MANAGING PRODUCTIVITY IN THE TOURISM INDUSTRY: BETTER STUDIES NEEDED FOR THE NEW ERA45327

MANAGING PRODUCTIVITY IN THE TOURISM INDUSTRY: BETTER STUDIES NEEDED FOR THE NEW ERA Nguyen Khanh Huy”, Le Trung Hieu?. With the view to faster fulfilling the strategic mission for devel

MANAGING PRODUCTIVITY

IN THE TOURISM INDUSTRY:

BETTER STUDIES NEEDED FOR THE NEW ERA

Nguyen Khanh Huy”, Le Trung Hieu? ABSTRACT

Tourism productivity takes a central stage in the new cra in the Vietnam economy However, the study for this topic is inadequate with out-dated measurement methods and insufficient data With the view to faster fulfilling the strategic mission for developing tourism industry in Vietnam, there needs to be more effective tourism productivity researches The article provides a deeper review on the literature of tourism productivity to make the way for further studies

Keywords: Tourism management, tourism productivity, productivity management, tourism, Vietnam

1 INTRODUCTION

In the global economy, service industries have been growing steadily over the years Tourism of which is witnessed as one of the

1 Center for International Training and Education, VNU University of Economics and

Business, Vietnam

2 VNU University of Economics and Business, Vietnam

*Corresponding author: huynk.02sep92@gmail.com

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leading services in the world However, it is difficult to measure

tourism productivity, so is service productivity Moreover, literature

on tourism productivity is inefficient and in need of having greater

research efforts (Assaf and Tsionas, 2018) Tourism productivity is

quite diverse, not only compatible and usually based partly on labor

productivity (Pham, 2019) Many researches were carried out but concluded quite the same that: Different firms, different management

methods are needed to measure tourism productivity

About the tourism industry and tourism productivity, the

World Tourism Organization (UNWTO) defines tourism as

including the activities of individuals who travel to and stay in places outside their regular residence for more than 24 hours but not longer than one year in a row for entertainment, business, and other purposes The International Trade Organization (WTO) recommends travel services including those provided by hotels, restaurants, travel agencies and tour program management services, tour guide services, and other related services As such,

it can be seen that tourism service is relatively well understood, covering a wide range of activities ranging from transportation,

program organization, catering, entertainment, accommodation,

forming a chain according to customer experience However, in order to facilitate tourism development, tourism productivity is needed to be well managed both internationally and domestically The World Trade Organization prioritized the enhancement of tourism productivity in its vision to 2020 and after The number

of international tourists rose steadily in the 2010-2018 period with the rate of 4-5% In 2018, this number reached 1.403 billion passengers As forecasted to 2030, the global tourists would increase

to 2 billion passengers Besides, the number of newly-established tourism destinations also rose annually which means the global

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tourism potential is great and the exploitation must be improved

in the next year for better development

The economy in Vietnam has steadily developed since 2015 The GDP growth rate maintains over 6% and is expected to rise beyond 7% in the next 5 years With the economic transitions

from agriculture and industry to service, the importance of the

service industry such as tourism is getting higher The direct value contributed by the tourism industry to GDP continued to increase,

from 6.3% (2015) to 6.9% (2016) and 7.9% (2017) The World

Tourism Organization identified Vietnam as one of the best tourism attraction in the upcoming 10 years so that tourism development is considered a vitally strategic mission for Vietnam

2 LITERATURE REVIEW

2.1 Productivity management

Traditionally, productivity management is concerned with the distribution of input to achieve appropriate output In Adam Smith's first study of The Wealth of Nation published in 1774, there were many definitions of productivity, new approaches to productivity Productivity clarifies the performance of business operations It is necessary for managers to analyze the situation of their enterprises and orientations to solve the problem

According to Adam Smith (1776), productivity was calculated

as follows:

Productivity = Outputs/Inputs

The input values are determined as resources such as labor, capital, land, materials, energy, and information; and for the type

of product or services, inputs are quite different According to the

modern method, the ratio was changed to:

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Service productivity = Quantity and Quality of outputs/Quantity

and Quality of inputs

(Source: Vuorinen et al., 1998)

Beside the quantity of input needed, the research concentrates more on the quality of outputs And the quality of output further leads to the quality of service However, the process of choosing the right quantity and quality or the input selection is still a challenge While quality in tangible goods was described and measured by marketers, quality in services is largely undefined and un-researched (Parasuraman, Zeithaml, and Berry, 1985) Therefore, a better measurement for productivity needs to be presented

Modern researchers are drawn to productivity In the new era

of economy, productivity defines the efficiency and effectiveness

of a firm (Joppe and Li, 2016) Productivity improvement is the results of managing and intervening in the transformation of work processes either by reducing the inputs needed to create the same output or by generating more output from a given set of inputs

Therefore, increasing productivity means increasing the usage of

inputs and outputs or in other words, increasing the revenue to the firm Productivity measures provide benchmarks for evaluating

methods and improving the use of labour, automation and logistics

as well as developing equitable, motivational employee reward

systems (McLaughlin and Coffey, 1990) Problematic firms had difficulties arising from inside and to maintain perfect performance

in finance and operation, the firms need better productivity management The research of McLaughlin and Coffey separated the factor of “customer” from productivity measurement and considered it the output of production process In other findings, productivity is under the effect of external factors in the economic

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environment such as: government policy, the economy In summary, productivity is a dependent variable in the model of study and not completely similar to traditional productivity variable in

manufacturing

Productivity not only works for a unique firm, it can be described

as the most comprehensive single measure of performance across all industries and one of the most reliable indicators appropriate for

comparison (Liu and Wu, 2019) The reason is that productivity

coverage is diverse In order to increase productivity, the industry must thoroughly review both financial and operational performance

of each firm in the industry Once the performance has been enhanced, the productivity would be better Therefore, productivity can be an effective measure for a particular industry The problem is that in the service sector, the conceptual and practical problems associated with constructing appropriate indexes to measure productivity are substantial (Li and Prescott, 2009) which means service productivity

is difficult to measure In order to complete the task, studies narrow the scope of measuring by choosing particular field of research After that, the selection of inputs and outputs becomes clearer For

example, in the research named “Factors influencing productivity

in small island hotels: Evidence from Northern Cyprus” (Kilic and Okumus, 2005) had the survey filled only in the scope of small island hotels in Northern Cyprus and only interviewed high managers ‘The findings can be inferred from the studies applied on the narrower scope and the recommendations were useful regionally Therefore, it can be concluded that productivity management is important for a specific industry as well as for firms, however, there are still problems

in measurement method for the industry

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Moreover, productivity management is essential in the macro

level - for the whole country Pham T:D (2019) stated that in the

national level, productivity provides a strong basis for policymakers to reveal the country’s strengths and weaknesses In summary, researching productivity can be of great use from micro level (in firms) to macro level (in industries and countries) in the modern economy From the previous studies, productivity is calculated by dividing the number of inputs to the number of outputs which measures the effectiveness of using inputs to produce outputs However, in the new context, the ratio calculation is out-of-date and only utilized in manufacturing industries When the international economy has been transforming

to serviced industry, productivity management must be considered in

complex models Particularly in a service, the phase of manufacturing

is separated from the phase of product sale and the phase of delivery

An effectively produced firm does not mean its product sale is good Therefore, the definitions of “productivity” is implemented to calculate

if one more money unit is put into production, how much more

revenue can be generated Other firm in service factor can utilize other methods for productivity management

2.2 Tourism productivity

Tourism can be defined as “a collection of activities, services

and industries which deliver a travel experience comprising

transportation, accommodation, eatingand drinking establishments,

retail shops, entertainment businesses and other hospitality services provided for individuals or groups traveling away from home by UNWTO The definition is referred to visitors who take a trip

to a main destination outside of their environment, for less than

a year, for any main purpose related to business, leisure or other

personal purpose other than to be employed by a resident entity

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in the country or place visited (Li, Jin, and Shi, 2018) Tourism

is different from travel In order for tourism to occur, there must

be a displacement: an individual has to travel, using any type of means of transportation (he might even travel on foot: nowadays,

it is often the case for poorer societies, and happens even in more

developed ones, and concerns pilgrims, hikers ) But all travel

is not tourism In other words, tourism is a person’s or a group’s activities in a destination and the activities generate revenue to the destination It is considered a “clean service” that can help develop

a destination, the economy, the country without damaging the environment like what the industrialization has caused

Productivity isn’t everything, but in the long run it is almost everything (Assaf and Tsionas, 2018), especially in the context of tourism Tourism productivity has been identified as one of the most important mission for global economic development in the next 10 years The life cycle of the tourist destination product in a certain area depends largely on the ability to combine and manage inputs efficiently to produce given output targets in tourism (Cracolici,

Nijkamp, and Rietveld, 2008) In other words, productivity is

considered to be a vital tourism factor and productivity is greatly relevant to economic development Tourism is an impetus to promoting economic growth from the perspectives of measurement

of its economic impacts, contributions to poverty reduction, the efficiency and productivity, and impacts of several external economic

factors (Li, Jin, and Shi, 2018) Therefore, enhancing the tourism

productivity is the not only the mission of the tourism industry itself but also the issue for the whole country Consequently, the key determinants of tourism efficiency and productivity, including

labor, capital, technology, and environment, were identified as

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input variables, while expenditure, revenue, and length of stay were

adopted as output variables In summary, tourism productivity is usually considered a dependent variable in researching models

However, in the new context, tourism productivity is proved to be

an independent one Productivity in tourism can create destination

competitiveness (Knezeviđờ Cvelbar et al., 2016) The model shows

that tourism productivity can affect the destination competitiveness After that, an increase in competitiveness produces more revenue and helps the tourist destination become more popular The tourism productivity is considered as an input for competitiveness study Moreover, governments can play a substantial role in enhancing the economic impetus of tourism Through balancing

the economic impacts and social, environmental, and political influences of tourism, governments can efficiently distribute

tourism investment With the assistance of proper redistribution policies and employment training projects, the goal of poverty

reduction might also be achieved Additionally, there is potential for governments to improve tourism efficiency, enhance tourism competitiveness, and eliminate the adverse impacts of external

economic factors by providing pre-employment training, attracting

FDI, offering tourism subsidies, encouraging the adoption of

advanced technology, and fostering a standard tourism market (Li,

Jin, and Shi, 2018)

While tourism demand analysis is a central topic for economists, the measurement of efficiency and productivity with a view to the optimal management of resources is also of major interest (Peypoch

and Solonandrasana, 2008) However, the measurement methods

encounter many obstacles There are essentially three difficulties in measuring productivity in services in general and tourism in particular: (1) identifying appropriate inputs and outputs, (2) determining

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appropriate measures of those inputs and outputs, and (3) ascertaining appropriate ways of measuring the relationship between inputs and outputs (Joppe and Li, 2016) Selection of suitable measures of productivity depends on the purpose of the productivity measurement and/or data availability Ultimately, all aspects—inputs, intermediary products (materials, components, supplies, energy, and_ services purchased from other producers), and output—trequire acceptable measures that can be compared across units, sectors, and countries Many of the tangible elements used in the production of experiences are less important than they might be in manufacturing ‘There is a shortage of methods of measurement for tourism productivity Most applied research in the field of tourism uses the Data envelopment

analysis (DEA) methodology These studies all assume that there is

an input or output oriented approach as the measures used attempt either to quantify the savings that can be made with a given level of production in the first case or to quantify the production gains that can be achieved for a given level of production factors in the second (Peypoch and Solonandrasana, 2008)

2.3 The research gap

As mentioned above, the studies in tourism productivity is

inadequate both in research content and method Tourism is a rapidly emerging, new economic sector in a globalizing world The number of competing tourist destinations is vast and prompts fierce

competition by alternative tourist sites, there needs to be more

studies on tourism productivity to further develop the economy Interest in this sector by economists and policymakers has lagged behind the rapid expansion of the sector, and the concept of services productivity has largely been neglected (Joppe and Li,

2016) Moreover, the worldwide studies cannot provide systematic

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research which means different countries, economies, firms have

different research content Joppe and Li (2016) re-stated that there

is a need for better tools in productivity measurement globally The measurement only focuses on the relationship of inputs and outputs Therefore, the comparison among countries, economies

or even among firms cannot be completed Consequently, different solutions are implemented and it hinders the effectiveness management In addition, the operating firms have no indexes for analyzing the performance or management of productivity It leads

to the situation that firms with specific number of capital, resources choose specific productivity management method and there would

be no systematic management in a country In conclusion, the research content needs to be improved by aiming to establish a systematic research for countries, economies and firms with the

same characteristics

Besides, the study method is not adequate as well Most applied research in the field of tourism uses the Data envelopment

analysis (DEA) methodology These studies all assume that there is

an input or output oriented approach as the measures used attempt either to quantify the savings that can be made with a given level of production in the first case or to quantify the production gains that can be achieved for a given level of production factors in the second With different studies, the independent variables are irrelevantly selected and consequently, the results are different DEA method is constructed by observed data and requires small sample size — not like what in other method Therefore, DEA is suitable only for regionally-analyzed researches — not applied in larger scale which

means macro-studies cannot utilize the method.