significantly influence competitive advantages. Therefore, additional internal and external variables influencing the deployment and performance of dynamic capabilities could be included. Similarly, further work is required on the strength of each capability (influenced by each determinant). Second, our data are cross-sectional and collected in a pre-defined period. This means the results might be limited in the extent to which they reflect the influence of dynamic capabilities on long-term performance and sustained competitive advantage over time. With the shocks and disruptions caused by the ongoing COVID-19 pandemic to all economies, more extensive and longitudinal research will be important to evaluate how dynamic capabilities can be sustained during a time of crisis. Third, the responses obtained might have been subjective to individuals at the point of collecting data. It is thus possible that different results would have been attained had the data been collected at a different time. Finally, due to the limited capacity of existing software that cannot calculate the R-squared of a non-recursive model like ours, this paper is incapable of providing R-squared values for the calculated models. Instead, we report the key fit indexes that have been widely suggested and applied multivariate data analysis literature (e.g., Hair et al. 2014 and Mai et al. 2021 ).

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Acknowledgments

The authors would like to thank Vietnam National Administration of Tourism for their support at the initial stage of the study, the respondents for their active participation, and three anonymous reviewers at 2019 Academy of Management Conference and two anonymous reviewers, Eshani Beddewela, Anna Zueva, Brendan Canavan, Alessia Grassi, and Hoa Do for their time in reading the paper and providing helpful feedback.

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Nguyen, H.T.T., Pham, H.S.T. & Freeman, S. Dynamic capabilities in tourism businesses: antecedents and outcomes. Rev Manag Sci 17 , 1645–1680 (2023). https://doi.org/10.1007/s11846-022-00567-z

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Introduction

Welcome to the exciting world of the hospitality and tourism industry! This dynamic and ever-growing sector offers an array of opportunities for those with a passion for travel, leisure, and providing exceptional customer experiences. In this article, we will explore the ins and outs of the hospitality and tourism industry, its definition, scope, key players, employment opportunities, challenges, and trends.

The hospitality and tourism industry encompasses a wide range of businesses and services that cater to the needs of travelers, tourists, and individuals seeking leisure activities. It includes establishments such as hotels, resorts, restaurants, airlines, cruise lines, travel agencies, theme parks, and more. These diverse entities all work together to create memorable experiences for guests and visitors.

As global travel continues to increase year after year, the hospitality and tourism industry plays a crucial role in the global economy. Not only does it provide employment opportunities to millions of people worldwide, but it also contributes to the growth of local economies and promotes cultural exchanges between different regions and countries.

Nowadays, people’s expectations for travel and hospitality experiences have evolved. It’s no longer just about offering a comfortable stay or a delicious meal; guests seek unique and personalized experiences that resonate with them. This shift has led to the rise of experiential travel, where travelers immerse themselves in the local culture, try authentic cuisines, and engage in activities that give them a deeper understanding of a destination.

The hospitality and tourism industry is driven by the concept of hospitality, which entails providing an exceptional level of service and attention to guests. Whether it’s warmly welcoming guests at a hotel, anticipating their needs at a restaurant, or ensuring smooth travel arrangements, hospitality professionals strive to create a positive and memorable experience for every visitor.

Furthermore, the industry’s success relies heavily on effective customer service and customer relationship management. Building strong relationships with guests and fostering loyalty are essential for businesses to thrive in this competitive landscape. Word-of-mouth recommendations and positive online reviews have a significant impact on a company’s reputation and customer acquisition.

As we delve deeper into the hospitality and tourism industry, we will uncover the various sub-sectors, discuss the employment opportunities they offer, explore the challenges faced by professionals in the field, and highlight the latest trends shaping the industry’s future. So, let’s embark on this journey together and discover the countless possibilities that await in the vast world of hospitality and tourism.

Definition of Hospitality and Tourism Industry

The hospitality and tourism industry is a dynamic and ever-evolving sector that encompasses a wide range of businesses and services. It revolves around providing exceptional customer experiences to individuals who are seeking leisure activities, travel, and accommodation. This industry plays a crucial role in the global economy, offering employment opportunities to millions of people worldwide and contributing to the growth of local economies.

At its core, the hospitality and tourism industry is defined by its focus on hospitality, which involves delivering outstanding service and creating memorable experiences for guests. Whether it’s a luxury hotel, a quaint bed and breakfast, a fine dining restaurant, or an adventurous travel agency, the industry is united by its commitment to catering to the needs and desires of travelers and tourists.

Tourism, a significant component of the industry, refers to the activities individuals engage in when visiting different destinations. These activities can include sightseeing, exploring cultural landmarks, participating in outdoor adventures, and immersing oneself in the local culture. The tourism sector relies on various services within the hospitality industry to provide comfortable accommodation, dining options, transportation, and entertainment.

The hospitality and tourism industry includes a wide array of businesses and services:

• Hotels and resorts: These establishments provide accommodation for travelers, ranging from budget-friendly options to luxury experiences.
• Restaurants and food services: From casual dining to Michelin-starred restaurants, these establishments offer a variety of culinary experiences.
• Travel agencies and tour operators: These organizations assist individuals in planning and booking their travel arrangements, including flights, accommodations, and itinerary.
• Airlines, cruise lines, and transportation services: These companies facilitate the movement of travelers, providing air, sea, and land transportation options.
• Entertainment and attractions: Theme parks, museums, historical sites, and other attractions offer leisure activities and entertainment for tourists.
• Event planning and management: This sector handles the organization and execution of various events, such as conferences, weddings, and corporate functions.

The hospitality and tourism industry is highly customer-oriented and focuses on creating positive experiences that meet and exceed the expectations of guests. It requires individuals with excellent communication skills, attentiveness, problem-solving abilities, and a genuine passion for providing top-notch service.

As the industry continues to evolve, the definition of hospitality and tourism has expanded beyond traditional boundaries. It now encompasses new trends such as eco-tourism, wellness tourism, experiential travel, and the integration of technology in enhancing guest experiences. This adaptability ensures that the industry remains relevant and responsive to the changing preferences and demands of travelers worldwide.

Scope and Importance of the Hospitality and Tourism Industry

The scope of the hospitality and tourism industry is vast and encompasses a wide range of activities, businesses, and services. From providing accommodation and dining options to organizing travel arrangements and offering entertainment, this industry plays a crucial role in shaping the experiences of travelers and tourists worldwide.

One of the primary purposes of the hospitality and tourism industry is to cater to the needs and desires of individuals seeking leisure activities and travel experiences. It offers a diverse range of services that provide comfort, convenience, and entertainment to guests, ensuring their satisfaction and enjoyment.

One of the key aspects of the industry’s scope is the provision of accommodation options. Hotels, resorts, bed and breakfasts, and other lodging establishments offer visitors a place to stay while exploring a destination. These accommodations can range from budget-friendly options to luxury suites, catering to the preferences and budgets of various travelers.

In addition to accommodation, the industry also encompasses an array of dining options. Restaurants, cafes, food trucks, and other establishments provide visitors with the opportunity to sample local cuisine, indulge in gourmet experiences, or simply grab a quick bite to eat. These dining experiences often add a cultural element to travelers’ journeys, allowing them to savor the flavors of a particular region or country.

The transportation sector is another critical component of the industry’s scope. Airlines, cruise lines, car rental services, and other transportation providers ensure that individuals can reach their desired destinations conveniently and safely. This seamless connectivity helps facilitate travel and allows visitors to explore multiple locations during their trips.

Entertainment and attractions are also significant contributors to the industry’s scope. Theme parks, museums, historical sites, natural landmarks, and other attractions offer leisure activities and unique experiences for tourists. These destinations play a vital role in attracting visitors, increasing local tourism, and promoting cultural exchanges.

The importance of the hospitality and tourism industry cannot be overstated. Economically, it generates substantial revenue for destinations, stimulates local businesses, and creates employment opportunities for millions of people worldwide. It supports a wide range of industries, including hospitality, transportation, food and beverage, and retail.

Socially, the industry encourages cultural exchange, promoting understanding and appreciation of different cultures and traditions. It fosters connections between people from diverse backgrounds, enabling the exchange of ideas, customs, and perspectives.

Furthermore, the hospitality and tourism industry contributes to the preservation and promotion of natural and cultural heritage. By highlighting and showcasing these assets, it raises awareness about the importance of conservation and sustains the value of unique landmarks and ecosystems.

Key Players in the Hospitality and Tourism Industry

The hospitality and tourism industry consists of numerous key players, each playing a crucial role in delivering exceptional experiences to travelers and tourists. These players include a diverse range of businesses and organizations that contribute to the overall success and growth of the industry.

Hotels and resorts are major players in the industry, offering accommodation options to guests. This includes luxury chains, boutique hotels, budget-friendly establishments, and everything in between. These properties provide a variety of amenities and services to ensure a comfortable and enjoyable stay for visitors.

Restaurants and food services are also significant players in the hospitality and tourism industry. From high-end fine dining establishments to casual cafes and street food vendors, these businesses cater to the culinary needs of travelers and locals alike. They offer a wide range of cuisines, flavors, and dining experiences to satisfy diverse palates.

Travel agencies and tour operators play a vital role in planning and organizing travel arrangements. These players assist individuals and groups in booking flights, accommodations, transportation, and activities. They curate itineraries, provide expert guidance, and offer personalized recommendations to create unforgettable travel experiences.

Airlines and cruise lines are essential players in the transportation sector of the industry. They facilitate travel by air and sea, connecting travelers to various destinations around the world. These players focus on providing safe, efficient, and comfortable travel options for guests, ensuring a seamless journey from start to finish.

Attractions and entertainment providers contribute to the industry’s vibrancy and appeal. Theme parks, museums, zoos, national parks, and cultural heritage sites offer unique and engaging experiences for visitors. They showcase local history, art, nature, and provide opportunities for entertainment and adventure.

Event planning and management companies are important players in the industry, organizing conferences, conventions, weddings, and other events. They ensure that every aspect of an event, from venue selection to logistics and execution, meets the highest standards and exceeds the expectations of attendees.

Tourist boards and destination marketing organizations (DMOs) play a critical role in promoting tourism and attracting visitors to specific destinations. They collaborate with businesses, governments, and local communities to develop marketing campaigns, initiatives, and strategies aimed at showcasing the unique offerings and attractions of a place.

In addition to these key players, technology companies have also become increasingly important in the hospitality and tourism industry. Online travel agencies (OTAs), hotel booking platforms, and travel review websites have transformed the way travelers search, book, and review accommodations and experiences. The integration of technology has revolutionized the industry, providing greater convenience and options for travelers.

Collaboration and synergy between these key players are essential for the industry’s success. By working together, they can create seamless, memorable experiences for travelers, enhance destination offerings, and drive the growth and sustainability of the hospitality and tourism industry as a whole.

Sub-Sectors of the Hospitality and Tourism Industry

The hospitality and tourism industry is vast and comprises several sub-sectors that cater to the diverse needs and preferences of travelers and tourists. These sub-sectors offer specialized services and experiences, contributing to the overall richness and appeal of the industry. Let’s explore some of the key sub-sectors:

Hotels and Accommodation: This sub-sector includes various types of lodging options, ranging from luxury hotels and resorts to budget-friendly motels and hostels. It encompasses full-service hotels, boutique properties, bed and breakfasts, serviced apartments, and vacation rentals. Each lodging category provides different amenities, styles, and experiences to cater to the needs of travelers.

Food and Beverage: Restaurants, cafes, bars, and food services form an integral part of the hospitality industry. This sub-sector caters to both locals and tourists, offering a wide array of culinary delights that showcase local and international cuisines. From fine dining establishments to street food vendors, the food and beverage sub-sector delivers diverse and memorable dining experiences.

Travel and Tourism Agencies: This sub-sector encompasses travel agencies, tour operators, and online travel agencies (OTAs). These entities specialize in organizing and facilitating travel arrangements for individuals and groups. Whether it’s booking flights, accommodations, transportation, or activities, travel agencies play a pivotal role in creating seamless and hassle-free travel experiences for customers.

Transportation: Airlines, cruise lines, car rental services, and transportation companies fall under this sub-sector. They ensure the smooth movement of travelers from one destination to another. Airlines connect cities and countries through air travel, while cruise lines offer leisurely journeys by sea. Car rental services and transportation companies provide options for convenient and efficient travel within destinations.

Entertainment and Attractions: This sub-sector comprises a variety of attractions and entertainment venues that enhance the overall travel experience. Theme parks, museums, art galleries, amusement parks, zoos, botanical gardens, and cultural heritage sites all fall under this category. These attractions offer visitors the opportunity to explore local history, culture, and natural beauty, providing unique and engaging experiences.

Event Planning and Management: This sub-sector specializes in organizing and managing various events, such as conferences, conventions, weddings, and exhibitions. Event planning companies coordinate every aspect of an event, including venue selection, logistics, catering, and audiovisual arrangements. They ensure that events run smoothly and leave a lasting impression on attendees.

Destination Marketing: Tourist boards and destination marketing organizations (DMOs) play a crucial role in this sub-sector. They promote specific destinations, highlighting their unique attractions, cultural heritage, and activities to attract visitors. DMOs collaborate with local businesses, governments, and communities to develop marketing campaigns and initiatives that boost tourism and drive economic growth.

Technology and Online Platforms: This emerging sub-sector encompasses technology companies that provide online booking platforms, travel review websites, and other travel-related services. These platforms have revolutionized the way travelers plan, book, and review accommodations and experiences. Through the integration of technology, travelers have access to a vast array of choices and can personalize their travel experiences.

Each sub-sector of the hospitality and tourism industry plays a vital role in creating a comprehensive and enjoyable travel experience. By working together, these sub-sectors contribute to the overall success and growth of the industry, ensuring that travelers have a plethora of options and experiences to choose from.

Employment Opportunities in the Hospitality and Tourism Industry

The hospitality and tourism industry offers a vast array of employment opportunities for individuals with a passion for customer service, travel, and creating memorable experiences. From entry-level positions to managerial roles, this diverse industry provides a wide range of careers that cater to different skills, interests, and qualifications.

Overall, the hospitality and tourism industry is a dynamic and promising field for employment. It offers a wide range of opportunities for individuals seeking a career that combines their passion for travel, customer service, and creating unforgettable experiences. Whether it’s in hotels, restaurants, travel agencies, attractions, or event planning, there is a career path for individuals with diverse backgrounds and interests in this ever-evolving industry.

Challenges and Trends in the Hospitality and Tourism Industry

The hospitality and tourism industry operates in a dynamic and highly competitive environment, continuously evolving to meet the changing needs and expectations of travelers. While the industry offers numerous opportunities, it also faces various challenges. Let’s explore some of the key challenges and trends shaping the industry today.

Challenges:

1. Economic Factors: Economic instability, fluctuating currency rates, and geopolitical issues can significantly impact the industry. Economic downturns can lead to reduced travel budgets and lower consumer spending, affecting businesses’ profitability and sustainability.

2. Seasonality and Demand Variability: Many tourist destinations experience peaks and troughs in visitor numbers due to seasonality. Managing staffing levels, inventory, and operations to meet fluctuating demand can be a complex challenge for businesses.

3. Competition: The industry is highly competitive, with businesses constantly vying for customers. From large hotel chains to online travel agencies and local establishments, businesses must differentiate themselves and offer unique experiences to attract and retain guests.

4. Changing Consumer Behavior: Consumers’ preferences and expectations are continually evolving. Travelers now seek experiential travel, personalized recommendations, sustainable practices, and seamless digital experiences. Adapting to these changing demands requires continual innovation and investment in technology.

5. Technological Advancements: While technology presents opportunities for growth, it also poses challenges. Online booking platforms, review websites, and social media influence consumer decisions and can impact a business’s reputation. Staying up-to-date with technological advancements and leveraging them strategically is key to staying competitive.

1. Sustainable and Responsible Tourism: In response to growing environmental concerns, travelers are embracing sustainable and responsible tourism practices. Businesses are implementing eco-friendly policies, reducing waste, and supporting local communities to meet the rising demand for environmentally conscious travel experiences.

2. Experiential Travel: Travelers are seeking immersive and authentic experiences. They want to connect with local cultures, participate in unique activities, and explore off-the-beaten-path destinations. Businesses are catering to these desires by offering curated experiences, cultural immersion programs, and adventure tourism options.

3. Personalization and Customization: Personalization is a key trend in the industry. Travelers appreciate tailored recommendations and experiences that cater to their specific preferences and interests. Businesses are utilizing technology and data analytics to understand customer preferences and provide personalized offers and services.

4. Technology Integration: Technology continues to transform the industry, with advancements such as artificial intelligence, virtual reality, and mobile apps enhancing customer experiences. Key trends include mobile check-ins, contactless payments, chatbots for customer service, and personalized digital concierge services.

5. Rise of Sharing Economy: The sharing economy, represented by platforms such as Airbnb and Uber, has disrupted traditional hospitality and transportation sectors. It has provided travelers with alternative accommodation options and transportation choices, forcing businesses to adapt and find innovative ways to compete.

By staying informed about these challenges and trends, businesses in the hospitality and tourism industry can adapt their strategies, invest in technology, and provide exceptional experiences that meet the evolving needs and expectations of travelers. The industry’s ability to navigate these challenges and embrace trends will determine its success and resilience in the ever-evolving global marketplace.

The hospitality and tourism industry holds immense potential as a thriving and vibrant sector that caters to the needs of travelers and tourists worldwide. Throughout this article, we have explored the definition, scope, key players, employment opportunities, challenges, and trends of this dynamic industry.

The industry’s definition is centered around providing exceptional service and creating memorable experiences for guests. It encompasses a wide range of businesses and services, including hotels, restaurants, travel agencies, airlines, attractions, and event planning organizations.

The scope and importance of the hospitality and tourism industry cannot be understated. It drives economic growth, generates employment opportunities, fosters cultural exchange, and promotes the preservation of natural and cultural heritage.

The key players in the industry each play a significant role in delivering outstanding experiences to travelers, ensuring their comfort, satisfaction, and enjoyment during their journeys.

The numerous sub-sectors within the industry, such as hotels, food and beverage, travel agencies, attractions, event planning, and technology, offer diverse employment opportunities for individuals with a range of skills and interests.

While the industry presents exciting opportunities, it also faces challenges, including economic factors, competition, changing consumer behavior, and technological advancements. Businesses must embrace these challenges and stay attuned to the latest trends in order to provide exceptional experiences and stay competitive.

The trends shaping the industry, including sustainable and responsible tourism, experiential travel, personalization, technology integration, and the rise of the sharing economy, offer new avenues for growth and innovation for businesses in the industry.

In conclusion, the hospitality and tourism industry is a dynamic and ever-evolving sector that offers a wide range of opportunities for individuals seeking a career that combines their passion for travel, customer service, and creating unforgettable experiences. By adapting to changing consumer preferences, embracing technology, and providing exceptional service, businesses in the industry can continue to thrive and contribute to the growth and success of this exciting and vital industry.

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