Box 1: Updating the TTCI Methodology
To keep the Travel & Tourism Competitiveness Index methodology up to date and respond better to policy needs, the World Economic Forum and its data partners (Deloitte, IATA, IUCN, Strategy&, UNWTO and WTTC) have engaged in a year-long review process. The review encompassed several workshops and consultations with experts, including Global Agenda Council members, policymakers and other users of the index.
The review highlighted a number of areas for improvement, which have been implemented in the new index structure, presented in Appendix A. While the main drivers (the 14 pillars) of T&T competitiveness remain conceptually unchanged, the new methodology relies on a larger set of indicators and optimizes the allocation of variables to form a cleaner structure. Informed by statistical tools such as principal component analysis, and guided by policy significance, the review re-allocated pillars to subindexes and some indicators to pillars.
The availability of new data significantly drove the changes in how the 14 pillars are measured. Overall, the new methodology uses more indicators (90 instead of 79), of which two thirds are statistical and one third are data from the Executive Opinion Survey.1
The main structural changes are outlined below (see Appendix B for details on indicators that have been added or dropped):
Separating the “enabling environment” from “T&T policy and enabling factors”. The more general Enabling Environment subindex now comprises five pillars: Business Environment, Safety and Security, Health and Hygiene, Human Resources and Labour Market and ICT Readiness. These factors are directly linked to economic growth and important for business development, including but not exclusively for the T&T sector. The new T&T Policy and Enabling Conditions subindex is made up of pillars which are more sector-specific: Prioritization of T&T, a direct measure of observable T&T policies; International Openness and Price Competitiveness, factors that can directly impact tourists’ decision to select a destination; and Environmental Sustainability, which indicates to what extent natural capital—on which a large part of the tourism industry relies—is being conserved.
Isolating the Infrastructure subindex. Connectivity and hospitality infrastructure are clearly distinctive drivers of travel & tourism. Dedicating a full subindex to these factors allows them to be assessed more clearly, revealing when they require policy attention.
Elevating the role of natural and cultural resources. Aside from business and personal reasons, cultural and natural heritage arguably constitute the main reasons to visit a country. Some countries have a richer endowment than others, but some are also better than others at promoting and protecting them, a factor which deserves to be elevated to specific policy focus.
Updating and rationalizing the selection of indicators. New data availability allows better selection of indicators and more focused measurement of pillars. Several outdated indicators have been dropped, such as GATS commitment restrictiveness and number of telephone lines; and more relevant indicators have been included, such as digital demand for cultural and natural tourism.
A summary of all indicators added and dropped by the index is presented at end of the next section.
The New Methodology
This section explains the rationale for selecting concepts and indicators composing the T&T Competitiveness Index.
Pillar 1: Business Environment (12 indicators)
This pillar captures the extent to which a country has in place a conducive policy environment for companies to do business. Research has found significant links between economic growth and aspects such as how well property rights are protected and the efficiency of the legal framework. Similarly, distortions in taxation and competition policy—including both domestic and international competition, measured in terms of foreign direct investment (FDI) facilitation—impact the efficiency and productivity of a country. These factors are important for all sectors, including T&T. In addition, we consider the cost and time necessary to deal with construction permits, which is a particularly relevant issue for T&T development.
Pillar 2: Safety and Security (5 indicators)
Safety and security is a critical factor determining the competitiveness of a country’s T&T industry. Tourists are likely to be deterred from traveling to dangerous countries or regions, making it less attractive to develop the T&T sector in those places. Here we take into account the costliness of common crime and violence as well as terrorism, and the extent to which police services can be relied upon to provide protection from crime.
Pillar 3: Health and Hygiene (6 indicators)
Health and hygiene is also essential for T&T competitiveness. Access to improved drinking water and sanitation is important for the comfort and health of travellers. In the event that tourists do become ill, the country’s health sector must be able to ensure they are properly cared for, as measured by the availability of physicians and hospital beds. In addition, high prevalence of HIV and malaria can have an impact on the productivity of the T&T labour force and play a role in discouraging tourists from visiting a country.
Pillar 4: Human Resources and Labour market (9 indicators)
Quality human resources in an economy ensure that the industry has access to the collaborators it needs. The sub-components of this pillar measure how well countries develop skills through education and training, and enhance the best allocation of those skills through an efficient labour market. The former includes formal educational attainment rates and private sector involvement in upgrading human resources, such as business investment in training services and customer care. The latter includes measures of the flexibility, efficiency and openness of the labour market and the participation of women, to assess the depth of the country’s talent pool and its ability to allocate human resources to their best use.
Pillar 5: ICT Readiness (8 indicators)
Online services and business operations have increasing importance in T&T, with internet being used for planning itineraries and booking travel and accommodation—but ICT is now so pervasive and important for all sectors, it is considered part of the general enabling environment. The sub-components of the pillar measure not only the existence of modern hard infrastructure (mobile network coverage and quality of electricity supply), but also the capacity of businesses and individuals to use and provide online services.
Pillar 6: Prioritization of Travel & Tourism (6 indicators)
The extent to which the government prioritizes the T&T sector has an important impact on T&T competitiveness. By making clear that the sector is of primary concern, the government can channel funds to essential development projects and coordinate the actors and resources necessary to develop the sector. Signalling the stability of government policy can affect the sector’s ability to attract further private investment. The government can also play an important role in directly attracting tourists through national marketing campaigns. This pillar includes measures of government spending, effectiveness of marketing campaigns and country branding, and the completeness and timeliness of providing T&T data to international organizations, as this indicates the importance that a country assigns to its T&T sector.
Pillar 7: International Openness (3 indicators)
Developing a competitive T&T sector internationally requires a certain degree of openness and travel facilitation. Restrictive policies such as cumbersome visa requirements diminish tourists’ willingness to visit a country, and indirectly reduce the availability of key services. Components measured in this pillar include the openness of the bilateral air service agreements which the government has entered, which impacts the availability of air connections to the country, and the number of regional trade agreements in force, which proxies the extent to which it is possible to provide world class tourism services.
Pillar 8: Price Competitiveness in the T&T Industry (4 indicators)
Lower costs related to travel in a country increase its attractiveness for many travellers as well as for investing in the T&T sector. Among the aspects of price competitiveness taken into account in this pillar are airfare ticket taxes and airport charges, which can make flight tickets much more expensive; the relative cost of hotel accommodation; the cost of living, proxied by purchasing power parity; and fuel price costs, which directly influence the cost of travel.
Pillar 9: Environmental Sustainability (10 indicators)
The importance of the natural environment for providing an attractive location for tourism cannot be overstated, so policies and factors enhancing environmental sustainability are an important competitive advantage in ensuring a country’s future attractiveness as a destination. This pillar consists of policy indicators such as the stringency and enforcement of the government’s environmental regulations and variables assessing the status of water, forest resources and seabeds, proxied by coastal shelf fishing pressure. Given the environmental impacts of tourism itself, we also take into account the extent to which governments prioritize the sustainable development of the T&T industry in their respective economies.
Pillar 10: Air Transport Infrastructure (6 indicators)
Air connectivity is essential for travellers’ ease of access to and from countries, as well as movement within many countries. In this pillar we measure the quantity of air transport, using indicators such as available seat kilometres, the number of departures, airport density, and the number of operating airlines, as well as the quality of air transport infrastructure for domestic and international flights.
Pillar 11: Ground and Port Infrastructure (7 indicators)
The availability of efficient and accessible transportation to key business centres and tourist attractions is vital for the T&T sector. This requires a sufficiently extensive road and railroad network, proxied by road and railroad densities, as wells as roads, railroads, and ports infrastructure that meet international standards of comfort, security and modal efficiency. The pillar also accounts for unpaved roads which enable local connections, and to some extent, can proxy the existence of picturesque roads which can, in very specific contexts, attract tourists.
Pillar 12: Tourist Service Infrastructure (4 indicators)
The availability of sufficient quality accommodation, resorts and entertainment facilities can represent a significant competitive advantage for a country. We measure the level of tourism service infrastructure through the number of “upper-level” hotel rooms complemented by the extent of access to services such as car rentals and ATMs.
Pillar 13: Natural Resources (5 indicators)
Countries with natural assets clearly have a competitive advantage in attracting tourists. In this pillar we include a number of attractiveness measures, including the number of UNESCO natural World Heritage sites, a measure of the quality of the natural environment which proxies the beauty of its landscape, the richness of the fauna in the country as measured by the total known species of animals, and the percentage of nationally protected areas, which proxies the extent of national parks and nature reserves.
Pillar 14: Cultural Resources and Business Travel (5 indicators)
A country’s cultural resources are another critical driver of T&T competitiveness. In this pillar we include the number of UNESCO cultural World Heritage sites, the number of large stadiums that can host significant sport or entertainment events, and a new measure of digital demand for cultural and entertainment—the number of online searches related to a country’s cultural resources can allow the level of interest to be inferred. The number of international association meetings taking place in a country is included to capture, at least partially, business travel.