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Productivity, Destination Performance, and Stakeholder Well-Being

Business School, University of Technology Sydney, Sydney, NSW 2007, Australia
Tour. Hosp. 2022, 3(3), 618-633;
Received: 10 May 2022 / Revised: 10 June 2022 / Accepted: 20 June 2022 / Published: 5 July 2022


This paper accords productivity growth and enhanced resident well-being more prominent roles in the study of tourism destination performance than they are offered in current research. Not only is productivity analysis essential to addressing the challenges associated with enhancing residents’ material well-being, but it displays substantial promise as a guide for an important research agenda in tourism embracing wider quality-of-life and sustainability issues. A framework is proposed to provide the basis for a research and policy agenda linking productivity, well-being outcomes, and destination sustainable development.

1. Introduction

Traditionally, economic measures such as tourism foreign exchange earnings, tourism contribution to GDP, and employment have served as key indicators of destination performance and competitiveness [1]. All such measures depend on the extent of growth in industry productivity. Simply put, ‘productivity’ is the ratio of a unit of output of goods and services produced per unit of physical input [2]. Over time, productivity growth is the key measure of how efficiently and effectively an economy is performing and is a fundamental means for society to improve its living standards [3]. Since productivity increases can mean higher levels of output while input levels remain constant, they constitute the most direct route to real economic growth and poverty alleviation and a crucial means of achieving sustainable, long-term growth in material well-being. As Nobel Laureate Paul Krugman famously proclaimed, ‘productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker’ [4].
The primary goal of tourism development is that of achieving high resident well-being in the present and into the future [5,6]. Tourism productivity is widely acknowledged to be an important driver of firm profitability, industry market growth, and societal material well-being [7]. Productivity growth provides the opportunity to enhance destination performance in respect of both economic benefits and wider socioeconomic goals. The benefits derived from economic growth driven by productivity improvement can be identified at different levels of aggregation—individual enterprises, industry sectors, industries, regions or destinations—and for different stakeholder groups [8]. However, productivity studies in tourism research have paid little or no attention to the links between productivity growth and stakeholder well-being. Rather, well-being outcomes are typically addressed as ‘add-ons’ to standard economic performance indicators such as contribution to GDP, neglecting the potential contribution of productivity growth to improved current and future resident well-being.
This paper demonstrates that exploration of the links between tourism productivity and stakeholder well-being outcomes can guide an important research agenda essential to tourism policy formulation and implementation aimed at enhancing social well-being. Section two defines productivity and identifies its main measures. Section three identifies the main benefits associated with productivity growth in any industry and tourism in particular. It is argued that different types of benefits from tourism productivity growth are enjoyed by a variety of different stakeholders, including destination residents, firms, workers, customers, and governments. In section four, the sources of productivity growth and their relevance to destination performance are investigated. The framework proposed identifies important sources of productivity growth, a number of which have been under- researched in the tourism literature. With the addition of a ‘well-being lens’ to determine the well-being outcomes of the various effects associated with productivity growth, researchers, industry, and policymakers can use this framework to identify the types of productivity-enhancing strategies that can improve social well-being. Section 5 discusses some policy implications of the proposed framework, concluding that further examination of the links between tourism productivity and social well-being outcomes promises to guide an important research agenda.

2. Measuring Productivity

Productivity relates to the efficiency with which firms, organisations, industry, and the economy as a whole convert inputs (labour, capital, land) into output. A standard production function is Q(t) = A(t)F(K(t),L(t)) where output (Q) is a function of capital (K) and labour (L) as well as the exogenous factor of technical change (A). Real GDP is often used to measure output. The denominator of the productivity ratio typically includes labour input, physical capital (such as tools, factories, and machines), natural capital (such as land, air, water, energy, and raw materials), and human capital (such as education, skills, knowledge, and experience). Indexes of labour and capital inputs can be aggregated to form an index of ‘combined inputs’. Productivity growth, reflecting a shift in the production function over time, is estimated by subtracting the growth in inputs from the growth in output [2]. Growth in productivity occurs from either increasing output while maintaining the same level of inputs, maintaining output while reducing the level of inputs, or a combination of these [9].
Productivity measures vary from the simple to the very sophisticated [10]. Various techniques have been used to measure productivity growth in different destinations and industry sectors [11]. The choice among them depends on the purpose of the productivity measurement and, in many instances, on the availability of data. Three important measures are as follows [12]:
Labour productivity, the most common measure of productivity, is the ratio of the index of output (gross domestic product or gross value added) to an index of labour input (actual hours worked or employment number). Labour productivity changes reflect the joint influence of changes in capital; intermediate inputs; the education and experience of the workforce; technical, organisational, and efficiency changes within and between firms; the influence of economies of scale; and varying degrees of capacity utilisation and measurement errors. Labour productivity is a key determinant of living standards, measured as per capita income, and is thus of significant policy relevance [12].
Capital productivity is output per unit of capital input, defined as the ratio of indexes of output to a quantity index of capital inputs, in which capital input is measured either as capital stock employed or as the services that the capital stock provides. Capital productivity growth reflects how a change in the volume of assets, such as buildings, machinery, computers and IT, and land, affect output growth [12].
Multifactor productivity (MFP) is equivalent to the growth rate of output not accounted for by the growth rates in the individual inputs (weighted by their contributions to production). This residual captures technology change, changes in management practices and institutions, measurement errors, and changes in any other inputs that are not explicitly measured. More detailed estimates of MFP employ the KLEMS approach [13], in which the growth of real total output is accounted for by the growth of capital (K), labour (L), energy (E), materials (M), and business services (S). MFP is conceptually the strongest measure, as it considers all the inputs of productivity in a combined way.
Productivity studies in tourism research have typically involved estimates at the national level [14,15] and at the level of particular industry sectors, such as hotel accommodation [16,17], airports [18], airlines [19], and travel agencies [20]. Objective measures of sectoral and aggregate tourism productivity can be estimated from the destination tourism satellite account (TSA), complemented by survey findings [12], allowing tourism industry productivity to be compared with national productivity, to determine if the tourism sector is outperforming or underperforming other industries, or to be used for international benchmarking of the industry.
Measurement challenges are associated with each productivity concept [21]. Tourism is a complex industry sector comprising a number of diverse enterprises and firms providing a range of goods and services of varying quality to a multitude of clients. Measuring service productivity is particularly challenging [22,23,24]. Given the distinguishing features of services, such as intangibility, heterogeneity, inseparability, perishability, and the importance of quality, many outputs and inputs in tourism are inherently difficult to define and quantify, making the measurement and interpretation of productivity problematic. Currently, statistical agencies are developing better statistics for the nonmarket sector in line with the national accounts framework but have not as yet formulated a robust and comparable statistical method to account for the complexity of inputs and outputs in the service sector of the economy [21]. In the meantime, research continues in order to develop improved measures of the productivity of services, including public services, that can be used in the System of National Accounts [9,12].

3. Benefits of Productivity Growth

Productivity growth benefits several categories of stakeholders, including residents, firms, consumers, workers, shareholders, governments, and destination managers.
Benefits to Residents. The more productive the economy, the more value it is able to generate per capita through either more efficient allocation of inputs, greater productive efficiency in converting inputs into outputs, or innovation of new products and processes [2]. Expanding the set of goods and services available for consumption enables the satisfaction of a growing number of needs, thus improving living conditions. However, the so-called ‘Easterlin paradox’ demonstrates that increased GDP does not improve long-term societal well-being once a comfortable standard of living has been reached [25]. Within a country, wealthier people tend to be happier than the less wealthy, but beyond a certain threshold, well-being levels do not increase alongside increasing income. A common interpretation of the paradox is that humans are on a ‘hedonic treadmill’—aspirations increase along with income, and after basic needs are met, relative rather than absolute levels of income matter to well-being [26,27]. These findings suggest that tourism development policies should give increasing importance to noneconomic aspects of life after a certain income level rather than focussing almost exclusively on economic growth.
Benefits to firms. There is a direct link between productivity and firm profitability— productivity growth ensures effective utilisation of available resources, thereby increasing the total volume of production, decreasing the cost of production, and increasing investment opportunities [2]. Comparing the firm’s productivity against market leaders, industry averages, or peer competitors assists business managers in formulating competitive strategies [14]. Information about comparative performance enables analysis of why some firms or regions are doing well or poorly and devising strategies to enhance the performance of the laggards. Productivity measurement itself can help to create a more innovative culture associated with improved understanding of the business [8,14].
Benefits to consumers. Real productivity improvements are likely to stem from reductions in costs, improvements in quality, or innovations by which new products can be created at affordable prices, all of which enhance customer satisfaction. The extent to which consumers gain directly from productivity improvements depends on how far, and how quickly, firms pass on these benefits rather than retaining them in the form of higher profits [2].
Benefits to the workforce. These are realised through better wages and conditions and opportunities for increased leisure time. Productivity measurement can facilitate the setting of targets for the firm as well as staff performance. Another benefit of improved productivity is personal well-being. More productive workers are usually more engaged in their work. The ‘happy-productive worker’ thesis [28] regards employee well-being as a positive determinant of greater levels of labour productivity. In turn, higher levels of individual well-being drive higher productivity, with high job satisfaction linked to improved individual and organisational productivity [25].
Benefits to shareholders and superannuation funds. These are realised through increased profits and bonuses that can be reinvested to support long-term business growth, facilitating greater funding opportunities and generating the cash flows necessary for tourism operators to take risks, make investments, and pursue new projects [29].
Benefits to governments. Productivity increases drive greater economic growth, which generates larger tax receipts for governments. This allows governments to invest more in infrastructure and fund social services, environmental programs, education and training, health care, and creative endeavours, all of which can enhance destination competitiveness in domestic and global markets [30].
Benefits to destination managers. Productivity measures can aid destination managers in achieving various tourism objectives, including destination competitiveness and success in achieving the Sustainable Development Goals, [31,32,33]. Destination price competitiveness depends on productivity growth and changes in input prices. Productivity benchmarking is crucial for tourism industry efficiency assessment. Productivity growth rates can also be valuable in forecasting tourism industry supply and demand, supporting efficient resource allocation.

4. Sources of Productivity Growth

To manage tourism productivity efficiently and effectively, its sources must be identified. In Figure 1, these are grouped under three major headings: immediate, enabling, and underlying drivers [7,30].
Immediate drivers. Associated with a destination’s firms and organisations, these have close and tangible links to input/output relationships in production.
Enabling drivers. This group comprises attitudes and activities that support productivity growth by creating conditions conducive to the existence and strengths of the immediate drivers.
Underlying drivers. This group comprises a range of deep-seated policy, social, natural, and institutional factors that affect productivity growth broadly in a basic supportive fashion. Underlying determinants of a destination’s productivity performance are essentially ‘givens’—at least in the short to medium term.

4.1. Immediate Drivers

Technological advance covers the creation, adaptation, and diffusion of new products and processes; the application of new ideas; economic competencies, including brand equity; and new management and marketing practices, enabling more value added in production [2]. Technological advance is central to a destination’s efforts to establish and maintain a competitive advantage in international commerce, including tourism [34,35]. Information and communication technology (ICT) has become a key driver of productivity growth [29]. Recent developments and innovations in ICT have radically transformed tourism industry operations, increasing the potential for interactivity and cooperation with customers in co-creation of services [36]. ICT facilitates the implementation of new business models, such as those for low-cost carriers and firms comprising the sharing economy, associated with greater labour productivity [25].
Investment in physical capital, measured by gross fixed capital formation, is a central driver of productivity growth. Capital deepening raises labour productivity, particularly when new skills are required to produce new goods and services. Productivity gains from investment in ICT generally arise when combined with complementary investments in staff and management training and innovation in products, processes, organisational structure, and supplier and customer relationships [35]. Public investment in infrastructure can lift productivity and resident well-being through reduced congestion and improved services. In tourism development, there is clearly a role for assistance to encourage firms to undertake greater investment where the outcomes are widely shared among stakeholders (e.g., convention centre construction, road signage, cruise shipping terminals, and airports).
Human resources are the pool of available human skills, knowledge, and expertise drawn on by businesses and developed when required. Human resources drive productivity growth directly, through people working ‘smarter’ via the acquisition and application of new skills, abilities, and knowledge, and indirectly, by influencing the rates of innovation, adoption of new technology, and accumulation of physical capital [2]. The skills of tourism operators and the capacities of trained staff to meet service quality and delivery, and thus customer needs, encompass the physical, intellectual, and entrepreneurial ability that support tourism supply across all sectors of the industry. Shortage of skilled labour is considered one of the main explanations of the poor productivity performance of the tourism industry in many destinations [37]. Over time, human resources can be converted to human capital, comprising the knowledge, skills, competencies, and other attributes embodied in individuals throughout the destination.
Firm organisation, management practices, and work arrangements involve embracing the design, development, and deployment of techniques to effectively utilise or optimise resources (inputs) to obtain higher output while maintaining quality standards [9]. Rapid changes in competition, demand, technology, and regulations imply that firms must have business models with the strategic flexibility and agility needed to alter workplace arrangements, innovate and adapt to changes in market conditions. An appropriate work–life balance affects worker productivity, given that the amount of time that people can devote to leisure, personal care, and other non-work activities helps them remain healthy and productive [38]. Workplace factors that influence productivity include areas such as colleague relationships and job demands and control as well as the physical features of the working environment [25]. The development of risk management strategies is crucial to sound business management in the face of uncertainties. Better workforce management leads to increased retention of skilled labour, improving firms’ capacity to respond to shifting demand. Given the people-focussed nature of tourism and hospitality, strategic talent management can build a high-performance workplace, encouraging employee engagement in a learning organisation and adding value to a firm’s branding agenda [9].
Economies of scale, scope, and specialisation are each important to improving business productivity. Mass tourism markets provide opportunities to reap economies of scale (lower average production costs) and charge lower prices to customers. Economies of scope exist when it is cheaper to produce a range of products rather than specialise in a smaller number (e.g., menu items in fast food restaurants). As tourism firms grow, their labour forces become more specialised. Specialisation and trade push a country’s consumption possibilities beyond domestic production. Tourism specialisation has been found to have a short-term effect on economic growth [39]. Specialisation brings productivity improvements through, for example, learning by doing, thereby reducing input costs and improving quality [2]. Two types of risks associated with overspecialisation relate to tourism, however. One type relates to a dependency on tourism in general as an export market, given global uncertainties such as wars and pandemics. Another type of risk involves too much reliance on tourism from particular origin markets or too much reliance on a particular tourism product. Changes adversely affecting these markets, making them less competitive and adaptable, can result in reduced growth to tourism destinations that overspecialise in them [32].
Resource allocation across industries and firm turnover constitute a means for productivity growth through a process of ‘creative destruction’ or ‘competitive dynamics’—the reallocation of resources towards efficient existing firms and new firms and away from less efficient operators [30]. Policies that create high exit costs for firms, such as strict land-use regulations and regulations that overly protect existing employment, can encourage low-productivity firms to stay in business longer than is ideal. Tourism-related examples include restrictive aviation agreements and ongoing government funding of a national carrier for political reasons. Lower aggregate productivity results from tying up assets that could be redeployed to higher-productivity firms inside and outside tourism. Ultimately, improvements in productivity come from the decisions of a multitude of firms in many industries in developing and adopting new products and processes and changing management, organisational, and operational practices [14].

4.2. Enabling Drivers

Market competition is a process of rivalry between suppliers that takes place either in the market or for the market. Competition enhances productivity via its impacts on productive, allocative, and dynamic efficiency [40]. Competition is, arguably, the strongest incentive for firms to innovate through technological improvements of production processes or the creation of new products and services. Competition between suppliers that respond to price signals can lead to higher productivity, lower costs, and improved product and service quality. Within firms, competition acts as a disciplining device, placing pressure on the managers of firms to become more efficient. Competition ensures that more productive firms increase their market share at the expense of the less productive (market-sorting effect). While intense competition can reduce profit margins, as observed in the tourism industry in various destinations, it can drive out low-productivity firms and enhance the growth of high-productivity firms within the market [41].
Openness to international trade and investment expands markets, fosters technology transfer to domestic firms, and stimulates competition, promoting greater contestability in domestic markets that can strengthen the imperative to innovate. A strong positive relationship exists between firm and industry productivity levels and their level of trade exposure, particularly after they begin to export—‘learning-by-exporting’ [41]. The volume and quality of knowledge transmitted from abroad depends on the closeness of linkages between local and foreign firms, the skills and absorptive capacities of local firms, and the technological sophistication of local industries [2]. Foreign direct investment can be an important source of innovation in a tourism destination whenever it leads to ‘spillovers’ of knowledge and technology transfer to local firms [42].
Innovative culture must be fostered by firms in rapidly changing and disruptive business environments to keep them ‘technology ready’ to adopt service innovations that improve customer experiences, better penetrate existing markets, and develop new markets [42]. An innovative culture needs a social/political/cultural/legal environment that fosters its application to support productivity growth. Embraced by individuals who are equipped to deal with change, an innovative culture in tourism organisations would support absorptive capacity—the ability to recognise the value of new, external information; assimilate it; and apply it to commercial ends [43]. An innovative culture provides the basis for a ‘smart tourism destination’.
Financial markets. The availability of finance and venture capital to facilitate investment and development is crucial for the implementation of productivity-enhancing projects in destinations globally. Access to finance for tourism enterprises is often challenging in developing countries. Financial institutions are often reluctant to provide loans to local tourism businesses, especially SMEs, because of a lack of collateral and the unstable sales of the businesses. Strong government support for tourism developments can reduce the risk for investors and provide a catalyst for finance [44]. What is needed is not more tourism investment per se but investment in the right types of projects to enhance productivity and destination competitiveness [42].
Networks, both business networks and communities, can share knowledge and resources to improve productivity at the firm, sectoral, regional and national level. Firms experience productivity gains by learning from other firms and adopting their practices and innovation. Networks, particularly those based on shared norms and values, trust, and understanding, facilitate cooperation within and between stakeholder groups, with their success found to differ according to destination industry structure [35]. The productivity of tourism firms can benefit from agglomeration economies that take the form of place-specific externalities such as strong input–output linkages, labour pooling, and knowledge [45]. Productivity spillover effects across spatial regions can also lead to regional growth effects. Increased collaboration across and along the tourism value chain by means of formal and informal alliances helps the industry to overcome its high fragmentation, to deliver a total tourism experience, and to support better use of existing infrastructure, staff, and resources [46].

4.3. Underlying Drivers

The underlying influences of productivity are the main types of capital stocks that sustain the various other sources. Four major types of capital can be distinguished—economically produced, human, social, and natural [47,48]. The tourism industry, with its varied types of products and services, is founded on and supported by these categories of resources.
Economic (physical) capital includes machines and buildings, tools and equipment, transportation, physical infrastructure, and financial resources such as stocks, bonds, bank deposits, and other financial assets owned by households, businesses, and governments [47]. In the tourism industry, economic capital includes all of the privately and publicly provided facilities and services that are available to the visitor, such as hotels, restaurants, roads, airports, shipping terminals, rental cars, and shopping malls [49]. The operation of tourism facilities, services, and amenities is heavily dependent on the available quantity and quality of public infrastructure—the physical and financial capital that underpins economic and social interactions, such as transportation networks, energy production, water storage and distribution, and telecommunications. Research has suggested that investment in physical infrastructure can boost long-term economic output more than other types of investment [2].
Human capital comprises the knowledge, skills, competencies, and other attributes embodied in individuals in the society [50]. Human capital in the tourism industry refers to the stock of competencies, knowledge, creativity, and social and personality attributes embodied in the ability to perform labour as well as to develop, innovate, and employ new technologies to produce economic value. Two major bases of human capital are the health system, supporting continuing workforce engagement in employment and leisure activities, and the education system, which helps to develop the knowledge, skills, and attributes of the workforce and its capacity to improve productivity in the economy. In the business context, human capital is the economic value that an employee provides to an employer, with higher levels linked to greater productivity [51]. Good health status enhances worker productivity, underpinning economic growth. An educated workforce is important for tourism business performance, as a more skilled workforce is more innovative and productive, improving business profitability and material living standards [52].
Social capital is an all-encompassing concept for the relationships among and between individuals and institutions, comprising the relationships, associations, ties, and norms that shape the quality and quantity of a society’s social interactions [53]. The concept covers relationships between individuals (shared norms and culture, social ties and networks that facilitate cooperation), between institutions (joint ventures, including government and governance arrangements), and between individuals and institutions (civic engagement, mechanisms for determination of wages and conditions, financial markets, cultural heritage, traditional knowledge, legal system). Social capital fosters organisational commitment and fosters the effective sharing and diffusion of skills and information amongst workers [53]. Studies have confirmed a positive link between social capital and productivity [25]. Participating in community life allows individuals to develop a sense of belonging and trust in others as well as enhancing the accountability and effectiveness of public policy, which are essential for supporting productivity growth. Social capital in the tourism industry includes the various networks, associations, joint ventures, and strategic alliances that exist to meet visitor needs as well as the community spirit of sharing and collaboration that drives the expansion of new forms of tourism supply [54]. Tourism-related cultural activities such as event and festival attendance activities and mixing in public spaces can play an important role in both preserving and building social capital [55].
Natural capital refers to the destination’s’ stock of renewable and non-renewable natural resources. It includes individual assets, such as minerals, energy resources, land, soil, water, air, flora, and fauna, as well as broader ecosystem systems that provide goods and services necessary for the economy, society, and all living things [33]. Benefits from a clean and healthy environment include sources of food and nutrition and building materials but also values associated with recreation, stress management, inspiration, and learning, all of which support productivity growth [25]. Recent studies have shown that use of the environment is a statistically significant factor in explaining output growth [56]. Although current productivity metrics largely fail to reflect natural capital, environmentally adjusted measures of productivity can be constructed [3]. With growing attention to environmental issues and sustainability [47,48,56], natural capital is now seen as a major driver of tourism productivity.

4.4. Policy Settings

Policy settings reflect the emphasis given to the development of productivity-enhancing strategies [17,30]. Just as there is no single driver of productivity growth, there is no single productivity policy lever. These can be of short-term effect or of a longer-term, strategic nature.
Since most productivity gains come from the private sector, the public policy focus should be on making businesses and markets more competitive. This can be done via development of incentives, strengthening of capabilities, and initiating reforms [30]. Incentives refer to the underlying external pressures and disciplines on organisations to produce efficiently. Policies that support productivity growth include macroeconomic settings, microeconomic reforms, legal institutions and frameworks, taxation structure, environmental management, and competition policy. Capabilities relate to improving the ‘support platforms’ for productivity growth, comprising the immediate, enabling, and underlying drivers identified above. Reforms can include taxation reforms, removal of regulatory barriers, and restrictive practices to strengthen competition and hence enhance productivity [30]. Competitive reforms in areas such as transportation, particularly aviation, offer potential to stimulate innovation and productivity more widely within the tourism industry.
The framework of Figure 1 can serve as both a diagnostic framework to determine the ‘strength’ of the different drivers of productivity and a guide to the types of policies that can enhance productivity in various tourism sectors and at different levels—firm, industry, and destination.
The items in the diagonal boxes in Figure 1 comprise only some of the sources of productivity that might apply to a destination, and many issues need more detailed attention to more precisely determine their tourism relevance. Further research is required to determine gaps in this framework that may be important sources of tourism productivity at various levels (firm, sector, and industry). What is remarkable, however, is the extent of overlap between the sources of productivity discussed above and the indicators of destination competitiveness identified in the main frameworks developed to date [6,41,57]. For every item identified as a source of productivity growth in Figure 1, that same item appears directly or indirectly in the sources and indicators lists associated with models of destination competitiveness. Given the vagueness of the destination competitiveness concept, and the arguments in favour of replacing ‘destination competitiveness’ with some clearly defined concept of ‘destination performance’ [58], a productivity-focussed approach, with its more clearly defined objective, receives additional support. The proposed framework of analysis also identifies directions in which tourism researchers could extend their investigations to provide additional content regarding sources of tourism productivity where appropriate. Meanwhile, the sources of productivity identified in Figure 1 provide a solid basis for the development of a robust research program that takes serious account of productivity-related issues in achieving and maintaining improved destination performance.
Importantly, Figure 1 recognises that the effects associated with productivity growth have well-being outcomes for tourism stakeholders. We now turn to discuss the potential for changes in well-being, how these well-being outcomes may be identified, and the implications for research, practice, and policy.

5. Linking Productivity with Well-Being

Defining and measuring ‘well-being’ is a much-debated topic among social scientists [59]. Although there is as yet no universally accepted definition of well-being, researchers have agreed that it includes the full range of factors that make life worth living—a multidimensional concept that incorporates notions of material comforts, individual freedom, opportunities available to people, their flourishing, and their capabilities [59,60,61]. Both subjective and objective dimensions of resident well-being are essential components of any well-being framework constructed to measure social progress and should be considered simultaneously [62]. Objective measures of well-being are the actual or reported levels of externally verifiable potential contributors to, or components of, well-being. A focus on subjective well-being is likely to ignore conditions that affect the sustainability of well-being outcomes [63]. Taken on its own, subjective well-being is not a reliable public policy yardstick [63,64]. Statistical agencies globally are also progressively developing subjective and objective indicators of well-being at the individual, household, and community levels [65,66]. These well-being indicators comprise the well-being lens as displayed in Figure 1. In the discussion below, the identified well-being outcomes associated with productivity growth are those that have been developed in the well-being research literature with theoretical and empirical support.

5.1. Links between Immediate Drivers and Well-Being Outcomes

The immediate drivers of productivity, such as technological advance; investment; economies of scale, scope, and specialisation; and resource allocation, have particular effects on material well-being but also generate other well-being outcomes. Investment in ICT can have positive effects on employee well-being by facilitating communication, task autonomy, and more flexible working conditions [28]. Physical and mental health are important in themselves for people’s well-being but also allow the performance of a range of personal and social activities that contribute to well-being. Being employed generates a sense of identity and opportunities for social contact with others, to be creative, to learn new things, and to engage in activities that give a sense of fulfilment, self-esteem, and enjoyment [50]. Education and skill acquisition affect job access, work satisfaction, productivity, economic prosperity, civic participation, higher rates of self-reported happiness, and deeper personal fulfilment [67,68]. Tourism and hospitality education are associated with values such as inclusiveness, pro-environmental behaviour, tolerance, peacefulness, and good citizenship [54]. Work–life conflicts cause psychological distress and demotivation [28]. An appropriate balance between time devoted to work and that devoted to leisure, personal care, family life, and other activities leads to greater productivity, improved health status, and personal well-being. The overall organisational culture, as well as physical characteristics of the work environment, can also have implications for employee well-being. Occupational health and safety regulations also affect well-being in the workplace [69].

5.2. Links between Enabling Drivers and Well-Being Outcomes

Sources of productivity such as competition, economy openness, innovative culture and financial resources are key enablers of material well-being. Networks and clusters provide material and emotional support to residents in times of need, as well as providing access to jobs and other opportunities [70]. Social connections affect physical and mental well-being, providing material and emotional support to destination residents in times of stress [52]. Well-being benefits can arise where nations have stronger social fabrics that enable them to better of various types. Social networks help individuals to cope with external crises such as the COVID-19 pandemic that is currently having a devastating effect on world tourism.

5.3. Links between Underlying Drivers and Well-Being Outcomes

The underlying influences of productivity are the main types of capital stocks that sustain the various dimensions of well-being. Changes in each type of capital stock affect social well-being.
Economic capital. Human well-being positively correlates with income and wealth, since persons with higher levels of each have greater opportunity to achieve what they desire in accessing material goods and services [71]. Given that individual well-being is strongly influenced by one’s position in relation to a peer group, the distribution of wealth and income is also an important driver of well-being intra-generationally [72]. Having a range and quality of goods and services on offer, including infrastructure, also makes for a more interesting and vibrant destination, creating opportunities for improvement in resident well-being. Tourism and recreational facilities include those dedicated to health and well-being enhancement, such as spa facilities, ecotourism, and health resorts available to residents as well as tourists. While tourism expansion can help fund infrastructure to improve resident well-being, higher levels of public debt may result in less public expenditure on essential community services, resulting in reduced community well-being overall.
Human capital includes the knowledge, skills, and attributes embodied in each person that facilitate the creation of individual, social, and economic well-being. Two major bases of human capital as it affects tourism development are the health and education systems, and several associated well-being measures have been identified [51,59]. Individuals with high levels of human capital (either a high education level or good health) show higher levels of subjective well-being, with deeper personal fulfilment, even when controlling for income and other factors [52]. Health status provides opportunities for social and leisure activities that enhance resident well-being as well as continuing workforce engagement in employment [67]. The education system contributes to present and future well-being through development of knowledge, skills, productivity, and the ability to innovate [50]. By transmitting knowledge through generations, education is the basis of human civilisation and has a major impact on the quality of life of individuals and the sustainability thereof over time [72].
Social capital can help foster development of cooperative norms, ethical business dealings, finding a decent job, reduction in inequalities, the cultural identity of host communities, democratic participation, crime reduction, health status, and sense of place and belonging [53]. Social networks provide material and emotional support in times of need as well as providing access to jobs and other opportunities. The creation of social networks may have a direct well-being effect, as individuals who are strongly embedded in societal networks fostering connectedness and collaboration tend to be happier and more satisfied with life than those who are less well integrated in society [73].
Community life fosters a sense of belonging and trust in others as well as strengthening the effectiveness and accountability of government institutions and public policy [53]. Social networks in tourism have been found to produce well-being outcomes by way of increased trust, cooperation, pride in local culture, heritage and environment, gender parity, prosocial and pro-environmental behaviour, ethical behaviour in business, and effective governance [54].
Natural capital plays an important role in human emotional, cognitive, educational, aesthetic, biological, and spiritual development [73]. Ecosystem services connecting natural capital to well-being comprise four main types of services: provisioning services (supplying materials and food), cultural services (scientific, recreational, aesthetic, educational, and spiritual enrichment), regulating services (climate control, air and water filtration) and supporting services (carbon storage, waste assimilation), all of which are essential to the biodiversity necessary for the health and survival of all species. The natural environment presents opportunities to undertake recreational and nature-based activities to improve physical and mental health, stress reduction, the work–life balance, longevity, social connections, and life satisfaction [52]. Natural capital contributes to well-being outside the market mainly when humans experience nature directly (wildlife viewing, camping) or when they derive pleasure from the knowledge that particular natural phenomena exist. Natural capital has particular relevance to tourism as a visitor ‘pull’ factor while also essential to other types of capital (economic, human, and social) that generate well-being now and will continue to do so into the future [73]. The quality of the natural environment where people live and work and the associated green space is important in its own right and matters for people’s health and their ability to undertake activities involving access to environmental amenities and quality recreation. Various forms of tourism facilitate reconnections to nature, with positive well-being outcomes [74,75].

5.4. Sustainability

The capital stocks (economic, human, social, and natural) comprising the underlying drivers of productivity have substantial implications for sustainable destination development. A theoretically sound approach to measurement of sustainability requires analysis of the evolution over time of the different stocks of capital that sustain the various dimensions of well-being, and in particular of how decisions taken today affect these stocks. On the so-called ‘Capitals Approach’ [76,77,78], the choices made by the present a generation will dictate the quantity and quality of the stock of resources available, or ‘bequeathed’, to future generations. Capital stocks act as a transmission mechanism for achieving intergenerational well-being. The conditions for sustainable tourism development amount to each generation leaving the next generation a stock of productive capacity that is capable of sustaining well-being per capita at a level no less than that enjoyed by the current generation [79]. Distinguishing the sources of current and future well-being allows sustainability considerations to be embedded into the study of destination productivity. To date, researchers have paid comparatively little attention to the relationship between changes in the capital stocks and well-being, and even less to consideration of this in the context of productivity growth.

5.5. Well-Being Affects Productivity

Although the above discussion has focussed on the potential positive effects of productivity growth on well-being, it should be noted that the relationship also flows in the other direction—from well-being improvement to productivity growth. Higher levels of subjective well-being have been linked to greater labour productivity [25]. People with higher education and greater skills tend to have higher earnings and accumulated wealth, live longer, have better health conditions and denser networks of connections, and be more active citizens [52], each of which supports a business environment fostering productivity growth. Industries where workers are on average happier have higher levels of labour productivity. This implies that worker well-being not only is desirable in itself but contributes productivity growth [52]. Empirical studies have suggested that a virtuous circle of increasing well-being and growth can be established with appropriate action [11]. Tourism research has generally emphasised resident life evaluation with little attention to feelings and emotions and eudaimonia, all of which can play an important role in productivity growth. Future studies need to investigate whether these dimensions of well-being are linked to productivity in the same way as subjective well-being.

5.6. Detrimental Well-Being Outcomes

While productivity–positive well-being links are emphasised above, productivity growth may have detrimental effects on well-being [25]. The pursuit of productivity growth in the workplace can heighten a number of workplace factors such as job demands and job insecurity, both of which are associated with poorer well-being. Sustained productivity growth may increase carbon emissions, raise average temperatures, and deplete forms of natural capital that have been shown to be beneficial for well-being. The way in which we pursue productivity growth appears to have the potential to undermine well-being.

6. Policy Implications: Constructing a Well-Being Lens

To determine and measure well-being outcomes associated with productivity growth, indicators of well-being must be employed. In Figure 1, the box labelled ‘well-being lens’ comprises indicators that allow the effects of productivity growth on stakeholder well-being to be identified and measured. Well-being indicators relevant to the effects of productivity growth are being developed according to international criteria: relevance and quality of data, comparability, predictive validity, coverage, and frequency of data collection [64,65,66]. The well-being lens must be flexible enough able to embrace a variety of indicators that reflect the particular values of different cultures and communities. There is no fixed list of indicators that can comprise the well-being lens for all destinations under all circumstances. Examples of widely accepted indicators of current and future well-being meeting the criteria that have particular tourism relevance are discussed in [31,32,76,77].
Taking seriously the claim that the primary policy objective of productivity growth is to enhance human well-being, well-being outcomes do not merely complement key performance indicators but form the ultimate criteria for estimating the effects of productivity growth. These measures can be refined as our knowledge of productivity–well-being links develops. The development of the well-being lens with appropriate content will be challenging in destinations with limited statistical resources and competing statistical demands or where many well-being data are not collected routinely or exist only outside the national statistical system. While various challenges must be overcome [76,77], the quality of data and set of preferred indicators may be expected to progress over time, resulting in more accurate measures of social progress.
The well-being lens can inform public- and private-sector strategies for improving tourism industry productivity. Most strategies will have short-term effects on productivity drivers, generating well-being outcomes for various stakeholders in the current generation. Regarding future well-being, public- and private-sector organisations can invest in types of built, natural, human, and social capital that will best enhance well-being outcomes given the resources invested. Assessment of future well-being requires particular attention to the effects of the changing capital stocks comprising the basic underlying drivers of productivity growth. While various conceptual and empirical challenges still need resolution, the recommended well-being lens represents an essential component of tourism policy making.

7. Conclusions

Given the relative neglect of well-being outcomes in destination performance studies to date, a greater research effort is required to explore the links between productivity and resident well-being in particular. The arguments presented herein demonstrate that well-being outcomes are crucially associated with attempts to embed productivity considerations into studies of tourism industry performance. Identification of major sources of productivity growth that have implications for tourism stakeholder well-being has highlighted an integrated research agenda to enhance productivity growth in different sectors of the tourism industry, with social well-being as the primary goal.
Putting resident well-being as central to tourism policy making requires not just better productivity measures and data but embedding well-being considerations into the culture and machinery of government decision making [1,65]. This will require a major transformation in stakeholder values and practice at all levels of decision making [79]. Given the diversity of the identified drivers of productivity, strategies to improve tourism productivity and associated well-being outcomes require a high level of coordination in strategy formulation. Thus, no matter how detailed a productivity improvement strategy might be, good governance is essential for successful implementation. In their education and training role, DMOs can inform tourism stakeholders about the crucial role of productivity growth in improving resident well-being and achieving sustainable destination development.
Further development of indicators of destination performance can benefit from ongoing research on the sources of productivity growth and the role that it plays in enhancing resident well-being and sustainable destination development. Given the thrust of current research by statistical organisations to develop objective well-being measures, tourism stakeholders, so far as is possible, can use the results of this research to more closely explore how well-being and productivity growth may influence each other over time and across destinations and different industry sectors. Related challenges will be to understand community views on what fosters positive well-being outcomes and to ensure that community values inform policy debates. It would be helpful to apply the proposed framework to a case study in order to test its practical usability. Advances in our knowledge of specific sources of service productivity and well-being outcomes can be added into the framework of analysis and employed as a guide to tourism policy making.


This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

Not applicable.

Conflicts of Interest

The author declares no conflict of interest.


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Figure 1. Sources of productivity growth and well-being outcomes.
Figure 1. Sources of productivity growth and well-being outcomes.
Tourismhosp 03 00038 g001
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