Economy and Values Research Center. The Travel & Tourism Competitiveness Report and Armenia s stance
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1 Economy and Values Research Center March 5, 2008, Yerevan The Travel & Tourism Competitiveness Report and Armenia s stance The Travel & Tourism Competitiveness Report (TTCR) was first launched on March 1, 2007 by the World Economic Forum (WEF). The Travel & Tourism competitiveness Index (TTCI) was developed to measure T&T competitiveness of different economies. The TTCI is the most comprehensive analytical tool which estimates the factors and policies that make it attractive to develop T&T industry in different countries. The index includes both hard data (WTTC; UNWTO) and soft data - survey results of the World Economic Forum s annual Executive Opinion Survey. The TTCI is produced in close collaboration with international organizations such as Booz Allen Hamilton, IATA, UNWTO, WTTC and partner institutions. The Economy and Values Research Center (EV) is the partner institute of the World Economic Forum in Armenia. The Travel & Tourism Competitiveness Index The Travel & Tourism competitiveness Index is composed of a number of pillars which are grouped into three subindexes: T&T regulatory framework T&T business environment and infrastructure T&T human, cultural and natural resources Picture1. The Travel & Tourism competitiveness Index Source: TTCR, 2008
2 The TTCI calculation methodology was changed in 2008, making the data incompatible for comparison purposes. Switzerland grabbed the highest spot among 130 economies, followed by Austria and Germany. The least competitive countries were Chad, Lesotho and Burundi. Results for Armenia Armenia is ranked 89 th overall loosing 15 spots over the previous year. Armenia is ranked 5 th among the CIS countries behind of Russia (64), Georgia (72), Ukraine (77) and Azerbaijan (79). T&T regulatory framework (scores from 1 to 7) Armenia is ranked high for providing safety and security to the travelers and for the relatively low level of road traffic accidents, crime and violence as well. Armenia provides relatively improved access to sanitation and drinking water to the tourists. Although tourism was proclaimed a priority industry by the government last year, Armenia is not aggressively pursuing country branding and its marketing strategy is not enough efficient. Thus, Armenian tour-operators attended 2 out of 12 1 major international T&T fairs in July 2006-August Sustainability of the T&T industry development is considered as one of the priority indicators for the tourism competitiveness of a given country. Armenia is ranked very low for the sustainability of T&T development in comparison to other countries. Bilateral Air Service agreements play a crucial role in the development of T&T industry, allowing regular flights between these nations. Visa requirements, especially for the citizens of the countries that travel the most create additional impediments for the competitiveness of Armenian T&T industry. T&T business environment and infrastructure According to the Report, the price competitiveness in the T&T industry is considered to be the only competitive advantage of Armenian T&T business environment and infrastructure. However, this advantage was largely due to the fact that 2006 data were taken for calculating the scores and rankings of indexes. The notable advantages were reported to be relatively low ratio of purchasing power parity (PPP) 1 ITB Berlin, Salon Mondial du Tourisme (France), World Travel Market (London), Holiday World Prague, International Trade Fair for Tourism (Russia), Arabian Travel Market (Dubai), PATA Travel Mart (Pacific Asia Travel Association), China International Travel Mart, Japan Association of Travel Agents (JATA) World Travel Fair, Travel and Tourism Fair (India), American Society of Travel Agents Trade Show, Travel Mart Latin America, the International Tourism Fair of Latin America
3 conversion factor to official exchange rate; average room rates (in US dollars) of the branded firstclass hotels in However, the T&T industry price competitiveness is negatively influenced by the current level of taxes. Armenia s current ranking was negatively affected by the relatively low quality of air transport infrastructure due to relatively low passenger-carrying capacity (available seat kilometers), low intensity of aircrafts departures, and limited number of airports. Although on average 27.5 air carriers were operating in Armenia in January-July 2007, they were serving limited number of countries/destinations. The ground transport infrastructure doesn t provide tourists with an easy/safe access to all sites, since the quality of roads doesn t meet high standards, railroad infrastructure is underdeveloped, and in some cases visitors need to take suboptimal routes to get to the tourism destinations/sites of Armenia. In terms of tourism competitiveness one of the major disadvantages of Armenia is the tourism infrastructure due to the limited supply of hotel rooms in 2006, relatively low number of international car renting companies operating in Armenia and the limited network of ATM accepting Visa/Masters cards in T&T human, cultural, and natural resources Affinity for Tourism and Travel is considered the competitive advantage of Armenian T&T industry, since Armenian citizens are open and welcome foreign visitors, business leaders recommend their overseas partners/executives to extend their trip in Armenia to visit different sites, etc. Tourism expenditure and receipts accounted for 5.2% of GDP of Armenia in Although T&T industry companies can easily hire and fire employees, they face a serious issue of finding high-skilled workforce, since the educational system of Armenian doesn t comply with the competitive industry requirements. The companies are reluctant to invest heavily in staff training as well. Armenia s natural resources are considered competitive disadvantages of the T&T industry, since there was no World Heritage natural site in Armenia as of August 2007, and only 10% of the land area of Armenia was protected and maintained by the law in 2005, while the natural environment of Armenia was among the most polluted in the world. Armenia was ranked 97 th for the total known species inhabiting in Armenia (birds, mammals, and amphibians). Although there were 3 World Heritage cultural sites in Armenia as of August 2007, and according to this indicator Armenia was ranked 54 th, very few international fairs and exhibitions were held in Armenia in : annually 0.7 events on average 2. Armenia vs. Central and Eastern Europeans, CIS and Middle Eastern countries The analysis of the results indicates the areas of concern that need to be addressed. However, how crucial these areas are could be assessed only by benchmarking Armenia s performance against other comparator countries. Eastern European countries with rich cultural heritage and/or 2 events/meetings organized by the international associations attended at least by 50 participants, held on regular basis and rotated between at least 3 countries
4 landlocked countries, CIS nations with former Soviet legacy and Middle Eastern countries were selected as benchmark countries. T&T industry competitiveness in the Benchmarked Regions According to the TTCI, Armenia lags behind Eastern European countries, captured a middle position in the CIS region, and overtook only Syria in the Middle Eastern region. The low performance was largely due to the poor quality of T&T business environment and infrastructure. T&T regulatory framework According to the T&T regulatory framework subindex, Estonia captured the highest spot in Central Europe, followed by Hungary and Czech Republic. Armenia overtook only Romania and Macedonia. Among CIS countries, Armenia was ranked the second, lagging behind of Georgia. Russia, the leader of the region, captured a moderate ranking (80th), due to the low level of safety and security for the tourists in the country, environmental sustainability, etc. No major shifts were observed in the rankings in the Middle Eastern Region. Although T&T sector is more prioritized in Syria than in Armenia, it lags behind of Armenia. T&T business environment and infrastructure Armenia captured a fairly low position (108 th rank) according to the T&T business environment and infrastructure subindex among CEE and Middle Eastern countries. In the CIS region Armenia overtook only Tajikistan and Kyrgyzstan. In CEE region the leader is Estonia, mainly due to the relatively high level of development of T&T, ICT and ground transport infrastructures. In the CIS region the top spot is captured by Russia, followed by Ukraine and Azerbaijan. Armenia and Moldova are ranked relatively high for the price competitiveness in the T&T industry, but in case
5 of Moldova its ICT infrastructure is more developed than Armenian ICT infrastructure. Israel is the leader in the Middle Eastern region, particularly due to highly-developed ICT infrastructure. T&T human, cultural and natural resources According to the T&T human, cultural and natural resources subindex, Czech Republic is the leader in the Eastern Europe due to its rich cultural and natural resources. Estonia s comparatively high rank is based on the openness and welcoming attitude of the citizens to foreign visitors, high tourism expenditure and receipts as a percentage of GDP, etc. In the CIS region Armenia lags behind Russia and Georgia, although the Russians generally favor the foreigners less than Armenians do. According to the T&T human, cultural and natural resources subindex, Turkey overtook Israel s leading position. Syria was behind of Armenian in the Middle East. Priorities Priorities: Private sector Participation in the International T&T fairs in targeted resource markets Design of ecotourism tour packages with adventure elements Invest heavily in staff training Targeted promotion and marketing/communications startegy Related industries Financial sector Increase the number of ATMs
6 Natural resources extraction industries Adoption of environmentally friendly production processes and the use of modern technologies Priorities: Government Prioritization of T&T sector Stringency of environmental regulation and enforcement Support private sector to attend international T&T fairs in targeted resource markets Country branding efforts in close collaboration with private sector Promote construction of 2-3 star hotels Open sky policy adoption Investments in infrastructure particularly in marzes Specialized educational initiatives Economy and Values Research Center (EV) Hovsep Emin 123 Yerevan 0051 Tel
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