Faculty of Social Sciences and Business Studies Business school
FUTURE SCENARIOS FOR FINNISH TRAVEL INDUSTRY
Master’s Thesis
Margarita Hiltunen (276479) 28.11.2017
Summary
UNIVERSITY OF EASTERN FINLAND Faculty
Faculty of Social Sciences and Business Studies
Department
Business School
Author
Margarita Hiltunen
Supervisor
Päivi Eriksson
Title
FUTURE SCENARIOS FOR FINNISH TRAVEL INDUSTRY
Main subject
Innovation management
Level
Master
Date
28.11.2017
Number of pages
72
This is a future study about Finnish travel industry. The world is changing and organizations need for preparing to the future by analyzing what will most likely happen in some time from now. It is important part of the strategy to prepare and be prepared for the possible futures. The future is unpredictable and there can be many possible futures. However, organizations need to try to predict the possible future by analyzing the signs of it on present and past. This study is creating four possible scenarios for the future for Finnish travel organizations, selling travel packages abroad.
“How will the future of the package tours from Finland abroad look like in 2022?” To find out the answer, there is a need to analyze the past and present. Pestel- analysis is showing the main driving forces for a change and overall picture at the moment. Based on Pestel- analysis is analyzed which of the driving forces are the most important ones and which would most likely happen in five years from now. After choosing the driving forces, four scenarios are created.
One scenario is left in the end. The scenario of 2022 of Finnish travel packages abroad is that internet and technology are going continue to develop and taking a leading place while people are making decisions and reservations. The attractiveness and availability of the independent flight, hotel and experience reservations will raise. There will be more applications like Airbnb on the market, which makes reserving accommodation of different kinds easy and makes the travel experience become authentic. However, the safety situation is not getting better than in present and danger of terror attacks is increasing in 2022. Safety situation is the reason why there is a chance that customers would not stop purchasing the travel packages. Professionals working at the travel agencies know which destinations are safe for a holiday.
Key words
Future research, Travel industry, Strategical planning, Scenario creating, Pestel analysis
Tiivistelmä
ITÄ SUOMEN YLIOPISTO Tiedekunta
Yhteiskuntatieteiden ja kauppatieteiden tiedekunta
Yksikkö
Kauppatieteiden laitos
Tekijä
Margarita Hiltunen
Ohjaaja
Päivi Eriksson
Työn nimi (suomeksi ja englanniksi)
TULEVAISUUDEN SKENAARIOT SUOMEN MATKAILUALALLE FUTURE SCENARIOS FOR FINNISH TRAVEL INDUSTRY
Pääaine
Innovaatiojohtaminen
Työn laji
Pro Gradu- tutkielma
Aika
28.11.2017
Sivuja
72
Tämä on tulevaisuudentutkimus Suomen matkailualaan liittyen. Maailma ja olosuhteet muuttuvat jatkuvasti ja organisaatioiden täytyy olla valmiina tulevaisuutta ja sen tuomia muutoksia ajatellen.
Valmistautuminen tulevaisuuteen ja sen tuomiin muutoksiin on tärkeä osa organisaation strategista johtamista. Tulevaisuutta on mahdoton ennustaa tai arvata, mutta nykyajan ja menneen perusteella, voidaan hahmottaa mikä on mahdollinen tulevaisuus ja sen näkymät. Tämä tutkielma keskittyy Suomen matkailualan, tarkemmin ulkomaille tehtävien pakettimatkojen tulevaisuuden hahmottamiseen luomalla neljä erilaista skenaariota tulevaisuudesta vuonna 2022.
Tutkimuksella pyritään vastaamaan kysymykseen ”Miltä Suomesta tehtävien pakettimatkojen tulevausuus näyttää vuonna 2022?” Tutkimuksessa alanysoidaan mennyt sekä nykytilanne. Pestel- analyysi on sopiva työkalu, sillä se näyttää tärkeimmät muutoksen tekijät sekä luo kokonaiskuvan tilanteesta. Pestel- analyysiin pohjautuen tutkimuksessa on analysoitu mitkä muutoksen tekijät ovat tärkeimmät pakettimatkoja ajatellen, huomioon ottaen todennäköisyyden vuonna 2022. Kun tärkeimmät muutoksen tekijät ovat valittu, niistä rakennetaan yhteensä neljä erilaista skenaariota.
Lopuksi jäljelle jää vain yksi skenaario. Tässä skenaariossa tulee esille kuinka internet ja sen tuoma teknologian kehitys tulee ottamaan yhä tärkeämmän roolin ihmisten päätöksenteossa sekä matkojen varauksissa. Teknologia tulee tekemään lentojen sekä majoituksen varaamisesta itsenäisesti entistä houkuttelevampaa, sillä ne ova entistä helpommin saatavilla. Matkailuun suunnattuja sovelluksia, kuten Airbnb, tulee olemaan markkinoilla entistä enemmän. Maailman turvallisuustilanne ei kuitenkaan näytä paranevan vuonna 2022 ja terrori iskut tulevat todennäköisesti lisääntymään. Tämä voi toimia syynä miksi pakettimatkat voivat silti pitää suosionsa, sillä ihmiset luottavat helpommin ammattilaisen tekemiin päätöksiin siitä mikä matkailukohde on turvallinen lomaa ajatellen.
Avainsanat
Tulevaisuudentutkimus, Matkailuala, Strateginen johtaminen, Skenaariorakentaminen, Pestel- analyysi
Table of Contents
1. INTRODUCTION ... 6
1.1. RESEARCH SUBJECT ... 6
1.2. THE PURPOSE OF THE STUDY ... 6
1.3. KEY CONCEPTS AND STRUCTURE OF THE STUDY ... 8
2. THEORETICAL BACKGROUND ... 10
2.1. TOURISM AND FUTURE RESEARCH ... 10
2.2. REVIEW OF THE PREVIOUS RESEARCH ... 12
2.3. SCENARIO CREATING AS A METHOD IN FUTURE RESEARCH... 12
2.4. PESTEL ANALYSIS IN FUTURE RESEARCH ... 16
3. METHODOLOGY ... 19
3.1. METHODOLOGY CHOICE ... 19
3.2. METHODOLOGY USE IN THE STUDY ... 19
3.3. DATA COLLECTION ... 21
3.4. SCENARIO DRIVING FORCES ... 22
3.5. IMPACT/UNCERTAINTY ANALYSIS... 25
3.6. SCENARIO CREATING ... 27
3.7. RANKING THE LAST SCENARIOS BY USE OF MATRIX ... 28
3.8. WANTED RESULT OF THE RESEARCH ... 29
4. SCENARIO DRIVING FORCES ... 30
4.1. POLITICAL ... 30
4.2. ECONOMIC ... 30
4.3. SOCIAL ... 31
4.4. TECHNOLOGICAL ... 34
4.5. ENVIRONMENTAL ... 36
4.6. LEGAL ... 39
4.7. ANALYSIS OF DRIVING FORCES ... 39
5. SCENARIO CREATING... 48
5.1. IMPACT/UNCERTAINTY ANALYSIS ... 48
5.2. CREATION OF SCENARIO LOGICS ... 59
5.3. SCENARIOS ... 63
5.4. MATRIX- ANALYSIS OF SCENARIOS ... 65
5.5. THE RESULT OF THE STUDY ... 66
5.6. SUGGESTIONS FOR FINNISH TRAVEL ORGANIZATIONS ... 67
6. CONCLUSIONS AND DISCUSSION ... 69
6.1. SUMMARY OF RESULTS ... 69
6.2. KEY FINDINGS AND THEIR SIGNIFICANCE ... 70
6.3. LIMITATIONS AND VALIDITY OF THE STUDY ... 70
6.4. IMPLICATIONS AND SUGGESTION FOR FURTHER RESEARCH ... 71
REFERENCES
1. INTRODUCTION 1.1. Research subject
Demand on the tourism has grown worldwide during the past two decades. Increasing competition on the travel industry has been recognized. Travel industry and travel organizations in Finland have faced big changes and challenges recently. (Vainikka, 2016) According to Furseth & Cuthbetson (2016:1), it has been noticed that amount of technology use in bookings has increased. According to Weiermair (2004), trends in traveling have changed and people want different things from their holidays than before. Experience is now in a leading role of the decision making. According to Vainikka (2016) travelers have also became more informed and they want a good quality for a lower price than before. Weiermair, Walder & Perez (2006) says that tourism industry has changed from sellers’ market to buyers’ market as customer is in the main role and attention needs to be on customers’ need.
According to Page, Yeoman, Connell & Greenwood (2010) there are many influencers on the tourism industry, every part of the influence needs to be taken into account while planning the future and strategies. This research concentrates on the future from the comprehensive point of view and finding the answer what are main driving forces of the change and how these driving forces will influence on the future of the tourism of outgoing trip packages from Finland in 2022.
According to Dwyer, Edwards, Mistilis, Roman & Scott (2007) Tourism is integrated with external sectors like economic, political, environmental, technological, social and demographic.
All changes which are going on are influencing on travel industry worldwide. Preparing for the future in the critical situation is important. It starts with gaining a better knowledge on trends on every external sector of the industry. Strategies can be formulated based on scenarios of the future.
1.2. The purpose of the study
This study concentrates on travel industry in Finland. Specifically on travels out of Finland to other countries, concentrating on travel packages as a product. The aim is to create a scenario of
the future of the travel industry on outgoing trips from Finland for five years from year 2017.
The main question of the research is:
“How will the future of the package tours from Finland abroad look like in 2022?”
Answer for this question is a scenario of the future of the travel packages (five years from 2017).
The side question is “How to prepare for the future being as a part of the tourism industry in Finland?” This question will be answered shortly in the end on the study.
The aim of the research is to find out how the current situation will develop in five years. Which driving forces will influence on the travel packages purchasing. The method of scenario planning has been chosen because according to Chermack, Lynham & Ruona (2001) it provides better understanding about the direction on the industry than qualitative or quantitative research methods. The authors say that scenario building is a methodology of forecasting and gives a chance to understand the whole range of possibilities that are important in the industry. By creating scenarios and developing them, organizations and companies can take actual steps for the future and adapt the fast changing environment.
The contribution of this study is important from two point of view: business and academic.
According to Dwyer et al. (2007) travel industry is changing fast and updated view of the future on the industry is urgently needed. Companies are trying to understand the change and win the increasing competition situation by creating new strategies. The challenge of the organizations is to identify driving forces of the change. The main question which the stakeholders on the travel industry should ask themselves is “What will the future of the industry be like”.
I think that on the academic point of view the importance is based on the amount of studies done on the future of the tourism. According to Dwyer et al. here is a need to find out what is the future of the travel industry and be prepared for the future. Most of the travel industry future concentrated researches has been done during 2000-2010, there is an urge for the new information on the field.
According to Dwyer et al. (2007) a key factor of a successful future of the tourism industry is to be informed and to prepare for the change. It is important to analyze the factors, create the picture of the future and be prepared for it. According to Honkanen and Räikkönen (2014) tourism innovation is connected to future research. It is aiming to predict the future and create the “innovative way” to prepare for it. It is important to understand that tourism innovation is not created alone by tourism organizations. They can create a package of trip different parts included in it, however the outcome depends on the customer’s reaction. Customer’s reaction is depending on Political, Economic, Social, Environmental and Legal issues. This is why Pestel analysis is important part of the research, as it takes into account all the parts of the industry. “Pestel” is used in this research to get a data base for scenario creating.
This research will give a suggestion how the possible future will be for out bounding package tours from Finland. Furthermore the scenario (result of the study) will create a base for further strategy planning for travel industry companies and organizations.
1.3. Key concepts and structure of the study Key concepts of the study are:
Travel industry and how it has been studied by use of future research tools. Travel industry and travel industry in Finland are the main concepts of the study.
Scenario creating method is one of the key concepts as it is the methodology which is used in this study.
Pestel- analysis and use of it is described as well. Pestel analysis is the main data collection method of the study.
Use of this concept will give the best picture of the travel industry in Finland in the past and present. It will give a strong base for creating scenarios for the future. Structure of the thesis will follow this order: theory, research method, Pestel- analysis, Scenario creating, Scenario ranking, Scenario analyzing and Conclusions.
First in theory part is introduction of the key concepts I presented previously. After it, the methodology section is about how the study is done with the use of Pestel analysis for data collection and scenario planning. Study is continuing to empirical part where the data collected with Pestel analysis is carefully analyzed with the use of Impact/Uncertainty analysis and after it scenarios are created. In the end the most certain and important scenario for the future is chosen by use of the Matrix analysis.
The time frame for this research is five years because this time frame is ideal for the Master’s thesis. Longer time period like ten years would be possibly too long for the thesis, as the time for writing the thesis is limited.
2. THEORETICAL BACKGROUND 2.1. Tourism and future research
According to Vainikka (2016) tourism has been growing for decades. One of the main reasons for growth for a long time was mass tourism. In the 1950s and 1960s, the development in transportation made holidays abroad easier and more accessible. During that time package tours were developed and brought on the market as a new product. Package tour means the ready packed tour, including flight and hotel. Vainikka (2016) notes that on Finnish, package tours came in late 1960s. Recently, mass tourism has lost its’ popularity and been replaced by the new kind of tourism. Tourism is changing toward “mega-tourism”, which means tourists are travelling more to other destinations than the mass tourism destinations. The main reason is low- cost aircraft companies and Internet booking hotel sites. Vainikka notes that low-cost airline companies arrived to Finland and they made cheap connections to Central Europe and Asia.
Despite the problems, the package trips have continued their existence and are still in important role in Finnish out bounding tourism. Package trips have been developed over the time and nowadays customer can choose how they spend their time on the holiday.
Researchers Song & Li (2008) say that at the same time as tourism industry has been growing during the past years, also tourism research has been growing. Tourism research journals were rare twenty years ago. Now there are over 70 journals publishing tourism researches. Burns, Palmer, & Brent (2005) say that tourism is an interesting field as it can be seen as part of business act or socio- cultural effect. Connected research areas to tourism research are anthropology, geography, psychology and management. Studies, which have been done on tourism are based on business and social science point of view. (Burns, Palmer & Brent, 2005:3) According to Hjalager (2009) tourism innovation is an important part of developing tourism over the world. There are different categories in tourism innovation like product, managerial, process, marketing and institutional. Still the innovation and tourism are little unclear while speaking about them in the research as terms. As innovation is a process which is problem solving with the new ideas, it is clear as we think about it alone. However, tourism innovation it is hard to define.
There are several types on innovation. The researcher notes that it can be product or service innovation, process innovation, managing innovation and institutional innovation. While
speaking about innovation in the research the researcher should define what kind of innovation in case. Entrepreneurship and innovation are close as entrepreneurs are making creative decisions, ideas and innovativeness. Innovativeness is also preparing for the future, as the future decision making is part of innovative processes of organizations. (Hjalager, 2009)
According to Yeoman et al. (2007) while talking about the future and change on the industry, some countries and organizations has already noticed that customers are spending money on different things than before. One of the changes in called “authenticity”, means people want to spend more money on the experiences than on the goods. It means more money spending on travel and other experiences like dining out. Also activities are getting more popular such as spending time is spa and sport activities. In other words, this kind of spending is called
“experience economy”. (Yeoman et al. 2007)
Several research made on the future on the travel industry. Dwyer et al. 2007 have made a study on the “Destination and enterprise management for a tourism future”. They used a Pest- analysis for finding out how trends will influence on tourists, destinations and organizations on the industry. After the Pest analysis, authors made a classification on the main change headings:
sustainable tourism development, climate change, target marketing, risk management and education. They discovered these factors on each part of the industry. The result of the study is that attention should be pointed at the risk management in the business strategy. Staff education and training were missing from the tourism management. The research was not extended by using the scenario creating -tool. (Dwyer et al. 2007)
Another futuristic research made on travel industry is done by Bohensky, Butler, Costanza, Bohnet, Delisle, Fabricius, Gooch, Kubiszewski, Lucacs, Pert & Wolanski (2010). Their research is about the climate change in Australia and especially on the coral reef “Great barrier reef”. The change on the reef situation would influence also the economy and tourism in Australia. Authors combined four scenarios where they described the future of the coral reef in different situations.
As the result of the research, they came out with the suggestion how to avoid the destruction of the coral reefs. This is an important question about the environment and tourisms’ impact on it.
(Bohensky et al. 2010)
Previously, I wrote about the studies which used the Pest analysis and scenario creating method.
However, there are also other options for doing the future research on tourism. Dwyer, Cvelbar, Edwards & Mihalic (2010) made a study “Fashioning a destination tourism future: The case of Slovenia”. It aims to study the future of Slovenia as the tourism destination. As a method surveys were used, by sending them to 163 tourism stakeholders in the country. The study is based on the opinion of the stakeholders of the tourism industry. The authors mentioned in the study that the danger of their method is that the questions may not be clear for the responders and they may misunderstand them. (Dwyer et al. 2010)
2.2. Review of the previous research
The meaning of the authenticity, in tourism has been researched by Brass, Mc-Mahon and Yeoman (2007). Authors made a future research about the travel industry and authenticity in traveling. The authors created two scenarios to display the authentic experience of the travelers.
They created the scheme of the trends which would impact on the travel industry in 2015 and explained them. The outcome was that the authentic tourist is searching for natural, honest, simple, beautiful, cultural and human focused experience. The research gave a direction for the Scottish tourism organizations. This research proved that scenario planning is a good tool for the tourism research. However, this research didn’t show how they did the analysis and didn’t recognize key driving forces. In scenario creating, it is important to recognize key driving forces, based on them create scenarios. (Yeoman et al. 2007)
2.3. Scenario creating as a method in future research
According to Burns et al. (2005) tourism has been studied often with interviews as a method. It is one of the main research methods. Interview gives opportunity to get a multiple picture of the tourism and parts of it. (Burns et al, 2005:6) However, Curthbertson & Furseth (2016) notes that the problem of innovation research is that researchers still use models that has been used in the old world, as the world is changing, also the research models need to change. According to researchers, old models do not capture the mega trends correctly. Often, studies are not taking mega trends into account and do not serve topics like growth, innovation and customer society.
According to Van Der Heijden (1996) scenario planning is a part of Strategic management. It is a management tool which allows to plan and invest in “what the company want to go”. Scenario planning is a useful tool if company or organizations want to get the best of the recourses and time use. Preparing for the future by using scenario planning has become popular and big companies like “Shell” have been using it. (Van Der Heijden, 1996: 1) Godet & Roubelat say that scenario is a “story” of the future and direction to events which allows one to move forward from this moments’ situation to the future situation. There are two major categories of scenarios:
exploratory and anticipatory or normative. Exploratory is starting from present and leading to the future. Anticipatory or normative is built on the different visions of the future and create a scenario. (Godet & Roubelat, 1996)
Like it has been mentioned before the world is changing and travel industry. According to Schoemaker (1995), managers of companies should think and try to figure out the way to survive in the problematic environment of the environment. Most of the organizations would make one common mistake in the process of decision making about the future: underestimate the change effect on the industry or business. Schoemaker notes that we can all imagine how difficult it would had been one hundred years ago to forecast how the world is today. Technology has developed a lot with inventing cars, airplanes, televisions, computers and other technological innovations. On other hand while technology took huge steps in inventions and it has been under predicted, futurists have also over predicted some events. Failing in inventing medicine for cancer and space travels is one of examples of over predicting the future. Scenario planning is the methodology of the predicting future, which allows researchers to see “between” under predicting and over predicting. It helps to see more possibilities while still keeping the picture realistic. (Schoemaker, 1995)
According to Van Der Heijden (1996) scenario planning helps to engage in a strategic thinking process because it concentrates on uncertain world around the business. All organizations experience uncertain times when strategic thinking is necessary. Scenario planning is one part of the organizational learning process. While uncertain changes are going on, scenario planning becomes a part of continuing learning. (Van Der Heijden, 1996: 1) Duiner & Greig (2007) says that scenarios are useful for the functions like risk management, where decisions can be made on the base what is “known” about the future. Snoek (2003) notes that while describing the future it
is necessary to take into account that future is uncertainty. Scenario creating methodology is connected with society research. It is connected with the changes which are happening in the society. According to Snoek scenarios are instruments which create a “pictures” about the future.
Decision makers can use the scenarios to learn about presumptions. According to Yeoman et al.
(2010) scenario planning method helps to understand what may happen (possible futures), what is the most likely to be happening in the future (probable futures) and what is the best for the company to happen (preferable futures). Scenario planning does not make forecasts, but it describes the image of the future. Those “images of future” challenges the assumptions that we have at the moment. According to authors, scenario planning is often used as a base for a strategic planning of the company. The images made on the future can be base for the change of the strategy. The method can be understood as a part of risk management, as it makes the company to prepare for the future dangers. Authors also notes that scenario building has been used by the large company as Shell.
Van Der Heijden says that scenario planning can also be used in testing business ideas. As well as every businesses environment, the environment of the new business idea is large. Scenario development needs an understanding about the business and the environment of it. (Van Der Heijden, 1996: 57)
Figure 1. Scenario planning as testing business ideas. (Van Der Heijden, 1996)
Van Der Heijden also states that the word “scenario” is not defined well in the theory of the strategic planning. Scenarios can be external and internal. External scenarios are combined by the external world outside the company. Usually, company cannot impact on external changes.
Internal scenarios are some which belong to a person inside company and how person will play a role in the scenario. In this research external scenario is used as a method, as it answers a question of the external changes which are affecting on the decisions of the travel industry customers in Finland. (Van Der Heijden, 1996: 5)
According to Bohensky et al. (2010) scenario planning used to be a tool for military planning and gaming, in the 1960s it started to be used in business and strategic planning. In future research the analysis of the scenarios is giving the answer, which will be the most certain description of the future. However, researchers also says that scenarios are different from forecasts and predicting tools, even they can supplement each other. In theory scenario planning is a future prediction tool, it differs from the other by exploring a future uncertainty as well.
According to Walsh (2005) strategic management of the organizations is using scenario planning as a tool. Usually future research is predicting, but scenario planning is concentrating on how the
change would influence on the industry and organizations. Scenario planning is different from other methods, as it makes us to think about the changes which were ignored before the analysis.
Scenario planning arranges the possibilities and threats in more simple way than it would be in rational methods. It can be said that scenario planning is a “bridge” between traditional methods and strategy planning. It clarifies possible changes. (Walsh, 2005) Not only companies but also countries are preparing themselves as a tourism destination for the future by using the scenario planning method. For example Varum, Melo, Alvarenga & Soeiro de Carvalho (2011) has used the scenario planning method to predict what kind of future Portugal should expect as a tourism destination.
Every method for the researches has their advantages and disadvantages. According to Peterson, Cumming & Carpenter (2001) scenario planning method have its’ own. As it is known the future is hard to predict. According to authors, there are some trends which are recognizable and by following them it can be said, that trend will lead to some kind of situation. However, the world situation is changing fast and some trends can change or disappear quickly without a big influence on the future. This is where the forecasting and scenario planning method can go wrong. As a future researcher there is a need to recognize these issues and be vigilant of them.
Authors also says that scenario planning tool gives the opportunity for developing a solid picture of the future when it is analyzed with the uncertainty and uncontrollability. It gives understanding about the key uncertainties, included the optional perspectives and flexibility of decisions.
2.4. Pestel analysis in future research
According to Burt, Wright, Bradfield, Cairns and Van Der Heijden (2006) and authors of another research authors Dwyer, Edwards, Mistilis, Roman & Scott (2007) the key tool for understanding the change is the environmental analysis. Van Der Heijden says that this environmental analysis is called Pest, it is combined of political, economic, social and technological analysis. Longer version is Pestel, which is political, economic, social, technological, environmental and legal analysis. Pest analysis is known as an instrument for the strategical planning. It aims to categorize the leading directions, known as trends in different categories. In the tourism future research, analysis is a base for the long term strategical planning. The key element to be a
successful player on tourism industry is the recognition and realization of change and preparing for it. The key pilots of the change on the industry are economic, environmental, technological, demographic and social. (Dwyer at al. 2007)
According to Fernander, Cala & Domecoq (2011) Pestel tool is connected with the company’s innovativeness. Understanding about the external situation, changes and the way of change are the key for innovation. Critical overview of the future is needed to create knowledge about the threats of the environment. According to authors, understanding the environment gives a view toward the opportunities.
However, like in every method, there is an issue in use of Pestel- analysis. Burt et al. (2006) says that the problem is that the analysis can be too wide and not answering the specific issues of the company or industry. This problem needs to be solved during the process of the environment analysis by specifying “our” environment, what are the current approaches and limitations. Burt et al. says that Pestel shows some way of the change but it doesn’t give a deep understanding about the change and its future. According to Dwyer et al. (2007) another issue in using the Pest or Pestel analysis is that trends are different. The trend is defined a “leading direction”, there can be trends but also mega trends which can become overwhelming. Dwyer et al. notes that some specific trend can take such a big role in a change and future so it takes a leading position and overcomes other trends. This is the problem but also a part of the future research which is aiming to recognize “the biggest trends”.
Figure 2. Influence of megatrends in tourism industry (Dwyer et al. 2007)
According to Burt et al. (2006) scenario creating methodology provides a way of developing the thinking process after the Pestel analysis. It gives an understanding about the environmental issues of the industry the company is and creates systematic relations, which creates discontinuity. Burt et al. says that creating the connection between the issues about the market, environment and customer behavior, gives the understanding on how the issues will influence the future if they would happen together.
3. METHODOLOGY 3.1. Methodology choice
This research aims to recognize the main driving forces of the change on travel industry. The methodology for it is scenario creating. According to Dwyer et al. (2007) future is always based on the past and present, it is not disconnected. That is the reason future research needs to be based on past and present. In this research base for the scenario planning is Pestel analysis which is aiming to recognize the leading trends of the different parts of the environment, the organization or company is a stakeholder.
The survey in the study of the future on the travel industry would not serve the research question as well as the scenario creating method does. According to Page et al. (2010), scenario creating method allows to see the direction of the future from the different sides and compare the possible situation with each other. The survey as a method would not be flexible enough.
3.2. Methodology use in the study
First step of the scenario planning is defining the topic or issue the scenario will be serving.
Second step is to identify key factors in the issue/topic. Third step is to identify critical uncertainties. Fourth step is to define scenario logics. Fifth step is to create the actual scenarios.
Sixth is to assess the implications for the organizations or community. The table below give a picture of the process:
1. Define the topic of the scenarios
2. Identify the key factors (Driving forces) 3. Identify the critical uncertainties
4. Define scenario logic 5. Create scenarios 6. Assess implications
Table 1. Steps of the scenario planning method.
Step 1. To identify the topic of the scenarios, it is necessary to look into the problem. Why this research is being done? This research is about the tourism from the point of view on the outgoing travels from Finland abroad. There are many factors which are influencing the travel industry at the moment. The aim is to find out the possible future of the travel packages. To take all the influencers into account there is a need for an overall approach. Pestel- analysis is the base which needed for this. (Dwyer et al. 2007)
Step 2. Identifying the key factors is the base for scenario creating. For identifying the key factors, will be used a couple of steps. First is Pestel- analysis to identify the comprehensive situation. Driving forces from Pestel analysis will be divided to the main Driving forces of the scenario planning. They are Demographic, Cultural, Economic, Technological, Environmental and Governmental. (Ratcliffe, 2000) These driving forces will be analyzed by dividing them into Events, Cycles, Trends, Constants and Issues, which will help to identify the Driving forces which will last for the next five years, which is the time frame for this research. (Bishop& Hines, 2012)
Step 3. Identifying the critical uncertainties will happen by using the analysis of Impact/Uncertainty analysis. The Driving forces will be given a number based on how much
they would impact on the future and how uncertain their impact could be. (Claims & Wright, 2011)
Step 4. Defining scenario logic will be the next step after analyzing the Driving forces. Three to four Driving forces will be analyzed by use of the “Importance grading”. The most important two forces will be chosen by the use of this logic: 0= not important, 1=somehow important, 2=important, 3=highly important. (Godet & Roubelat, 1996)
Step 5. Scenarios will be created by the use of two most important Driving forces. Four scenarios are the ideal amount. In the end one “the most” important scenario will be ranked by the use of “The Matrix” analysis. Matrix analysis will be described further. (Godet & Roubelat, 1996)
Step 6. As an implication to the community and organizations in Finland, it will be suggested shortly how to prepare for the possible future (the result of the research) and give a suggestion for the further research.
Further it is described step by step in more details how this research will be done by the use of the scenario planning method.
3.3. Data collection
The very first step of creating scenarios is the time frame creation and the extent of the analysis.
Extent here means what area, market, product or technology are going to be researched. In this research, the time frame is five years from now (2017). According to Schoemaker (1995) it is useful to look back in the past five years. Think of what have been changed and what was unknown five years ago about the subject and changes, which is known now. Schoemaker says that usually at least the same amount of changes what happened during past five years should be happening the next five years.
Next step is identifying the stakeholders. Who will have the interest of the issues? Who will be affected by changes? Who will be influenced? Usually the group influenced are the customers,
suppliers, competitors, operatives, shareholders and government. In this research, the customers in Finnish market are the target stakeholders as it is aiming to find out how the changes will influence customers decision. (Schoemaker, 1995)
A set of scenarios will be created on the basis of Pestel- analysis. Pestel analysis is the role of data collection method in the research. In this research, it will create a comprehensive picture of the travel industry in Finland. Pestel analysis will be based on the academic literature which is the base for the whole research. The literature overview which is used for the Pestel analysis is concentrated on the trends which are going on in 2017 and connected with the future of the travel industry on outgoing trips from Finland abroad. Pestel will be the base for the process of the scenario creating after it. It is important part of the scenario making, because it will give an important data for the research of the impacts on the industry. According to Dwyer et al. (2007) the key drivers of the change in the external environment are Economic, Political, Environment, Technological, Demographic and Social. Analyzing these elements is called Pestel- analysis. The analysis is well known as a tool in strategic management to categorize the forces of change and trends.
Dwyer et al. (2007) also notes that during the Pestel analysis, it is necessary to take into account the global drivers as well as drivers in travel industry and the trends in different part of Pestel.
Pestel is known as a tool in strategic management to make a sense of the driving forces of the change. Authors also say that other purpose of Pestel analysis is to make categories of segments which are Political, Economis, Social, Technological, Environmental and Legal. I will search for the trends of the travel industry during the process of Pestel- analysis. The trend can be defined as “a leading direction”. There are trends of different kind, some of them have a bigger chance to become a big driving force.
3.4. Scenario driving forces
Scenario driving forces are the forces which are bringing the change or leading in the change events in the world. Driving forces are external, not those which are inside the organizations.
Usually company or organizations cannot impact on driving forces. Driving forces in scenario planning are cultural, demographic, economic, environmental, governmental and technological.
Cultural driving forces are elements of human life as work, health, education, welfare, crime, environment, equality and leisure. Demographic are population change and growth, urbanization, life expectation, changes in the family constructions and modernizations of attitudes and values in societies. Economic driving forces are global economy, technological drive in economy, man- made industries. Environmental is a philosophy of the sustainability of the nature recourses, developing environment friendliness and in general being responsible for the environment and nature. Governmental includes political and legal issues, power of the changing structures in the world, roles in public sector. Technological is a way of the change is technology and how it develops, the impact of it on the society and the world situation. (Ratcliffe, 2000)
Driving forces will be identified by the use of Pestel analysis, information based on it will be analyzed. The information collected during the Pestel analysis will be analyzed first by dividing them into five groups. The groups will be constant, cycles, trends, events and issues. Each of them will be placed in the table which will include also the main groups of the Pestel-analysis like Political, Economic, Social, Technological, Environmental and Legal.
The first step of this analysis is to insert parts of the Pestel analysis into the right segments of the
“Driving forces”. Political belongs to “Governmental” section, Economic to “Economic”, Social is partly “Demographic” and partly “Cultural” sections, Technological is “Technological”, Environmental is also “Environmental” and Legal belongs to “Governmental” part. The analysis of “Driving forces” will look like this:
Constants Cycles Trends Events Issues Demographic
Environmental
Technological
Economic
Governmental
Cultural
Table 2. Scenario driving forces- table, based Pestel analysis by dividing the information to constants, cycles, trends, events and issues.
Here is the explanation what they mean in the future research. Trends are changes that have been moving in a specific direction over a long period. Cycles are the changes that recur. It can be said “it happened again”. Issues are the changes that has been currently happening and can become bigger influences in the future. Constants are the quantities or changes that are the most likely to stay the same before the time line (five years) will end. Events are happenings which have created the current situation. This analysis is the first step of recognizing the most significant influencers on the future. Dividing into these groups will help recognize which changes will most likely still exist in five years from now. They are called scenario driving forces. (Bishop & Hines, 2012)
3.5. Impact/Uncertainty Analysis
Next step after recognizing trends, cycles, issues, constants and events is to recognize the most uncertain and the most impacting driving forces. For this will be used: “Impact/Uncertainty”
analysis. For this analysis will used the numbers from one to ten (1-10). One is the most
“uncertain” and ten is the most certain change in the future. For the “impact” forces it is also from one to ten. One is the less impact on the future and ten is the most impact on the future.
(Claims & Wright, 2011: 36) The table of analysis will look like this:
Scenario driving forces Impact Uncertainty Demographic
Driving force 1 1 10
Driving force 2 10 1
Environmental
Driving force 3 3 4
Driving force 4 4 5
Governmental
Driving force 5 5 7
Driving force 6 6 5
Social
Driving force 7 8 9
Driving force 8 5 7
Technological
Driving force 9 5 8
Driving force 10 10 2
Economic
Driving force 11 3 6
Driving force 12 5 9
Table 3. The scenario driving forces ranking table (an example)
Each driving force should be named in the table as clearly as possible. They need to be explained just in a couple of words but still be understandable. (Clairns & Wright, 2011: 36) The key of this analysis is simple. The point is to identify three of four factors which are “The most
important” for the future of the Finnish travel packages outside country and “the most certain”
Based on this scenario driving forces which are left can be further analyzed. (Ratcliffe, 2000) 3.6. Scenario creating
An ideal amount of the scenarios is three of four. It is ideal because it expands the way of thinking about the future. Two scenario is not enough to challenge the thinking on the specific future possibilities. (Peterson et al. 2001) The future does not have a single option, it is multiple and several potential scenarios are possible. In this research after the “Pestel analysis”, “driving forces analysis” and “scenario ranking analysis” the forces which are left for the future will be analyzed by the importance for the Finnish travel agencies and their travel packages in the future:
0= not important, 1=somehow important, 2=important, 3=highly important. After this, two the most important factors will be chosen. There will be scenarios created by the two most important forces use.
For example:
“Economy growth and climate change” as the main driving forces.
1. Scenario = economy is not growing and the climate is not changing 2. Scenario= economy is not growing and climate is changing
3. Scenario= economy is growing and climate is not changing 4. Scenario = economy is growing and climate is changing
These are examples so I can describe how the scenario creating process is going. After these scenarios are chosen there is a need to describe what will actually happen in each scenario and how it will influence on the industry and some specific area in it. (Godet & Roubelat, 1996) Scenarios include the key options in narrative stories. To each scenario will be given a name to help discuss them. The name should describe the main features of the scenario. (Peterson et al.
2001) Effective naming is important, the logic or “story driving” names are usually the successful ones because they are memorable. Meaningful titles can become actually important
part of the company’s strategic planning. That is why they need to point out the point of the whole scenario. (Ratcliffe, 2000) Successful scenarios are different from each other and they clearly summarize the future. (Peterson et al. 2001)
3.7. Ranking the last scenarios by use of Matrix
After the scenarios have been created, there is a need for their evaluation. The consequence will be tested by quantification again one scenario again other scenarios. (Peterson at al. 2001) Ranking the key decision factors and forces will be made on base of two criteria:
1. The importance for the success of the industry 2. Uncertainty on the factors or trends
Figure 3. The Matrix of the ranking the most important and certain scenario (Peterson at al. 2001)
Being systematic in this process is important. The matrix will be created and the scoring system with high- medium- low impact and high- medium – low uncertainty created. The attention in this matrix will be on high- impact and low uncertainty which are significant for the future. After
the scenarios are ranked, one scenario is left. After it, the chosen scenario will be described better. For my study I will choose one scenario to create a suggestion for the future preparation on the outgoing trips from Finland abroad. (Ratcliffe, 2000)
3.8. Wanted result of the research
The result of the study is the possible future of the outgoing trips from Finland abroad. The result of will answer the question:
“How will the future of the package tours from Finland abroad look like in 2022?”
In the end of the study will be a suggestion of how can an organization or company in Finland could prepare for the future. So there will be short suggestions for the tour operators in Finland for the preparation for the “scenario” and the future. The question for this part are:
How to prepare for the possible future presented in this study?
By using this technique, the scenario will be turned in the “short strategy” for the future. The robust strategy needs more than scenarios alone so the outcome of this research will not be the strategy for the Finnish travel companies but it will be a base for it. (Godet & Roubelat, 1996) The research will provide the analysis of the future on the travel industry and it will concentrate on Finnish travel industry on outgoing trips from Finland abroad. The scenarios will create a
“picture” of a possible future and provides suggestions on how to prepare the company for it.
4. SCENARIO DRIVING FORCES
Finding driving forces for the future starts with analyzing present and past. An ideal tool for this is Pestel. It is a tool for recognizing the environment of the industry and the company with political, economic, social, technological, legal and environmental approaches. Further will be presented Pestel analysis of the Finnish travel industry on Outgoing trips abroad. This analysis is used in the study for identifying the driving forces for a change. (Dwyer et al. 2007)
4.1. Political
Political drivers on the tourism industry are international power, security and regional conflicts.
The USA has had the strongest influence on other countries and it will most likely stay as the strongest influence. China and India are emerging as important global influencers and changing the tourism landscape. (Dwyer et al. 2007)
There are many issues at the moment which are connected with travelling. Terrorism has expanded over the world and one reason is the internet and easy information sharing. Security issues are making border controls stricter and creating barriers for travelling. Border controls are becoming stricter as the result of terrorism. (Dwyer at al. 2007)
There is a danger of regional and ethnic conflicts. The situation of the Middle East, connected with Islam will continue and increase a cost of travels. Ethnical conflicts such as in Ukraine and Spain are most likely to be continuing. It has been noticed that nations are responding to the outcomes of globalization by learning about their own identities. Climate change is also creating a risk of more conflicts for example over the recourses of clean water. (Dwyer et al. 2007)
Popularity of travelling has brought the risk of different diseases and other health crises to the developed countries. This might be bigger problem in the future. Politicians can become worried about this issue. (Dwyer et al. 2007)
4.2. Economic
As the result of globalization, borders are easier to cross, which brings more customers and tourist destinations for the tourism industry. Competition on the tourism industry has increased
as well because of more open borders. It is expected that development of global transport will continue. (Dwyer at al.2007)
The economy is recovering after a long down period. In 2016 GDP growth was 2.3%. In 2017 2.6% and forecast for 2018 is 2.9%. It means that people will also have more money to spend as economy is growing. “Emerging countries” like India and Ghana are developing and GDP of those counties is growing fast. This means that the middle class in those countries is growing fast and they have more money to spend. (Databank, worldbank, 2017) Studies have shown that rising economy and income are the most important influence on tourism flows. (Dwyer et al.
2007)
In 2020, the expected GDP growth is 50%. Luxury seems to be the mainstream effect of the income increase. People want to buy goods which can improve their quality of life, such as travel experiences. This is so called “experience economy”. It is the need to buy something that is real instead of “manufactured” products. This means that also in travel destination, customer will want “a real” destination, not some place which has been created for the tourists. There is also one issue connected with marketing which makes people “resist” mass tourism destinations.
More people are resisting advertisements and it is possible, because “digital television” is giving an opportunity to do that, skip the advertisements. The decisions about the holidays are made more based on “the network of the society”. Advice and opinions from the others are more appreciated than advertisements. (Yeoman et al. 2007)
4.3. Social
Globalization has been mentioned before, and while talking about it, perhaps that “multi- culturalism” is the term for modern culture. Awareness and access to the information and all the ideas are made easy. Media, including internet and TV provide us a way to see the world through
“multi-cultural eyes”. Nowadays the consumer can easily watch Bollywood- movie and become interested in Indian culture, for example. Besides that, buying the exotic, international food is available almost everywhere. Books about the other cultures are also easily available as well.
Knowledge about other countries has increased. (Yeoman et al. 2007)
The world is changing and by technology and its effects, also customer behavior is changing.
When people are more connected on the social network and other channels, information is moving fast. Shared information can create trends and trends of that kind can change the way people think, act, live and work. (Curthbertson & Furseth, 2016)
Customer behavior is changing on the travel industry. Customers might look at the experience more than at destination while booking the trip. It is important to think about experience rather than about destination while developing products. Holidays offering experience are becoming the most important motive for the travelling. (Weiermair, 2004) However, that creates a problem for a tourism agencies. Even they make everything as well as possible, customers are still using services offered by different other service providers. Overall satisfaction on the holiday depends on the whole experience. (Honkanen & Räikkönen, 2014)
There is a new group of the customers “Money-rich-time-poor” people. This means they have money, but they are busy in their everyday life. This group of people are in need of a short holidays away from home. Another new kind of group are “Individualists”, they want to have holiday which are specially tailored individually for them. These people are interested in discovering, experiencing, participating, learning and doing things while being at the holiday.
(Dwyer et al. 2007)
A big social trend is in aging population. Aging population is growing and older people have time to travel. People are also expecting more luxury for middle price as prices has been decreasing. There are lot of opportunities so hinting for lower prices is a trend. Health and wellbeing are one trends as well. People want to improve their health also on holidays.
(Amadeus, 2007)
In 2015 and 2016 there were several things that impact on the travel industry. Violent conflicts, terrorist attacks, refugee crisis and economic situation are impacting on the global tourism. Even that happened, in 2015 tourism raised with 4.5%. In 2016 4.3% growth was expected. (IPK International, 2015)
Urbanization is continuing growing. People are moving to big cities, for a free time, people will travel to non-crowded places to take a rest from busy life style. Also social structures of the
families are changing. There are more single life style living people in than ever before. Family holidays will stay popular but need for a holiday offers for retired and single people is growing.
(Dwyer et al. 2007)
On the other hand main trends in the travel are growth of the city trips, cruise holidays and long- haul travel. More and more people are taking six months off and travel around the world. (Brent et al. 2005) Off-season travel is growing, people are taking city trips on the low season. Social media is becoming more and more important in the tourism business. The number of active Facebook- users has reached 1, 5 billion people around the world. Social media users get a lot of information online and it is affecting on their decisions. (IPK International, 2015) Independent tourism is more popular nowadays than for example even ten years ago. The reason for that can be technology and on the other hand experiences of the other people on social aspect. Other travelers experience shared online makes people more informed about the opportunities in independent travels. (Chen, Tsaur & Yen, 2010)
Beside these trends people are spending more on the holidays and other non-material services because they are searching for more experiences like a weekend at relaxing spa or a water rafting at the river. This is called “experience economy”. One of the experiences is volunteering abroad.
Volunteering is seen nowadays as “an ethic” way of travel. This is the way of “ethical consumption” in travel industry. (Yeoman et al. 2007)
Tourism has changed during the years. Before, it was mostly concentrating on the domestic tourism but nowadays it is international. This kind of internationalization makes opportunities on the market like nationally- specialized services in hospitality and specialized tourist guides at destinations. (Shaw & Williams, 2011) Unlike previous generations, todays’ people are free and make more decisions by themselves. This means that society have less boundaries than before.
Todays’ society can be called “global-network knowledge”- society. This kind of knowledge has developed new interest toward awareness of new destinations in the world for traveling.
Nowadays people are more open, the human contacts are strong and it has always been. The technology has just brought it to the new level. (Yeoman et al. 2007)
Level of the education is increasing, especially higher education. The more educated people are, more capable they are to make the choices they really want. By education people become more individual and are able to do more on their own. People are able to build their identity by using the new technologies and awareness of the information available online. This trend of the individualism offers more travel choices as well. “Own” needs can differ from the family, friends or society so person can feel better to book a trip on his/ her own to fulfill individual need.
(Yeoman et al. 2007)
While people are more educated and their income is getting better overall, there is one issue connected with them: the time. People have less time, less holidays while educating themselves and working. Time has become more precious to people. On the other hand, people want to maximize the efficient of the use of the time. This is called the law of “Gazinda”, where people rather do a lot of activities than only one or two. This has led to the situation where the shopping malls have cinemas and other activities inside them. Other trend is that people want natural, longer, authentic activities to fill up their time. This can be for example climbing the mountain.
(Yeoman et al. 2007) Other trend connected to the time spending is that people are willing more flexibility from work. Not being ready to sacrifice personal and family time for the careers is becoming a norm. (Dwyer et al. 2007)
4.4. Technological
As the world is changing and globalization is going on, tourism in only one part of human mobility. People are moving and they have second homes. Technology is developing and trip that used to take three days, now can be done in one day or less. Beside holiday tourism there is range of different tourism types like visiting friends and relations, business travel, travel to second homes, health related travel, education-related travel, religious travel, shopping travel and volunteer tourism. With these types of tourism it is hard to define for how long people stay in foreign country. Travel industry has faces big changes like digitalization recently. Digital services are easily accessible and taking place instead of personal service of the travel agencies.
(Amadeus, 2007) Innovation in tourism services and enterprises has been analyzed as low liability to development into products. It has been studied that tourism businesses are less innovative than manufacturing business. (Camison & Monfort-Mir, 2010)
Internet has made information available for everyone who uses a computer or smartphone. For that reason, brand loyalty is not a case anymore, price and quality are the most important drivers during the decision making process. (Cala, Fernandez & Domecq, 2011) Technology is the new evolution in travel costs. People are ordering and buying flights and booking hotels online for cheaper price than ever before. Technology has developed quickly and people are more and more connected with everyone because of technology. Also information is now easily available and customers become more informed. Technology and internet are the reasons why travel agencies became less popular. People has become informed of the different ways on purchasing trips.
New services can be also developed easier and quicker than new products. (Furseth &
Cuthbetson, 2016)
E-commerce in travel industry is one of the most successful ones. Customers can make a lot of decisions based on the information available online. More and more reservations are made by purchasing flights, hotels and activities separately. The services of the travel agency are not necessary nowadays if consumer is able to use internet. There are couple of barriers in purchasing online, like payment safety and decision making skills of the consumer. Travel agencies should provide security for online payments and some possibilities for making decision making easier online. (Souffriau & Vansteenwegen, 2010)
Beside use of online services for booking a flight tickets and hotels, people more often use a mobile device or computer for attractions booking for the trip. Applications have become very popular for that purpose. Many people visit some region or a city only for short time so it is not possible to see and visit every sight at the destination. The tourist has to make a plan for what is worth visiting. However tourist can face some trouble while searching for the information as some travel guidebooks can have outdated information about the attractions and wrong information for the current time. Guidebooks cannot provide temporary information as the change of the opening hours, routes or discounts which are important for the traveler. Mobile applications and websites are more useful for that. Modern tourists want to use their time effectively and they want to be informed all the time of the offers at the destination. (Souffriau &
Vansteenwegen, 2010) Beside the easier booking process for the flights, there are more flights available overall. Better flight connections and low-cost companies have taken a big role in tourism. (Vainikka, 2014)
Instead of booking a trip from a local tour provider it is easy to plan the whole trip online. Some applications like “Personal interest estimation” POI does the whole travel planning for you taking into account weather, hotel reservations, budget, transportation and many more functions.
Unfortunately many personalized trip agencies are not able to do the same as effectively and cost efficiently as an application. (Souffriau & Vansteenwegen, 2010)
Technological impact on travel industry and consumer behavior is huge. Beside online reservations and applications there is one huge impact called “Shared economy”. Shared economy platforms are technological innovations which provide shared apartments or other services. One of the most popular is Airbnb. It is the most successful platform for the accommodation as a “P2P” platform. Airbnb connects hosts who have some space for the sleeping and guests who are searching for an accommodation. For the expanding Airbnb has also better possibilities as apartments are located everywhere. For the hotels it is more difficult to expand in the old cities for example. Many tourists prefer to use Airbnb over the hotels as they provide more local life style and neighborhoods than touristic hotels. (Gutierrez, Garcia- Palomares, Romanillos & Salas- Ilmendo, 2016; Airbnb, 2017)
One of the latest innovations in the technology, related to travel industry is “virtual travelling” It is called (3D) technology, allows people to see the destinations through Web. “Tourist” can take a virtual tour to the destination. The experience can feel “real” as it allows a virtual visitor to even create and communicate with the image of the destination. (Buhalis & Law, 2007)
Beside all the other technological impacts, there one more very important influence on travel industry overall, the transportation. Faster and better transportation is making the accessibility of the travel destinations more attractive worldwide. New technologies are making transportation faster, cheaper and more environment friendly. At the same time access to internet provides huge possibilities to travel customers on how they spend their time and money. (Dwyer et al. 2007) 4.5. Environmental
People are interested in wider issues like environment, animal rights nowadays. Talking about more trends in the consumption of the people, people are spending more money on holidays, eating out, and theatre and so on. In other words, consuming is changing from buying some
