What is a value chain? Value chain refers to the activities within and around the orgianzation that relates to its competitive position. It is the story of a product, from creation to consumption.
In the previous lesson, we encountered the word “analysis” which means breaking down a complex topic into smaller, comprehensible parts. Hence, to analyse the tourism value chain means to liik at tis smaller parts and components and follow the story of a tourism product from planning up to the delivery of the experience to the tourist. Value chain analysis entails the examination of each sub-system or organization represented by each box a shown in Figure 10.1 to understand how the business can improve its operations, competitive advantage, and profitability. For example, “How can tourism intermediaries like travel agencies improve its relationship with suppliers like hotels?” this can be done through establishing a credit line and priority in booking, which hotels usually provide to good clients.
Tourism suppliers, also called tourism principals, include hotels,, restaurants, museums, shops, and transport companies. Intermediaries, such as tour operators and travel agencies link the suppliers to the consumers and vice versa. They provide means to convert inquiries to actual bookings. Tour operators sell wholesale or in bulk, while travel agencies usually sell retail. In addition, tour operators by and hold title to rooms, tickets, or transportation seats while travel agents only represent either the principal or a tour operator and do not buy room, tickets, or seats. The consumers or end-users refer to the tourists.
The story of the tourism product could go this way: the tour operator puts together a package that includes hotel accommodation, transportation, and city tour; sells it directly to a group of tourists or through a travel agency; and then, the tourists get to experience it through the services provided by the driver, the hotel staff, and the tour guide.
The linkages in tourism go not only forward but backward as well. Backward linkages refer to the supply chain in tourism. Tourism is not just a single industry but a mix of interrelated sectors that range from hotels and airlines down the line to food production and other allied services (Edgell et al., 2008). For instance, with tourism, vegetable farmers and fishermen will have more buyers. Other products and services will have to sourced, too, either through local or foreign suppliers.