Evolving Tourism Resilience through the Shift from Packaged to Differentiated Experiences
Disruptive Business Models, Innovative Tourism Strategies, and Transformative Urban Landscapes
“Just as platform shifts occur when new technologies or approaches disrupt existing systems and transform industries, embracing innovative strategies, disruptive business models, and diversifying products in any industry involves a similar shift. In either case, there is a recognition that traditional models may no longer suffice or fully meet customers evolving needs and expectations.”
—OHK at the World Economic Forum Annual Meeting 2023, Davos.
Cairo, the timeless city on the Nile, has been a focal point of package tourism since its inception. Thomas Cook, the pioneer of organized travel, established a tradition in the late 19th century that endures to this day. He brought groups to Egypt, leading them on Nile cruises and arranging visits to the pyramids—an early form of the package tours we know today. In the modern era, Cairo remains a significant stopover in package tours, particularly for North American tourists. These visitors, drawn by Egypt's rich history, predominantly explore the city through pre-booked tours. With its vibrant mix of ancient and contemporary, Cairo is an unmissable part of these journeys, reinforcing its position as a cornerstone destination of the package tourism industry. The photo above shows a typical Cairo stopover, the Khan al-Khalili market in downtown Islamic Cairo, a must-visit destination for package tourists.
In the evolving landscape of tourism, the appeal of independent travel stands in contrast to the practicality and convenience of package tours. As this shift transforms experiences in historic cityscapes worldwide, it's crucial to strike a balance, ensuring that the uniqueness of individual discovery isn't lost in the surge of pre-arranged group tours.
Traveling alone, many individuals find tranquility in navigating through unknown cityscapes and embarking on self-discovery and reflection. A wanderer can bask in the beauty of a new place at their own speed without adhering to a strict schedule or appeasing the needs of companions. Yet, despite the appeal of solitary exploration, package tourism has gained significant popularity in recent years. The number of tourists who are part of pre-arranged travel groups has surged, particularly in historical destinations like Venice, Cairo, Florence, Istanbul, and Ghent, where package tourism has become the norm.
Tour operators typically facilitate package tours that offer all-inclusive services, including accommodation, guiding, local transportation, and, occasionally, all meals. The travel groups usually comprise between fifteen to fifty foreign visitors, and these trips are often booked at least half a year in advance. This forward planning ensures a constant influx of tourists to the destination, contributing to a steady revenue stream for the local tourism industry.
Historic cities have increasingly accommodated these group tours—especially for specific markets like the US and China, where age and travel habits play a role— in integrating them into their daily cityscape. The local markets, grand religious structures, and iconic stone walls now frequently share their space with throngs of tourists huddled together in groups. A common sight at these places is a sea of tourists donned in matching attire, flaunting identical lanyards, following a guide who stands out with a brightly colored pole or umbrella. A significant proportion of visitors to these cities participate in package tours, and this trend has a substantial impact on the local tourism industry.
Annual visitors to the City of Ghent (shown in photo above) are four times the city's population. Located in the Flemish Region of Belgium, Ghent is the country's third-largest municipality, with approximately 270 thousand inhabitants. Despite its size, it pulls in tourists from every corner of the world. The staggering figure of visitors compared to the city's residential population is a testament to its rich history, striking architecture, and cultural vibrancy. These tourists are diverse, with many international visitors coming on package tourism from the UK and US.
Shocks to tourism destinations, especially those lacking resilience, amplify the influence of large tour operators. Through package tourism, they steer tourists towards specific local businesses, reinforcing the dominance of group tours over solo exploration, thus reshaping the global tourism landscape."
Large tour operators yield considerable influence in the market, especially in regions where the tourism sector is susceptible to political instabilities and relies heavily on pre-booked package tours' predictability. These operators often exploit their market power through commission arrangements. They pre-book rooms and guide their guests toward particular restaurants and shops. In return, they receive preferential rates and earn a commission on sales. This symbiotic relationship between tour operators and local businesses further perpetuates the prevalence of package tourism.
Even though solo travel remains attractive to many, the convenience and security offered by package tourism continue to lure an increasing number of tourists. The tourism industry, in turn, molds its strategies and offerings around this trend, creating a cycle that continually feeds the popularity of group tours. As such, the face of tourism continues to evolve, driven by market forces and consumer preferences. Whether one prefers the solitude of solo travel or the camaraderie of a group tour, there is no denying the impact that package tourism has had on the global tourism landscape. Despite the allure of solitary exploration for some, package tourism's popularity continues to shape how people experience new destinations.
The Old City of Jerusalem, a compelling destination within package tourism for religious travelers, culture tourism, and a frequent stop on the Middle East or Levant circle, often visited with Egypt or Jordan, resonates with ancient narratives and cultural intersections, captivating visitors worldwide. Jerusalem's Old City walls and gates are notable landmarks in the city’s package tourism routes.
The commission system, a pivotal element in the package tourism dynamics of old heritage centers in the Middle East, can be both a boon and a bane. We pinpoint a self-perpetuating cycle that elucidates package tours' proliferation and their profound impact on local tourism economies. The process is somewhat cyclical, and the stages are often typical.
First, an external shock, such as political unrest, disrupts the steady flow of visitors. This situation leaves package tour visitors as one of the only reliable segments within the tourism industry. As the instability deters individual travelers, these pre-booked groups become the lifeblood of the tourism economy. In response to the dwindling visitor numbers, retailers, restaurateurs, and hoteliers compete fiercely for these remaining package tour guests. The battle for patronage escalates, causing commission rates and discounts to soar. Each business is desperate to lure in groups of tourists, and thus, they bid against each other, inadvertently driving up the costs of their own operation. The cost increase and consequent lower margins force independent entrepreneurs and those offering higher-value products. These business owners either cannot appeal to the cost-conscious package tourists or fail to optimize their supply chains to maintain profitability in the face of escalating commissions and discounts.
As a result, the range of tourism products available at the destination becomes highly limited. This lack of variety fails to appeal to independent travelers and other visitor segments with higher spending levels. In many old city destinations in the Middle East, the tourism industry has become increasingly homogenized, catering primarily to package tourists. Over time, other visitor segments perceive that the destination has nothing to offer them. The limited range of products and services, designed primarily for tour operators, does not entice other or new segments of potential visitors. With the decline, the local tourism industry relies more on captive package tourists. This over-reliance leads us back to the second stage of the cycle, where businesses compete fiercely for the patronage of these package tourists. This vicious cycle presents a complex problem with no immediate solutions.
However, at OHK, we persistently explore strategies to help municipalities, master developers, and tourism authorities break this loop. One innovative approach that has shown promise in several projects involves creating one or more hubs in urban cores. These hubs cater to non-traditional visitor segments, particularly those who stay longer or have some form of emotional or vocational investment in the destination.
Visitors such as high net-worth individuals, luxury travelers, foreign students, consular officials, traveling professionals, and the burgeoning class of mobile "digital nomad" entrepreneurs represent the leading edge of independent tourists. While these independent tourists may be outnumbered by the volume of package tourists, their presence and expenditure patterns introduce a radically different tourism paradigm. Their needs and preferences necessitate a broader range of products and services, encouraging diversity within the tourism industry. This diversity can, in turn, attract other visitor segments, potentially reversing the cycle of over-reliance on package tourists.
Photo shows OHK's work in the Old City of Jerusalem which focuses on transforming historic buildings into boutique hotels, cultural centers, museums, and unique local shopping experiences, fostering an inclusive and dynamic tourism industry that caters to the evolving demands of independent travelers. This is a 3D model of the adaptable use plan of the Dar Al-Consul urban regeneration project.
Introducing non-traditional visitor segments can trigger positive feedback loops within the local tourism economy. A diverse range of tourists can stimulate the creation of a wider array of products and services. The variety can attract more independent tourists, further fueling the diversity of the tourism industry and visitor segments that often spend more per capita than package tourists.
By attracting these high-spending visitors, businesses can maintain profitability without offering high commission rates or discounts. This situation could reduce the competitive pressure within the industry, allowing a broader range of businesses to thrive. Moreover, these non-traditional visitor segments often have a stronger emotional or vocational connection to the destination. This connection can lead to more sustainable tourism practices, further enhancing the destination's appeal to independent travelers and other high-value visitor segments. For instance, foreign students may be more likely to participate in cultural exchanges or volunteer programs, contributing to the local community in a way that package tourists typically do not. With their longer stays, consular officials and traveling professionals may engage more deeply with local customs and traditions, fostering cultural exchange and mutual understanding.
Meanwhile, mobile "digital nomad" entrepreneurs can bring a fresh perspective and innovative ideas, potentially stimulating local economic development beyond the tourism sector. Their presence can enrich the local community, both culturally and economically, making the destination more appealing to other non-traditional visitor segments. These positive feedback loops, triggered by non-traditional visitor segments, can gradually disrupt the self-perpetuating cycle of package tourism. Over time, they can transform the local tourism industry, creating a more diverse, resilient, and sustainable economy.
However, achieving this transformation requires a concerted effort from various stakeholders, including municipalities, urban planners and managers, master developers, operators and investors, tourism boards, and authorities. It is important for these stakeholders to work together to create an environment that is welcoming and appealing to non-traditional visitor segments. This might involve improving infrastructure, offering language support services, providing flexible accommodation options, and promoting cultural exchange opportunities. In addition, it is crucial to maintain a balanced approach to tourism development. While it is important to attract non-traditional visitor segments, it is also necessary to ensure that the needs and interests of package tourists are still being met. This might involve negotiating fairer commission rates with tour operators, offering a wider range of products and services that appeal to package tourists and independent travelers, and implementing sustainable tourism practices that enhance the destination's appeal for all visitor segments.
Introducing landmark projects, cultural icons, installations, and memorable expressions in the built environment and public spaces has long been a driving force behind the endurance of cultural centers. Cities like Paris understand this concept well and continually reinvent themselves through new installations and public space expressions. However, some old cities in the Middle East, such as Cairo, Beirut, and Marrakech, have seemingly been left behind. These cities must remember that their brand has always been rooted in their contributions to human evolution through art forms and architectural innovations. To reclaim their true standing, they must rediscover their role as a beacon of inspiration, honoring their historical heritage while embracing modernity. By becoming a catalyst for artistic and architectural creativity, these cities can once again captivate the world and restore their rightful place in the global cultural landscape. Old centers of the Middle East can draw inspiration from the Louvre project, particularly the controversial addition of a glass pyramid. Just as the glass pyramid challenged the traditional perception of the Louvre, these cities must recognize the importance of embracing both their historical heritage and contemporary design to rejuvenate their cultural centers. While the glass pyramid initially faced criticism, it eventually became an iconic symbol of the Louvre, blending modernity with tradition. Similarly, other urban cores in old centers of the world should strive to find a balance between honoring their rich history and embracing innovative architectural expressions to reclaim their standing as vibrant cultural destinations. OHK has partnered with the Paris-based O4 Publica design studio to bring concepts of public space and building installations to various tourism destinations worldwide. OHK spotlights how these approaches make a difference in today’s competitive cityscapes and tourism destinations.
Ultimately, breaking the cycle of over-reliance on package tourism is not an easy task. It requires a holistic and flexible approach to tourism development that considers all visitor segments' needs and interests. However, by embracing this challenge, destinations can move toward a more diverse, resilient, and sustainable local economy. This, in turn, can enhance its appeal benefiting the community and the visitors themselves.
In conclusion, while package tourism will continue to play a significant role in many destinations, fostering a diverse and balanced tourism industry is crucial. By attracting a wider range of visitor segments, offering a broader array of products and services, and promoting sustainable tourism practices, it is possible to break the over-reliance on the package tourism cycle and create a more vibrant and sustainable local tourism economy.
The tourism industry is evolving faster every day, influenced by a new wave of technological advancements and business models. Central to this transformation is the emergence of disruptive companies like Airbnb, Uber, Lyft, Booking.com, TripAdvisor, VRBO, GetYourGuide, Klook, and Couchsurfing, which have shaken up the typical supply chain that package tourism relies on. This disruption drives a gradual yet significant platform shift in the tourism sector, challenging traditional paradigms and paving the way for more innovative, flexible, and user-centered travel models. Airbnb and VRBO, for example, have revolutionized the accommodation sector by offering a platform where homeowners can rent out their homes or rooms to travelers. This peer-to-peer business model has provided an alternative to traditional hotels—a packaged tour component—allowing travelers to immerse themselves in local communities uniquely and personally.
Disruptive business models are gradually reshaping the tourism industry by challenging the traditional package tourism model. They are fostering a more personalized, transparent, and flexible approach to travel. We expect to see an even more diverse and dynamic tourism landscape as these models evolve and gain popularity. The tourism industry's future seems to be heading towards a more decentralized and traveler-centric model, offering endless possibilities for tourists to create unique travel experiences.
OHK specializes in supporting tourism authorities and destinations, providing a wide range of consulting and planning services tailored to their challenges and needs. Contact us today to discover how we can assist you in shaping the future of your tourism industry.