The Albergo Diffuso Model

Community-based hospitality for a sustained competitive advantage

Maurizio Droli

• Publisher: De Gruyter Oldenbourg
• Year: 2019
• Topic: Business
• eBook ISBN:
  9783110639919
• Subtopic: Industria dell'ospitalità e del turismo
• Index: Business

The hospitality model called "Albergo Diffuso" (AD), or "scattered hotel," has been engneered by Mr Giancarlo Dall'Ara and described by The New York Times as a way of bringing life back to historic towns and rural hamlets by utilizing unused rooms for tourism. This "simple but genial" model devised in Italy in the mid-90's received an award from the UNDP for its sustainability, but despite the spread of AD's, no peer-reviewed books have previously been published in English focusing on this innovation. In this book, the author therefore begins by exploring the AD as a community-based hospitality model, examining both its pros and cons. He then considers conviviality, sense of security, and other factors that Hans Magnus Enzensberger referred to as luxuries of our time for urban dwellers. These represent the key pre-requisites a location must possess to be deemed suitable for this innovation. Next, investors and co-interested private, public and not-for-profit associations are provided with a structured framework to help them achieve a defensible competitive advantage by harnessing the economic potential of valuable, rare, inimitable and non-substitutable (VRIN) resources. The final section assesses the AD as a business model, evaluating various aspects at the heart of any business plan.

1 Introduction

An innovation, in business terms, may be assessed by considering the following key elements, according to Schumpeter (1934) and Hjalager (2010):

• A1. development of new sales markets
• A2. generation of new or improved products
• A3. introduction of new production processes
• A4. development of new supply markets
• A5. reorganization and/or restructuring of the company or tourism destination

Different studies, including those of Hjalager, Kwiatkowski, and Larsen (2017, 1), have shown “the increasing interest in higher quality of rural tourism products, and the innovation gaps occurring in the rural tourism industry.” This book represents the first attempt to describe a hotel hospitality model that was developed in Italy and called the “Albergo Diffuso” (AD) – literally, “scattered hotel” – by answering the corresponding questions:

Q1. How are ADs developing new sales markets?

In the last two decades, the word diversity has been used to express one of the single most important driving forces behind tourism development (UNWTO 2009). Scholars such as Pine and Gilmore (2011) underline how tourists are increasingly seeking heterogeneous and increasingly immersive tourism experiences. Others, including Fabris (2006), Buhalis and Costa (2006), and Canestrini (2004), suggest that post-industrial, ever more experienced tourists are increasingly motivated to experience the culture of the place visited. Following Dall’Ara (2015, 18), who engineered the AD hospitality model, tourists are increasingly:

• aware of the potential residing in information technology
• self-organized
• interested in interacting directly with the culture of the places visited
• more attracted by places newly entered into the tourism market which have their own distinct identities

This search for original tourism products is creating a new sales market for hospitality services, both in rural areas and in historic centers. Those needs can, within the same areas, also be partly met by establishing conventional hotel structures. This book, therefore, tries to answer the following question:

Q2. Does the AD represent a new product?

ADs are spreading in predominantly rural areas which, for the purposes of this book, can generally be described as “paesi” or hamlets that have fewer than 150 inhabitants/km² (OECD 2006). These areas may be rich in both natural and historical resources but, mainly due to higher accessibility costs compared to urban centers, often struggle to attract the levels of investment necessary to create hotels. This is where the AD model has come to the fore. In the past, such investments have been dissuaded by depopulation and the marginalization of rural areas. More recently, overcrowding in urban areas is becoming a common thread linking developed and developing countries. For instance:

• According to the 2018 Revision of World Urbanization Prospects, the world’s urban population surpassed the number of rural residents in 2010 and is likely to rise by a further 2.5 billion people, to more than 6 billion people by 2050 (UN 2018).
• Many rural municipalities have seen their resident populations decrease as employment opportunities become increasingly scarce compared to opportunities available in urban centers (Eurostat 2016; ESPON-EU 2017, 2018; Matanle and Rausch 2012; Pew Research Center 2018).

In the rural tourism sector, fully satisfying the demands for post-industrial tourism seems to depend on the possibility to develop a hotel hospitality model based on local, thus characteristic, historical conditions. Doing so does not necessarily imply drastically modifying existing production processes which have been engineered to manage conventional hotel hospitality models. This brings us to consider the following question:

Q3. Does the establishment of an AD imply the adoption of a new production process?

Assessing the changes considered by Q2 represents a complex challenge. Innovating a new production process represents just one way to respond to this challenge, and may not actually be compulsory. As researchers have suggested (ESPON-EU 2017, 2), “policy-makers can address these changes by adopting two, essentially alternative, policy approaches”:

• the “going for growth” approach, trying to reverse shrinking trends and stimulate population growth in rural areas
• the “coping with decline” approach, accepting shrinkage and adapting to its economic and social consequences

The AD represents a hotel business of public interest. It helps decision makers “to plan for the best and work for the worst” by adopting resource-based strategies. This brings us to consider the following question regarding the way in which it operates:

Q4. Does the enactment of an AD require the development of new (local) supply markets?

The use of the suffix “diffuse” (in English, “scattered”), represents a promise made by the ADs to their guests that they will experience both the hotel and the territory in which they are staying. Thus, the possibility to fulfill this promise depends heavily on the way in which the AD’s management and its staff manage interactions between guests and the local community, for instance, by activating both static (all-encompassing) and dynamic (on-demand) packaging initiatives. Managing those interactions requires the AD’s management and staff to:

• locate the necessary local suppliers
• assess their capacities, abilities, and skills
• assess their availability to enter into partnership
• manage income opportunities by creating the experiences required by guests but not yet otherwise offered

The above questions lead to the following, final question:

Q5. Does the resource acquisition and preservation process enacted by an AD allow the reorganization and/or restructuring of the tourist destination?

Some authors, including Hjalager, Kwiatkowski, and Larsen (2017, 1) suggest that “any hotel should continuously bring innovations toward the market, especially by supplying products, services, and experiences required by its guests.” This should be done in order to:

• leapfrog the visibility of a shrinking rural hamlet within an increasingly crowded international tourism market
• increase revenues from lodging and food, tourism core, and other services,
• improve the local economy
• preserve the local resources leveraged

Often, an ideal productive process is the one that delivers the innovations required by its potential customers; its basic requirements are the requirements of those customers; and it promotes itself to customers at the time when the customers themselves have demanded it. The AD represents an attempt to:

• innovate tourism destinations through leveraging local traditions and by preserving the environment
• synchronize the rhythm of innovation processes occurring within the sector and within the rural destination in which it operates
• adopt a resource-based lean production process
• achieve a both sustainable and sustained competitive advantage

This book deals with the way in which the AD addresses these challenges.

Chapter 2 and Chapter 3 of this book will assess Q1 on how ADs are developing new sales markets and Q2 regarding the way in which they represent a new product. The second chapter outlines the key features of a hotel hospitality model, which is its ability to meet the expectations, needs, and requirements of a post-industrial tourism market while, at the same time, recovering historical buildings and contributing to slowing down the depopulation processes affecting rural areas (Dall’Ara 2015; Confalonieri 2011a, 2011b; Dichter 2008; Dichter and Dall’Ara 2008; Dall’Ara and Esposto 2005).

Regarding Q2, the Albergo Diffuso (AD) model has been described (Dichter 2008, 3) as follows:

• An Italian innovation, first conceived in a mountainous area of the Eastern Alps in Italy in response to an earthquake that occurred in 1976.
• A unique experience of living a rural hamlet and a historical center.
• It provides all the services of traditional hotels.
• The rooms are scattered around the hamlet or historical center.
• It provides the sensation of being a local.
• Guests are temporary residents and not traditional visitors.
• It responds to the demands of the post-industrial, third generation tourist.

Chapter 2 describes the similarities and differences that exist between the AD and two of the most famous examples of the conventional hospitality model, represented by the hotel chains founded by César Ritz and Kemmons Wilson, and their heterogeneous growth rates. The first of these ADs, the Sas Benas, opened in Sardinia in 2002 and led to the AD model being officially recognized in Italy under a specific law (ADI 2018d). As of July 2018, more than 120 Alberghi Diffusi have been...

Table of contents

• Title Page
• Copyright
• Contents
• Acknowledgements
• 1 Introduction
• 2 The Albergo Diffuso as an original model for hotelier hospitality
• 3 Rural hamlets: Basic requirements for setting up the hospitality model
• 4 Analyzing resources for sustained competitive advantage: A resource-based theory approach
• 5 The AD as a business model
• 6 Conclusions
• References