Prospects of Cost Leadership Strategy for Tourism Performance: Are Cost-Reduction Techniques a Solution?

Abstract

Tour operators are critical in Kenya's multi-billion-dollar tourism industry, a vital pillar of the country's economic development agenda. However, recent statistics indicate that tourism performance has declined due to various factors, including political and security unrest, bureaucratic government policies, stiff competition, and the COVID-19 pandemic. Additionally, the emergence of sharing economy platforms such as Airbnb has threatened the traditional business model of tour operators. At the same time, a 16% value-added tax on sales has also put pressure on their revenues. In addressing these challenges, this paper examined how tour operators in Nairobi City County can enhance their performance by implementing a cost leadership strategy in Kenya. A descriptive survey study was conducted with 15 company owners and 210 managerial staff. The respondents answered structured questionnaires and interviews, and the data were analyzed using descriptive and inferential statistics. Correlation analysis revealed a moderate positive relationship between cost leadership strategy and organizational performance (r=0.449, P<0.05), rejecting the null hypothesis, with the strategy explaining 20.2% of the variation in performance (=0.378, P<0.05). The study recommends that tour operator companies adopt strategic alliances with the supply chain, implement operational efficiency frameworks, entirely automate their services, and follow cost-reduction mechanisms to enhance organizational performance. These findings guide tourism stakeholders, particularly company executive teams, on the organizational performance implications of strategic cost-reduction techniques in the context of Nairobi City County's tour operator industry. Keywords: Cost Leadership Strategy, Organizational Performance, Nairobi City County, Tour Operators, Tourism, COVID-19