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Performance measurement in
tourism: a value chain model

Performance
measurement in
tourism

Yldrm Ylmaz
Akdeniz University, Antalya, Turkey, and

341

Umit S. Bititci
University of Strathclyde, Glasgow, UK
Abstract
Purpose The tourism industry consists of various players and tourism demand is met by the joint
efforts of these players. However, it seems that there is no attempt in the tourism management
literature proposing frameworks or models, which can assist the tourism companies, evaluate and
control the overall tourism value chain. This paper attempts to show the usability of value chain
concept in the tourism industry to manage and measure the value chain processes.
Design/methodology/approach A tourism value chain model with four stages; win order,
pre-delivery support, delivery, and post-delivery support, is developed. A value chain performance
measurement model for the tourism industry is suggested according to the value chain model
developed.
Findings There is an opportunity to study the tourism industry as a value chain and to develop a
value chain oriented performance management and measurement framework that would allow various
players to communicate and coordinate their processes and activities in a more mature manner.
Therefore, it becomes critical to measure and manage the overall efficiency and effectiveness of the
tourism product and services from a value chain management perspective. The framework has some
implications for both practitioners and researchers.
Practical implications The tourism companies can use the suggested model as a guide to
evaluate their performance in terms of customer and internal dimensions through the value chain
perspective. Mapping of existing thinking on performance measurement against the proposed tourism
value chain model reveals gaps for further research, such as: the need to study the tourism industry as
an end-to-end value chain; the need for understanding and measuring the performance of front-end
win-order and pre-delivery-support processes; and the need for managing the delivery process as a
whole rather than as two or three unrelated services. The model is intended to be useful for the
practitioners when designing and implementing a framework who search for the whole tourism chain
effectiveness using both internal and customer related metrics.
Originality/value The paper highlights the need to evaluate the overall tourism value chain
through the customer and internal dimensions and suggests a unique model for this aim.
Keywords Value chain, Tourism management, Performance measures, Management effectiveness
Paper type Research paper

Introduction
Measuring business performance in tourism industry has been attracting researchers
and practitioners for some time. However, there are few studies on performance
measurement in the tourism industry when compared to studies done for
manufacturing industries. It is also noted that these theoretical or empirical studies
are limited to the hotel sector alone (Atkinson and Brander Brown, 2001; Mia and
Patiar, 2001; Phillips, 1999; Enz et al., 2001) and they do not examine the performance
measurement subject considering the interdependent nature of tourism industry.

International Journal of
Contemporary Hospitality
Management
Vol. 18 No. 4, 2006
pp. 341-349
q Emerald Group Publishing Limited
0959-6119
DOI 10.1108/09596110610665348

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342

The interdependent feature of the tourism industry makes the companies in

different sectors, i.e. transportation, tour operators and hotel, heavily reliant on each
other (Evans et al., 2003). If one fails to deliver a service it has an affect on the other one.
Along the other characteristics of tourism products and services like its intangibility,
perishability and inseparability; interdependent nature of tourism plays a great role
in providing the overall service quality of the product that the consumers buy. Hence, it
requires various organisations in the tourism industry to work together as a value
chain to add value and deliver product and services to the customer.
To build a system that searches for customer satisfaction at every step in the
tourism value chain, and the efficiency of this chain at every phase, needs a robust
performance measurement system. Although the distribution channel concept has
been studied widely, the focus of these studies were marketing oriented and no attempt
has been observed which addresses the performance measurement of the distribution
channel within a value chain understanding.
This paper, therefore, aims to offer a tourism value chain performance measurement
framework that allows various players to communicate and coordinate their processes
and activities and helps to measure the customer and internal performance in a more
mature manner.
The tourism value chain
The tourism industry has been analysed in a holistic manner through distribution
channel perspective by many authors (Middleton and Clark, 2001; Mill and Morrison,
2002; Halloway, 1998; Laws, 1997). The book, Tourism Distribution Channel, edited by
Buhalis and Laws (2001) also consists of 23 papers of various writers. The majority of
them are marketing oriented and do not emphasise the performance management and
measurement of value chain in the tourism industry. Poon (1993) adapted Porters
value chain concept to the tourism industry. However, she also did not mention the
performance management of value chain. Another lack of the literature is not to have
looked at the value chain from the customer perspective; in other words there is a lack
of customer-oriented approach in the end-to-end value chain. The customers see the
tourism product as a seamless product and that requires to be handled from the
customer point-of-view so as to measure the tourism value chain effectively. Although
great emphasis is given to service, quality and customer satisfaction issues and their
link to the business performance in the tourism industry, it is surprising not to see a
customer-oriented approach in the tourism value chain. von Friedrichs Grangsjo (2003)
emphasises the importance of destination networking and co-opetition (he means that
competitors can both have a competitive and a co-operative relationship with one
another at the same time). Despite being solely a marketing oriented perspective, his
research demonstrated the importance of co-operating in the tourism network. As he
stated the tourism product is produced in interaction with the customer and the
customers have to be imported to the arena of production, to the destination (p. 427).
This inseparability, as mentioned before, makes the companies interdependent on each
other, which affects the overall customer satisfaction and so the future business. Hence,
at this point, to search the ways to manage and measure the tourism value chain as a
whole with a customer-oriented approach becomes vital.
The tourism value chain starts with the customer order. Customers or tourists have
some alternatives when they purchase the tourism product. They can either arrange
their travel plan with the help of tour operators or outbound travel agents (package
travel) that has the advantage of taking professional advice on the whole holiday

package without any thinking; or arrange it themselves (individual travel), which

allows them to be flexible in their travel experience. Incoming travel agents can be used
to make transfer arrangements from/to the airport (or train station, harbour, etc.)
to/from the hotel and for daily excursions and other activities held at the destination.
Transportation (airline, train, etc.) between home and destination is also an important
part of the tourism value chain.
The package travel model includes the alternatives of either taking the whole
holiday package, which is the most popular one, or any part of the travel (e.g. airline
ticket only, hotel reservation, car rental at destination or a combination of both). On the
other hand, consumers can individually organise each step of their travel by
themselves that means they buy the airline ticket, hotel stay, car rental, sightseeing
tour or any other activities individually from the companies directly without using any
intermediary. The use of IT on the indirect travel mode is increasing and many authors
like Nissen (2001), Law et al. (2004), Meyronin (2004), Sigala (2003), Smith (2004) and
others have discussed the impact of IT usage on the tourism distribution channel
especially since the late 1990s.
To manage the tourism product as an end-to-end seamless product, a tourism value
chain concept can be developed, as in Figure 1. At the win order stage, consumers
purchase the product among the pre-determined travel packets either as a whole or
part(s) of it from the travel organiser. A tour operator or outbound travel agent makes
the necessary arrangements on behalf of the consumer.
Pre-delivery support consists of activities like handling visa requirements, giving
the detailed information about the destination and any other things that the consumer
may need before departure. The tour operator or outbound travel agent operates at this
stage.
The delivery stage is where the customers consume their product. The tourism
suppliers deliver their products to the consumers at this stage.
Post delivery support is where the customer satisfaction is measured and the
necessary corrective action taken to make sure that the tourism value chain is managed
in a continuous manner.

Performance
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Figure 1.
Tourism value chain

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If we accept the proposed value chain as an accurate representation of the tourism

industry, it will be possible to develop a framework to facilitate management of
performance as an integrated value chain, rather than by an individual sub-sector (e.g.
hotel).
Performance measurement in the tourism value chain
The suggested model for tourism value chain performance measurement is illustrated
in Figure 2. Current measures used in the literature of performance measurement have
been mapped onto this model. This shows the potential gaps in the current thinking
with respect to the tourism industry. In Figure 2 some example measures have been
suggested as a guide to people who may wish to work on these areas.
At the first level of the tourism value chain, the scope and content for the value
chain operations are defined and the bases of competition performance targets are set.
The performance attributes can be designed to focus on the internal and customer
perspectives for the whole value chain.
At the second level, the performance measurement criteria of each process of the
value chain is determined in accordance with the attributes and set targets defined at
the first level. A third level can be added to the value chain, if necessary.
Level 1
Performance attributes and possible metrics for internal-facing and customer-facing
perspectives can be constituted as in Figure 2. The performance attributes and metrics
for the customer perspective could be set to reflect the characteristics of the tourism
industry, some of which are briefly mentioned in the paper, namely intangibility,
perishability, inseparability, interdependence, and service quality. Hence, the
attributes of SERVQUAL (Parasuraman et al., 1988); reliability, responsiveness,
assurance, tangibles, and empathy can be used to measure the aforementioned
characteristics of the tourism product. The suggestion of using SERVQUAL attributes
is due to the common usage of it by the practitioners and academicians in various
service sectors. Although many authors have put great emphasis on customer
satisfaction in the tourism industry, these efforts are limited to the sectoral basis. In
other words, the tourism literature is weak in measuring the customer satisfaction
within the end-to-end value chain concept. Besides, at level 1 some performance
attributes, such as; profitability/productivity, cost, cash flow and capacity
management can be used to measure the internal perspective of the tourism value
chain. A sample is given in Figure 2.
Level 2
Consists of win order, pre-delivery, delivery and post-delivery stages. At this level the
performance attributes, which are set at level 1, are used to measure the effectiveness of
each process in the value creation process.
The win order stage is where the customers have initial contact in the value chain.
Although this stage is important for the effectiveness of whole chain, it is one of the
least, if not, focused areas in terms of performance measurement. This may be due to
the difficulties in measuring the process and outputs of it, but not impossible indeed.
There could be opportunities to measure this stage, for instance, from the customers
perspective: cycle time for purchasing a trip, number of complaints on responsiveness
of contact persons, and the amount of misinformation given to customers; and for the

Performance
measurement in
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Figure 2.
Value chain performance
measurement framework
for tourism industry

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internal perspective: cost of sales, volume of sales, business conversion rate, speed and
accuracy of information.
The pre-delivery stage also has similar problems in terms of performance
measurement literature. The sustainability of the value chain depends on the
effectiveness of each process in the value chain and each process in the chain needs to
be managed and measured as a simple system rather than a number of independent
systems. In this area emphasis could be placed on the measurement of handling
customer requirements before the delivery process occurs, such as cycle time of getting
the necessary visa procedures, percentage of customer complaints about the detailed
information given regarding destination (can be taken from after trip feedback), and
cost of service for internal-facing metric can be useful for this stage.
Delivery can mainly be divided into three sub sectors: accommodation,
transportation and incoming travel agents. The relations between these players
affect the performance of the delivery stage. Therefore, the performance measures
should reflect the interdependency features of the industry. As in the other stages, in
this stage the performance attributes and metrics should be related to those in level 1.
There is also a gap for designing and implementing such a performance measurement
system to combine the delivery stage in the literature of performance measurement of
tourism industry. Most efforts on performance measurement have been made for the
sub-sectors, which are discussed further below.
Post-delivery is where the overall customer satisfaction is measured and necessary
corrective action is taken. Besides, total value chain effectiveness in terms of the added
value of each organisation could be evaluated at this stage. These feedbacks, customer
and internal, could be used for monitoring and managing a sustainable value chain.

Level 3
A need for a third level arose due to the complex nature of the delivery stage.
Performance attributes and the metrics at this stage could be developed in accordance
with level 2 for the accommodation, transportation and incoming travel agents, which
are common suppliers in the tourism value chain.
Accommodation. Although the accommodation sector seems most advanced in the
literature on performance measurement, the main focus seems to be on what to
measure rather that the development and use of a performance measurement system
(Figure 2).
Transportation. In the transportation sector, the main emphasis is on the airlines
and their relations with the travel organisers. It is again the case that performance
measurement is very immature in the transportation sector and it requires further
focus on this huge industry, which suffers from heavily fixed cost structure and also
the customer loyalty problems. In terms of ensuring customer satisfaction and their
loyalty, the companies develop various strategies. The impacts of these strategies and
the agent-airline relations need to be carefully measured and managed.
Incoming travel agents. The perceived quality of service as regards the tourism
experience by the consumers (tourists) is well affected through the experience they
have with the guidance of a travel agent at the destination. Hence, the measurement of
customer and internal facing perspectives require careful attention. However, there is
little attempt in the literature to address this area.

Conclusion
As demonstrated through the proposed tourism value chain model, there is an
opportunity to study the tourism industry as a value chain and to develop a value
chain oriented performance management and measurement framework that would
allow various players to communicate and coordinate their processes and activities in a
more mature manner. Therefore, it becomes critical to measure and manage the overall
efficiency and effectiveness of the tourism product and services from a value chain
management perspective. The framework has some implications for both practitioners
and researchers.
Implications for practitioners
The model suggested in this paper aims to provide a framework to measure and
manage the tourism value chain through mapping the performance measures of each
process in the chain. This approach can be useful especially for the tourism companies,
whether vertically/horizontally integrated or not, in terms of measuring the
effectiveness of the customer relations and the internal efficiencies.
It is envisaged that this approach can increase the customer satisfaction. The key
difference in the value chain concepts of the tourism industry, when compared to
manufacturing industry, is that the customer experiences the chain at first hand as it is
the customer that passes from one process to other rather than the goods in
manufacturing along the value chain. This view will help to make the managers,
who use the tourism value chain framework, know and take the necessary actions to
ensure overall customer satisfaction. The reason for this is that tourists customers
evaluate their travel experiences as a whole. That is, bad experiences in one part of the
value chain (e.g. hotel), will affect not only the future business of the hotel but also the
future business of the tour operator, transportation, local travel agents and other
parties that are involved in the entire value chain.
Besides its impacts on increasing the overall customer satisfaction, the framework
can be a useful tool when measuring the effectiveness of the value chain via controlling
the costs, sales and other variables that affect the performance of tourism ventures.
Measurement of both customer and internal related metrics with a systematic
approach in a value chain measurement framework could expose the problem areas
that need to be improved. Hence, it may give the managers a greater chance to
significantly improve its customer satisfaction level and to manage its operations
efficiently.
Using the value chain performance measurement thinking, based on systems
approach, provides the tourism industry an opportunity to make a step change that can
serve for the efficient use of resources and the effectiveness of properties in terms of
customer satisfaction and repeat business consequently.
Implications for researchers and further research areas
Current measures used in the literature of performance measurement have been
mapped onto the suggested model, which served to identify the following gaps in the
performance measurement theory and practice of the tourism industry:
.
Measures for overall value chain (level 1). As the industry is not seen or studied as
an end-to-end value chain, performance measures that assess the efficiency and
effectiveness of the value chain as a whole do not exist.
.
Win order process (level 2). The value chains starts with the customer getting
sold a product. It seems that the root cause of some of the problems experienced

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in the value chain may lie in the processes at the start of the value chain. Despite
this fact, there seems to be little attention paid to measuring the efficiency and
effectiveness of the win-order process.
Pre-delivery process (level 2). Similar to the win order process, this is another area
that seems to have received little attention.
Delivery processes (level 2). This is the most mature area of the tourism value
chain. However, it is not managed or coordinated as a whole.

For further research, case studies would give more insights about the usefulness of the
model and help to identify the problem areas when designing and implementing the
model.
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Corresponding author
Yldrm Ylmaz can be contacted at: yyilmaz@akdeniz.edu.tr

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