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A recent study looked into European snow tourism and the market positioning of destinations. Three main findings emerged - that clear positioning on longer-stay customers makes it more likely that the conduct of ski corporations and hotel businesses will complement each other; that clear positioning on longer-stay customers improves the competitive performance of ski corporations; and that clear positioning on longer-stay customers improves the competitive performance of tourist hospitality businesses.
Two dimensions were found to be decisive: the commercial mix of customers attracted to the destination (distinguishing between day-trippers and longer-stay customers), plus the structural mix of plant capacity (ski lifts, cable cars etc.) and high turnover tourist accommodation facilities.
European snow tourism in context
European snow tourism is subject to increasing competition. It’s a market characterised by low growth rates, and it’s been faced with continuing expansion of supply driven both by the creation of new destinations and by the growth in available resources at those already in existence. In this context, many destination operators (businesses, associations, destination marketing organizations (DMOs) etc.) are undecided over which strategy to adopt to maintain or increase their own market share and how to create a sustainable competitive advantage.
This issue is important, because the already delicate economic-financial equilibrium of the ski corporations is being eroded further by the new rules of the game. There are many causes which have contributed to a significant increase in operational costs and investments – reduction in snowfall and the consequent development of planned snowmaking, the increased investment costs for modern transport, the growing staff and energy costs, and the increased cost of maintaining ski run safety and environmental integrity including minimising the risks of avalanches. At the same time, there is also reduced room for manoeuvre in terms of real prices, the two factors combining to reduce the profitability of invested capital.
Business competition strategies alone are not enough to foster competitive advantage; rather an appropriate strategy is required at the destination level. Such a strategy requires the combined efforts of public and private players, with the role of the DMOs having particular importance. Nonetheless, the formulation and implementation of a deliberate destination strategy appears to be difficult to achieve, above all in view of the complex and multi-sector form taken not only by local skiing facilities and services but also by the hospitality facilities. This is typical of a community model that is often characterised by a degree of friction between the different local players, particularly between ski corporations, the tourist hospitality businesses, and local councils (responsible for the planning use of the land).
These conflicts and the inevitable divisions arising from them in many cases impede concentration on a destination strategy with action plans based more on short-term policies and tactics, unable to create or consolidate the foundations of a competitive advantage.
In the European context, winter destinations operate principally in the Alpine region, serving a target customer group interested in sport, with skiing being pre-eminent. However, we can regard snow tourism as a special form of the more general “mountaineering” or “alpinist” phenomenon.
Characteristics of Alpine destinations
Alpine destinations display the characteristics typical of the community model. It is a model with a fragmented supply side, centred on independent SMEs who operate in a decentralised way and where no body dominates administrative power or ownership at the destination. This fragmentation is reflected in the structural complexity of the strategic positioning sought by local businesses and by potentially conflicting views of the course the destination should take in its future development. On the other hand, there are often shared values at these destinations, a starting point for any dialogue between operators.
Winter destinations' strategy and performance
Of the many types of businesses operating within a winter destination, we concentrate here on ski corporations and tourist accommodation businesses. This is because of the central importance of ski services to the choices made by winter customers, and to the importance that the hospitality sector has in attracting the end customer. Skiers staying a number of nights - as opposed to day-trippers - represent the largest customer segment for Alpine destinations. The accommodation structures are primarily responsible for shaping the destination's commercial mix rather than the businesses operating the ski-plant.
The other local businesses, “local tourism organisations” (LTOs), are restaurants, entertainment, transport and banking services, public services etc. While playing an important role in the completion of the global product required by the end customer, they rarely offer services that can be described as core or are capable of determining the customer's choice at the moment of purchase.
“The role of the ski corporations is of key importance since they are responsible for the content of the central service for winter holidays.”
Getting the mix right
The dynamic management of two pivotal elements is important for any destination:
- The management of the commercial mix in order to optimise sales volumes; and
- The infrastructural balance between high turnover guest beds and the hourly capacity of functional plant given the high degree of interdependence between the two sectors.
A destination's positioning with regard to customer segments represented by day-trippers and tourists seems to be pivotal in its mix selection. Focusing on short-term custom will optimise volumes during holidays (typically weekends, Christmas, Carnival and Easter) while also laying the foundations for reduced levels of operation in the destination during weekdays. Furthermore, these flows tend to fluctuate widely depending on climatic conditions, with sharp falls in numbers during bad weather. In contrast, concentration on longer stay custom (ideally weekly) reduces the variation in flows between weekdays and holidays. Furthermore, the greater complexity of the needs of the long-stay customer has important knock-on effects for the other businesses operating in the destination (the LTOs). This customer segment is less sensitive to deteriorating weather conditions because of the increased length of stay, and tends to be prepared to accept the risk of bad weather. A person buying a multi-day ski pass tends to be prepared to pay for the service even on those days when he or she is not actually able to ski.
The ratio between the ski-plant's hourly capacity and the availability of high-turnover bed-spaces is important to the structural balances internal to the destination. Where the ratio is too high with respect to hourly capacity, the insufficient accommodation means that short-stay customers are sought to fill the capacity, but when the ratio is too low the destination risks offering reduced skiing capacity with long queues at the ski lifts or too many people on the runs.
The need for the involvement of a number of local parties exists, from both the public and private sectors, with responsibility for the management of a number of strategic factors capable of having a bearing on the destination’s positioning. Local councils monitor the ratio between the hourly capacity of the ski lifts and bed spaces, giving encouragement to the accommodation sector. This has a beneficial effect on the ski corporations by generating high turnover.
DMOs are normally the agencies with responsibility for the destination strategy, the management of communication and the development of new products. It is important that the resort marketing strategy should look primarily for longer-stay customers to consolidate the positive and reciprocal benefits to be gained from this by both the accommodation and ski sectors. Such dual development can give rise to interesting openings for other LTOs. The development of new products must also be directed as much as possible towards the resolution of specific occupancy problems and the consolidation and development of the destination brand in the eyes of the market and the target customer groups.
The role of the ski corporations
The role of the ski corporations is of key importance since they are responsible for the content of the central service for winter holidays. To be able to attract the longer-stay customers it is necessary to give particular attention to plant and slope maintenance as well as to collateral services. They need to put pressure on local councils and DMOs for the creation of the right infrastructural balances and the adoption of the appropriate destination marketing techniques. Where this is possible, it is important to increase resources to offer their customers an extensive choice of plant and ski runs. They must also give thought to the co-habitation of different target groups, particularly long-stay customers and day-trippers. The overlapping of these groups must be assessed with care in order to avoid over-crowding on ski runs and ski lifts, which is often not tolerated well by longer-stay customers. Equal care must be given to the management of the marketing produced by these companies. It is important that advertising is aimed at the longer-stay market, and it should be coordinated and integrated so far as possible with the initiatives undertaken by the DMOs in order to avoid duplication, contradictions in the messages transmitted, and fragmentation.
The accommodation sector
Finally, the accommodation sector has a direct effect on the destination's commercial mix, above all when deciding which customer segment to target. The knock-on effect for the ski corporations of giving priority to weekend custom will be very different from the effects of favouring longer-term guests. The customer's main requirement in visiting will also have a significant effect on the skiing facilities. The effects will be particularly strong if the accommodation sector attracts “pure” skiers, less noticeable if the guests are only occasional skiers, and virtually non-existent if they are interested in other sports. The degree to which organised tourism is accepted or rejected is also very important. From the destination's point of view, there is no doubt that the best commercial mix is one that is neither concentrated exclusively on the individual customer nor on organised holidays.
January 2011.
This is a shortened version of “Strategic positioning and performance of winter destinations”, which originally appeared in Tourism Review, Volume 63, Number 4, 2010.
The author is Ruggero Sainaghi.