Sustainable Tourism and the emergence on new Environmental Norms

Sustainable Tourism and the Emergence
of new Environmental Norms

Malgorzata OGONOWSKA & Dominique TORRE
Malgorzata.Ogonowska@gredeg.cnrs.fr
Dominique.Torre@grdeg.cnrs.fr
Université de Nice – Sophia Antipolis, France
GREDEG - CNRS

Problem Definition

Local
population
TOURISM
includes
wide
range of
economic
activities

Environment

20-21/09/2012 Nice 2nd International Conference on Tourism Management and 2
Tourism Related Issues

Problem Definition
Since 1990s: consumers’ awareness of pollution and
environmental protection

Modification of tourists’ preferences

Sustainable Tourism:
“Every tourism activity that preserves for a long time the
local natural, cultural and social resources, contributing to
the well-being of individuals living in those tourist areas”
(Associazione Italiana Turismo Responsabile)


Related Literature (1/2)
• Literature on sustainable tourism:
– Public policies assuring relationship between the local community and
the tourists
• Accinelli, Brida & Carrera [2008], Caserta & Russo [2002]
– Public policies enhancing the actors to implement ecologically
responsible measures and amenities
• Rivera [2002], Shen & Zheng [2010], Weaver [2005]
– Ecological education of market actors and population
• Nita & Agheorghiesei [2010]
– Demand influence on investment and modernisation of amenities
• Accinelli, Brida, Carrera & Pereyra [2007], Brau [2008], Claude & Zaccour
[2009], Minciu, Popescu, Padurean, Hornoiu & Baltaretu [2010]
– Price discrimination in natural reserves ticket pricing
• Becker [2009], Walpole, Goodwin, Kari [2001]


Related Literature (2/2)

• Price discrimination strategies in tourism
• Clemons, Hann & Hitt [2002], Gallego & van Ryzin [1994], Stokey[1979]

• Tourism products distribution strategies
• Fay [2008a], Fay [2008b], Feng & Xiao [2000], Fleishmann, Hall & Pyke
[2004], Fleishmann, Hall & Pyke [2004], Shapiro & Shi [2008], Zhao & Zheng [2000]


ISSUE
Given the modification of demand preferences, how
the service provider adapts its offer and reacts to
the possibility of a competitor’s entry?

What role do the service provider and industry play in
the emergence of environmental norms?

Method:
optimisation model with heterogeneous agents


General Settings – 5 stages:
1. No information on existing pollution
– traditional product only
2. Public information (i) on environmental damages is made available
– new segment of demand appears (m) – agents sensible to environmental issues and
interested in sustainable tourism products
– 2 types of product on 2 different markets
3. Agents integrate this information and environmental issues in their
decisions
– m grows
– new brand emerge for sustainable tourism products
4. Environmental norms become general norms
– quality of sustainable tourism products improve
– all agents consume the products
5. Possibility of competitor’s entry on the traditional market
– 3 incumbent’s reactions possible
– The industry’s role in emergence of environmental norms


No information on existing pollution
1. n agents interested in traditional products according to their
net utility function:

uT    PT  

Firm’s profits:

*  n  PT  n(   )
T


Demand differentiation
2. Information i on existing pollution appears and the new
segment of demand m (agents sensible to environmental
issues)

– 0  m0  n – initially very small
– Their utility decreases as traditional products generate pollution:
uT     pT   , with    
G

– Service provider adapts the traditional product’s price:
pT 2     

– Service provider’s profits:
T 2  n(    )
T 2  T
*


Product differentiation
– Service Provider adapts to the new segment of demand
& offers a sustainable tourism product:
o assumption:    (rather low quality – ex. camping)
o environmentally conscious consumers’ utility:

ug1     pg1   ,
G

   

– Still (n  m0 ) agents interested in traditional products

– Firm’s profits:
* / g1  m0 (    )  (n  m0 )(   ),
T

* / g1  T 2
T


Branding
3. m spread information i in their circles: m  i
– m increases & becomes m1
 Consumers – more sensible to environmental issues and boycott traditional
polluting products
(   0)

– Service provider creates a specific sustainable tourism brand (h)
 c’ – cost of creating, maintaining quality and confidentiality of parent company
 Consumer’s utility function:
ug 2  ug1     pg1  
G G

– Firm’s profits:
* / g 2  m1 (    )  (n  m1 )(   )  c
T

• But: consumers find out the financial links between the two brands & finally
boycott the new sustainable brand...


Investing in quality
4. Service provider enhances the quality of the product
  
– Double effect:
• It attracts tourists initially not interested in sustainable tourism products;
• It erases service provider’s bad reputation as distributing also polluting products
– Consumers’ utility functions:
uT4    pg 4   
g

ug 4     pg 4   
G

– Price chosen – reservation price of “traditional” tourists
– Service provider’s profits:
* / g 4  n(   ')  c
T


Investing in quality
– Environmental standards become general norms
– nm
Still a group of consumers - more interested in luxury standards than in
environmental issues:

Stable
  b b
mt  max  n, min 0, a(mt 1  )  n  mt 1     solution
  i i 
1
2 stationary solutions possible: m  0 or m  n
20-21/09/2012 Nice
a
2nd International Conference on Tourism Management and 13

New competitor’s entry and the industry’s
role in diffusion of environmental norms
• Arrival of a competitor on the traditional market –
service provider’s possible actions:
– Duopoly (co-existence strategy)
• Each service provider specializes in specific product on specific
market:
Incumbent – sustainable tourism product & entrant – traditional product
 g 5  m1       c
– Elimination pricing
• Incumbent’s profits:
 ce 
 g6  n     c
 n  m1 
– No quality enhancement
 g 3  n(   )


Comparison of incumbent’s profits while
implementing co-existence, elimination
and no quality enhancement strategy


Stylized Facts
• 47% of French in 2011 (1st time since 2006) – more concerned
with environmental issues then economic problems…
…but 78%: sustainable products – too expensive;
and 91%: sustainable products – more expensive than other
products;

• 90%: “green” brands should belong to groups or companies
involved in global sustainable development approach;
• 66% consumers rely on labels;
(ImagePower® Global Green Brands 2011 study by PSB for Cohn & Wolfe and Landor
Associates)


Belambra’s Case
• 2007 – beginning of Sustainable Development mission;
• 4th in 10 top green brands in France (Green Brands 2011);

• Actions:
– Resorts’ renovation to correspond to new standards including
environmental norms (use of environment respective materials etc.)
– Energy saving lamps;
– Waste sorting and recycling;
– Test of remote control of electronic devices in 4 resorts;
– Preserving natural environment on the sites;
– Internal evaluation program measuring environmental norms’ respect
and implementation.


Belambra’s Case
• New resorts constructed in accordance with High Environmental
Quality norms/program (ex: Very High Energy Performances);
• Staff sensitization to environmental issues;
• Promotes local employment;
• Responsible purchase approach:
– environmentally respective cleaning products;
– electric vehicles;
– eco-certified construction materials;
– deliveries’ optimization;

• Partnership with LANEO (support environment preservation actions
and education programs).


Club Med’s Case
• 2004: quality standards’ update
upmarket strategy
– Project: “Cap sur l’Incomparable”
• 2007: creation of the top quality range “5Ψ”;
• “Quali Signs” – global and characteristic to each resort quality
standards;

• 2006: demand influenced investments in environmentally
respective high quality amenities.


Club Med’s case
Number of eco-certified resorts
2008 2009 2010 2011
Total number of 76 75 74 71
resorts
Number of eco- 1 2 8 23
certified resorts (Opio en Provence; 1st EU
eco-certified resort in
France)
Percentage of eco- 1,3% 2,6% 11% 32%
certified resorts source: Club Méditerranée Annual Report 2011
Distribution of eco-certified resorts in the world (total):
– Europe - Africa: 17 (50)
– Asia - Pacific - Oceania: 1 (9)
– Americas: 5 (11)


Club Med’s case
• Customers satisfaction score: 85,1% in summer 2011

• Actions:
– 100% waste water cleaned ;
– 55% of resorts perform waste tracking;
– 10% of energy comes from renewable sources;
– 12% reduction of CO2 emission;
– Biodiversity protection programs (& educative programs) in
Gregolimano, Opio and Corsican resorts (Cargese - Natura 2000
network)

– 95% of purchases - local;
– 76% of employees - locals;


Results & Further research
• Evolution of service provider’s offer given the modification of
demand preferences:
– depending on m and 
• Analysis of branding strategy
– Demand heterogeneity
– Reputation effects
• Importance of quality
• Industry’s role in emergence of environmental norms
– Monopoly & competition cases
• Empirical examples

• Further research:
• the role of local residents in the adoption of sustainable products and
norms;
• labelling.


Sustainable Tourism and the emergence
of new Environmental Norms
Malgorzata OGONOWSKA & Dominique
TORRE
Université de Nice – Sophia Antipolis, France
GREDEG - CNRS

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Sustainable Tourism and the emergence on new Environmental Norms

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