Chapter Preparing tourism businesses for the digital future Abstract

Cater to multiple users – Multi-sided companies deliver value for two or more user groups and have been shown to perform better than businesses based on binary producer consumer relationships. These business models build in different value creation mechanisms, financial and non-financial (e.g. reviews, reputation and ratings), and are more resilient to digital disruption and change (Skog et al., 2018). Available data suggest that such platforms accounted for around 7% of the global accommodation market in 2018, with a projected yearly growth rate between 2013 and 2025 that is six times faster than the projected annual growth rate of traditional accommodation providers (World Bank, 2018).

Drive economies of scale through demand – Business ecosystems driven by demand tend to perform more strongly than the product-driven models that characterise traditional firms. In demand-driven models, users create diverse kinds of value for other users through a range of mechanisms (e.g. sharing goods, accessing idle services, ratings that generate trust, and so on). Instead of generating products and then trying to sell it as an industrial firm would do, digital firms shift production to the outside (i.e. they outsource to the apartment owner who wants to share their accommodation). Digital networks enable the scaling of production outside the firm shifting from traditional vertical integration to demand-product matching.

Supporting innovation is a key concern for all governments, and policy initiatives fostering innovation in general are widespread. In tourism, production systems are difficult to define, making targeted policy responses difficult. Not only are producers and consumers globally dispersed, but there are a growing number of online intermediaries, and the production of tourism products and services can be quite complex. There are also many subsectors with different digitalisation challenges and opportunities.
Policy initiatives that support innovation more broadly are often not sufficiently targeted to deal with the particular barriers, opportunities and operational characteristics of tourism SMEs (Table 2.2). For instance, initiatives such as incubators and accelerators are often tech-centric and not necessarily focused on tourism. They might disrupt tourism markets and traditional business models but may not contribute to wider tourism development goals such as enhancing visitor experiences, destination sustainability, and community wellbeing. Airbnb, for example, initially viewed itself as an online marketplace, however it has more recently acknowledged a wider role in visitor experiences (Airbnb Trips).
This suggests that there is opportunity to position incubators, accelerators and other policy supports to develop tourism business models and value ecosystems that not only achieve tech-centric objectives but also benefit tourism SMEs, destinations, and the sector. Global companies such as Amadeus have programmes to support SMEs to digitalise (e.g. Amadeus for Startups) and large travel companies may provide partnership opportunities mentoring and investment opportunities, while universities may also have a role in supporting such initiatives. For example, TourismX was launched in Denmark in 2018, with the purpose of strengthening innovation in Danish tourism enterprises. The project links tourism business growth ideas with the latest research and knowledge in order to develop new innovative products and services within the tourism industry. The project is being implemented in a partnership between national tourism development organisations and universities.
Many countries responding to the survey, including Greece, Austria, Israel, Iceland, Spain, Denmark and France, have introduced hubs, incubators and accelerators targeting supports to the digital transformation needs of tourism businesses. The France Tourisme Lab is a national network of thematic incubators and accelerators specialised in tourism, which aims to boost innovation, promote new ideas and increase the visibility of innovative companies in the sector. The Lab caters to the specific needs of tourism start-ups, and promotes the development of the tourism offer in the destination: urban tourism, slow tourism, connected tourism, tourist mobility. While in 2018, the European Commission supported the first European network of incubators in tourism. The Creative Accelerators for Sustainable Tourism (CAST) Network aims to provide incubation and acceleration support to sustainable tourism start-ups and SMEs to grow and scale. Activities include helping generate new products, services and business models, facilitate access to finance and new markets, while also building new skills and resilience. The CAST consortium consists of partners from 8 countries: Ireland, Cyprus, Spain, Italy, UK, Belgium, Germany and Denmark (www.castnetwork.eu).
These initiatives are largely focused on supporting new digital start-ups and developing the wider digital ecosystem for tourism, however in some cases they also encourage digital entrepreneurship among existing tourism businesses. In Iceland, for example, the Iceland Tourism Cluster and the Innovation Center Iceland have partnered to create an incubator for established business owners, Ratsjáin, which focuses on improving the digital capacity of business managers and the use of data analytics for strategic decision making. The Icelandic Tourist Board is also in the starting phase of creating a Test Lab, Sandkassinn, in order to match tourism companies with tech companies and thereby lower the barriers between these two players.
In a few cases, these incubators and accelerators are one element of wider efforts to support the digital transformation of the sector. In Portugal, for example, Tourism 4.0 aims to build a digital ecosystem to support start-ups, promote entrepreneurship and foster innovation in tourism. Turismo de Portugal provides finance, training and advisory supports to tourism SMEs, and partners with a network of incubators and accelerators to support the development of new business models in tourism.
Concerns in the sector are raised as current supports to SMEs are often focussed on tech service providers. Certain types of businesses, such as small hotels, travel agencies, and activities providers may have difficultly qualifying to participate in labs, as these support measures do not typically assist existing SMEs modify business models to participate in the digital ecosystem. However, by definition, existing businesses will also have to undertake digital transformation, and to do so they will need support to ensure they have the opportunity, and the tools necessary to reach their digital potential.