This topic will assist you in developing an understanding of the many aspects of the tourism industry, and an appreciation of its place in the global and local economies.
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Tourism is one of the world's fastest growing industries as well as the major source of foreign exchange earnings and employment for many developing countries.
World tourism demand continues to exceed expectations, showing resilience against extraneous factors. According to the UNWTO World Tourism Barometer, released (November 2006):
- In the first eight months of 2006 international tourist arrivals totaled 578 million worldwide (+4.5%), up from 553 million in the same period of 2005, a year which saw an all-time record of 806 million people traveling internationally.
- Growth is expected to continue in 2007 at a pace of around 4% worldwide.
Tourism is vital to the well being of many countries, because of the income generated by the consumption of goods and services by tourists, the taxes levied on businesses in the tourism industry and the opportunity for employment and economic advancement by working in the industry.
What defines tourism
The concept of tourism refers to the broad framework that identifies tourism’s essential characteristics and distinguishes tourism from similar, often related but different phenomena The two terms ‘travel’ and ‘tourism’ can be used in isolation or together to describe three concepts:
- The movement of the people
- A sector of the economy or an industry
- A broad system of interacting relationships of people, their needs to travel outside their communities and services that attempt to respond to these needs by supplying products
- International Tourism: Consists of inbound tourism, visits to a country by non-residents, and outbound tourism, residents of a country visiting another country
- Internal Tourism: Residents of a country visiting their own country
- Domestic Tourism: Internal tourism plus inbound tourism (the tourism market of accommodation facilities and attractions within a country)
- National Tourism: Internal tourism plus outbound tourism (the resident tourism market for travel agents and airlines)
According to the WTO tourists are people who: “travel to and stay in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited.”
Devised by WTO was endorsed by the UN Statistical Commission in 1993 following an International Government Conference held in Ottawa, Canada in 1991.
Before people can experience tourism they usually need at least:
- disposable income, ie. money to spend on non-essentials
- leisure time
- tourism infrastructure, such as transport and accommodation.
- Other factors such as health and motivation to travel are also important.
As a service industry, tourism has numerous tangible and intangible elements. Major tangible elements include transportation, accommodation, and other components of the hospitality industry. Major intangible elements relate to the purpose or motivation for becoming a tourist, such as rest, relaxation, the opportunity to meet new people and experience other cultures, or simply to do something different and have an adventure.
Following is a range of aspects to do with the tourism industry. Please feel free to expand the dot points with your own findings and research.
Structure and organization
The tourism industry is based on many different components and interrelated parts. For example, transport, accommodation, attractions, activities, marketing and government regulation. Many businesses span more than one sector and the impacts in one part of the tourism industry have significant implications for other sectors.
The tourism industry includes:
- those sectors which enable the tourist to travel to and from the destination (for example travel agents, airlines, bus companies, tour operators and rental car companies)
- those sectors which are part of the product at the destination (for example, accommodation, facilities and attractions)
- the human component of tourism (the labour force)
- public sector or government agencies, regional tourism organisations, professional associations and industry training organisations.
((Figure 4.1 P94 – Tourism,Principles,Practices, philosophies))
World Tourism Organisation
(UNWTO) is the most widely recognised and the leading international organisation in travel and tourism today. It is a specialised agency of the United Nations. It serves as a global forum for tourism policy and a practical source of tourism know-how. With its headquarters in Madrid, Spain the World Tourism Organisation plays a central and decisive role in promoting development of responsible, sustainable and universally accessible tourism, with the aim of contributing to economic development, international understanding, peace prosperity and universal respect for and observance of human rights and fundamental freedoms.
Its membership includes 150 countries and territories and more than 450 affiliate members representing local governments, tourism associations, educational institutes and private sector companies including airlines, hotels and tour operators.
Other international organisations which have a specialised interest in tourism include the International Civil Aviation Organisation (ICAO) which is a specialised agency of the United Nations and is concerned with the development of international civil aviation, and the International Governmental Maritime Consultative Organisation (IMCO) which is an inter-governmental organisation concerned with co-operation in sea transport.
The International Air Transport Association
(IATA) is an association of airlines concerned with the development and regulation of the air transportation industry. Members comprise of approximately 80% of the world’s international airlines.
Regional International Organizations
European Civil Aviation Conference
(ECAC) this is a regional organisation with a specialised interest in tourism and concerned with co-operation and co-ordination of European airlines. www.ecac-ceac.org
European Travel Commission
is a strategic alliance that provides for the collaboration between thirty-three European national tourism organisations. The commission’s goal is to attract customers from overseas markets to come to Europe through promotional campaigns and industry trade shows. www.visiteurope.com
Public (government) sector
The major reason for government involvement in tourism is concerned with the welfare of their citizens and the overall welfare of their country. This relates to areas such as economic stability, protection of natural resources, national security, public health and employment. Tourism activity can occur in all of these areas so governments are concerned that it is regulated and directed so as to ensure maximum benefit for the country and the negative factors are minimised.
The degree of control differs between each country. State organisations in the former Soviet Union had almost total control of tourism from the formation of policy to running the only travel agency Intourist, airline Aeroflot and over 40000 rooms.
The only remaining countries that still control tourism completely so that independent travel is impossible are North Korea and Turkmenistan.
In capitalist countries, the mix of private-sector and public-sector involvement in tourism varies considerably between each country.
The United Nations Conference on International Travel and Tourism in Rome in 1963 adopted the following resolution:
The Conference considers that it is incumbent on governments to stimulate and co-ordinate national tourist activities, convinced that this task can, in the main, be carried out through the medium of national tourist organisations.
Virtually every country in the world has a national body responsible for tourism. It can be part of a ministry, a constituted part of a government department or an organisation with a separate legal status. Generally the role of a NTO will be to ensure appropriate development and promotion of a nation as a tourism destination. This can include the following functions:
- information and promotion within the country
- overseas promotional activities
- international relations
- development of tourist areas
- overall tourism policy and promotion
- in supporting key tourism interests in a time of financial crisis
Below the National Tourism Organisations, in most countries, there is often a complex web of organisations which complement the work of the NTO at the regional and local level. Their activities are often a scaled-down version of the NTO’s work at a regional level; they often implement national policy and pursue integrated activities with the NTO providing guidance.
((Presentation ‘Key elements of Tourism’ to be inserted here))
Direct elements of the Tourism Industry - Those areas of the tourism industry which come into direct contact with tourists
- Ancillary Services
Indirect elements of the Tourism Industry - Often called support sectors. Those parts of the tourism industry which may not come into direct contact with tourists, but without the rest of the industry could not function.
- Public Toilets
- Building Industry
- Water supply
- Sewerage and waste disposal
Tourism, for some countries, is of almost importance. Countries such as Grenada etc.
Transport by water can be an attraction in itself whether you are travelling on a cruise ship in the Mediterranean or on a ferry between Wellington and Picton. Travelling by water has been more popular as tourists seek to avoid the frustrations of air travel with its airport delays, congestion and the lack of comfort in the air (unless travelling first class!). Cruising has undergone a revival and all forms of recreational pursuits on the water including yachting and jet boating have expanded to fulfil this demand.
Advances in aviation technology has meant that travel by air is now relatively safe, economical, quick and reasonably comfortable. The development of the jet airliner after World War II to the first jumbo jet, the Boeing 747 in 1970 led to rapid falls in seat cost per passenger kilometre. The advances have continued with the Airbus ‘super jumbo’ A380 a double-decker aircraft seating between 550-800 passengers enters service in late 2007 with Singapore Airlines operating the aircraft on the London -Singapore – Sydney route.
Airbus A380 cross section
A380 cabin cross section showing economy class seating
There are two basic type of air transport operation:
- Scheduled services
- Charter services
Scheduled services operate on defined routes, domestic or international, for which licences have been granted by the governments concerned. The airline must operate on the basis of their timetable regardless of the passenger loading.
Fully state owned carriers such as Singapore Airlines and the Emirates are known as the national flag-carriers. Even when the carrier has been privatised as in the case of British Airways the airline is still seen as the national flag carrier. Air New Zealand was privatised but after the 9/11 disaster 80 per cent of the carrier was returned into public ownership. Air transport is very important to the national economy of a country and a government will often assist in times of crisis.
Low Cost Airlines LCA’s or LCLF (low cost low fare) carriers has been a major development in scheduled services in the last decade. A total of 80 million people travelled on European no-frills carriers in 2004 up from 47 million in 2003. These airlines create a cost-competitive advantage by using some of the following means:
- operate from secondary airports which have lower landing fees and are less congested allowing quicker turnarounds and more flights
- operate on high density, short-haul routes with one class of seating
- charge passengers for food, drink and entertainment
- sell only via the Internet
- tickets are inflexible – generally non-refundable
- not operating frequent flying programmes and keeping airport passenger services to a minimum
Charter services do not operate according to a published timetable and so do not have to operate with uneconomical loadings. They are not advertised or promoted by the airlines themselves as they are usually charted by intermediaries – usually tour operators. Many charter flights are sold as part of a package holiday in which the price paid includes flights, accommodation and other services.. Such packages are frequently cheaper than regular schedule airline fares. Furthermore charter airlines frequently operate on routes, or to airports, where there is no scheduled service. Much of the traffic through small and medium sized airports in the United Kingdom consists of charter flights, and the survival of these airports often depends on the airline landing fees they get from the charter companies.
Although charter airlines typically carry passengers who have booked individually or as small groups to beach resorts, historic towns, or cities where a cruise ship is awaiting them, sometimes an aircraft will be chartered by a single group such as members of a company, a sports team, or to travel to a major event.
Many airlines operating regular scheduled services (i.e., for which tickets are sold directly to passengers) have set up charter divisions, though these have not always proved competitive with the specialist charter . In New Zealand, Freedom Air was established by the Mount Cook Group in response to the competition from the charter airline, Kiwi Air (went in to voluntary liquidation in 1996). Freedom Air now operates as a scheduled airline from smaller airports eg Dunedin and Hamilton. The economics of charter flights demand that the flights should operate on the basis of near 100% seat occupancy.
Land transportation can be used for travelling from home to a host destination, within the destination and between the host destinations.
Tourists can use privately owned cars for independent and flexible holidays both domestic and international. They can take day excursions or longer trips. The explosion in private car ownership has changed the tourism industry by establishing a need for motels, bed and breakfasts, home stays, roadside cafes and car ferry services particularly in Europe.
The car rental business is divided into two categories, the large international companies e.g. Hertz, Avis, Budget and the small, locally based companies. The larger companies will have contracts with airports and railways maintaining a desk at the location for easier collection of vehicles, links with airlines and hotels, (some large hotel chains offering desk space in their reception area) and access to their business through a computer reservation system (CRS) and website.
Rail travel has declined in popularity because of the rise in ownership of private vehicles, the advent of jet aircraft and the failure of rail operators around the world to adapt to changing tourists needs. The Orient Express (www.orient-expresstrains.com), the Trans-Siberian Railway and the Tranz Alpine railway (www.tranzscenic.co.nz) are all well known for their sight seeing appeal and are attractions in their own right. Rail can provide efficient links between airports and city centres and can carry large numbers of passengers and luggage. E.g. London, Frankfurt, Paris and Rome. Trains often have an advantage over coach travel as they are a lot faster. Inter-city express services operate in Britain, Europe, U.S.A. and Japan. For rail travel within a city, tourists tend to travel by underground trains such as the ‘Tube’ in London, Le Metro in Paris and the ‘Bart’ in San Francisco, Hong Kong, Singapore, Rome and Prague also have their own underground rail systems. Tickets offering unlimited travel by train, marketed to inbound tourists and only sold prior to departure, have boosted sales of rail travel. These included Eurailpasses in Europe and Britrail pass in Britain.
These are becoming increasingly popular both in New Zealand and overseas especially in the USA where more than 25 million Americans make use of them each year. While not cheap to hire, they have the advantage of flexibility and independence providing both transportation and accommodation.
Coach operations can be categorised as follows:
- express coach services, domestic and international
- private hire services
- tour and excursion operations
- transfer services
Greyhound in the USA is one of the most famous inter city express coach operators but must compete with budget airlines and AMTRAK rail services for its customers. In New Zealand, the Intercity bus service operates between major cities. Coaches can be hired by groups to travel to special events e.g. Millbrook concerts or for educational purposes e.g. tourism students educational tours. Escorted package tours are the most visible use of coaches in the travel industry where there is a combination of accommodation, sightseeing by coach and transportation between cities. E.g. Trafalgar Tours, Contiki Tours. The majority of coaching holidays are booked by the over-45s. City sightseeing tours for half-day or full-day are usually undertaken by coaches or mini-buses. They can be specialised coaches such as London’s double-decker buses or open-decked used in Auckland.
Transfers from airports to hotels are often by provided coach transportation especially when the distance makes the cost of travelling by taxi prohibitive. Some accommodation providers will also provide complimentary transfers by mini-coach or they will be included in the cost of the package holiday.
The accommodation sector provides an enormous variety of accommodation types to suit a wide range of visitors. Accommodation ranges from luxury 5 star hotels which provide facilities and services such as 24 hour room service, gyms, swimming pools etc. to camping grounds where the visitor is provided with a patch of ground on which to pitch a tent. Classification of different types of accommodation is very difficult as they can mean something different in another country. In the USA, the meaning for an ‘inn’ is hotel or motel style accommodation usually operated by a chain e.g. Holiday Inns. In Britain, and ‘inn’ would describe pub-style accommodation offering bed and breakfast style accommodation.
There are many grading systems recognised by visitors and the accommodation industry. Grading Systems are used to encourage and ensure a consistency of quality.
Systems may be administered by public organisations or privately by organisations such as accommodation chains and franchises. The most recognisable of these grading systems is the “star” system where individual accommodation is rated depending on its levels of service, cleanliness, décor and facilities. For instance most people recognise that a 5 star hotel will have excellent service, be exceptionally clean and tidy with housekeeping staff on call 24 hours, have up to date, luxurious décor and have a wide range of facilities on offer. A 3 star hotel on the other hand will have fewer facilities, less luxurious décor and more limited service, e.g. a limited 24 hour room service menu instead of the entire restaurant menu.
While this “star” system is recognised internationally it is not administered at an international level, but rather at a national or in some cases regional level. This leads to inconsistencies as to what the star grades actually mean. Many national tourism organisations are now actively developing standardised grading systems and encouraging accommodation providers to allow their accommodation to be graded.
The benefits of this are:
- Visitors can easily choose accommodation which will suit their needs and budget, while being assured of quality.
- Accommodation providers have a clear understanding as to what standards are expected of them.
- Accommodation providers can use their rating on their promotional material.
- As more accommodation businesses join the grading scheme the over all quality of a destinations accommodation improves.
- This gives visitors an overall impression of the destination as one of quality.
New Zealand uses the Qualmark model
to grade its accommodation. This model is recognised internationally and uses a Qualmark star grading of 1 to 5. Accommodation is rated by type:
- Holiday home
- Holiday park
- Student accommodation
- Self contained & serviced
In the United Kingdom, accommodation is graded according to stars, diamonds or crowns. In the USA a 5 star hotel would be graded as ‘deluxe’ then to ‘first class’ to ‘superior’ and the minimum grading would be ‘tourist’ or ‘budget’.
Activities and Attractions
All destinations require features that will attract tourists to come and see and experience these activities and attractions. They can range from physical features; beauty of the mountains to the quality of a beach to activities such as jet boating down a river or shopping and entertainment.
Attractions can be categorised as either natural which includes mountains, geothermal areas, forests or constructed attractions which must be created and maintained. Examples of constructed attractions are amusement parks, museums and art galleries, wildlife parks, events, staged entertainment, cultural exhibitions, gardens and historical buildings.
Also known as the travel sector, sales involves the distribution of tourism products to the consumer through retail travel agents, tour operators and wholesalers. As already demonstrated the tourism product is diverse and includes transport, attractions/activities, accommodation and ancillary services. The sales sector is especially important in tourism because the customer and the service are geographically separated. For example, a customer in Brisbane may purchase the bulk of their Central Otago skiing holiday at home, before they leave, including: air tickets, transfers, hire car, hotel accommodation and ski passes.
The tourism product can be sold in a variety of ways:
1.The customer purchases directly from the supplier (principal) Many companies such as Air New Zealand are encouraging their customers to do this, especially for domestic flights. The growth in internet use and the ease of gaining information and booking via the web means more and more visitors are choosing to book tourism products themselves.
Advantages for the supplier are more profit as no commission has to be paid to intermediary, save time and reduce possibility of mistakes and supplier maintains control of sale e.g. a hotel could offer an upgrade to a suite to promote future business with customer. Disadvantages would be increased cost to supplier in establishing an office to promote their product and can antagonise intermediaries
2.The customer accesses the supplier through an intermediary Intermediaries include retail travel agents, conference planners and information offices (I-Site in New Zealand). Sometimes organisations usually considered to fall within the other sectors may also act as intermediaries e.g. a hotel booking guests into an activity and taking payment, or a tour company booking clients into accommodation. Intermediaries usually gain a commission of between 10 and 20% for making bookings.
An intermediary will provide a service that adds value for the traveller. For example, a travel agent may negotiate with an airline for special rates or conditions, or they may offer value in other ways such as providing specialised knowledge or a greater range of choices for itinerary planning. Travel agents may specialise in particular destinations, modes of travel or provide services for niche market segments.
3.The customer accesses the supplier through two intermediaries. Travel agents will often use wholesalers to book products for their clients. Wholesalers negotiate with suppliers and sell products such as all-inclusive tours. Many retail travel agencies have wholesaling arms e.g. the retail travel agency chain House of Travel has the wholesale arm Travel Plan.
Wholesale tour operators put together tours combining transport, accommodation, activities and in the case of fully inclusive tours ancillary services such as food etc. These tours are usually sold via a travel agent. Some tour operators do deal directly with the public i.e. Contiki.
The travel agents role is different to other retailers because they do not purchase a product for resale to their customers.
Travel agents and tour operators can earn their income from commission paid by the service provider they are representing, and not by the purchaser. Airlines are reducing the levels of commission they currently pay to agents making it necessary to sell more to make larger amounts of commission these days.
Examples of commission rates to travel agents include 5-9% on international air tickets, 10% for a tour package, cruise or accommodation (this can be more depending on the preferred status held with the supplier), and 33% for travel insurance.
With the current changes to the commission system such as a single capped fee, direct booking over the phone or internet and e-ticketing, agents are working harder to make their commission. The focus on selling domestic fares is lower as there is very little to be made on these bookings now days and more concentration is taking place on the add-ons to the international flights.
Some travel agencies also generate income from bureau de change or traveller’s cheque operations. Traditionally, this has been a significant source of income for some major travel chains such as Thomas Cook and American Express. However, with electronic banking, direct booking and the introduction of the Euro, their income is also decreasing. It represents a saving for the consumers who are benefiting by saving on commission.
Otherwise known as support services.
ancillary services of tourism Ancillary Services are the 'Extras' of a holiday, such as; -Travel Insurance -Park/Event Tickets -Car Hire -Car insurance -Airport Parking -Money; Foreign Exchange -Luggage -Tour Guide -Chauffeur Service
These are the things you would need to complete your holiday, apart from booking your hotel and accommodation the ancillary's is what makes the holiday and are all the extra important pieces you would need to sort out. For example with travel insurance if your luggage is lost at the airport the travel insurance would cover that and help and secure you along the way of finding your luggage no matter what it took.
Car Hire/Insurance/Airport Parking all come under the same category, you would need to have a valid driver's license to drive over in a different country therefore if you was going somewhere, were you would need to travel to far distance places a car hire would be very reasonable and useful, then you would have to pay for the insurance on that car to use it abroad and pay for the parking at the airport.
Again if you are visiting different parks, in Florida maybe you would need to have a car to travel to all the different parks or events that might be happening on your holiday, therefore you would need to purchase your park/event tickets. Before you even go on holiday if it's an outbound holiday you would have to change your currency for example if you was going on holiday to Spain you would have to change pounds to euros or Florida; pounds to dollars. There are many different aspects to ancillary's which are very important and make up your holiday and make it secure and easier for you, if don't have many of these aspects covered especially if you know you need them to get through your holiday then you probably aren't going to get very far and if anything goes wrong.
Ancillary services refers to organisations that do not have a direct role in travel and tourism, but play a supporting role, perhaps offering related products and services. Example of a travel agency, the main products it sells are holidays and flights, but it will offer a wide range of ancillary services in order to provide a full service for its clients and earn extra revenue. Examples include insurance companies that offer travel insurance and car parks operators that provide parking facilities at airports as well as in other locations. Some other examples are:
• luggage • foreign exchange • car hire • luggage transportation • theatre and event tickets • tour guiding
The commission earned on the sale of these items is often higher than the travel agent receives for selling holidays and flights, so they are an important source of extra income. There are a growing number of companies that specialise in offering ancillary services to the travel trade and direct to the public. Selling extras is also an important source of income for tour operators.
Food and Beverage
One of the most important experiences while on holiday for a lot of travellers is the consumption of food and beverage, enhanced when the food and drink in question is exceptional and/or exotic which is often the case on holidays abroad.
Countries with well-established reputations for their food and drink have ensured that these attractions are promoted prominently in their tourism campaigns. Tours are now from New Zealand offering tuition in French cooking and the many food and wine festivals around the world attract both domestic and international tourists.
One of the most famous Festivals is Oktoberfest, held annually in Munich, Germany for 2 weeks. The Speights brewery tour in Dunedin is world renowned with tourists having to book in advance.
Research conducted by Tourism New Zealand has shown that ‘Interactive Travellers’ to New Zealand are especially interested in experiencing the country’s local food and wine.
The dominance in the UK and around the world of transnational corporations such as McDonalds, KFC and Burger King has changed the eating habits of travellers. The more unadventurous of tourists can now be comfortable eating food similar to the food at home. Research conducted by Tourism New Zealand has shown that ‘Interactive Travellers’ to New Zealand are especially interested in experiencing the country’s local food and wine.
Shopping has become the number one activity of tourists in the world. Designer brand outlets are very popular destinations throughout the United States attracting millions of visitors each year from countries such as China, Brazil, and UK. Top US destinations include Orlando Premium Outlets, Woodbury Commons Premium Outlets, Las Vegas Premium Outlets and Desert Hills Premium Outlets near Palm Springs.
Shopping can be both an attraction and a basic facility which tourists will expect at a destination. This can include souvenir shopping or purchasing basic necessities such as shampoo. Products which identify with a destination are always popular. In New Zealand, anything to do with the kiwi is sold in huge numbers in Hawaii its pineapples and macadamia nuts.
Insurance is a very important aspect of a tourist’s travel arrangements. Most policies will cover the following:
- medical care and hospitalisation
- personal accident
- cancellation/curtailment of holiday
- delayed departure
- baggage loss
- money loss
- personal liability
The traveller must ensure that medical coverage is sufficient to meet their needs particular in countries where hospital care is very expensive. In the USA, costs in excess of $1 million are not uncommon for serious illnesses.
The cost of an international trip can be substantial and often difficult to estimate in advance. Several factors can influence this with the key one being fluctuating exchange rates. Local taxes and tipping may be add-ons to prices that were not anticipated in advance. It is also important to consider the e cost of living between countries and how that contributes to the travellers perceptions of value.
An example of cost of living in countries would be those who want to travel to Scandinavia. The cost of living is very high especially when buying food. In somewhere like Bali the cost of living is not as high – food and souvenirs are much cheaper but it must also be remembered that tourists help to boost the economy. Hence, after the bombing in Bali in 2003 the economy took a dive until tourists deemed it safe to travel there again.
International travellers have an increasing number of ways they can pay for goods and services while in a foreign country. These include:
- Taking cash from home. However, this may lead to theft or loss, and some countries have restrictions on the import or export of their currencies.
- Taking traveller’s cheques. Used widely around the world, traveller’s cheques provide security with compensation for theft and loss. Standard premium charge of 1%.
- Arrange for the advance transfer of funds to a foreign bank.
- Use travel vouchers provided by travel intermediaries. Tour, transport, accommodation or meals may be purchased in advance.
- Use a credit card to purchase goods and services or for cash advances. Fees may apply and if there is a delay between purchase transaction and debit of the holder’s account, currency exchange fluctuations may alter the amount of the purchase.
- Use an eftpos card to access money/make purchases. The card needs to have the internationally recognised symbol on the back of it and then funds are accessed direct from bank account and are available from ATM machines 24 hours a day.
The standard commission charged is 1.5% which can be a relatively small amount if the traveller is not purchasing much. Therefore, there is a minimum charge which is passed on to the client of $5.00 if the 1.5% commission is less than $5.00. This discourages people from only exchanging small amounts of traveller’s cheques over the counter.
Currency codes are three letter standard abbreviations which identify the currency of the country. Eg. NZD = New Zealand Dollars, GBP = Great British Pounds The introduction of the EURO has reduced the number of foreign currencies now used in Europe and makes it easier for the traveller when carrying traveller’s cheques, for instance.
Currency Exchange Rates
International transactions require buyers and sellers to deal in foreign currencies. The price of one currency in terms of another is called the exchange rate. Currency exchange rates are usually floating and values fluctuate depending on supply and demand in the global marketplace. Fluctuation, either appreciation or depreciation, depends on a number of economic and political considerations. If a country, for example, suffers a war or terrorist attack then it becomes politically unstable and people will not go there. If it is not receiving large numbers of tourists anymore then the economy suffers and the value of the currency will drop.
Changes in exchange rates are usually small in the short term, but over a period of weeks or months, trends can result in substantial differences. Changes in some currencies can have knock-on effects for others too. For example, the value of the New Zealand dollar is linked to the US dollar and the Japanese Yen.
International travellers have an increasingly wide range of ways in which they can now pay for their goods and services abroad. These can include:
- Traveller’s cheques - which are still widely used as they are readily available and recognised throughout the world and offer the security of replacement if lost or stolen.
- Both credit card and cash card usage are increasing but it is recommended that travellers also take an assortment of notes and travellers cheques in case of card theft.
Tourist publications and information
Traditionally this information has been in the form of brochures, but the Internet is now an increasingly important source of information for tourists and for tourism operators. Availability of current information for tourists is vitally important e.g. weather, local transportation, attractions etc. Travel guides such as the Lonely Planet series are immensely popular and continue to be updated and extended each year. Some guidebooks are now taking the form of travel blogs and wikis, such as Wikivoyage
. Podcasts prove to be very useful as the audio information can be downloaded over the Internet to a computer, then transferred automatically to a portable audio player. Virgin Atlantic was one of the first companies to offer this service when they launched a guide to New York
. The key benefit is that it is free, can be instantaneously updated and quick and easy to use while on the move.
i-SITE offices in New Zealand have a vital role in providing information on local and national visitor attractions and activities, accommodation and transport. They are operated and funded by local councils e.g. Dunedin City Council.
This category includes cinemas, theatres, nightclubs, bars, casinos and shows. Many tourists will look for entertainment and expect these facilities to be available especially in cities. If it is not available, this is reflected highly in visitor’s surveys as a reason for dissatisfaction.
Infrastructure is critical to the success of the tourism product. Without suitable access to a destination whether by road or air, the tourist will not be able to visit. Airports must have certain facilities to gain status as in international airport e.g. Duty Free facilities.
Communications also play a vital role especially today when people expect cell phone coverage and internet access to keep in touch with family and friends or for business.
Access to clean public toilets can be very important to the satisfaction of a tourist’s holiday. Clear signage is vital for independent travellers both within the cities to show routes to attractions, on roads to point out the way to destinations and also within and outside tourist attractions providing information.
The manufacturing and building industry are vital to providing the superstructure tourists need – hotels, restaurants, shops and attractions.
Business of tourism
Economic Impacts of Tourism
Tourism is considered by many to be the largest industry in the world and the fastest growing. Tourism can provide many benefits for host communities and countries but there are also negative effects. Impact studies are carried out with the aim of improving our understanding of the positive and negative impacts of tourism so that steps can be taken to lessen the negative effects and work at sustainable tourism development. In other words, sustainable tourism development is concerned with maximising the benefits while minimising the negative effects.
Tourism is seen by governments as a useful tool for economic development. The economic benefits tourism may offer include:
- Employment: tourism is a labour intensive industry,
- Entrepreneurial opportunities,
- Generate tax revenues,
- Development in rural regions,
- Foreign exchange generator,
- Tourism promotes other industries, particularly in services sectors of the economy.
Tourism contributes in four major areas of the national economy:
- Balance of Payments
- Regional economic development
Salaries, interest, rent and profits all contribute to income generation. In the tourism industry, which is labour intensive, the greatest proportion of income will be derived from salaries paid to the workers both directly serving tourists or from those benefiting indirectly from tourists’ spending.
Tourism is the main income generator for one-third of the developing nations but is also a major generator in the Western world. In New Zealand, tourism is of prime importance in areas where there is little other industry such as in Wanaka and the Bay of Islands. Interest, rent and profits can generate income from loans to companies building hotels or rental paid to the landowner for a tourism attraction.
Taxation also contributes to income in the form of G.S.T. in New Zealand and V.A.T. in the United Kingdom. In Fiji, there is an accommodation tax of 3% levied on hotel rooms. Departure taxes are now levied by most countries and some including the USA also have an arrival tax.
The sum on all incomes is called the national income and the importance to a country’s economy is measured by looking at the proportion of national income created by tourism. In New Zealand, for the year ended 2004, tourism contributed $6.2 billion or 4.9% of New Zealand’s total industry contribution the GDP.
The tourist income multiplier or ‘ripple’ effect accounts for the indirect impact of tourist spending on the economy. The multiplier is expressed as a ratio between one dollar of tourist spending and the number of times it is re-spent. For example, a multiplier of 0.72 has been calculated for Fiji. This means that 72 % of each dollar of original visitor spending is re-spent in the Fijian economy.
Some major weaknesses have been identified in calculating economic multipliers. One particular problem is the difficulty involved in collecting accurate data of tourist expenditure. Tourism involves a large number of sectors in the economy and tourists spend their money on extremely diverse goods and services. Also, tourism comprises many small, owner-operated businesses. It is likely that a number of operators do business informally, though cash or barter transactions and some transactions are never recorded. Due to the difficulties in obtaining accurate data on how much money is spent by tourists and the numerous small and informal businesses in the industry, multiplier ratios can only be approximations.
Determining the economic impact of tourism is more complicated than simply calculating tourist expenditure. The value of tourist expenditure to the host country is reduced by the value of imported goods and services required to satisfy the needs of tourists. This is referred to as leakage. If the host country has constraints on its ability to supply goods and services to tourists, the grater the number of visitors the more imports will be required and the multiplier ratio will fall. Imports may include materials for construction, petrol, information technology and even food and water for some small island communities. Leakages explain why only a portion of the income generated is re-spent in the local economy.
Balance of payments
International tourists contribute to a receiving country’s balance of payments through money being spent credited to their balance of payments. A New Zealander spending money in Australia, places a debit on New Zealand’s and a credit on Australia’s balance of payments. The outflow of New Zealand money being spent abroad by New Zealanders is an import, while the inflow of foreign tourists’ money spent in New Zealand counts as an export.
The total value of receipts minus the total payments made during the year represents a country’s balance of payments of the tourism account.
International tourism is an ‘invisible’ export which helps to balance imports and thus improve the balance of payments.
The UNWTO has estimated that around 260 million people work in jobs directly related to tourism worldwide and will represent approximately 8.3% of total world employment.
In tourism dependant countries such as the Caribbean, as many as 25% of all jobs are associated with the tourism industry. An estimated 102,700 full-time employees (or 5.9% of total employment in New Zealand were actively engaged in producing goods and services for tourists in 1994.
Developments in technology are affecting labour opportunities in employment. Computer reservation systems are replacing manual systems and as a result fewer agents are working in airlines and hotel chains. The increasing use of the Internet for reservations has also reduced numbers of travel agencies are airline offices.
Call centres are replacing branches, often situated in low-wage countries like India. The success of the tourism industry relies on the supply of a skilled labour force to serve the needs of the tourists.
Investment and development
The level of investment in tourism can determine the success of a region. The investment can be private of public. Often there is a ‘chicken and egg’ situation where there is an unwillingness to invest until there is a flow of tourists but the tourists will not come to the region until there is facilities e.g. hotels, restaurants to attract them.
Often there is a flow on effect and other industries will be attracted to the area to provide services for both tourists and workers
Another consideration in calculating the economic effects of tourism involves the opportunity costs. Money and other resources, committed to tourism could have been used for different purposes, providing alternative benefits for the host community. Labour is a good example. If local workers are employed in tourism then other industries such as fruit picking or agriculture may suffer. If there is a shortage of skilled labour, workers may be imported from other countries, resulting in further leakages from the economy. Capital expenditure on developing tourism-related establishments precludes spending scarce resources on other types of development with alternative uses. Inflation can be caused by high levels of expenditure by foreign tourists which increase the prices of food, transportation, and clothing and as in the case of Queenstown, land values,
Social and Environmental Impacts of Tourism
A cost-benefit analysis for tourism developments should assess the social and environmental impacts as well as economic effects. Sustainable development means that tourism is designed to fit with the social and natural environment and not cause the destination to become less desirable for visitors and permanent residents. Social and environmental can also have the negative impact, for example, tourist that coloring the tree, destroy the pathway of the forest and so on
attraction - a place, event, building or area which tourists want to visit
biodiversity - a variety of wildlife in an area
business plan - an action plan that entrepreneurs draw up for the purpose of starting a business; a guide to running one's business
component - a constituent part
culture - people's customs, clothing, food, houses, language, dancing, music, drama, literature and religion
destination - the end point of a journey
diversity - variety; multiplicity; range; assortment
domestic - within one's own country. A domestic tourist is a person who engages in tourism in his/her own country; domestic flights are those within the airline's own country.
economy - wealth of resources of a community
ecosystem - an area where living and non-living things interact
eco-tourism - a combination of tourism and the environment (e.g. planning before development; sustainability of resources; economic viability of a tourism product; no negative impact on either the environment or local communities; responsibility for the environment from developers, the tourism industry and tourists; environmentally-friendly practices by all parties concerned and economic benefits flowing to local communities)
endangered species - in severe danger of becoming extinct in the near future unless immediate steps are taken to protect the species
environment - the diverse community activities and cultures of a country's inhabitants, as well as its scarce and sensitive natural resources
event - an occurrence of importance
excursionist - a temporary visitor, staying less than 24 hours, including cruise travellers but excluding travellers in transit
fauna - all the animals of a particular area
flora - all the plants of a particular area
gateway - the point of access to a country or region, usually an airport or seaport, although certain frontier points and railway stations can be given the designation
global - worldwide
Greenwich meridian - the meridian of longitude that passes through Greenwich (London) and from which all other meridians are numbered; also known as the prime meridian or the zero meridian
heritage - a very broad expression that describes anything that has a link with some past event or person (e.g. cultural heritage refers to past customs and traditions with the unspoken implication that these are worthwhile or creditable)
heritage site - a place that capitalises on its connection with heritage
human-made attraction - an attraction created by people
icon - a symbol representing something
inbound tourist - tourist coming into a country from another country
international tourist - tourist travelling to and between foreign countries
itinerary - the written details of a customer's travel arrangements in the form of dates, times and destinations
local - belonging to a particular place or region
macro business - a large, formal business that employs many people
micro business - a small, often informal, business that employs very few people
natural attraction - a tourist attraction that has not been made or created by people
natural disaster - a destructive force (e.g. earthquake, flood, volcanic eruption)
outbound tourist - a tourist departing to a destination beyond the borders of the country of residence
profitability - capacity to make profit
region - an area of land having more or less definable boundaries
sector - a part or branch of the whole industry that provides particular goods and/or services
service - work done for the benefit of another
service delivery - the manner in which customer needs are met
service provider - a person or company that supplies a particular service
short haul - 1-3 hour flight
souvenir - a product purchased by a tourist as a reminder of a holiday
sustainable - something which can be kept in the same or a better condition for the future
tourism - the all-embracing term for the movement of people to destinations away from their place of residence for any reason other than following an occupation, remunerated from within the country visited, for a period of 24 hours or more
tourism geography - the knowledge of countries, regions, major cities, gateways, famous icons, monuments, building structures, and geographical features such as rivers, seas, mountains, deserts and time zones
tourism industry - a group of businesses that provide services and facilities for consumption by tourists
tourism infrastructure - roads, railway lines, harbours, airport runways, water, electricity, other power supplies, sewerage disposal systems and other utilities to serve not only the local residents but also the tourist influx (suitable accommodation, restaurants and passenger transport terminals form the superstructure of the region)
tourism product - different things to the various members of the tourism industry. To the hotel it is `guest- nights'. To the airline it is the `seats flown' and the `passenger miles'. To the museum, art gallery or archaeological site, the product is measured in terms of the number of visitors. For the tourist the product is the complete experience resulting from the package tour or travel facility purchased, from the time they leave home until their return.
tourist - one who travels for a period of 24 hours or more in a place other than that in which he or she usually resides, whose purpose could be classified as leisure (whether for recreation, health, sport, holiday, study or religion), business, family, mission or meeting
tourist facility - a feature created for utilisation by tourists
tourist route - a route developed to attract tourists to an area to view or experience something unique to that area (e.g. wine route, whale route, heritage route, battlefield route)
tourist trend - a general tendency to visit a country, region or destination or to pursue a specific tourist activity
world heritage site - a site designated by UNESCO as being of special historical, cultural or natural importance
BB - Bed and Breakfast
Which one of the following describes the desire to leave familiar things and seek new experiences?
The main attraction of Grand Canyon National Park in the USA is its:
Activities such as bungee jumping and white water rafting are most likely to be included in which one of the following types of holiday?
During January to March the Alps in Europe mainly attract people on:
The main reason why tourists go on safari is to:
Experience the great outdoors
Prevent animals being put in zoos
See animals in their natural environment
See the countryside in the safety of a group
The main purpose of national tourist boards is to:
Co-ordinate the work of local tourist information centres
Promote the country to potential visitors overseas
Provide information to visitors arriving in the country
Supply tour operators with photographs for their brochures
Which two of the following would be offered by an in-bound tour operator?
Pre booked accommodation
The term ‘package holiday’ usually refers to holidays which include:
Car hire and meal vouchers
Entrance fees and souvenirs
Transport and accommodation
Travel insurance and spending money
Which one of the following is the term used for holidays when passengers travel by air to the port of embarkation?
The positive economic impact of tourism is likely to be experienced by the national population if income from tourism is:
Distributed within the local economy
Exported to overseas companies
Reinvested within parent organisations
Stockpiled within the tourism industry
‘All inclusive” resort hotels are becoming popular. The main disadvantage to the local area of such developments is
An increase in electricity consumption
Depletion of wildlife and plant life
Greater pressure on the emergency services
Loss of employment in supporting industries (ie restaurants)
Which one of the following best describes the term ‘economical leakage’?
Details of new promotional activities which are given to competitors
Serious water problems affecting the health of tourists to a region
The profits from tourism being drained away to benefit other countries
Visitors being attracted to other resorts in the region
Hotel grading schemes are most likely to give potential visitors an indication of the hotel’s
One effect of the US dollar weakening against the GB pound is that
British holidaymakers will find the costs in the USA are lower
British holidaymakers will find the costs in the USA are higher’
Transatlantic airfares will go up
Transatlantic airfares will go down
Which one of the following effects will an increase in visitor numbers have in the UK?
The UK’s balance of payment will improve
The UK’s balance of payment will worsen
More UK residents will travel overseas
Fewer UK residents will travel overseas
Last edited on 14 May 2021, at 20:30
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