Int. J. Leisure and Tourism Marketing, Vol. 4, No.

2, 2014 135

Identifying travel and tourism industry clusters:

an empirical analysis using macro-economic data

Amanpreet Kang
Amity Business School,
F-2 Block, 3rd Floor,
Faculty Suites (M&S – II),
Amity University Campus,
Sector-125, Noida, India
E-mail: akang@amity.edu

Abstract: Travel and tourism industry if developed strategically can prove to

be the ‘golden goose’ for any economy contributing to employment,
national income, balance of payments and foreign exchange earnings. The
successful development of this industry is reliant on several factors viz.,
tourism openness, government expenditure, infrastructure and skilled resources,
etc. The present research identified 20 such macro-economic variables that
impact the growth and development of travel and tourism industry and data was
collected for 140 countries from various sources. Analysis was done using
multivariate technique resulting in the formation of ‘four’ distinct clusters. The
clusters were studied to establish whether these destinations have the potential
for the development of travel and tourism industry. This research is an attempt
to draw attention of the policy makers towards the overlooked resources of
their regions, especially those contributing to development of travel and
tourism, which can be utilised for effectively marketing their destinations.

Keywords: travel and tourism industry; macro-economic variables;

hierarchical cluster analysis; K-means cluster analysis; industry potential;
economic growth.

Reference to this paper should be made as follows: Kang, A. (2014)

‘Identifying travel and tourism industry clusters: an empirical analysis using
macro-economic data’, Int. J. Leisure and Tourism Marketing, Vol. 4, No. 2,
pp.135–155.

Biographical notes: Amanpreet Kang is an Assistant Professor in International

Business at Amity Business School. She is pursuing her PhD and her research
interests include International Marketing, International Trade and Economics
and WTO and International Regulatory Environment.

1 Introduction

“The world is a book and those who do not travel read only one page”.
St. Augustine
The opinion reflected by St. Augustine echoes the importance of travel and tourism.
However, travel once was largely the forte of the rich in the society. Tourism as a leisure

Copyright © 2014 Inderscience Enterprises Ltd.

136 A. Kang et al.

activity became a mass phenomenon only in recent decades. Travel refers to the activity
of travellers and a traveller is someone who moves between different geographic
locations, for any purpose and any duration. Tourism, which is a subset of travel, is
described as travel for recreational, leisure, or business purposes and the World Tourism
Organisation defines ‘tourists’ as ‘domestic, inbound or outbound visitors’ whose trip
includes an overnight stay. Tourism was recognised in the Manila Declaration on World
Tourism (1980) as ‘an activity essential to the life of nations because of its direct effects
on the social, cultural, educational and economic sectors of national societies and on their
international relations’.
Travel and Tourism is a vital industry for an economy and has the potential to bestow
economic growth and development. It is also the primary source of income in some
countries such as Thailand, Maldives, Nepal, etc. which have strong dependence on this
sector. The Travel and Tourism sector contributes to employment, raises national income
and can improve the balance of payments of a nation by generating foreign exchange
earnings (World Economic Forum, 2013). This sector is an important driver of growth
and prosperity, especially in developing countries which lack competitive manufactured
product offerings for export markets. This sector can play a key role in exporting higher
value added services from these nations.
The magnitude of travel and tourism industry can be gauged by its economic
contribution. As estimated by the World Travel and Tourism Council (WTTC), the direct
and indirect activities of travel and tourism sector combined, accounted for 9.2% of
global gross domestic product (GDP), 4.8% of world exports and 9.2% of world
investment in 2012. This industry generated 1 in 11 of the total world’s jobs. Conversely,
in value terms its contribution to world GDP was US$ 6.6 trillion and this sector created
more than 260 million jobs. The significant contribution of Travel and Tourism Industry
to the world economy, in 2012, is presented in Table 1.
However, this sector is particularly susceptible to mild macro-economic changes
which in turn hugely impact its growth. In recent past, travel and tourism was adversely
affected by recession in late 2008 and early 2009, climatic disturbances (such as
earthquakes and tsunami), pandemics (such as outbreak of the H1N1 influenza virus) and
supranational security and health safety incidents (such as SARS, bird flu). As a result,
the international tourist arrivals contracted in 2009 and recovery was achieved only in
2012 when tourist arrivals surpassed the milestone 1 billion tourists globally for first time
in history (World Travel and Tourism Council, 2013).
As discussed above, it is well documented that developing the travel and tourism
sector provides many benefits to economies. But, numerous national level obstacles can
also hinder its development. The nations should identify the factors that positively and
negatively impact travel and tourism industry. The strategic development of the factors
that clearly promote travel and tourism can provide potential gains to these nations. It is
also important to benchmark a destination vis-à-vis other potential ‘destination’
competitors. For undertaking cross country comparison, it is imperative to analyse the
competence of these destinations based on certain characteristics for which comparative
data are available. As these are most basic characteristics of the nations and can be
categorised as macro-economic variables. The present research endeavours to study the
macro-economic variables that impact travel and tourism industry. It proposes to
highlight the macro-economic characteristics which contribute or decelerate the
development of this sector in a nation. Finally by making cross country comparison, the
 Identifying travel and tourism industry clusters: an empirical analysis 137

present research work helps to identify segments of countries which have the potential to
develop/strengthen their travel and tourism industry.

Table 1 Contribution of travel and tourism industry (World)

World 2005 2006 2007 2008 2009 2010 2011 2012

Travel and tourism direct contribution to GDP
2011 US$ bn 1860 1930.53 1985.92 1935.8 1867.78 1928.39 1992.1 2056.59
Travel and tourism total contribution to GDP
2011 US$ bn 5840.75 6091.52 6321.58 6328.54 6082.55 6243.63 6436.6 6630.37
Visitor exports
2011 US$ bn 1030.6 1073.21 1121.94 1140.96 1070.77 1132.84 1186.86 1242.95
Domestic travel and tourism spending
2011 US$ bn 2707.91 2830.93 2893.86 2841.48 2703.06 2776.08 2854.11 2934.8
Government individual travel and tourism spending
2011 US$ bn 48.791 50.495 52.565 54.797 57.824 59.492 60.24 61.539
Internal travel and tourism consumption
2011 US$ bn 3791.81 3959.39 4073.03 4042.3 3837 3972.94 4105.72 4243
Leisure travel and tourism spending
2011 US$ bn 2808.3 2900.12 2979.56 2987.5 2892.1 3006.55 3113.65 3222.13
Business travel and tourism spending
2011 US$ bn 977.036 1053.13 1086.89 1048.39 938.528 960.723 987.645 1017.44
Capital investment
2011 US$ bn 636.655 692.491 758.21 803.2 725.568 722.706 746.729 764.737
Source: World Travel and Tourism Council (WTTC)

The plan of the remaining paper is as follows – the subsequent section reviews the related
studies in the literature. The thirst and the fourth sections discuss the objectives and
rationale for conducting this study. The fifth section describes the methodology, sample
selection and data collection. The section after that reports the empirical findings and
finally the last section concludes and provides avenues for future research.

2 Literature review

Travel and tourism is an important industry for the global economy with significant
economic impacts. The governments of several nations are gradually prioritising tourism
for achieving economic development. Ekanayake and Long (2012), examined the causal
relationship between tourism development and economic growth using Granger causality
tests in a multivariate model using the annual data for the 1995–2009 period. Though the
results indicated that the elasticity of tourism revenue with respect to real GDP was not
statistically significant but its positive sign indicated that tourism revenue makes a
positive contribution to economic growth in developing countries. The results of the
138 A. Kang et al.

study also suggest that governments of developing countries should focus on economic
policies to promote tourism as a potential source of economic growth. Undoubtedly
tourism can have direct, indirect positive and negative economic impacts for any country.
With short-term and long-term strategic planning for tourism development, using specific
abilities and tourism products, most of the problems of developing countries such as
unemployment, low foreign exchange earnings, high inflation, etc. can be largely solved
(Ardahaey, 2011). Chen and Kim (2010) studied the impact of growth of this sector on
corporate earnings of tourism firms. They tried to find out whether tourism expansion
leads to significant growth in corporate earnings for tourism firms. The results of causal
analysis support the assumption that tourism expansion could significantly improve the
corporate earnings of tourism companies.
Though many research studies have highlighted that tourism can help in economic
development, a research in Kenya concluded that forms of tourism development
employed did not reduce poverty or contributed to the socio-economic empowerment of
local people. Conversely, large scale capital-intensive tourism projects led to increasing
control of the country’s tourism resources by powerful external interest groups and the
propagation of enclave tourism. This resulted in high outflows of tourism revenues and
limited benefits to the local and national economy. Local people were not involved in
product development and product marketing, and got minimal benefits from the tourism
industry while bearing many of the costs. This was result of unclear tourism strategies
and policies for sustainable socio-economic development through this sector (Akama and
Kieti, 2007).
The market for tourism services and products is dynamic and accompanied by rapid
changes in the environment due to increased competition, technological changes and
inflation (Meidan, 2005). There are various factors that affecting the tourism market and
the degree to which a country can benefit from its tourism industry depends largely on its
competitive position on the international tourist market and therefore, it is very important
for a destination to realise its real competitive position in the tourism market as well as to
address its weaknesses after comparing them to its major competitors (Armenski et al.,
2011). Park and Yoon (2011) conducted a research using qualitative measures (Delphi
technique) for identifying the indicators to measure sustainable rural tourism
development. They identified 33 indicators including accessibility, convenience,
accommodation, environment, tourism business, customer satisfaction, etc. For entire
tourism industry to develop, its major sectors should also grow. The major sectors of
travel and tourism include
• travel agencies and tour operators
• hotel and catering
• transport (Meidan, 2005).
These sectors should be carefully developed by individual governments. International
Financial Corporation (IFC) among many other international organisations focuses on
development of hotels in many countries as they constitute tourism and business
infrastructure. The hotels also have great potential for job creation, growth in tax
revenues and are source of foreign exchange earnings (Peric et al., 2009).
 Identifying travel and tourism industry clusters: an empirical analysis 139

3 Objectives

The market forces drive many companies to extend their operations abroad and target
international market segments (Steenkamp and Hofstede, 2002). Many companies today
choose to serve segments that transcend national borders (Hassan and Katsanis, 1994).
Thus, inter-market as well geographic segmentation will become necessary. However,
irrespective of the importance of international segmentation, the number of studies
undertaking this is relatively less (Steenkamp and Hofstede, 2002). To conduct
international segmentation, a large number of segmentation bases and segmentation
methods are used including – information on countries (or regions within countries),
information regarding consumer preferences across countries, individual – specific
information of consumers. Out of these the country-level segmentation bases typically
include a combination of economic, political, geographic and demographic information
(Helsen et al., 1993; Huszagh et al., 1986) or cultural variables (Hofstede, 1980; Sirota
and Greenwood, 1971; Steenkamp, 2001). Previous research studies aimed to study the
causal relationship between tourism and economic development. Some have tried to
identify the factors that lead to the development of travel and tourism. After identifying
the factors that help in the development of this industry, it is important to benchmark the
destinations basis the factors. This will help in providing conclusive evidence as to why
some countries have a competitive travel and tourism sector and others do not. On basis
of the literature review and research gap analysis, the present research was conducted
with the following key objectives:
• to identify the macro-economic variables that are likely to impact travel and tourism
industry
• to segment countries on the basis of these macro-economic variables thus assessing
their potential as travel and tourism destinations.

4 Rationale for the study

As discussed in the sections above there are several benefits that travel and tourism
industry can offer to the economies. The governments of the respective nations have to
take development of this industry strategically. Certain countries are likely to have
adequate ingredients necessary for the growth of this industry but may have not realised
their potential. Even Indian government started focusing on building this industry only
recently. The governments, policy makers and marketers need to identify what makes or
can make their destinations as ideal tourism hot-spots. To the best of my knowledge,
previous research done on this topic does not endeavour to segment majority of the
world nations into clusters of model travel and tourism destinations. None have used
macro-economic characteristics of countries for identifying potential travel and tourism
segments of nations. The findings of this research will help marketers and national
governments in dovetailing their marketing strategies for developing successful travel
and tourism business.
140 A. Kang et al.

5 Methodology

Identifying macro-economic variables influencing travel and tourism industry in a

country: The Travel and Tourism Competitiveness Index 2013 (TTCI), of World
Economic Forum (WEF) has recognised 14 pillars, i.e., broad factors which impact this
industry. Figure 1 provides the details regarding these 14 pillars as specified by WEF.
The data for this report was collected from the Executive Opinion Survey as well as
certain external sources which provide the best available estimates from various national
authorities, international agencies, and private sources, etc. (Blanke and Chiesa, 2013).
This report helps to gauge the competitiveness of different countries individually.
However, the overall travel and tourism competitiveness index is not calculated.

Figure 1 14 Pillars impacting travel and tourism competitiveness (see online version for colours)

Source: Adapted from The Travel and Tourism Competitiveness

Report (2013), WEF

For the purpose of the present research, the macro-economic variables influencing travel
and tourism industry are identified on the basis of previous research as well as from the
list of variables selected by World Economic Forum for creating Travel and Tourism
Competitiveness Index 2013. As these variables can also be used to study the differences
in performance of these countries in Travel and Tourism Industry, they were selected. All
the variables included under each of the 14 pillars were not selected. The variables based
on primary research, i.e., Executive Opinion Survey were specifically omitted. Further,
for some of the variables the data are not freely available from national and international
organisations. Owing to cost and time constraints, it was not possible to include all the
macro-economic variables in the present study. This has also been highlighted as one of
the limitations of the present work.
 Identifying travel and tourism industry clusters: an empirical analysis 141

Description of macro-economic variables included in the study: A brief description of all

the potential determinants impacting travel and tourism sector of a nation, included in the
present research, is as follows:
Name of the variable Explanation of the variable and its inclusion
Number of World The World Heritage cultural sites are those properties that the World
Heritage cultural sites Heritage Committee considers as having outstanding universal value.
and Oral and Intangible The Intangible Cultural Heritage includes those practices,
Heritage (V1) representations, expressions, knowledge, skills that communities,
groups, and, in some cases, individuals recognise as part of their cultural
heritage. These provide nations with a sense of identity and this variable
has been selected as it will continue to promote respect for cultural
diversity and human creativity
Sports stadiums (Sports This variable is calculated as the ratio of total seats for all major sports
stadium capacity per stadiums in the country to the total population (in millions). The number
million population; V2) of sports stadiums in a country will help the country in attracting
international tourists for watching sports and games
Number of international The higher the average number of international fairs and exhibitions
fairs and exhibitions held held annually in each country, the higher is the likelihood of
in the country annually international tourist flow
(V3)
Creative industries The products of creative industries include art crafts such as carpets,
exports (V4) celebration papers, paperware, wickerware, yarn, other; films;
architecture, fashion, glassware, jewelry; music; books, newspapers and
other; antiques, paintings, photography, sculpture, and other. If a
country produces more such papers, the likelihood that people from
other nations will get attracted is high
Number of World The World Heritage natural sites are those properties that the World
Heritage natural sites Heritage Committee considers as having outstanding universal value.
(V5) These will help in inviting international tourists
Tourism openness The ratio of the sum of international tourism expenditures and receipts
(Tourism expenditure to GDP indicates tourism openness of an economy and has thus been
and receipts as a included
percentage of GDP; V6)
Ticket taxes and airport This index measures the relative cost of access to international air
charges (V7) transport services based on the level of airport charges, passenger ticket
taxes, and value-added taxation. As this adds to the cost of travel it has
to be carefully assessed
Ratio of purchasing This variable is selected as it will help to determine relative expense of
power parity (PPP) travel for tourists in different economies
conversion factor to
official exchange rate
(V8)
Hotel price index (V9) This index measures the average price, in US dollars, of first-class hotel
accommodation in each country and will add to the cost of travel and
has thus been included
Hotel rooms (V10) Number of hotel rooms per 100 population. This will help to determine
the availability of places four tourists to stay
ATMs accepting Visa Number of automated teller machines (ATMs) accepting Visa credit
cards (V11) cards per million population. This variable once again indicates ease and
convenience for travellers
142 A. Kang et al.

Road density (V12) The higher is the road density, easier will it be for people to commute.
The kilometres of road per 100 square kilometres of land, is assessed by
this variable. It also indicates the level of infrastructure
T&T government The travel and tourism government expenditure as a percentage of total
expenditure (V13) government budget. This measure includes expenditures (transfers or
subsidies) made by government agencies to provide T&T services such
as cultural (e.g., art museums), recreational (e.g., national parks),
clearance (e.g., immigration/customs), and so on to visitors. This also
indicates the focus of individual country governments towards
development of this sector
Road traffic accidents Estimated deaths due to road traffic accidents per 1,00,000 population.
(V14) This indicator is estimated using fatal road traffic injury data. It will help
in assessing the safety of tourists in a specific destination
Visa requirements (V15) This variable is based on visitor visa requirements of all UN countries.
The score refers to the percentage of UN countries whose citizens
require a visa to enter the country. This will help to indicate the easy of
getting a clearance for travel to the specific destination
Number of operating It represents the number of airlines with scheduled flights originating in
airlines (V16) the country
Airport density (V17) The number of airports with at least one scheduled flight per million of
population. Higher is the density, higher is the traffic that can be
handled
Departures per 1000 It indicates the number of departures per 1000 population. The aircraft
population (V18) departures include the number of domestic and international take-offs
of air carriers registered in the country
Available seat The scheduled available international seat kilometres per week
kilometres, international originating in country (in millions) is represented. This variable
(V19) measures an airlines’ passenger-carrying capacity and it is composed of
the number of seats available on each international flight multiplied by
the flight distance in kilometres
Available seat The scheduled available domestic seat kilometres per week originating
kilometres, domestic in country (in millions) is measured. This variable measures an airlines’
(V20) passenger-carrying capacity and it is composed of the number of seats
available on each domestic flight multiplied by the flight distance in
kilometres

Data sources: The data have been compiled from various reputed secondary data sources
including: International Congress and Convention Association (ICCA), United Nations
Conference on Trade and Development (UNCTAD), UNESCO, World Tourism
Organisation, International Monetary Fund, International Air Transport Association
(IATA), The World Bank, World Development Indicators, Booz & Company,
Deloitte–STR Global and Smith Travel Research Inc., Visa, World Travel & Tourism
Council, World Health Organisation, etc.
Theoretical model: For the purpose of international segmentation, the researchers can
utilise general observable bases or domain-specific bases. The general observable bases
are easy to identify, result in substantial international segments and the type of data
involved in these segmentation bases is available from published sources for a large
range of countries (Steenkamp and Hofstede, 2002). The present research is based on the
general observable macro-economic variables and the data on the selected variables is
secondary data publically provided by reputed national and international organisations
 Identifying travel and tourism industry clusters: an empirical analysis 143

(specified above). Another major benefit is that these bases enjoy construct equivalent
across countries which is a major problem faced when using domain specific variables.
Figure 2 details the theoretical model followed for present research.

Figure 2 Theoretical model used for international market segmentation

Source: Adapted from two-stage model for international segmentation

suggested by Gaston-Breton and Martín (2011)

Theoretically it is proposed that:

Travel and Tourism Potential ∼ f (V1, V2, V3, …, V20).
This research will segment the countries of the world to identify segments of nations
which have significant potential for developing travel and tourism industry.
Procedure: After macro-economic variables were identified clustering was undertaken
with the objective of understanding similarities among markets which would allow
formulating a common marketing strategy. Along with similarities, differences between
the clusters provide equally meaningful insights by allowing targeting each cluster
contrarily. Most of the previous research studies have reduced the initial number of
variables into factors using exploratory factor analysis. Subsequently hierarchical and
k-mean clustering techniques are used for analysis. Using this methodology when
exploratory factor analysis was undertaken, meaningful factors were not obtained. Hence,
it was decided to cluster countries after standardising the variables included in the study.
The technique used for segmentation is cluster analysis. This technique is used because
cluster analysis is a multivariate statistical technique used to classify objects or items
based on their similar or dissimilar characteristics. As the characteristics of countries are
varied, when clustering of countries is undertaken, it will minimise within-group variance
and maximise between-group linkages leading to formation of heterogeneous groups with
homogeneous contents within each group (Hair et al., 1998). This will help us to
determine how many homogenous travel and tourism ‘hot-spots’ exist and also identify to
which segment does each country belong.
144 A. Kang et al.

In cluster analysis, the hierarchical method will group the countries with similar
characteristics together via a linkage method. When procedure starts there are N clusters
with one case each. Ward’s method which evaluates the squared Euclidean distance
between the two clusters based on the values of all the variables is used. The most similar
pair of cases combine at each stage in the clustering procedure, i.e., the within-cluster
sum of squares is minimised over all partitions obtained. This is repeated until all cases
are in one cluster and the best cluster solution is determined by a large change in
agglomeration coefficient. In present research, the Euclidean distance to analyse the
pairwise distance between countries (based on 20 variables included in the study) can be
represented as follows:
n = 20
D ( j, k ) = ∑ (X
i =1
ij − X ik ) 2 ,

where Xij and Xik represent the ith characteristic of countries j and k, respectively.
The smaller is D(j, k), the more similar are countries j and k. Furthermore, the sum of
squared deviations within a cluster k is calculated as follows:
20
ESS(k ) = ∑∑ ( X ijk − X ik ) 2 ,
j € k i =1

where Xijk is the ith characteristic of country j in cluster k, and X ik is the average of the
ith characteristic across all countries in cluster k. This clustering procedure will group
countries based on their travel and tourism potential and identify regions which are more
lucrative than the others. The details of analysis and discussion of the results is described
in the next section.

6 Data analysis, interpretation and discussion of results

The data for 140 countries of the world was compiled from various sources (mentioned
above). After compilation, the data were analysed using SPSS Ver. 20.0. Table 1 presents
the summary of descriptive statistics of all the variables for 140 countries in the dataset.
The sample means, maxima, minima, standard deviations and variance are reported. The
standard deviation and variance for each variable is considerable because the countries
are large in number, i.e., 140 and also vary significantly on each of the variables selected.
This stresses the importance of identifying similar characteristics among the countries for
clustering them.
One of the main requirements for conducting cluster analysis is that the data are
normal. The descriptive analysis in Table 1 is indicative of variance in data and also
suggests the need for standardising the data. Thus, before conducting the analysis, all the
variables were standardised (i.e., that they had a mean of 0 and a standard deviation of 1).
As discussed above to begin with, as a priori number of clusters is unknown, the initial
analysis was done using hierarchical cluster analysis (using Ward’s method and applying
squared Euclidean Distance as the distance or similarity measure). This helped to identify
the optimum number of clusters. Several solutions were examined to determine the
number of clusters to be extracted. The agglomeration coefficients, vertical icicles plot
and dendrogram were used to determine the optimum number of clusters. When the
 Identifying travel and tourism industry clusters: an empirical analysis 145

agglomeration schedule in employed to determine the optimal number of clusters, small

variations in the agglomeration coefficient indicate that fairly homogeneous clusters are
being merged. Alternatively, if the agglomeration coefficient varies distinctly between
stages, then it indicates the creation of a new cluster. When vertical icicle plot and the
dendrogram are used, they graphically describe the creation of clusters. On the basis of
the results of all these, the number of clusters identified after hierarchical cluster analysis
is ‘four’.
As suggested by previous research studies (Milligan, 1980; Hair et al., 1998) the
results of the hierarchical cluster analysis were refined using a non-hierarchical procedure
known as K-means clustering. In K-means clustering, the initial cluster centres are
determined (based on results of hierarchical cluster analysis). The countries are then
allocated to these clusters based on their ‘nearness’ to each of the cluster centre. The
cluster centres are recalculated and iterations are conducted for re-allocation of the
countries to each cluster. The maximum number of iterations for analysing this data was
pre-specified as 10. However, only six iterations resulted in the formation of final
clusters which have been reported. Table 2 presents the initial cluster centres for all
variables (in each cluster) used for clustering countries and Table 3 presents the final
cluster centres after analysis is completed. Table 4 represents the number of countries in
each cluster and Table 5 shows the countries that have clustered together to form the four
clusters.

Table 2 Initial cluster centres

Initial cluster centres

Clusters
Variables 1 2 3 4
Number of world heritage V1 24.00 8.00 1.00 3.00
cultural sites
Sports stadiums V2 87427.90 1628.60 244059.60 161078.70
Number of international fairs and V3 449.00 7.70 34.70 48.00
exhibitions
Creative industries exports V4 4.30 0.00 0.00 0.00
Number of world heritage V5 5.00 1.00 1.00 0.00
natural sites
Tourism openness V6 3.50 2.90 10.60 6.10
Ticket taxes and airport charges V7 24.50 72.90 84.00 88.20
Ratio of purchasing power parity V8 1.10 0.30 1.20 0.90
(PPP) conversion factor to official
exchange rate
Hotel price index V9 125.90 115.60 118.40 120.20
Hotel rooms V10 1.00 0.00 3.10 0.60
ATMs accepting Visa cards V11 639.60 2.30 592.50 25.20
Road density V12 172.00 4.00 13.00 44.00
T&T government expenditure V13 2.80 2.40 10.70 5.10
Road traffic accidents V14 5.40 35.00 10.00 4.30
Visa requirements V15 87.00 26.50 71.00 71.00
146 A. Kang et al.

Table 2 Initial cluster centres (continued)

Initial cluster centres

Clusters
Variables 1 2 3 4
Number of operating airlines V16 156.50 11.00 9.00 12.00
Airport density V17 1.00 0.30 27.70 0.60
Departures per 1000 population V18 18.90 0.60 35.40 5.70
Available seat kilometres, V19 5990.30 183.10 91.60 54.80
international
Available seat kilometres, domestic V20 239.20 3.70 2.40 0.00
Source: Analysis of data compiled from various sources

Table 3 Final cluster centres

Final cluster centres

Clusters
Variables 1 2 3 4
Number of world V1 9.26 6.65 1.00 7.29
heritage cultural sites
Sports stadiums V2 59229.28 15033.02 228270.23 128973.53
Number of international V3 110.87 33.78 42.23 137.20
fairs and exhibitions
Creative industries V4 0.83 0.71 0.17 0.71
exports
Number of World V5 1.29 1.41 1.00 2.38
Heritage natural sites
Tourism openness V6 6.65 4.97 16.10 8.17
Ticket taxes and airport V7 76.62 72.16 78.17 81.49
charges
Ratio of purchasing V8 0.80 0.57 0.93 1.05
power parity (PPP)
conversion factor to
official exchange rate
Hotel price index V9 121.44 102.21 233.90 145.13
Hotel rooms V10 0.81 0.24 2.53 1.60
ATMs accepting Visa V11 508.01 162.33 495.13 647.55
cards
Road density V12 97.57 40.70 86.67 172.57
T&T government V13 3.79 4.16 12.30 5.42
expenditure
Road traffic accidents V14 14.94 20.77 12.33 9.82
Visa requirements V15 78.35 76.54 98.60 65.07
Number of operating V16 46.51 29.74 16.00 46.24
airlines
 Identifying travel and tourism industry clusters: an empirical analysis 147

Table 3 Final cluster centres (continued)

Final cluster centres

Clusters
Variables 1 2 3 4
Airport density V17 1.61 0.56 17.63 2.88
Departures per 1000 V18 10.46 2.19 112.67 26.37
population
Available seat V19 722.84 388.87 172.03 1003.03
kilometres, international
Available seat V20 131.93 227.83 1.73 1152.17
kilometres, domestic
Source: Analysis of data compiled from various sources

Table 4 Number of cases in each cluster

Number of cases in each cluster

Cluster 1 42.000
2 74.000
3 3.000
4 21.000
Valid 140.000
Source: Analysis of data compiled from various sources

Table 5 Countries in each cluster

Number of countries Countries included

Cluster 1 42 Albania, Argentina, Armenia, Austria, Belgium, Bosnia and Herzegovina,
Botswana, Brazil, Brunei, Darussalam, Canada, Cape Verde, Chile, Costa
Rica, Croatia, Czech Republic, Ecuador, Estonia, France, Georgia,
Germany, Greece, Hungary, Italy, Jamaica, Korea, Rep, Kuwait, Latvia,
Lebanon, Lithuania, Macedonia, Netherlands, Oman, Panama, Poland,
Puerto Rico, Romania, Serbia, Slovak Republic, Suriname, Swaziland,
UAE, UK
Cluster 2 74 Algeria, Azerbaijan, Bangladesh, Benin, Bolivia, Burkina Faso, Burundi,
Cambodia, Cameroon, Chad, China, Colombia, Côte d’Ivoire, Dominican
Republic, Egypt, El Salvador, Ethiopia, Gambia, Ghana, Guatemala,
Guinea, Guyana, Haiti, Honduras, Hong Kong, India, Indonesia, Iran, Israel,
Japan, Jordan, Kazakhstan, Kenya, Kyrgyz Republic, Lesotho, Madagascar,
Malawi, Malaysia, Mali, Mauritania, Mauritius, Mexico, Moldova,
Mongolia, Morocco, Mozambique, Namibia, Nepal, Nicaragua, Nigeria,
Pakistan, Paraguay, Peru, Philippines, Russian Federation, Rwanda,
Saudi Arabia, Senegal, Sierra Leone, Singapore, South Africa, Sri Lanka,
Taiwan, China, Tajikistan, Tanzania, Thailand, Turkey, Uganda, Ukraine,
Venezuela, Vietnam, Yemen, Zambia, Zimbabwe
Cluster 3 3 Iceland, Ireland, Seychelles
Cluster 4 21 Australia, Bahrain, Barbados, Bulgaria, Cyprus, Denmark, Finland,
Luxembourg, Malta, Montenegro, New Zealand, Norway, Portugal, Qatar,
Slovenia, Spain, Sweden, Switzerland, Trinidad and Tobago, USA, Uruguay
Source: Analysis of data compiled from various sources
148 A. Kang et al.

To identify the differences between the clusters, one-way analysis of variance (ANOVA)
was conducted. The results of ANOVA are presented in Table 6. To compare the details
of differences between the clusters, the comparative means of all variables for each
cluster are presented in Table 7. Figure 3 presents the graphical comparison of these
results. Across the 20 variables used in the clustering process, the results indicate that
the cluster differences in terms of the means of the variables are highly significant for all
except the following variables: Number of World Heritage cultural sites; Creative
industries exports; Number of World Heritage natural sites; Ticket taxes and airport
charges; Visa requirements; Available seat kilometres, international and Available seat
kilometres, domestic. These variables are not able to differentiate between the groups
when average value for a given ‘n’ for each group is considered. When closely analysed
(refer the reader to Table 7) it is observed that though the differences based on mean
scores are immense, the statistical validity does not exist. However, the majority of the
variables included in the study have an important role in differentiating between the
resultant clusters.

Table 6 ANOVA

ANOVA
Cluster Error
Mean Mean
Variables square df square df F Sig.
Number of world V1 103.51 3.00 115.49 136.00 0.90 0.44
heritage cultural
sites
Sports stadiums V2 106790099164.31 3.00 210876444.11 136.00 506.41 0.00
Number of V3 87809.62 3.00 13930.14 136.00 6.30 0.00
international fairs
and exhibitions
Creative V4 0.48 3.00 7.23 136.00 0.07 0.98
industries exports
Number of world V5 6.54 3.00 6.45 136.00 1.01 0.39
heritage natural
sites
Tourism openness V6 165.38 3.00 31.82 136.00 5.20 0.00
Ticket taxes and V7 539.71 3.00 269.63 136.00 2.00 0.12
airport charges
Ratio of V8 1.43 3.00 0.06 136.00 24.21 0.00
purchasing power
parity (PPP)
conversion factor
to official
exchange rate
Hotel price index V9 24877.46 3.00 4984.49 136.00 4.99 0.00
Hotel rooms V10 14.29 3.00 0.36 136.00 39.97 0.00
ATMs accepting V11 1858366.79 3.00 89101.19 136.00 20.86 0.00
Visa cards
Road density V12 102344.44 3.00 13442.91 136.00 7.61 0.00
 Identifying travel and tourism industry clusters: an empirical analysis 149

Table 6 ANOVA (continued)

ANOVA
Cluster Error
Mean Mean
Variables square df square df F Sig.
T&T government V13 76.43 3.00 16.38 136.00 4.67 0.00
expenditure
Road traffic V14 790.07 3.00 84.29 136.00 9.37 0.00
accidents
Visa requirements V15 1430.66 3.00 1824.57 136.00 0.78 0.50
Number of V16 3606.33 3.00 1307.96 136.00 2.76 0.04
operating airlines
Airport density V17 295.17 3.00 5.73 136.00 51.56 0.00
Departures per V18 13904.39 3.00 179.61 136.00 77.41 0.00
1000 population
Available seat V19 2605325.92 3.00 1552532.81 136.00 1.68 0.17
kilometres,
international
Available seat V20 5645810.95 3.00 3707769.64 136.00 1.52 0.21
kilometres,
domestic
The F tests should be used only for descriptive purposes because the clusters have been
chosen to maximise the differences among cases in different clusters. The observed
significance levels are not corrected for this and thus cannot be interpreted as tests of the
hypothesis that the cluster means are equal.
Source: Analysis of data compiled from various sources

Table 7 Comparison of clusters

Cluster 1 Cluster 2 Cluster 3 Cluster 4

Variables Mean Mean Mean Mean
Number of world heritage V1 9.26 6.65 1.00 7.29
cultural sites
Sports stadiums V2 59229.28 15033.02 228270.23 128973.53
Number of international V3 110.87 33.78 42.23 137.20
fairs and exhibitions
Creative industries exports V4 0.83 0.71 0.17 0.71
Number of World Heritage V5 1.29 1.41 1.00 2.38
natural sites
Tourism openness V6 6.65 4.97 16.10 8.17
Ticket taxes and airport V7 76.62 72.16 78.17 81.49
charges
Ratio of purchasing power V8 0.80 0.57 0.93 1.05
parity (PPP) conversion
factor to official exchange
rate
150 A. Kang et al.

Table 7 Comparison of clusters (continued)

Cluster 1 Cluster 2 Cluster 3 Cluster 4

Variables Mean Mean Mean Mean
Hotel price index V9 121.44 102.21 233.90 145.13
Hotel rooms V10 0.81 0.24 2.53 1.60
ATMs accepting Visa cards V11 508.01 162.33 495.13 647.55
Road density V12 97.57 40.70 86.67 172.57
T&T government V13 3.79 4.16 12.30 5.42
expenditure
Road traffic accidents V14 14.94 20.77 12.33 9.82
Visa requirements V15 78.35 76.54 98.60 65.07
Number of operating V16 46.51 29.74 16.00 46.24
airlines
Airport density V17 1.61 0.56 17.63 2.88
Departures per 1000 V18 10.46 2.19 112.67 26.37
population
Available seat kilometres, V19 722.84 388.87 172.03 1003.03
international
Available seat kilometres, V20 131.93 227.83 1.73 1152.17
domestic
Source: Analysis of data compiled from various sources

Figure 3 Comparison of clusters (see online version for colours)

Source: Analysis of data compiled from various sources

 Identifying travel and tourism industry clusters: an empirical analysis 151

On the basis of the results of cluster analysis presented in Tables 2–7 and Figures 1–3,
a detailed analysis and description of all the clusters is as follows:
• Cluster 1: This cluster is formed of 42 countries and is the second largest cluster.
The countries included are – Albania, Argentina, Armenia, Austria, Belgium, Bosnia
and Herzegovina, Botswana, Brazil, Brunei, Darussalam, Canada, Cape Verde,
Chile, Costa Rica, Croatia, Czech Republic, Ecuador, Estonia, France, Georgia,
Germany, Greece, Hungary, Italy, Jamaica, Korea, Rep, Kuwait, Latvia, Lebanon,
Lithuania, Macedonia, Netherlands, Oman, Panama, Poland, Puerto Rico, Romania,
Serbia, Slovak Republic, Suriname, Swaziland, UAE, UK. The primary
differentiating factors include – number of world heritage cultural sites (including
oral and intangible heritage), creative industries exports and the number of operating
airlines. These countries also score high on the other factors such as – sports
stadiums, number of international fairs and exhibitions, ATMs accepting visa cards,
road density and available seat kilometres (international). These countries primarily
belong to different regions of the world (viz. South America, Europe, Middle East,
etc.). However, the travel and tourism expenditure by Government (as a percentage
of GDP) is the lowest in these countries. Also, tourism expenditure and receipts as a
percentage of GDP and Number of hotel rooms available per 100 population is
relatively lower in these countries. This country cluster is labelled as ‘orphaned
grandeur’ because these are nations which have highest number of world heritage
cultural sites as well as huge creative industry exports. However, apparently the
governments have not had strategic approach towards development of travel and
tourism industry as the travel and tourism overall expenditure is low resulting in low
tourism openness index. The government should realise the potential of these
destinations by undertaking ‘destination marketing’ campaigns. The focus should be
on educating the consumers about cultural heritage of these countries. This can serve
as the unique selling proposition (USP) for marketing these nations.
• Cluster 2: This cluster is formed of 74 countries and it is the largest cluster. The
countries included are – Algeria, Azerbaijan, Bangladesh, Benin, Bolivia, Burkina
Faso, Burundi, Cambodia, Cameroon, Chad, China, Colombia, Côte d’Ivoire,
Dominican Republic, Egypt, El Salvador, Ethiopia, Gambia, Ghana, Guatemala,
Guinea, Guyana, Haiti, Honduras, Hong Kong, India, Indonesia, Iran, Israel, Japan,
Jordan, Kazakhstan, Kenya, Kyrgyz Republic, Lesotho, Madagascar, Malawi,
Malaysia, Mali, Mauritania, Mauritius, Mexico, Moldova, Mongolia, Morocco,
Mozambique, Namibia, Nepal, Nicaragua, Nigeria, Pakistan, Paraguay, Peru,
Philippines, Russian Federation, Rwanda, Saudi Arabia, Senegal, Sierra Leone,
Singapore, South Africa, Sri Lanka, Taiwan, China, Tajikistan, Tanzania, Thailand,
Turkey, Uganda, Ukraine, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe. This
cluster has majority of the developing and underdeveloped countries with exceptions
including Israel, Japan and South Africa. China and India are also a part of this
cluster. These countries rank low on a number of factors such as – sports stadiums;
number of international fairs and exhibitions; tourism openness; ratio of purchasing
power parity (PPP) conversion factor to official exchange rate; hotel rooms; ATMs
accepting visa cards; road density; airport density and departures per 1000
population. Though road density in these countries is less, the estimated deaths due
to road traffic accidents are the highest. The governments of these nations offer low
contribution towards development of travel and tourism sector and indeed tourism
152 A. Kang et al.

openness exhibited by them is the lowest. The number of sports stadiums in these
countries is lowest and the international fairs and exhibitions that take place in these
nations are inadequate. Some of these nations have good number of world heritage
natural and world heritage cultural sites but the governments and private
organisations have failed to market these destinations very well. This country cluster
is labelled as ‘impecunious counties’ because these are nations which have poor
resources (in terms of government’s expenditure) for development of travel and
tourism, government support is less and resulting revenues are also low. It is likely
that the governments do not have enough to meet the needs of this sector. The
governments may involve and invite private participation for development of this
sector. Surprisingly, Japan, Israel and South Africa are a part of this cluster. It is
possible because these are very expensive destinations as the ratio of PPP conversion
factor to official exchange rate is the lowest in this country cluster.
• Cluster 3: This cluster is formed of only three countries and it is the smallest cluster
formed. The countries included are – Iceland, Ireland and Seychelles. The
government expenditure on travel and tourism is the highest in this country cluster.
The expenditure and receipts of this sector as a percentage of GDP (reflecting
tourism openness) is also the highest in this cluster. The Visa requirements for the
tourists are friendly. This country cluster has highest number sports stadium capacity
per million population. Furthermore, the airport density is high and the number of
departures per 1000 population are highest. The number of hotel rooms available in
these countries is the highest. However, the hotel price index is high suggesting that
the hotels are expensive in these nations. It is important to note that the number of
world heritage cultural sites, number of world heritage natural sites and creative
industries exports are the lowest in these countries. Despite their natural
disadvantage due to less number of tourist sites, these countries have been able to
develop their travel and tourism industry significantly and are hence labelled as
‘canny advocates’.
• Cluster 4: This cluster is formed of 21 countries. The countries included are –
Australia, Bahrain, Barbados, Bulgaria, Cyprus, Denmark, Finland, Luxembourg,
Malta, Montenegro, New Zealand, Norway, Portugal, Qatar, Slovenia, Spain,
Sweden, Switzerland, Trinidad and Tobago, USA and Uruguay. This cluster includes
majority of developed countries of the world. These countries boast of the highest
number of World Heritage natural sites and host highest number of international fairs
and exhibitions. However, these countries have stringent Visa requirements and the
ticket taxes and airport charges are also very high. The hotel room density and the
price of these rooms are moderate. It is likely because the ratio of PPP conversion
factor to official exchange rate is very competitive, i.e., these currencies are strong.
These countries have highest number of ATMs accepting Visa cards. Though they
have highest road density the estimated deaths due to road traffic accidents are the
lowest. This country cluster also offers maximum number of available seat
kilometres for international and domestic destinations. The government expenditure
on this sector is moderate and so is tourism openness. The governments can get an
extra edge by strategically marketing these destinations. Hence this cluster is tagged
as ‘opportune expanses’.
 Identifying travel and tourism industry clusters: an empirical analysis 153

7 Conclusions

The research to segment countries for identifying their travel and tourism potential
successfully clustered 140 countries into four homogenous clusters. Majority of the 20
variables used for classification could be used to distinguish between the clusters. The
four clusters obtained were named as: ‘orphaned grandeur’, ‘impecunious counties’,
‘canny advocates’ and ‘opportune expanses’. These names are suggestive of the
characteristics of these clusters. The canny advocates are those countries that despite
having adequate ingredients have developed their travel and tourism industry very well
resulting in high earnings from this sector. Apart from this cluster none of the other
countries/clusters have considered developing this industry strategically. The fourth
cluster includes some of the well known destinations but the data indicates that probably
these destinations earn significantly due to business travellers vs. tourists. The earnings
that they have and the government expenditure on this sector is moderate. Furthermore,
countries belonging to the first cluster are major losers because despite having required
elements they have not marketed their destinations well. To add to it, the governments of
these nations have exhibited a step treatment towards this sector leading to low
contribution of this sector to their GDPs. The second cluster combining majority of the
developing countries (except Japan, Israel and South Africa) is the most difficult to
rectify. These countries do not possess adequate resources to develop travel and tourism
industry. An alternative could be to attract private investment – be it domestic or foreign
– in this sector. This could lead to development of one of the most profitable and
resourceful sector of their economies.

8 Limitations and suggestions for future research

Like all other research endeavours, this study does suffer from certain limitations all of
which suggest further possibilities of research. It was very challenging to identify specific
input variables and to ensure the completeness of the same. A possible opportunity for
future research will be to identify more variables related to infrastructure, political and
legal environment of countries as these are also likely to impact the travel and tourism
industry. Also, the other participants in this sector such as travel agents, their role
and technology could be incorporated for refining the research results. Also as time
series data of these variables has not been used the changes in performance of these
countries on the selected variables have not been studied. Future researchers can use
time-series data to study the development of travel and tourism industry in the selected
countries.

Acknowledgements

I am grateful to the anonymous referees of the journal for their extremely useful
suggestions to improve the quality of the paper. Usual disclaimers apply.
154 A. Kang et al.

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