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Hospitality and Tourism

A Theory of Tourism Consumer Decision Making

Report Segment: Complements and Substitutes

Here is a theory about tourism destinations and businesses which can be illustrated by an onion – with different layers of skin representing tourism offers. In the picture below, it is not until one moves closer to the centre that potential substitutes begin to emerge. One way of thinking about the tourism and hospitality sector is to look at the way demand works for different parts of the tourism offer. In the language of economics, we can say that there are a range of “substitutes” (competing offers) and “complements” (complementary offers). These tend to correspond with geographic movements so that businesses offering the same product or service are often not competing until the tourist makes a final decision about for example, where to stay or eat.

Complements and Substitutes

If other tourism businesses are more often seen as complements rather than substitutes for your offer, the whole way you view your relationship with ‘competitors’ can change. Moreover, if, as is suggested here, the destination is generally a key part of the tourist’s initial decision making, it makes sense for a business to invest staff time in:

- Understanding more about the local environment; and

- Raising the quality of your business to help meet the expectations of the tourists (think back to the Potters example).

Visit England’s “England Fact Book Key Statistics about English Tourism” August 2010 seems to support this theory and shows that decision making for day trips is often made without prior planning, and with little information about the destination. This suggests that people like the idea of exploring towns and cities and they will make food and drink decisions on the spot rather than in advance.

What does this tell us about business decision making? First of all, it demonstrates the importance of working together rather than apart; Even though there are many local hospitality and accommodation associations across the country, businesses in the tourism sector could do much more work together, but fear of competition stops them. If more businesses realised that their competitors are often all perceived as complements up to the point of decision which may not occur until the tourist has arrived on the actual street, perhaps they would be more amenable to genuine collaboration – in marketing and possibly even in skills sharing (signing up to Group Training Associations or Apprenticeship Training Associations).