CLUSTER APPROACH IN THE TOURISM BUSINESS

One of the approaches to development of the tourism industry at the regional level, based of market rules and principles are creation and development of tourism clusters. Clusters span numerous different companies, contribute to more efficient solution of socio–economic problems in the country as a whole, and in certain regions. Clusters centre around different companies, which have not cooperated in the past, to encourage their development. The cluster approach should make radical changes to content of the tourism development policy; it means that there is a need to promote and develop the system of relationships between economic operators and the national authorities rather to support individual companies or industries. Practically it enables creation and implementation of large trans–sectoral and interregional investment and innovation projects.


Introduction
During the last decades, attention to tourism as a specific form of socio-economic relations both in individual countries and in the world as a whole is steadily growing.Under globalisation conditions when intercommunication between nations and regions is constantly expanding, economic development problems of individual nations exceed the separate national boundaries.Topicality of the research: level of economic development of the national tourism industry and analysis of socio-economic situation in Latgale, and the need for an innovative approach to deal with the complex problems of the crisis period, forms the basis for use of organisation of the tourism business cluster in the region of Latgale.
The methods applied: systemic and comparative analysis of theoretical concepts and methodology, monographic, logicallyconstructive method.
Goal of the paper: to perform a study on possibilities to use the cluster approach for the tourism business.
The following objectives are set to attain the goal: 1.To analyze concept of "cluster" and "tourism cluster".2. To carry out an analysis of the importance of tourism cluster in the regional economy.3. To carry out an analysis of the foreign experience in creation and development of clusters in the tourism business.4. To examine Latvia's cluster experience and to draw up proposals for the creation of the tourism business.

Place and importance of the tourism cluster in the regional economy
The term "cluster" is a polysemantic notion denotating more a form of phenomenon (group, collection), but not the content (15).
The Database of Academic terms AkadTerm provides 7 explanations to the notion of "cluster" and one of them is that the notion of "cluster" is "a group of objects with a particular set of features" (14).According to the general scientific interpretation "a cluster" is a collection of several uniform elements, which can be viewed as an independent unit with certain characteristics.In the science of Economics, the notion "cluster" for the first time was introduced by an American scientist Michael Porter.Porter defines clusters as concentration of interrelated companies and institutions in a geographical region, to resolve either individual sectoral problems, or trans-sectoral problems (10).
M. Porter believes that it is a group of companies located in the same region and being mutual related (suppliers, producers, et al.), and coordinating their cooperation with the national and local authorities, educational institutions, managers of the objects of infrastructure, working in a particular industry and which activities are governed by a joint action programme.
Clusters are covering a large number of different companies -from the product manufacturers and service providers, suppliers of dedicated equipment, new technologies, materials, complementary and replacement goods to undertakings providing infrastructure.In some developed countries, clusters also include national authorities, educational establishments, standardization centres, different associations that provide specialized training and technical support, information and research.Cluster contributes to more effective solution of social and economic problems in the country as a whole and in certain regions.
In accordance with studies of Economists having examined the cluster definitions, such as Martin and Sunley (5), Fernandes (4), Rosnfeld (8), Flowers and Easterling (3), Simmie (9), clusters are a direct path to innovations, geographical concentration enables the companies to work with greater efficiency, promoting creation of new types of companies.Participants of the cluster have access to the cluster information -providing assistance in training of qualified staff increasing the level of education for the population.Consequently, the cluster could be described as a means to improve competitiveness in the region.
While most of the authors define the concept of a cluster in respect of traditional sectors, it can be applied also in the tourism sector.This is because the tourist satisfaction depends not only from attraction of the area, but also from quality and operational efficiency of hotels, restaurants, shopping centres, and transport infrastructure.
There are several definitions of a tourism cluster.Equally to the netting, the clusters are a group of tourism companies with a purpose is to promote, to encourage and to support development and use of knowledge in the management.The aim of tourism cluster is to enhance competitiveness of the partners involved through their cooperation and interaction, by providing common learning and exchange of knowledge (19).
Research of Professor Joao Matos Ferreira (18) (Portugal) proposes several definitions, including those provided by M. Beni (1).M. Beni defines a tourism cluster as a set of tourism objects, which are concentrated in a limited geographical area with facilities and the quality of services, collective responsibility, social and political coherence, work coordination and cultural associations with excellent management of the cluster of companies, resulting in comparative and competitive advantages (1).
There are no significant differences between definitions of the cluster of general nature and the tourism cluster, as was concluded in the research by Prof. Ferreira.Whereas studies of the tourism cluster concept are few, great interest is displayed by conceptual model of the tourism cluster presented by Prof. J. Ferreira (18).According to the authors' opinion, his model fills a gap in research and it can be used in regions.
The model displays an interactive system of tourism, which is in a dynamic equilibrium and depends on the harmony of three basic components: the tourism product, which consists of resources and tourist attractions; the tourism destination and the tourism cluster.Where the first two components of the related system are operating efficiently, the tourism cluster also functions productively.
The model displays decisive factors being of particular importance to the tourism cluster, elements such as companies and agents, which are combined -thus supporting themselves on the market by means of internal competition strategy between organisations, as well as by means of external competition strategy with other tourism clusters.
In the model proposed by Ferreira the main feature is interaction of components in order to ensure competitiveness.In addition, according to the author's opinions, namely competitiveness is a key element in order the cluster to achieve success.The model takes into account not only the government's role in defining the policy that affects competitiveness of the cluster, but also in ensuring the tourism products and services, emphasizes the role of universities (higher education institutions) as importance of the main strategic participant in studies of development, innovation and differentiation, as well as education and training of human resources.
The most important variables for competitiveness of the tourism cluster are attitudes and perceptions, which affects also development of the region.In Figure 1 (18), Prof. Ferreira presented a conceptual model of the tourism cluster, which provides regional competitiveness.
In order to ensure overall quality of the tourism products, each element of the introduced tourism cluster model is cooperating with others, determining competitiveness of the cluster.In opinion of the authors, Prof. Ferreira most completely takes into account the factors and their interactions in the tourism cluster model.Taking into account international experience in formation and development of clusters, this approach could be used for development of the tourism cluster model in the region of Latgale.

Foreign experience in formation and development of clusters
When analyzing the global experience for organization of clusters, it should be noted that there are two approaches to formation of a cluster (21): In 80-90ies M. Porter (11) has proposed classic liberal approaches based on the "open market", which is a self-regulation of economic players.Such mechanisms have no direct government intervention and/or aid.
Contemporary European approach called "competitiveness pole", which has been developed in France (13) from 2006, and based on the partnership between business, government and local authorities.The state has its interest in global competitiveness of economics and to reach the world level with "competitiveness pole", expressed in the form of providing different types of state aid.Such support is granted by implementation of the territorial development policy.
In opinion of the authors, it is appropriate to use the experience of other countries having a long standing history in formation and development of clusters.In this respect, very close to Latvia is the experience of Finland -the country, which has more than once been at leading positions of the World Economic Forum studies -the prospective competitiveness index (Growth Competitiveness Index), and the current competitiveness index (Business Competitiveness Index).
In Finland during the time period from 1991 to 1993, using the theory of Porter, a series of large-scale studies was carried out, which was published in 1995 under the title "Advantage Finland -The Future of Finnish Industries" (12).This study has analysed the structure, described trends and evaluated competitiveness prospects of the Finnish cluster.Idea of the cluster approach seemed very attractive to the public, this approach was included in training materials for economic institutions, programs, as well as in training courses for managers and officials, making the cluster approach to micro-and macro-economic processes as analytical tool to officials and leaders at all levels (12) Finnish economists took as the basis the "Porter's diamond" model, which was supplemented in the light of actual conditions in the country, and the global economic processes.
Finnish scientists have established the final product characteristics of the industrial sector of international competitiveness, combined in clusters: by exceeding in this sector their product share of the global market, compared to the state's total global trade share, and production exports in the industry are exceeding imports.The potential competitiveness was fixed in cases when the rate of increase, sales volume, profits and investments, as well as labour productivity in the said sector are above the average global indicator of level in the sector (12).When developing the prospective tourism cluster in Latgale these theses are very important in respect of the sectoral exports exceeding imports, confirming the need to concentrate efforts on the incoming tourism.
As shown by the Finnish experience, it is important to realize that key factors for competitiveness of contemporary cluster are highly advanced trans-sectoral links, as well as participation of scientific and educational establishments.Therewith conditions of business cooperation are dictated by the market, and establishment of a system of training of qualified personnel and the national innovations is impossible without participation of the state.
From the point of view of Finnish scientists, the most important elements of the cluster, such as health care and business service clusters (these are clusters that are comparable to tourism, customer-oriented), will be continuous innovations, as well as increasing domestic and external demand.
Organisational elements of cluster can be viewed from example of the Finnish water tourism "Saimaa Holiday", which brings together nine different types of service providers at the shores of Saimaa lake with Linnansaari and Kolovesi national parks.The main activity is concentrated in two areas, each on their own shore of the lake, and in two different communities.Already for nine years operators were active in the status of officially registered association.
The main cooperation is going on in business planning, marketing and joint sales of a variety of related products.Canoe trips, a village of holiday houses, restaurant, equipment hire, small shop and tour programs are offered at a single point of sale.Even though activities belong to different operators, for tourists it is not important, what is the particular business structure and to whom it belongs.A customer selects the services, guided by their own interest, and demand for combined marketing efforts has increased a number of times.While water tourism "Saimaa Holiday" network is of a small scale, this business model demonstrates viability, growth and efforts to reduce the impact of seasonality.
From the authors' point of view, interesting and encouraging experience is development of the Egyptian tourism cluster.A brief overview of the history and the conditions laid down in this African country is reflected in the study "Cluster Initiatives in Developing and Transition Economies" (2).Quoting this study, you can see the importance of tourism cluster development for the national and regional economy: "

TOURISM IN EGYPT: COMPETITIVENESS STRATEGY FOR DEVELOPMENT OF LABOUR FORCE"
Issue.In Egypt the tourism industry plays a vital role in the economic growth.In 1999 USAID has launched its "Workforce Development Initiative" project.In 1999 the tourism sector employed more than 14% from the Egyptian labour force, however, only some of the employees had sufficient skills or knowledge required by their employers.In fact, companies other than the international hotel chains paid no attention to training of their employees.In addition, Egyptian universities and educational establishments primarily implemented the officially-formalized training programs that were very poorly connected with practical requirements of the sector.As a result, tourists arrived in Egypt to see the pyramids and other historical monuments, but rarely returned, partly because of a poor quality services they received.In the face of strong competition from other tourist destinations, in order for Egypt to be competitive in the future, it has started to understand the need to offer more than just its historic sites.The tourism industry must be staffed with highly skilled workforce.
Providing support to the project initiative, which was based on the principles and methods of cluster and which was a starting point for the cluster initiative, the parties involved met together with the participation of: private sector managers (representing hotels and accommodation, restaurants, travel agencies, guidebook organisations, attractions, et al.), industry and business associations, providers of education and training and government representatives.Stakeholders critically reviewed the tourism sector, examined the strengths and weaknesses -with special emphasis on the competitiveness of labour force in the sector.
Implementation of the project.The team at USAID (US Government Agency for International Development) quickly discovered that it was hard to find local professionals who can organize practical training in the industry.As a result, the main idea of the strategy was the ability to implement vocational training, which from the Egyptian employers' point of view would become a relevant and appropriate support.The project was targeted at 2-4 star hotels (since these hotels provide jobs for more than 100,000 people, and in fact do not train them).Based on the model developed by the American Hotel & Lodging Association, nine mobile "principal trainers of hospitality" were prepared for training of the project staff.These principal trainers conducted training for hotels within one area at the same time, in order to increase the impact of the strategy and to demonstrate the results to the hotel owners and managers, which turned out to be important in order to succeed.District after district, they systematically went through seven Egyptian administrative regions to arrange the "training of trainers" courses.Original aim of the project was to train 2000 service staff of 2-4 star hotels.Two years later this goal was exceeded by more than 300 percent, in total 9755 people were trained, including 8577 employees, 1156 hotel managers.In addition to the huge number of trained people, specific proposals were provided to owners and hotel managers how to increase revenues, to reduce costs and to improve invariability and morale of the staff.As results from the cluster's strategic planning process, important links were created between the tourism enterprises and the tourism "practical trainers", which allowed for the project to provide training, which is practical, easy to apply, and directed towards requirements of Egyptian tourism enterprises through involvement of the private sector (hotel owners and managers) at every stage (12).When commenting the said example, from the authors' point of view it is necessary to take into account the importance of the role of leaders who can combine and coordinate the process of the formation of clusters, with participation of the government representatives, as well as the importance of vocational training.
When analyzing the foreign experience, without a doubt it is reasonable to have a look at the neighbours' (Russian) experience where the cluster approach in managing the tourism business is becoming increasingly practised on a large scale.With the Russian Government's decision to develop a tourist and recreational cluster in the North Caucasus, this decision indirectly confirms conclusions by the author about application of this method in the regional development.It is very important that the cluster scales allow talking about some kind of "breakthrough" -such projects as the North Caucasus tourism and recreation cluster could double the regional GDP (22).The Russian project requires significant investments: 450 billion rubles (€ 11,700,000,000), including 60 billion rubles (€ 1,560,000,000) provided as a state aid (22).Taking into account that more than 80,000 people at the age of working capacity need employment, priority for the country is that 100,000 people will work in the cluster (22).In accordance with Mr. Khloponin, representative of President of the Russian Federation in the North Caucasus Federal District, words (23) "... the main idea of the project -to create a network of ski resorts according to the public-private partnership model".Despite of significant difference for situation in the North Caucasus region of Russia and the Latgale region in Latvia, the regions have common problems: high level of unemployment and socio-economic development lagging behind.From the authors' point of view, the public-private partnership model is the best way to enhance the development level of Latgale region.

Experience of Latvian clusters
Latvia still has very little experience in organization of clusters.In the authors' opinion, scientists and practitioners have not given proper attention to the topic of clusters.
According to studies of some researchers, unequal regional development determines that only the Riga region is really competitive, and this factor impedes the development of clusters.Thus authors of the research "Role of clusters in developing the competitiveness of the regions of Latvia" write: "If economic development and competitiveness of Latvian statistical regions are analysed by the methodology given by the World Economic Forum, the only Latvian region that can be viewed as a competitive one on the global market is Riga region which is at the transition stage to the innovation-driven one.All the rest of the territory of Latvia is at the efficiency-driven stage; consequently its competitiveness on the global market is relatively low" (16).
According to conclusions of the research "Role of clusters in developing the competitiveness of the regions of Latvia", effective cluster operation is possible, it seems doubtful, that only at the innovation stage of economic development -at least in the tourism sector."As demonstrated by results of determining the role of clusters in competitiveness of a region, clusters usually develop only in competitive regions, usually located in the innovation stage, further increasing their competitiveness, that is becoming a factor in the competitiveness of these regions, but in other regions the clusters are indicators of competitiveness, suggesting that the region has just reached the threshold level of competitiveness" (16).
In the authors' opinion, the authors are making a fundamental mistake by assuming that the cluster development is possible for highly developed economies, but the authors think that clusters can be simple tools with which economic situation in the region can be changed in a positive way.
Final conclusion of the research is that only the Riga region has a real competitive capacity, "as to the whole other Latvia's territory, which is at the efficiency-driven stage and is far behind Riga, it has to find other instruments which would raise its competitiveness -for example, augmentation of industrial productivity, -thus creating the background for the formation and development of clusters, which in their turn would encourage further improvement of the territory.However, for the time being clusters may not be factors to increase competitiveness of the Vidzeme, Kurzeme, Zemgale and Latgale regions, due to the level of development of Latvia's peripheral areas, because effective clusters cannot be created in such economic and social environment (19)".However, the mere fact that the research has been made on promotion of the cluster competitiveness in Latvia's regions, can be considered a positive development in the regional policy issues and a change in the researchers' attitude.
Analysis of tourism clusters in Latvia is not profoundly studied, although some attention has been paid to this problem, in such an important document that determines the development of the tourism industry, "The Latvian Tourism Marketing Strategy 2010-2015".Section "Development of Latvia's tourism product" has recognized the role of clusters in the development of tourism in Latvia: "According to the strategies of focusing and deep penetration, the formation of tourism products and the promotion of a certain tourism destination is a regional scale development of the tourism sector and promoting its competitiveness at the international level.By a tourism cluster we understand a group of tourism service providers, organizations and institutions (suppliers, service providers, local governments, tourism organizations, education establishments), which creates synergies through an efficient and concerted functioning in a certain geographical location, thus not only enhancing the competitiveness of each individual member of the group, but also the satisfaction of the end user -the visitor.A cluster also promotes mutual positive competition among the members of the group, thus increasing quality and productivity and facilitating innovations (20)".
Fully supporting the position of authors of this strategic document with regard to the importance of clusters for regions, the authors' observation is that in this document a cluster is not considered to be key instrument by means of which it is possible to radically improve the situation in regions.It may be inferred from the following example provided in the document: for the tourism cluster Sigulda and the vicinity of Sigulda -"tourists are guaranteed attractions and activities for winter and summer seasons, and the required services (accommodation, catering, transport, guides, souvenirs etc.).Tourism companies in Sigulda cooperate by offering a joint discount card 'Siguldas Spieķis' (Sigulda Walking Stick) and by packaging the tourist offer (e.g., skiing + accommodation + SPA services).Thus they seek to ensure that visitors stay longer and are provided a full scale service.The Sigulda TIC functions as a co-ordinator, organizer, and initiator and implementer of activities for marketing the destination" (20).In the authors' opinion, cooperation of Sigulda tourism businesses is not a full cluster, but we can talk about elements of Sigulda clusterization, which in itself is a positive phenomenon.In order to improve competitiveness and innovation in Latvia, discussions have been recently started with regard to development of the territory's economy and clusters as a national priority.However, Latvia expressed its support for the European Cluster Memorandum, indicating that the clusters are important factors for raising of capital, people and knowledge.
As mentioned by Prof. Tatyana Volkova in her work "Potential for development of clusters in Latvia" (17), "a necessity to establish clusters in Latvia is mentioned in the National Development Plan, Industrial Development Guidelines of Latvia for 2004-2013 and in Latvia's National Lisbon Programme 2005-2008.The Ministry of Economy in 2007 entered into collaborative agreements with the relevant organisations with regard to elaboration of development strategies for the Forest cluster, Furniture Manufacturing and related sectors (industries) cluster, Metalworking and related sectors (industries) cluster, Biofuels and related sectors (industries) cluster, Food Production and related sectors (industries) cluster, Textile and related sectors (industries) cluster, Information Systems cluster, Pharmaceutical and related sectors (industries) cluster, Electronics and related sectors (industries) cluster.For example, the Latvian IT cluster is successfully functioning since 2001 with a view to promote cooperation among IT companies and related organisations in order to increase competitiveness of IT enterprises on the international markets.Development of activities of other clusters is also successful, but the need to create new clusters still remains topical, especially in the service sector, and to strengthen their competitiveness.Latvia has a great potential to develop clusters in creative industries, which are rapidly growing in Europe and in the world.Leading associations, organizations of these industries should take initiative in the creation of such clusters."

1.
Although most authors define the notion of cluster in relation to traditional sectors, it is possible to apply it also to the tourism sector.This is because the tourist satisfaction depends not only on attractiveness of the site, but also on quality and operational efficiency of hotels, restaurants, shopping centres, and transport infrastructure.

2.
According to the authors' opinions, Prof. Ferreira most perfectly takes account of factors and their interactions in the tourism cluster model.In the light of international experience in formation and development of clusters, this approach could be used for development of the tourism cluster model in the region of Latgale.

3.
According to the authors' opinion, it is appropriate to use experience from other countries, having a long history of formation and development of clusters.According to the conducted research, Finnish experience is very close to Latvia -for competitiveness of contemporary cluster, significant factors are highly developed intersectoral links, as well as participation of scientific and educational establishments.Consequently, conditions for business cooperation are dictated by the market, as well as training of qualified personnel and creation of national innovation system is not possible without participation of the state.