Wine Tourism Destinations:Increasing Competitiveness Through Collaboration

by

Olivia Nowek

for

Dr. Brian White

Royal Roads University

October 10, 2013

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Table of Contents

Abstract…...……………………………………………………..……………………..2

Introduction to Wine Tourism……………………………………………………….…3

Key Themes

Stakeholders……………………………………………………………………………5

Cooperation, Networks, and Partnerships..………………..……...……………………6

Cluster Theory………………………………….………………………………………8

Exploring Examples of Wine Tourism Partnerships

Wine Routes…….……………………………………………………………………...9

Destination Management Organizations (DMOs)………………………………….....10

Government’s Role (Public-Private Partnerships).........................................................12

Napa Valley, California……………………………………………………………….14

Recommendations……………………………………………………………………..15

Conclusion………………………………………………………………….…………16

Figure 1.1……………………………………………………………………………...17

References……………………………………………………………………………..18

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Abstract

As travel with the main purpose of visiting wine regions becomes ever more popular, the

wine industry has slowly begun to acknowledge that in order to compete with similar

destinations around the world, there is benefit in forming networks at varying levels. In the

literature surrounding wine tourism, there are several key themes which should be seen as

valuable to wine tourism development. Some of these key themes include understanding

stakeholders, cooperation, networks and partnerships, cluster theories, wine routes, the role of

destination management organizations (DMOs), and the role of government. This paper

critically evaluates different strategies for building competitive advantage in wine tourism

destinations, within the above themes, and identifies best practices in sustainable wine

destination development and management. This paper will also draw on the example of Napa

Valley, California in looking into success factors for wine destinations. The objective of this

report is to solidify the critical role that cooperation, networks, and partnerships play in

increasing the competitive advantage of wine tourism destinations around the world.

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Introduction to Wine Tourism

Although the production of wine has been occurring for hundreds of years, tourism and

wine have only recently married to create what is known as wine tourism. In the modern world,

wine regions often overlap with tourism regions, and it is not surprising that the wine and

tourism industries often are combined when this is the case (Nordin, 2003). Wine tourism can be

defined as “…visitation to vineyards, wineries, wine festivals and wine shows for which grape

wine tasting and/or experiencing the attributes of a grape wine region are the prime motivating

factors for visitors” (Hall et al., 2000, cited by Carlsen, 2004, p. 5). Wine tourism has become an

important form of tourism in the last two decades, and many have observed a steady growth of

tourists interested in wine (Pikkemaar, Peters, Boksberger, & Secco, 2009). The increased

popularity of wine tourism has been accompanied by the increased interest of scholars, with a

sizeable body of work published on the topic (Sevil & Yuncu, 2010, p. 478). As Poitras and

Donald (2006) explain, “…as wine regions become increasingly involved, or even dependent

upon wine tourism, the need to sustain tourism as an economic resource is essential” (p.426), and

this goal of sustaining the business of wine tourism encourages scholarly research into the field.

Wine is a unique product, a product which relies highly on geography, which motivates

wine lovers and those interested in wine regions to travel to preferred destinations of wine

production (Pikkemaar et al., 2009, p. 239). Wine is thought to develop distinctions in character,

derived from geographical difference, also known as terroir. Terroir is a concept which

encompasses the unique combination of topographic, soil, climatic, and cultural differentiations

that give a special character to the wines from different grapes and different places (Mason &

O’Mahony, 2007). These distinctions attract wine connoisseurs who are prepared to travel and

pay higher prices in order to experience where the wine product gains its distinction (Mason &

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O’Mahony, 2007). According to Nordin (2003) “…wine tourism is the ultimate opportunity to

connect with the consumer and create loyal, long-term customer relationships…giving the

visitors the chance to see the vineyard, bottling line and aging barrels enables them to connect

with the brand” (p.48). Although not all wineries need to incorporate tourism into their

operations (Sevil & Yuncu, 2010), more and more are seeing the outstanding benefits of

welcoming the customers into their wineries to experience their product first hand.

One of the complicating issues for wine tourism is that the tourism and hospitality

industry is often seen as a secondary industry by wine makers, who see their primary business as

wine production (Sevil & Yuncu, 2010). This issue creates a difficulty in gaining buy-in and

establishing the networks and partnerships which will be discussed later in this report. As

Bruwer (2003) summarises, “although it can be recognized that many businesses and segments

of the economy may benefit from tourism, it is only those organizations with a direct relationship

to tourists and/or who actually perceive their customers as tourists that become actively involved

in tourism development or tourism marketing” (p. 428).

Fortunately, many wine regions and tourism destinations have realized that the benefits

of wine tourism extend to virtually all areas of the regional economy (Carlsen, 2004). Wine,

food, tourism and the arts collectively comprise the core elements of the wine tourism experience

(Carlsen, 2004), and “…wine is, at once, an international status symbol, a measure of cultural

standing and distinction, an asset within a country or region’s image, even a beverage with

beneficial properties” (Mattiacci & Zampi, 2004, as cited in Mason & O’Mahony, 2007, p. 501).

Additionally, the ability to use wine tourism as a rural redevelopment measure has been

recognized and utilised in many regions around the world (Pikkemaar et al., 2009). The

marriage between wine and tourism has provided considerable growth opportunities for both of

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these industries and the rural and regional economies where they are co-located (McRae-

Williams, 2004). The development opportunities created through wine tourism have been

recognized and actively exploited in many New World wine producing regions (McRae-

Williams, 2004), and is beginning to be utilised as a revitalization tool by Old World wine

regions such as Italy and France, who have lost market share to New World producers in recent

years. Finally, the emphasis regional development initiatives have placed on the promotion of

wine tourism has resulted in increased interest in understanding their level of complementarity

(McRae-Williams, 2004), again increasing scholarly interest in the subject.

Wine tourism academics have sought out critical success factors for wine tourism

destinations, understanding that “…while the tourist remains the single most important focal

point that we seek to understand and satisfy within the complex phenomenon we call tourism, it

is critical to recognize that the tourism destination is the primary unit of study and management

action” (Bornhorst, Ritchie, & Sheenan, 2010, p. 572). For this reason, the following report will

focus on the destination side of wine tourism, as opposed to looking at the wine tourist and their

motivations in depth.

Although wine and tourism have not always been partners, as Bruwer (2003) states, “…

the very nature of the wine industry lends itself to a marriage with tourism…wine is a beverage

that is associated with relaxation, communing with others, complementary to food consumption,

learning about new things, and hospitality,” (p. 423) all of which are sought by tourists.

Wine Tourism Stakeholders

Wine tourism involves a complex set of stakeholders, many of which are easily

overlooked and/or underutilized. Some of the obvious stakeholders include wine tourists, winery

owners, wine makers, local and regional governments, and complimentary industries. In

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addition to these, there are many other stakeholders. As Bruwer (2003) laments, “…wine

tourism and its links with other tourism sectors have so far received little attention in the

literature” (p. 423), leading to the question of who stands to benefit if wine tourism achieves its

full potential. With so many different stakeholders involved in the wine tourism phenomenon, it

becomes very challenging to find common ground among the varying agendas (Bornhurst,

Ritchie, & Sheenan, 2010). Furthermore, wine-makers exhibit a strong product orientation,

focusing predominantly on wine production and often having little understanding of tourism or

tourism marketing (Sevil & Yuncu, 2010), causing less enthusiasm in joining wine tourism

related initiatives. Although small wineries are heavily dependent on sales at their premises via

wine tourists (Sevil & Yuncu, 2010) (Bruwer, 2003), larger wineries may not see the benefit to

creating tastings and tour opportunities. The role of some of these stakeholders will be further

explored in terms of their role in partnership options, but first we need to define cooperation,

networks, and partnerships a bit more fully.

Cooperation, Networks, and Partnerships

Typically, there has been a fair amount of competition and rivalry amongst wineries

looking for their share of an uncertain market as production continued to climb. However, with

the increased globalization of the industry and the growth of wine tourism, regions have been

forced to work together in order to form regional identities, and to achieve collective goals. As

Nordin (2003) states, “competitive rivalries continue, but joint efforts and cooperation are

increasingly becoming the norm in virtually every industry” (p. 10), and the wine industry is no

different. In terms of the tourism industry in particular, “the fragmented nature of tourism

supply at destinations, combined with the need for the provision of total tourism products that

satisfy the visitors' needs calls for co-operation within tourism regions” (Augustyn & Knowles,

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2010, p.341). Cooperation between stakeholders in the wine industry can occur in many forms,

and can be labelled as cooperation, collaboration, networks, or partnerships. All of these involve

the working together of a group (2 or more) of stakeholders to achieve common goals. Defined

by Hall & Kirkpatrick (2005) “…networking refers to a wide range of cooperative behaviours

between otherwise competing organisations and between organisations linked through economic

and social relationships and transactions” (p. 154). This definition could be loosely applied to

partnerships as well.

In terms of partnerships and networks, the wine industry demonstrates the benefits that

can be realised through a combination of collaboration and competition (Marsh & Shaw, 2000).

In their study of tourism networks in York, Marsh and Shaw (2000) found that their study “…

illustrates the challenge in sustaining collaboration - as a complement to, and facilitator of,

competitive strengths amongst producers” (p.5). They found one complexity in sustaining

collaboration arises from the differing incentives. Scale differences between firms in the industry

create differential stakes and concerns. All firms have deep interests in united action, but

intensity of concern can vary between areas (Marsh & Shaw, 2000, p. 60). This would certainly

apply to looking at partnerships and networks amongst wine tourism stakeholders. As previously

mentioned, smaller wineries rely more heavily on cellar door purchases and therefor may make

more efforts to participate in networking and partnership opportunities. Competition amongst

wineries can be supplemented by industry collaboration around matters of shared concern. The

Australian wine industry, for example, has raised its level of integration and is developing into a

knowledge driven cluster (Marsh & Shaw, 2000). This paper will look at wine routes, DMOs,

and government partnerships as examples of how the wine industry stands to benefit from

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networking initiatives. In addition to networks, partnerships, and cooperation, there is another

aspect to wine region organization worth mentioning: clusters.

Clusters

In addition to the partnerships and networks discussed above, wine has been recognized

as one industry in which clustering may be a significant competitive factor (Hall & Kirkpatrick,

2005). Although similar, networks and clusters have distinct definitions. According to Nordin

(2003), clusters are “…geographic concentrations of interconnected companies and institutions

in a particular field, linked by commonalities and complementarities” (p. 11), and “…it is usually

not a group of firms that deliberately join to reach common objectives, but rather a non-planned

phenomenon” (p. 10).

When compared to the network or partnership, the cluster concept goes beyond

horizontal networks and in many cases are cross-sectoral (Hall & Kirkpatrick, 2005). “Firms and

organizations involved in clusters are able to achieve synergies and leverage economic advantage

from shared access to information and knowledge networks, supplier and distribution chains,

markets and marketing intelligence, competencies, and resources in a specific locality” (Hall &

Kirkpatrick, 2005, p.155). Clusters are dynamic with boundaries in constant change, as new

companies and new linkages appear and others disappear, and they do not require membership,

contractual agreements, or goals like networks do (Nordin, 2003). Clusters arise naturally, but

may need to be developed to reach their fullest potential (Nordin, 2003).

If clusters cannot be created, and occur naturally, one might ask if there is any point in

learning more about the cluster concept (Nordin, 2003). However, “…there are a lot of ways to

back up and promote potential as well as established clusters, for instance by creating supporting

structures” (Nordin, 2003, p. 34). In terms of wine destinations, it is intriguing to look at how

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long the wine industry has been operating in the region and what kinds of groundwork this laid

for the formation of current clusters (Hall & Kirkpatrick, 2005), which can then be used to

hypothesize cluster prerequisites for the wine industry in particular.

One of the lessons of cluster development programmes around the world is that there is

no single formula for developing industry clusters (Hall & Kirkpatrick, 2005). A number of

factors have been recognized as significant in the development of clusters, and should be noted

when looking at wine tourism clustering: government financing and policies, the skills of the

region’s human resources, the technological capabilities of the region’s R&D activities,

infrastructure quality, the availability and expertise of capital financing in the region, quality of

tax and regulation environment, and the appeal of the region’s lifestyle (Hall & Kirkpatrick,

2005, p. 156).

Now that the concepts of networks, partnerships, and clusters have been introduced and

explored, this report will now look at some examples of wine destination networking, beginning

with wine trails.

Wine Trails

Although wine tourism is a relatively new form of travel, there have already been joint

efforts by stakeholders in these regions to collaborate in hopes of offering a better experience to

visitors. One of these methods of collaboration is the establishment of wine routes, also known

as wine trails. A fair amount of literature has explored the wine route from both the perspective

of stakeholders as well as tourists (Bruwer, 2003) (Pikkemaat et al., 2009). Bruwer (2003)

describes the multiple stakeholders involved in wine trails as “government, private enterprises

and associations, the tourism industry, wineries and the local council” (p. 428), justifying the

description of wine trails as industry networks. For the regions that establish a wine route or

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trail, it is one of the best frameworks for cooperative work between the stakeholders mentioned

above (Bruwer, 2003). Wine trails harnesses the energies of all involved with regional

development, ultimately creating jobs and economic and cultural development (Bruwer, 2003). .

Wine trails and routes represent co-operative behaviour between otherwise competing

organizations and between organizations linked through economic and social relationships and

transactions” (Bruwer, 2003), making them a worthy example of wine tourism and the potential

which can be realised through partnerships and networking. Those involved can even move

beyond the wine trail with “…formal and informal agreements between wine route estates, tour

operators and the food industry” (Bruwer, 2003, p. 428), which highlights the significance of

horizontal and vertical linkages in wine tourism (Bruwer, 2003).

Bruwer (2003), who studied wine tourism in South Africa, found that other wineries in

the region studied were identified by fellow wine industry members as the most important

stakeholders in a wine route system, pointing out the strong partnership and collaborative nature

of wine trails. Furthermore, Pikkeemaat et al. (2009) studied the staging of experience for wine

tourists in Italy, and found that “…for most tourists aesthetics is the most important experience

dimension in wine routes while education seems to be the most unimportant dimension” (p. 248).

Studies such as this are vitally important for wine regions considering the development of wine

routes or trails as a means of cooperation amongst local stakeholders. The advantages of these

partnerships spread throughout the local and regional economy and culture, increasing the

overall sustainability of the wine tourism destination.

The Destination Management Organization (DMO)

One of the key players in many wine regions is the destination management organization

(DMO) of the given place. With so many different stakeholders involved in the tourism

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phenomenon, including in wine tourism, it becomes very challenging to find common ground

among the varying agendas (Bornhorst et al., 2010). If, as this paper has so far suggested,

cooperation is a desired objective in order to enhance destination competitiveness, then the

ability for DMOs to facilitate such partnerships becomes an essential learning. Bornhorst et al

(2010) summarise the role of the DMO in tourism:

“the roles of the DMO, in the broadest terms, are: to work towards enhancing the well-

being of destination residents; to do everything necessary to help ensure that visitors are

offered visitation experiences that are at a minimum, highly satisfactory, and where

possible, highly memorable; and while doing so, to ensure the provision of effective

destination management and stewardship” (p. 573)

In trying to live up to the various roles outlined above, DMOs are faced with many challenges.

One such challenge is obtaining buy-ins from stakeholders, who may or may not see a benefit to

joining the DMO. While some stakeholders, such as hotels and city government, are clearly very

critical to the success of a DMO because of their financial contributions, there are numerous

other stakeholders, whose views must also be considered (Bornhorst et al., 2010). While some

stakeholders may perceive that a large part of their own self-interest rests with the interests of the

destination itself, others may not. Disorganization, alienation and dysfunction are also possible

where tourism organizations perceive that the costs of cooperating as a destination outweigh the

benefits (Ritchie & Crouch, 2003). So how does a DMO overcome the challenge of obtaining

buy-ins from stakeholders? Scholars have discovered that two of the most important jobs of

DMOs are facilitating relationships and communication amongst industry members (Bornhorst et

al., 2010).

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A study of DMOs by Bornhorst et al. (2010) found that “…if DMO executives cannot

effectively manage relationships within the destination, specific resource inputs from both the

private and public sector may become impaired…” (p. 586), and “…without the buy-in and

resources from these stakeholders, functions such as marketing or other service aspects are

negated and the DMO becomes unsuccessful” (p. 586). Relationships also include those

between DMOs, stakeholders, and local residents. Bornhorst et al (2010) warn that “…if

interaction with the local residents is not effectively managed, they may become unfriendly

towards visitors” (p. 586). The DMO must have the leadership necessary to effectively manage

these relationships. DMOs in which leaders and managers have a stakeholder relationship

orientation are much more likely to succeed (Bornhorst et al., 2010). The ability of the DMO to

effectively manage relations between members will increase confidence in their organization.

“This stakeholder confidence in the DMO will further improve the DMO’s ability to attract

secure sources of funding, partnerships and collaboration that lead to greater resources to fulfill

its mandate” (Bornhorst et al., 2010, p. 587).

In looking at DMOs, effective communication is noted as a critical part in achieving

stakeholder satisfaction and buy-in (Bornhorst et al., 2010). Studies emphasize the need for

strong leadership to gain stakeholder involvement, making the DMO an integral part of

managing any wine tourism destination.

Government Role (Public-Private Partnerships)

Another form of cooperation which may prove useful in wine tourism destinations is

public-private partnerships between government bodies and the wine tourism industry.

Governments have a strong ability to enhance the success of partnerships, improve the

effectiveness of DMOs, and to facilitate industry associations.

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According to Augustyn and Knowles (2000), if public-private partnerships are to be

successful, who studied the wine industry in Australia, there are several critical success factors.

These include expert preparation, having the right underlying objectives, a strong developmental

structure of the partnership, the effective and efficient actions of the partnership, and

sustainability of the partnership itself (Augustyn & Knowles, 2000). In looking at expert

preparation, Augustyn and Knowles (2000) suggest:

“…a stronger emphasis should be placed on direct and wider private sector involvement

in these initiatives. The balance between the two sectors in creation, and then operation,

of the partnership has to be ensured. This will secure the objectives of the partnership to

be representative of all members and result in a greater commitment of the tourism

businesses to achieving the common goals” (p. 350)

In terms of sustaining the partnership, Augustyn and Knowles (2000) recommend that the goals

and objectives of the group be reviewed and revised if necessary to ensure their continued

relevance.

In addition to forging public-private partnerships, as discussed previously, the

government could also play a role in encouraging and supporting DMOs or other industry

associations through levies and incentives. While levy arrangements eliminate the possibility of

free riding, and differential levels of levies can recognize the different stakes of producers and

growers of differing size, government industry policy incentives can encourage buy-ins and the

achievement of common goals (Marsh & Shaw, 2000). Clearly, the role of the government as

catalyst, supporter, and enricher of partnerships within tourism and wine tourism cannot be

underestimated.

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Applying the concepts of cooperation, partnerships, networks, clusters, and government

to wine tourism can be looked at through the example of Napa Valley, California.

Wine Destination Case Study: Napa Valley, California

The case study of clusters and cooperation within the wine region of Napa Valley,

California, undertaken by Nordin (2003) serves as a useful case study in uncovering means for

improving destination competitiveness and sustainability. The Napa Valley attracts nearly 5

million people each year, and is world famous for its wine (Nordin, 2003). The vineyards and

their tours and tastings make up the foundation of massive industry with a long-standing tradition

in the region (Nordin, 2003). Napa Valley is essentially one of the most well-known, and easy to

study, wine clusters in the world. Robert Mondavi, a winery entrepreneur, has been credited for

staring the real clustering we can now observe in Napa, marking him as a possible community

champion for wine in the region. Mondavi started by trying to change the relation between

growers and producers, resulting in an opening up of the grape growing industry, to include more

partnering (Nordin, 2003). He was devoted to research and development and introduced

educational programs for growers, stimulating innovation and education of industry members

(Nordin, 2003). More recently, “…a conscious effort has been made to package a wider Napa

Valley experience, involving not only wineries, but also gourmet cuisine, spas and hot springs as

well as other attractions” (Nordin, 2003, p. 47). Tourists are sold an image of a unique wine

region incorporating both wine and character (Nordin, 2003).

In her study of Napa Valley, Nordin (2003) identifies some factors of great importance to

the successful development of the wine region: a civic entrepreneur as a key driver of

development and as a network broker, the transformation into a more open industry, the interest

in research and education as well as the latest technology, a strong regional trademark, a vision

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shared by many operators, the need for collaboration and reciprocity, a high level of innovation,

collaboration with universities and schools, accessibility and good infrastructure, and linkages to

complementary industries. Just as the wine produced from regions around the world has distinct

character, so does the nature of development in wine regions. It is important to understand that

while the success factors seen in Napa Valley deserve great attention, there should also be

flexibility amongst developers to cater to the needs of their given location.

Recommendations

In looking at the development and sustainability of wine tourism destinations around the

world, the benefits to cooperative measures among stakeholders cannot be denied. Although

generally businesses will tend to be conservative and often do not change their procedures until

they basically have to in order to remain competitive (Nordin, 2003), there are outstanding

benefits in supplementing competition with collaboration.

The role of the DMO cannot be ignored when we look to increasing cooperation in wine

tourism regions. Their ability to strengthen relationships, foster good communication, and

provide collective vision are all crucial roles played by the DMO. However, “…whereas a

company governs, directs and controls, a DMO merely influences, facilitates and coordinates…

the DMO is not the destination” (Ritchie & Crouch, 2003, p. 96). This is to say, the DMO

cannot be relied on solely to foster cooperation and partnerships. There is also a strong role to be

played by governments, who have the ability to fund initiatives and provide strong incentives to

achieving industry-wide goals. In terms of who should be involved, Augustyn and Knowles

(2000) suggest including employees in the decision making process may contribute to an

increased enthusiasm on the part of the employees, who are the most immediate link between the

visitors, the businesses they work for and the partnership.

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Finally, educational institutions play an important role since the wine industry is

knowledge-driven, research and development has been, and continues to be, critical to its success

(Marsh & Shaw, 2000).

Overall, cooperation strengthens the wine destination because it increases the extent to

which relevant organizations are trying to move toward the same goal (Ritchie & Crouch, 2003,

p. 97). Competitive advantage requires the ability to effectively manage all components of the

tourism system to ensure success is achieved (Bornhorst et al., 2010), and this can be enhanced

greatly through cooperative action.

Conclusions

Typically, there has been a fair amount of competition and rivalry amongst wineries

looking for their share of an uncertain market as production continued to climb. However, with

the increased globalization of the industry and the growth of wine tourism, regions have been

forced to work together in order to form regional identities, and to achieve collective goals.

These goals can be realised through partnerships and cooperation. The advantages of these

partnerships spread throughout the local and regional economy and culture, increasing the

overall sustainability of the wine tourism destination. Studies emphasize the need for strong

leadership to gain stakeholder involvement, making the DMO an integral part of managing any

wine tourism destination. The role of the government as catalyst, supporter, and enricher of

partnerships within tourism and wine tourism cannot be underestimated. Finally, just as the wine

produced from regions around the world has distinct character, so does the nature of

development in wine regions. It is important to understand that, while the success factors looked

at in this report serve as a necessary foundational learning, the requirements of any given wine

destination will require creativity and innovation on behalf of planners.

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Figure 1.1 – California Wine Clusters. Taken from: Marsh, I., & Shaw, B. (2000), p.25. Australia's wine industry: collaboration and learning as causes of competitive success (pp. 22-23). Australian Business Foundation.

18

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