Offshoring of services as a competitive strategy in the tourism industry

Abstract

The offshoring of services has steadily expanded in recent years and acquired growing importance in certain tourism subsectors. The present study analyses for the first time the offshoring indices and the trend seen in tourism services, based on input–output data (Spanish National Accounts) during the 2000–2007 expansive period. A distinction is made between offshoring associated with international fragmentation of production and offshoring due to a shift from domestic to foreign suppliers. The results point to a relocation of intermediate services to foreign countries in certain tourism subsectors (including travel agencies and air and maritime transport), involving both the international fragmentation of production and a substitution of the source of supply.

Keywords

input–output inter-sectoral intra-sectoral offshoring tourism services

Introduction

The swift development of the new information technologies has allowed an ever greater number of activities to be performed in locations different from those of the parent companies carrying them out (Aksin and Masini, 2008; Blinder, 2006; Bradford and Kletzer, 2005; Contractor et al., 2010; Metters, 2007; Stratman, 2008; Stringfellow et al., 2008; Vivek et al., 2008). This, together with intense international competition and the strong pressure to remain price competitive faced by service companies in general and tourism companies in particular, has driven the search for greater efficiency and cost reduction. To that end, companies have fragmented their production processes, relocating them to those countries offering the greatest competitive advantages. This strategy by domestic companies of turning to suppliers in foreign countries for their inputs is known in economic literature as offshoring. Although initially offshoring was a practice essentially restricted to manufacturing companies, in recent years it has spread to the service sector (Metters and Verma, 2008) and especially to tourism-related services (Hjalager, 2007; Nowak et al., 2010, 2013).

One of the alleged negative effects of offshoring is that when parts of the production processes of domestic companies are relocated to other countries, there is a fall in labour demand associated with the relocated operations in the short term. But the positive side is that companies following such a strategy also improve the operations remaining in their country (Myro and Labrador, 2008), that is, the ones they perform more efficiently in-house and which require higher levels of qualification, thereby leading to increased productivity (Amiti and Wei, 2006a; Fariñas et al., 2011; Gorg and Hanley, 2005; Winkler, 2010).

Thus, locating the different stages of production processes in the most efficient places with the lowest costs enhances productivity and competitiveness (Olsen, 2006), allowing companies to cut their average costs and reduce the final cost of their services (Crinò, 2009). Domestic companies that adopt offshoring strategies succeed in cutting costs and enhancing their efficiency, which is what may determine their continued presence in the market and the viability of new projects (Bhagwati et al., 2004).

The offshoring of services has seen gradual expansion and acquired growing importance in certain tourism subsectors as a competitive strategy. This is because the tourism product encompasses multiple activities or services, such as transportation, travel agencies, accommodation, catering, entertainment and cultural services. It is difficult to believe a country would have a comparative advantage in each and every one of these subsectors and be able to specialize efficiently in all of them. Consequently, the optimal strategy for companies that offer tourism-related services in any of their component branches is to seek their input supplies in the countries offering the greatest competitive advantages in those specific inputs. This generates an international division of the tourism industry’s value chains and therefore a pattern of partial specialization per country in providing each of the phases of the value chain. In other words, the tourism sector has undergone a process of international fragmentation of its production.

There are many examples of this phenomenon. For example, the air transport services industry may be located in one country, but it uses tour operators from other countries to manage tickets or outsources its catering services to several other countries. A museum can be located in one country but outsource its management, design, marketing services, IT services and so on to companies in other countries.

In the literature, few studies can be found on this strategy in the tourism sector (Nowak et al., 2010, 2013). Limited evidence on this issue in economic analyses is due to the intrinsic problems in defining and measuring the importance of cross-border tourism production, combined with a lack of data enabling to detect such operations. Neither international trade nor foreign direct investment statistics provide the information needed to accurately capture offshoring processes. Foreign trade statistics do not reflect the destination of a country’s imports. Therefore, these statistics do not reveal whether purchases made abroad aim at final consumption or at intermediate consumption for the service sector. In the latter case, it is not possible either to determine which importing sectors they are. Foreign investment statistics do not enable to detect this strategy either: some of these offshoring operations take place via foreign investment processes while others do not. For this reason, the few available studies have mainly been carried out using microeconomic data at company level. Nowak et al. (2010, 2013) highlight the need to deepen the analysis of this issue in the tourism sector in order to discover its causes, extent, characteristics and effects.

The aim of this work is to analyse the trends in offshoring in the service sector in general and in Spain’s tourism services in particular, based on the Spanish National Accounting input–output data for the 2000–2007 expansive period. This is the first study to measure the extent of this strategy in tourism-related services in Spain. It is also the first time that a macroeconomic methodological approach is used in economic literature to analyse offshoring in tourism. The Spanish case provides a valuable example for the analysis of service offshoring strategies in the tourism industry, given the significant weight of tourism in the Spanish economy as a whole. Tourism accounted for 11.1% of Spain’s GDP in 2015 (Spanish National Statistics Institute, Tourism Satellite Account) and 41.6% of total service exports in that year, with a 371.5% cover rate (Bank of Spain, Balance of Payments), which evidences the strong international component of tourism services in Spain. Moreover, in 2015, Spain was ranked first in terms of global tourism competitiveness (Travel and Tourism Competitiveness Index) by the World Economic Forum out of a total of 141 countries, which makes it a leading world player in tourism.

The analysis of the trend in service offshoring is complemented by a distinction between intra-sectoral and inter-sectoral offshoring, with a view to determining the extent to which service activities depend on inputs imported from the same sector of activity or from other service sectors. In addition, the present study analyses another aspect that we consider relevant, namely whether the offshoring of tourism services is associated with the international fragmentation of production or with a shift from domestic suppliers to foreign ones.

The structure of the present work is as follows: First, we review the literature on the offshoring of services and in particular the offshoring of tourism-related services, indicating the added value of this study in relation to previous studies on tourism. Next, a definition is given for the concept of offshoring and the various indices used to calculate it, specifically the broad offshoring (BO) indicator, which measures total reliance on imported inputs and the narrow offshoring (NO) indicator, which measures the reliance on inputs imported from the same sector of activity. Then, based on the calculation of the above-mentioned indicators, we analyse the overall trend in service offshoring – intra-sectoral and inter-sectoral – both for the service sector as a whole and for the various tourism subsectors, with a view to determining their relative importance and evolution. This is followed by a more in-depth analysis of the indicators, breaking down the offshoring indices in order to identify the tourism sectors in which offshoring is the result of international fragmentation of production versus those in which it is due to a change in procurement sources from domestic to foreign suppliers. Lastly, the main conclusions of this study are drawn and discussed, together with future lines of research.

Offshoring of services: Literature review

The growth in service offshoring is explained by the growing importance of the service sector in the world economy, the development of the new information and communication technologies (ICT), the progressive liberalization of international markets and the strong pressure faced by companies to cut costs and be more competitive (Metters and Verma, 2008).

In this section, we review the empirical literature on the offshoring of services in general, as well as the few theoretical and empirical works that exist in the specific field of tourism globalization.

Among the studies analysing this phenomenon for the service sector on an international level based on input–output data, the methodology followed in this work, it is worth highlighting Raa and Wolff (2001) and Grossman and Rossi-Hansberg (2006) for the US economy; Winkler (2010) for Germany; Castellani et al. (2010) for Italy; and Crinò (2009) and Castellani et al. (2013) for several European countries, the former covering 9 European countries and the latter covering 21 countries in Europe. However, a number of papers analyse the outsourcing of services on the basis of information sources other than input–output tables (IOTs). On the one hand, there is a group of studies addressing this phenomenon based on microeconomic data relating to specific companies, including Abramovsky and Griffith (2005), Hijzen et al. (2007) and Geishecker and Görg (2013) for the United Kingdom; Amiti and Wei (2006b) and Bunyaratavej et al. (2007, 2008) for the United States; and Bhalla et al. (2008) for East European companies. On the other hand, a number of studies, such as that carried out by Dossani and Kenney (2007), focus on the analysis of offshoring by US companies in India. In addition, Mirani (2007) conducts two case studies on software offshoring, and Andersen (2008) studies the case of a Danish company offshoring its services to China. Lastly, Hahn and Bunyaratavej (2010), based on the Financial Times direct foreign investment global database, analyse the offshoring of services in the United Kingdom, the United States, Germany and Japan.

All these works study different aspects of service offshoring, including its size in certain countries, its effects, the characteristics of companies carrying it out, the characteristics of the countries to which the services are offshored, the impact of the use of ICTs on the offshoring of services and the impact of the offshoring destination countries’ cultural dimensions on the selection of the location. All these empirical contributions highlight the growing importance of service offshoring for the different national economies.

Theoretical and empirical evidence of offshoring in the particular field of tourism-related services based on foreign trade sectoral data is basically limited to the work of Hjalager (2007) and Nowak et al. (2010, 2013). Previous tourism-specialized studies do not consider that tourism includes all tourism activities based on value chains and is therefore subject to offshoring. Rather, in each case, a specific segment of the activity is examined (Algieri, 2006; Jensen and Zhang, 2007; Peterson, 1988). Specifically, these studies cover the competitiveness of international travel (Peterson, 1988), international tourism flows in terms of supply-side factors (Jensen and Zhang, 2007) and the impact of tourism demand on economic growth (Algieri, 2006).

Hjalager (2007) was the first to develop a theoretical model of tourism globalization, based on the gradual approach to internationalization introduced by Johanson and Vahlne (1977) to explain the international expansion of manufacturing companies. Hjalager shows how the tourist product, broadly understood, and not only referring to airlines or hotels as is usual in the literature, can also be explained by this process of internationalization in several stages.¹ Nowak et al. (2010, 2013) apply the Hjalager (2007) model, concentrating on stage 3, that is, fragmentation, which is where the offshoring strategy is explicitly considered. They build a competitiveness indicator based on contributions to the trade balance (Lafay, 1992) of two subsegments of tourism production: accommodation and transport of passengers. This index reflects the comparative advantage or disadvantage, based on the traditional Ricardian paradigm of international trade theory, of each phase of the value chain according to its account balance in the country’s trade balance. The results prove that most of the countries considered in the study do not have a comparative advantage in the two segments when considered simultaneously, but advantages in one and disadvantages in the other. Therefore, the pattern of trade should be partial, showing specializations per country only in those segments with a comparative advantage and not for the tourism product as a whole. This corresponds to the concept of international fragmentation of tourism production.²

Works based on a microeconomic approach using company data concern offshoring in tourism subsectors such as hotels (Espino-Rodríguez and Lai, 2014; Espino-Rodríguez et al., 2017), air travel (Hsu and Liou, 2013; Rieple and Helm, 2008) and a number of studies on medical tourism (Bies and Zacharia, 2007; York, 2008). The hotel sector being the most extensively studied in this regard. Thus, for example, Espino-Rodríguez and Lai (2014) and Espino-Rodríguez et al. (2017) analyse the relationship between outsourcing activities and competitive strategies in the hotel industry, using company data from this industry in Taiwan and applying hypothesis contrast techniques with analysis of variance models. Similar works carried out by these and other authors include Espino-Rodríguez and Padrón-Robaina (2004, 2005a, 2005b); Espino Rodríguez and Gil Padilla (2005, 2007); Espino Rodríguez et al. (2008, 2012); and Hiamey and Amenumey (2013). All of them address the subject from a different perspective to that adopted in our article.

Shang et al. (2008), for their part, apply different methodologies, but they also use hotel data and study efficiency by means of the data envelopment analysis model to analyse the impact of service outsourcing on hotel performance, concluding that it is not a determining factor for the international efficiency of Taiwan hotels.

As regards Spain, very scant empirical evidence is available on the offshoring of services. The offshoring of material inputs in the manufacturing sector (Díaz Mora and Gandoy, 2005; Díaz Mora et al., 2007; Fariñas and Martín, 2009; Fariñas et al., 2011; Gómez et al., 2006; Minondo and Rubert, 2001) has been extensively researched, but there are few studies focusing on the offshoring of services. Those that analyse it using the IOT methodology include Canals (2006), who analyses the offshoring of both materials and services in the industrial sector; and Camacho and Rodríguez (2008) and Fuster and Martínez (2013), who analyse the offshoring of services by sectors of activity in the service industry. Moreover, Canals (2006) and Camacho and Rodríguez (2008) use a different offshoring indicator from that used in this study.³ All of these papers point to the growing importance of offshoring of services for the Spanish economy, as is the case in other countries.

In Spain, however, there is no previous evidence of offshoring of services in the tourism subsectors, and this is one of the main contributions of this study. Moreover, whether in Spain or internationally, no papers are to be found in the literature specifically focusing on the study of tourism services offshoring from an indicator calculation perspective – as is the case of our article – or drawing a comparison with the offshoring of other services using macroeconomic data. This represents another relevant contribution of this work.

Definition and measurement of service offshoring

Feenstra and Hanson (1996, 1999) were the first to measure the intensity of offshoring as the proportion of imported inputs relative to the total inputs used, both domestic and imported. However, the most widely used measure of offshoring in empirical literature is the ratio of imported inputs to the production value (Cadarso et al., 2012; Campa and Goldberg, 1997; Castellani et al., 2010; Díaz Mora et al., 2007; Ekholm and Hakkala, 2005; Falk and Wolfmayr, 2005; Geishecker and Görg, 2005; Michel and Rycx, 2012).

Unlike previous works applying the input–output methodology to study the offshoring of services in Spain (Canals, 2006; Camacho and Rodríguez, 2008), in the present article offshoring is identified as the proportion of imported intermediate services relative to the production value

{BO}_{j t} = \frac{\sum_{i = 1}^{n} {II}_{j i t}}{Y_{j t}} j = 1, \dots, J; i = 1, \dots, I

where BO _jt is the broad offshoring index for sector j in the year t, II _jit the intermediate consumptions imported by sector j originating from activity i in the year t and Y _jt is the production value of sector j in the year t.

The IOTs from Spain’s National Accounting offer, for each sector j, annual information on the value of intermediate consumption imported from each branch of activity i, both for material goods and for services. Since the objective of this work is to analyse the offshoring of services, the values of services imported from different activity branches are used to calculate the annual offshoring indicator for each sector j. The values of services imported from the different branches of activity are used. Thus, for example, during 2007 in Spain, the air transport sector outsourced intermediate services to foreign companies such as legal and accounting services, advertising, consultancy and cleaning services, among others, whose total value amounted to €1847 million. Given that the output of this branch in 2007 was €10,628 million, the offshoring indicator (BO _jt ) has a value of 0.1738. This means that 17.38% of the production value of the air transport industry in Spain corresponds to imported service activities.

The measure of offshoring, which refers to all the imported services, encompassing both the same sector and the other service sectors, is known as BO. However, it is also interesting to determine the extent to which the service sectors receiving inputs from other countries import services from their own sector or from the other service sectors. The reliance on inputs imported from the same sector of activity, known as NO index, was measured for the first time by Feenstra and Hanson (1999).

{NO}_{j t} = \frac{{II}_{j j t}}{Y_{j t}} j = 1, \dots, J

where NO _jt is the NO index for sector j in the year t, II _jjt the total imported inputs used by sector j from its own field of activity j in the year t and Y _jt the production value of sector j in the year t.

To continue with the example of the air transport, to calculate the NO index (NO _jt ), only intermediate services imported from the same branch, that is, air transport services outsourced to foreign companies in 2007, should be considered. By dividing the value of these inputs by the production value of the sector, the NO index is obtained, producing a result of 0.0162. This means that 1.62% of the total value of the air transport sector’s production corresponds to intermediate services imported from the same branch.

The analysis of both indicators – BO and NO – allows us to determine whether offshoring stems from increased reliance on intra-sectoral imported inputs, that is, from the same sector of activity, or whether it is more the result of the use of intra-sectoral inputs, originating from other sectors of activity. Note that the BO indicator can be expressed as the sum of the narrow (intra-sectoral) offshoring plus the inter-sectoral offshoring.

Continuing with the example, in 2007, the air transport branch in Spain outsourced intermediate services to foreign countries, which represented 17.38% of the value of its production, of which 1.62% points correspond to services of the same branch of activity and the rest (15.76%) to other service activities.

Trends in service offshoring: Importance in tourism services

Using the data from the Spanish National Accounting IOTs (Spanish National Statistics Institute (INE)), the offshoring indicators defined above were calculated. The results point to a trend of increasing outsourcing of services by tertiary sector companies over the 2000–2007 period, indicating that service companies are now importing activities that were previously performed in-house. The growth trend in service offshoring based on the BO indicator is not as pronounced as that based on the NO indicator.⁴

As regards offshoring by different service sectors, three tourism activities rank the highest: travel agencies, maritime transport and air transport (Figure 1). It should be noted that these three sectors show the highest reliance on imported intermediate services by product unit, with the highest BO indices, at 23.70, 22.15 and 17.38, respectively, (Table 1), a long way ahead of the next service sector (insurance and retirement plans, at 7.69; Figure 1). Moreover, two of these three sectors related to tourism – maritime transport and travel agencies – also stand out among all the tourism and non-tourism services as the fastest growing in terms of offshoring over the period under study (Table 3).

Figure 1.

Service offshoring by sector of activity, 2007. The intra-sectoral indicator represents narrow offshoring and refers to the reliance on imported intermediate services belonging to the same sector of activity relative to the production value, and the inter-industry indicator refers to the reliance on intermediate services from other tertiary sectors of activity relative to the production value. The sum of the two indicators gives us the total reliance on imported intermediate services relative to the production value (II/Y). II: imported inputs; Y: production value. Source: Prepared by authors from Input–Output Tables, Spanish National Accounting, INE.

Table 1.

BO of tourism services and intra- and inter-sectoral reliance, 2007.

Sectors of activity (decreasing order of BO)	BO	Intra-sectoral		Inter-sectoral
Sectors of activity (decreasing order of BO)	BO	Index	Percentage of BO	Index	Percentage of BO
Travel agency activities	23.70	6.45	27.20	17.25	72.80
Maritime transport	22.15	0.00	0.00	22.15	100.00
Air transport	17.38	1.62	9.30	15.76	90.70
Recreational, cultural and sports market activities	6.95	5.61	80.65	1.35	19.35
Transport-related activities	4.94	4.54	91.82	0.40	8.18
Accommodation	1.97	0.00	0.00	1.97	100.00
Railway transport	1.22	0.00	0.00	1.22	100.00
Overland transport	0.94	0.00	0.02	0.94	99.98
Recreational and cultural non-market activities	0.40	0.00	0.00	0.40	100.00
Restaurants and catering	0.02	0.00	0.00	0.02	100.00

Source: Prepared by authors from Input–Output Tables, Spanish National Accounting, INE.

Note: BO: broad offshoring; II: imported inputs; Y: production value. The intra-sectoral indicator represents narrow offshoring and refers to the reliance on imported intermediate services from the same sector of activity relative to the production value, while the inter-sectoral indicator refers to the reliance on intermediate services from other tertiary sectors of activity relative to the production value. The sum of the two indicators gives the BO, which measures the total reliance on imported intermediate services relative to the production value (II/Y). The sectors of activity are shown in decreasing order of BO.

Travel agencies stand out as the sector that outsources the highest number of services internationally in relation to their production. They follow this strategy to be competitive in the context of intense globalization in which they are immersed. In particular, they import services from their own sector of activity (travel agencies from other countries) and mostly services from other sectors such as transport and accommodation services. In the case of maritime transport, this branch imports all its services from other branches of activity, such as ancillary services to transport, repair services, insurance, rental of machinery, advertising, cleaning and consultancy. Air transport, as previously mentioned, outsources advertising, consultancy and cleaning services to foreign countries, among others.

Lower down the ranking we find, within services with a tourism component, recreational, cultural and cultural market activities (6.95 BO), which, together with transport-related activities, show BO values approximately ranging between 7 and 5 (Figure 1). Recreational and cultural activities import IT services, reception and reproduction of sound and pictures, consultancy and services related to its own branch of activity as well as artistic and cultural services.

Other tourism activities further down this ranking include accommodation (1.97) and railway transport (1.22). The accommodation sector outsources mainly advertising and consultancy services.

To complete the analysis of tourism services, the final four positions are overland transport (0.94), recreational, cultural and sports non-market activities (0.40), and restaurants and catering (0.02).

It should be highlighted that, out of all the tourism-related services analysed, only four – travel agencies; recreational, cultural and sports market activities; transport-related activities; and air transport – carry out intra-sectoral or NO in addition to inter-sectoral offshoring, that is, they also show a reliance on imported intermediate services from their own sector of activity. All the other tourism sectors only carry out inter-sectoral offshoring, sourcing their services from other tertiary sectors of activity (Table 1).

From a dynamic perspective, over the 2000–2007 period, the evolution of offshoring indices (BO) for tourism-related activities reveals that offshoring by travel agencies, maritime transport and air transport is significant over the whole period under study (Table 2 and Figure 2).

Table 2.

BO of tourism services, 2000–2007.

	Imported intermediate services relative to the production value
Sectors of activity	2000	2001	2002	2003	2004	2005	2006	2007
Accommodation	2.09	2.20	1.36	1.32	1.69	1.80	1.95	1.97
Restaurants and catering	0.06	0.12	0.11	0.10	0.09	0.06	0.05	0.02
Railway transport	0.72	0.90	0.89	0.87	0.91	1.08	1.05	1.22
Overland transport	0.61	0.83	0.88	0.97	0.92	0.77	0.85	0.94
Maritime transport	13.42	15.73	20.97	20.12	19.56	18.90	18.38	22.15
Air transport	22.17	21.91	18.12	17.72	17.08	17.62	16.37	17.38
Transport-related activities	4.95	5.26	5.26	5.07	5.01	4.92	4.48	4.94
Travel agency activities	16.04	18.71	18.19	18.34	19.15	22.96	23.72	23.70
Recreational, cultural and sports market activities	8.19	8.33	5.62	7.86	7.88	7.26	6.98	6.95
Recreational and cultural non-market activities	0.01	0.35	7.64	0.36	0.38	0.40	0.39	0.40

Source: Prepared by authors from Input–Output Tables, Spanish National Accounting, INE.

Note: BO: broad offspring.

Figure 2.

Evolution of service offshoring of tourism-related activities, 2000–2007. Source: Prepared by authors from Input–Output Tables, Spanish National Accounting, INE.

Figure 2 shows the evolution of offshoring indices (BO) for tourism-related activities depending the most on imported intermediate services. Travel agencies, with offshoring rates ranging from 16 to 24, show a growth trend over the entire period increasing significantly from 2004 onwards. Maritime transport, which is entirely inter-sectoral and with values in the range of 13–22, was on an increasing trend until 2002 and, after a slight decline, has rebounded since 2006. Air transport activities, which range from 16 to 22, declined until 2002 and have stabilized since then with a slight increase since 2006. Recreational, cultural and sporting activities remain stable, except for a decline in 2002. Lastly, activities connected to transport remain virtually constant with a value of around 5.

Table 3 shows which part of offshoring growth measured for each branch between 2000 and 2007 is due to the intra-sectoral factor and which part is due to the inter-sectoral factor. With regard to the observed increase in the offshoring of services during the period under study, as indicated earlier, two tourism-related services have shown the most dynamic performance – maritime transport and travel agencies – with 8.73% and 7.66% increases in offshoring levels, respectively, between 2000 and 2007. Whereas in maritime transport, the growth in offshoring has a fully inter-sectoral component (8.73), reflecting an increase in the reliance on imported inputs from other tertiary activities, in the case of travel agencies the growth is both inter-sectoral (2.54) and intra-sectoral (5.12), with a prevalence of the latter.

Table 3.

Trend in BO and NO indicators for tourism services (percentage change between 2000 and 2007).

Sectors of activity (decreasing order of BO in 2007)	BO 2000	BO 2007	Percentage difference 2000–2007
Sectors of activity (decreasing order of BO in 2007)	BO 2000	BO 2007	BO	Intra-sectoral	Inter-sectoral
Travel agency activities	16.04	23.70	7.66	5.12	2.54
Maritime transport	13.42	22.15	8.73	0	8.73
Air transport	22.17	17.38	−4.8	0.35	−5.15
Recreational, cultural and sports market activities	8.19	6.95	−1.24	−0.27	−0.97
Transport-related activities	4.95	4.94	−0.01	1.2	−1.21
Accommodation	2.09	1.97	−0.12	0	−0.12
Railway transport	0.72	1.22	0.5	0	0.5
Overland transport	0.61	0.94	0.33	0	0.33
Recreational and cultural non-market activities	0.01	0.40	0.39	0	0.39
Restaurants and catering	0.06	0.02	−0.04	0	−0.04

Source: Prepared by authors from Input–Output Tables, Spanish National Accounting, INE.

Note: BO: broad offshoring; NO: narrow offshoring. The sectors of activity are shown in decreasing order of BO in 2007.

As for the rest of the tourism services, railway transport, cultural and recreational non-market activities and overland transport showed a slight rise in terms of offshoring (by half a percentage point or less) and said increase is fully accounted for by the inter-sectoral component. On the other hand, transport-related activities; restaurants and catering; accommodation; recreational, cultural and sports market activities and air transport showed a drop in offshoring activity, mainly due to a lower reliance on imported intermediate services from other sectors.

Breakdown of the offshoring index

The trend in the offshoring indicators analysed shows an increase in the reliance on imported intermediate services, in most cases with a larger inter-sectoral component, that is, an increased reliance on imported intermediate services from other tertiary sectors.

However, an increased reliance on imported inputs may have its origin in a change in the source of supply, that is, a shift from domestic suppliers to foreign suppliers, or alternatively it may be due to a process of international fragmentation of production, that is, the substitution of company production with imported inputs. In order to analyse the extent to which service companies are adopting international fragmentation of production strategies and outsourcing to other countries the supply of intermediate services that were previously performed in-house, the offshoring indicator (II/Y) can be broken down into two components: the ratio of imported inputs to total (domestic and imported) inputs used (II/TI) and the ratio of the total intermediate consumptions used to the production value (TI/Y), such that

BO = \frac{II}{Y} = \frac{II}{TI} \times \frac{TI}{Y}

{BO}_{j t} = \frac{\sum_{i = 1}^{n} {II}_{j i t}}{Y_{j t}} = \frac{\sum_{i = 1}^{n} {II}_{j i t}}{\sum_{i = 1}^{n} {TI}_{j i t}} \times \frac{\sum_{i = 1}^{n} {IT}_{j i t}}{Y_{j t}} j = 1, \dots, J; i = 1, \dots, I

where BO _jt is the total offshoring in sector j in the year t, II _jit the intermediate consumptions imported by sector j from sector i in the year t, IT _ij the total inputs used by sector j from sector i in the year t and Y _jt the value of the production of sector j in the year t.

The existence of international fragmentation of production would lead to a positive trend in all the factors of the above equation. Thus, rises in input imports per unit produced (increase in II/Y) would be taking place as a result of companies discontinuing the production of certain inputs and sourcing them from other companies (increase in TI/Y) and, specifically, from foreign suppliers (increase in II/TI). However, a positive trend in the total indicator not associated with increases in the other components would not indicate the existence of international fragmentation of production. Thus, a rise in the offshoring indicator (II/Y) coupled with a negative or flat trend in the (TI/Y) factor would reflect a rise in input imports per unit produced, but as a result of a replacement of domestically sourced inputs with imported inputs.

This breakdown of the offshoring index, used by Díaz Mora et al. (2007) to analyse the offshoring of materials in the Spanish economy and by Castellani et al. (2010) to study the offshoring of materials and services in Italy, is the one used in this study. Unlike previous works analysing the offshoring of services in Spain (Canals, 2006; Camacho and Rodríguez, 2008), the present work combines the analyses of all three of the above-mentioned indicators to determine whether an international fragmentation of production activities has taken place or whether there has simply been a shift in suppliers from the domestic to the foreign market.

International fragmentation of activities in tourism services?

Empirical analysis of the breakdown of the offshoring indicator allows us to distinguish between the tourism services for which offshoring can be explained by the international fragmentation of production and those for which offshoring is due to the substitution of domestic suppliers with foreign suppliers. To that end, the disaggregated offshoring indicator for tourism service activities has been calculated (Table 4).

Table 4.

Breakdown of the offshoring indicator into its components for the tourism service sectors, 2000 and 2007.

	Change in BO 2000–2007 (%)	II/TI			TI/Y
	Change in BO 2000–2007 (%)	2000	2007	Dif	2000	2007	Dif
Travel agency activities	7.66	25.89	36.00	10.11	61.94	65.84	3.90
Maritime sector	8.73	33.50	55.58	22.08	40.05	39.85	−0.20
Air transport	−4.8	51.25	41.69	−9.56	43.27	41.68	−1.59
Recreational, cultural and sports market activities	−1.24	32.78	23.36	−9.42	24.99	29.76	4.77
Transport-related activities	−0.01	10.52	9.07	−1.45	47.04	54.44	7.41
Accommodation	−0.12	10.61	8.23	−2.38	19.73	23.92	4.19
Railway transport	0.5	4.28	4.11	−0.17	16.92	29.70	12.78
Overland transport	0.33	1.87	2.52	0.65	32.59	37.26	4.67
Recreational and cultural non-market activities	0.39	3.05	0.13	−2.92	41.64	42.48	0.85
Restaurants	−0.04	0.50	0.15	−0.35	12.39	15.45	3.06

Source: Prepared by authors from Input–Output Tables, Spanish National Accounting, INE.

Note: II: imported inputs; TI: total inputs (imported and domestic); Y: production value.

The various tourism service categories show different results upon analysing the breakdown of the offshoring index. Among the main results, it is worth noting, on the one hand, the existence of international fragmentation of production in travel agencies, one of the sectors with the highest prevalence of offshoring. For such activities, the rise in offshoring is explained by an increase in its two components, II/TI y IT/Y, indicating that companies stop producing certain inputs and start importing them instead. On the other hand, the rise in offshoring in maritime transport is explained by the substitution of domestic suppliers with foreign suppliers, hence it is not associated with international fragmentation of production.

As regards the reduction in offshoring seen in the air transport sector, this is due to the fact that the value of some of the activities that the sector outsourced to foreign countries in 2000, specifically advertising and consulting, dropped significantly during the period under study, due to the fact that airlines started to outsource part of these services in Spain (this explains why the II/TI indicator came down by 9.56 points). Data in Table 3 show that this sector’s intra-sectoral offshoring index did not fall, but rather increased (0.35%), though a great decline of the inter-sectoral offshoring index (−5.15%) causes a 4.8% reduction of the total index (BO). This drop in the offshoring index (BO), due to the inter-sectoral component, should not be interpreted as a reduction in the number of outsourced activities in the sector but as a reduction in the value of these activities in relation to the value of production in the air transport sector (−1.59% in the TI/Y indicator; Table 4).

However, the rest of the activities showing a drop in offshoring levels (recreational, cultural and sports market activities; transport-related activities; accommodation and restaurants) show a growing outsourcing of services, but to domestic suppliers, thereby reducing the reliance on imports.

Conclusion, discussion and future lines of research

In this study, we have analysed the offshoring of services as a competitive strategy in the tourism industry. Offshoring has gained importance in the service sectors essentially as a result of technological development, the liberalization of international markets and the need for companies to adopt strategies to become more competitive and efficient within this context.

The Spanish case, with a significant weight of tourism in the country’s GDP and a tourism industry with a strong international component, constitutes an excellent laboratory for analysing offshoring, which has been the subject of scant or no research at all on this industry from the standpoint adopted in this article.

In order to analyse the offshoring of services in the tourism sectors, the first step involved the calculation of the BO and NO indicators from the IOTs. These indicators allow us to determine the higher or lower level of reliance of the various tourism sectors on imported intermediate services, distinguishing between those from the same branch of activity (intra-sectoral) and those from other branches of activity (inter-sectoral). The results reveal that all the different tourism sectors carry out offshoring and that the first three places in the ranking of all the service sectors (tourism and non-tourism) by offshoring level are taken by three sectors with a major tourism component (travel agencies, maritime transport and air transport), with a predominance of inter-sectoral offshoring, but also intra-sectoral offshoring in the case of travel agencies. Recreational, cultural and sports market activities and transport-related activities also take relatively high places in the offshoring ranking, in this case with a strong intra-sectoral component.

A second step involved analysing the trend in tourism service offshoring during the 2000–2007 growth period. Two sectors stand out: maritime transport, with a fully inter-sectoral increase and travel agencies, showing both inter-sectoral and intra-sectoral growth, with a prevalence of the latter. Air transport showed the most significant drop in the BO index, due to a slight increase in the intra-sectoral index, but with a bigger fall in the inter-sectoral index.

Lastly, the disaggregated offshoring index was calculated for the different sectors in order to determine whether the higher reliance on imported inputs is due to a substitution of domestic suppliers with foreign ones or to international fragmentation in service production. The most significant findings are a clear international fragmentation process for travel agencies and a change in supply sources in the case of maritime transport, involving a shift from domestic to foreign suppliers. As regards air transport companies, the disaggregation indicator results reveal that the fall in offshoring is due to these companies offshoring the same activities while reducing their reliance on suppliers from other countries.

In sum, the results point to the existence of offshoring in tourism services, with three of them ranking highest among all tourism and non-tourism services. The significant adoption of offshoring strategies is driven by efficiency considerations and justifies its use in tourism sectors such as travel agencies and international transport, facing strong international competition. It is striking that offshoring is still not very prevalent in the accommodation sector, a tourism activity immersed in a highly competitive environment; also worth noting is the extremely low offshoring indicator in the restaurant and catering industry.

In light of the above, the present article contributes a novel approach to the study of service offshoring strategies in the tourism industry, with the calculation of offshore indicators, intra- and inter-sectoral components and a disaggregation with macroeconomic data for the period under study for the case of Spain as a leading global tourism player.

Other future lines of research would include a similar analysis spanning the subsequent economic crisis period; determining whether such offshoring strategies have increased or decreased in light of the new situation and a study using microeconomic data, including companies from different tourism sectors, for instance those whose importance has been evidenced in this study.

Moreover, the methodology followed in this work serves as a model that can be applied to the study of offshoring indices for the tourism sector in other countries.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes

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