#6004 - Tourism Tourism Demand - Tourism Management and Development

Understanding Tourism Demand

Introduction

• Attempting to explain what demand means in simple terms is probably most clearly expressed by Pearce (1995) as the relationship between individuals motivation to travel and their ability to do so.

• This means that a range of factors influence tourism in both the tourist generating and destination areas.

• Based on Smith’s (1995) observations, demand occurs at four different levels including:

  • The amount of products that will be consumed at various prices

  • Actual levels of participation

  • The unsatisfied component of participation

  • The desire for emotional and psychologically based experiences

• Burkart and Medlik (1981) divided the influences on the tourism market into two components:

  • Determinants – refer to the exogenous or external factors that shape the general demand for tourism within society or a specific population. Such factors tend to be common to all world regions although are likely to show a different emphasis in every country.

  • Motivations – refer to the personal factors that directly affect the individual and are expressed as tourism desires and choices. Motivations can be influenced by internal and external aspects.

• Extrinsic factors or determinants such as government policy, media communications, marketing, societal norms and pressures, knowledge, information on and images of destinations, technological change and wider socioeconomic determinants have an equally important role to play in shaping tourism destination demand.

The Elements of Tourism Demand

• Aggregate/effective/actual demand

  • The term demand is often used to specify actual or observed tourism participation and activity, this type of demand is known as effective or actual demand and refers to the aggregate number of tourists recorded in a given location or at a particular point in time.

  • It is most easily visualised by reference to tourism statistical sources where the total numbers of people are shown.

  • Clearly tourism suppliers require demand for their products but too much effective demand poses the problem of exceeding the supply of products such as overbooking of airline seats,

• Suppressed demand

  • This can be subdivided into potential and deferred demand (Cooper; 1998).

  • Both refer to those who do not travel for some reason.

  • Those who might be classified as potential demand are more likely to become actual demand in the future when circumstances allow. It may well be that waiting for additional income or holiday entitlement is needed for that suppressed but potential demand to become actual or effective.

  • With deferred demand the reasons for the suppression are down to problems on the supply side with perhaps accommodation shortages, transport difficulties or weather preventing people from travelling.

• No demand

  • There is a proportion of the population that does not participate in tourism. Reasons for this may be lack of money, an unwillingness or inability to find the time necessary or desire to enjoy holiday time at home rather than away from it.

• Other aspects of demand

  • Cooper (1998) referred to substitution of demand when demand for an activity is replaced by another form of activity.

  • Redirection of demand occurs when the geographical holiday location is changed.

Factors Influencing Demand in the Tourist Generating Area

• There are numerous factors influencing demand from the tourist generating area which in simple terms can be grouped as:

  • Economic determinants

  • Social determinants

  • Political determinants

• Economic determinants

  • Personal incomes – the availability of the necessary finance is the most obvious variable influencing tourism demand. Incomes and tourism expenditure are closely linked and it is possible to examine this relationship through statistics on economic trends and tourism activity in any country.

  • Distribution of incomes – A skewed income distribution is likely to limit the proportion of people who can afford to travel internationally. In wealthier developed countries a more equal income distribution may result in a high overall level of tourism demand. What is apparent is that the propensity for holiday making, especially multiple trips to different destinations is greater among higher occupational and income groups.

  • Value of currency/exchange rates – a destinations exchange rate has a far reaching influence on tourism demand from a generating area and international tourism is highly susceptible to exchange rate fluctuations that can alter the cost of a holiday considerably. The potential consequences of changes in exchange rates are immediately acted upon by the tourist industry and travellers alike. Crouch (1994) identified the impact of an unfavourable exchange rate to include less travel abroad, a reduction in expenditure of length of stay, changes in the method or length of travel time and a reduction in spending by business travellers.

• Social determinants

  • Demographic variables – the age of a traveller will often Exeter an influence on the type of travel product and destination they choose. The impact of education can also be a major determinant of both employment type and income earning potential and therefore the type of tourism experience one seeks. Similarly stage in the family lifecycle has a bearing on the availability of time and disposable income available for tourism. Other factors such as home ownership, occupation and ethnic groups are increasingly being recognised as major determinants of tourism demand.

  • Holiday entitlement – the growth of leisure time over the last two centuries has greatly increased the amount of time available for tourism, especially in the developed world, but since the 1980’s there has been some reversal. In Germany and Italy typical holiday entitlement amounts to 28 days in addition to 12/14 public holidays whereas in Japan 10 days is normal. The patterns of public and school holiday periods give rise to seasonal patterns of tourism demand in developed countries. One result of this I the growth of supplementary shorter holidays in addition to the main holiday often referred to as short breaks. Low levels of holiday entitlements do act as a real obstacle upon the opportunities for recreational travel while a high entitlement encourages such travel.

• Political determinants

  • Government tax policies and controls on tourist spending – Bull (1995) shows that government fiscal and control policies can change tourist flows and specific destinations can gain or lose potential profitability. According to Pearce (1989) more than 100 countries used to have certain restrictions which limited the amount of currency citizens could obtain for foreign travel. Many governments have used tourism as a source of tax revenue and Bull (1995) notes three specific types; taxes on commercial tourism products, taxes imposed on consumers in the act of being tourists and user pays charges.

Factors Influencing Demand in the Tourist Destination Area

• The level of demand at a tourist destination is influenced by economic and political factors but tourist products and services also have a role to play here.

• Dominant among these are the price of tourism products, the supply of tourism products and services and their overall quality.

• Moreover the government of the destination area can affect the trading operations of suppliers of the way tourists purchase goods and services and thereby influence demand.

• Economic

  • Price – tourism suppliers such as in the accommodation and transport sectors may will price their goods or services independently but a close watch on the behaviour of their completion is clearly necessary (Burkart and Medlik; 1981). The relationship between price and demand is an inverse one.

• Supply related

  • Competition – if the number of suppliers providing goods and services in the destination increases with demand, the level of competition among suppliers also increases. The extent of this form of supply competition will relate to both the size and number of suppliers involved.

• Political

  • Government controls at the destination – just as governments in the generating area can influence demand so can those at destinations. Regulation can directly limit the number of tourists through visa restrictions. Other countries restrict the opportunity for charter flights to enter, again influencing demand. It is possible for countries to control the amount of tourist expenditure or restrict the amount of currency that can be exchanged.

Other Factors Influencing Tourism Demand

• There are some factors that fall between the destination or the generating area as influencing factors.

• Among these are the promotional efforts of the destination and the time/cost of travel.

• Promotional efforts of the destination

  • While it could be argued that the promotional efforts of a destination are largely due to the destination itself, aspects of imagery and how such efforts are received make this influence distinctive,,

  • As a product tourism is intangible which means that it is impossible for the consumer to test the product before purchase.

  • When contemplating a visit to a new destination the consumer must use various means...