PurposeThis study aims to describe the concept of smart tourism, placing emphasis on the smart tourism ecosystem and value co-creation concept within the system at a destination level. The work also summarizes the key challenges associated with smart tourism implementation and development.Design/methodology/approachThe study was conducted as a critical literature review, discussing the outcomes of a wide range and scope of relevant academic literature on the chosen concepts.FindingsSmart tourism can be described as the use of information and communication technology (ICT) technologies to facilitate and enrich tourism products, services and experiences. Within the smart tourism ecosystem, all stakeholders – customers, suppliers, intermediates, the public sector, service providers, destination management organizations and others –participate in the synergies and value co-creation, also share the benefits from it. The ultimate aim of a smart tourism ecosystem is to create sustainable economic, social and environmental benefits for all and promote destination competitiveness. Smart tourism implementation is also associated with several challenges, of which the most important are participation, an overwhelming amount of data, data privacy and technology adoption.Originality/valueThe paper provides a critical review of the recent and relevant literature in order to define and discuss the mechanisms of value co-creation in a smart tourism ecosystem and the challenges associated with it.