BTT107_CU -SEM II- BSC TTM-Tourism Economics (1)-converted

Forsyth, 2004 ) Life Cycle A; This life cycle is short, but the product achieves high sales over this short period ( Examples: High fashion designer clothes brands, especially women’ s wear that also tends to be seasonal; Blockbuster movies which achieves large revenues but has relatively limited run because of other movies coming to the market) Life Cycle B: This is also short, but unlike A, this does not generate high sales revenue. ( Example: Products introduced into the market for which there is litt le or no demand) Life Cycle C: This life cycle goes through periods of decline before being rejuvenated and achieving new growth within the market. The rejuvenation may be due to an improved product formulation or modification or new packaging (Example: Detergents) Life Cycle D: This highlights quite rapid growth, but a short maturity stage before decline and then resurgence within the market Life Cycle E: This life cycle has a relatively short growth rate before maturity stage is reached. ( Example: A specialist product or service that has established itself within the market.) The variations in the pattern of life cycle make it difficult for the marketer to know what pattern fits a particular brand. Ramaswamy and Namakumari discussed three levels of operation of Product Life Cycle – (a) the product level, (b) the product sub- category level and (c) the brand level ( Ramaswamy & Namakumari, 2002 ). Life cycles of products in the product category level influenced the life cycle of the products in the product sub- category level. When the life cycle of a brand is assessed, it is essential to study the life cycle of the product category and that of the product sub- category. Usually, the product sub- category is of greater relevance than the basic product category. In other words, life cycle of a brand cannot be projected and studied independent of the product sub-

category or product category to which it belongs. Like the Product Life Cycle, most successful brands follow a similar life cycle that includes introduction, growth, maturity and decline stages. The Product Life Cycle concept can be used to analyze a product category, a product form or a brand (Kotler, Keller, Koshy, & Jha, 2007 ). At the start, brands are unknown, so the emphasis in the marketing mix is on promotion to acquaint customers with the brand. As sales increase during the growth phase, emphasis shifts to opening new distribution channels and retail outlets. When a brand reaches maturity, competition increases and marketing managers emphasize price and sales promotion to draw the attention to their brand. Brand life cycles vary in length from a few weeks for fashion merchandize to up to 100 years for soaps, appliances and food items ( Darymple & Parsons, 2002 ). SUMMARY Tourism supply components are classified into five main categories: Natural resources — includes elements in an area for the use and enjoyment of visitors such as climate, landforms, terrain, flora, fauna, bodies of water, beaches, natural beauty and water supply for drinking, sanitation, and similar uses. In time series data, seasonality is the presence of variations that occur at specific regular intervals less than a year, such as weekly, monthly, or quarterly. Seasonality may be caused by various factors, such as weather, vacation, and holidays and consists of periodic, repetitive, and generally regular and predictable patterns in the levels of a time series. Seasonal fluctuations in a time series can be contrasted with cyclical patterns. The latter occur when the data exhibits rises and falls that are not of a fixed period. Such non- seasonal fluctuations are usually due to economic conditions and are often related to the \"business cycle\"; their period usually extends beyond a single year, and the fluctuations are usually of at least two years.

KEYWORDS • A time series is a series of data points indexed in time order. Most commonly, a time series is a sequence taken at successive equally spaced points in t ime. • A run chart, also known as a run- sequence plot is a graph that displays observed data in a time sequence. • Seasonal subseries plots are a graphical tool to visualize and detect seasonality in a time series • Seasonal subseries plots are a graphical tool to visualize and detect seasonality in a time series. Seasonal subseries plots involve the extraction of the seasons from a time series into a subseries. • In the analysis of data, a correlogram is a chart of correlation statistics. For example, in time series analysis, a plot of the sample autocorrelations versus is an auto correlogram. If cross- correlation is plotted, the result is called a cross- correlogram. LEARNING ACTIVITY 1. What stage of the life cycle could possibly explain the present scenario of Kerala tourism? 2. What are the endogenous factors that affect the life cycle of selected tourism destinations? UNIT END QUESTIONS [email protected] Highlight the keyAw.oDrdesfcorriwpthiivcehQthueestions meaningisgiven.

1. What is supply? 2. What do you understand by tourism supply? 3. What are the components of tourism supply? 4. What is supply system in tourism? 5. What is tourism product life cycle? 6. Does attitude of residents of the selected tourist destinations favour tourism development in their neighborhood? B. Multiple Choice Questions (Mcq’s) 1. The dilemma of analyzing the supply side of tourism from an economic point of view has arisen because of what unique characteristic of tourism? a. It comprises both tangible and non- tangible elements b. The sector is characterized by very unstable demand c. It comprises many different types of provider d. All of the Above 2. What amount has the US invested in its green stimulus package over the next ten years? a. $100 million b. $50 million c. $200 million d. $150 million 3. The typical feature of tourism is that a. The tourist spot is heat, clear & attractive

b. Tourists have to pay lots of money to visit various tourist spots c. The tour operator helps its customers d. Tourists have to be physically transported to tourist spots 4. Which one of the following is not a place of religious significance? a. Puri b. The Vatican c. Jerusalem d. Riyadh 5. Leisure is a/an a. Concept b. Activity c. Adventure d. Timeframe 6. Which one of the following is a travel motivator a. Booking an order b. Bomb blasts in Bali c. Imposition of heavy excise duty on gold import d. None of these Answer 1. d 2. d 3. d 4. d

5. b 6. a SUGGESTED READINGS • Business Statistics: Why and When (Chapter 15) by Larry E. Richards and Jerry J. Lacava. • Business Statistics (Chapter 16) by J.K. Sharma. • Business Statistics, a decision making approach (Chapter 18 ) by David F. Groebner and Patric W. Shannon. • Statistics for Management (Chapter 15) by Richard I. Levin and David S. Rubin. • Forecasting: practice and principles by Rob J. Hyndman and George Athansopoulos

UNIT -8 TOURISM SUPPLY – II STRUCTURE 1. Learning objectives 2. Introduction 3. Tourism Supply and market structure 4. Pricing strategies for tourism 5. Supply trends in tourism 7. Summary 8. Keywords 9. Learning activity 10. Unit end questions 11. Suggested readings LEARNING OBJECTIVES After studying this lesson, you will be able to: • Understand the tourism supply, and market structure. • Understand about pricing strategies in tourism • Understand the supply trends INTRODUCTION The definition of tourism supply should result from the definition of tourism. Thus it can be defined as the supply of all assets, services and goods to be enjoyed or bought by visitors and occasioned by the journeys of visitors.

Statistics on tourism supply may be approached in two ways: • statistics on the production ( structure) of enterprises etc., e. g. supply has been interpreted as ACTIVITIES of enterprises such as the supply of HORECA, transport and retail services; • statistics on the results of such activities, i. e. PRODUCTS, which also may be services, consumed by visitors. The general purpose of statistics on tourism supply is to assess the contribution of the tourism sector to a country's general socio- economic process and to identify the effects of tourism, distinguishing between direct effects and indirect or induced effects. Here are typical components of the tourism supply: Tourism supply components are classified into five main categories: 1. Natural resources — includes elements in an area for the use and enjoyment of visitors such as climate, landforms, terrain, flora, fauna, bodies of water, beaches, natural beauty and water supply for drinking, sanitation, and similar uses. 2. Infrastructure — consists of all underground and surface developmental construction such as water supply systems, sewage disposal systems, gas lines, electrical and communications systems, drainage systems and other constructed facilit ies such as highways, airports, railroads, roads, drives, parking lots, parks, night lighting, marinas and dock facilit ies, bus and train station facilities and similar tourist service installations. 3. Superstructure- The above ground facility services such as airport buildings, passenger traffic terminals, hotels, motels, resorts, restaurants, shopping centers, places of entertainment, museums, stores and similar structures. 4. Transportation and transportation equipment- includes items such as ships, airplanes, trains, buses, limousines, taxis, automobiles, cog railways, aerial tramway, and similar passenger t ransportation facilit ies. 5. Hospitality resources — include the cultural wealth of an area which makes possible the successful hosting of tourists. Examples are the welcoming spirit of tourist business employees,

attitudes of the residents towards visitors, courtesy, fr iendliness, sincere interest, willingness to serve and to get better acquainted with visitors, and other manifestations of warmth and fr iendliness. It also includes the cultural resources of an area such as fine arts, literature, history music, dramatic… Attractions They are the places the tourists perceive as the satisfaction of their leisure- oriented needs. • Natural Attractions: Caves, canyons, rocks, waterbodies, landscapes. • Man- Made Attractions: Theme parks, towers, bridges, architecture, temples, mosques, churches, and monuments. • Cultural Attractions: Historical sites, monuments, local arts and crafts, local folk core, music and dance. Transportation They are the modes of commuting. • Road: Car, bus, cycle. • Rail: Long distance, high speed, commuter, or intercity trains. • Water: Boats, ferries, cruises. • Air: Carriers that operate on fixed schedule, Charters that operate as and when required.

Intermediaries They are the mediators. • Travel Agents: The business of selling hospitality and tourism products. • Tour Operators: They deal with the operating components for rates. Destination It is the place the tourists visit. It is composed of: • Accommodation: Hotel, motel, lodge, guest house, B&B. • Restaurant: Specialty restaurants, themed restaurants, branded restaurants such as CCD, KFC, Bistros, and takeaway food joints. • Tourist Facilities: Pubs, entertainment parks, shopping centers, and casinos.\\ Activities They include activities the tourists are interested to engage in: • Adventure Sports: Mountain biking, bungee jumping, rafting, and other similar activities. • Leisure: Basking on beaches, swimming, dining near waterbody. • Business Activities: Attending seminars, business meetings, promotions. • Health Activities: Attending Yoga sessions, exercising, undergoing naturopathy, and similar such activities. TOURISM SUPPLY AND MARKET STRUCTURE Leisure tourism has long been a pursuit of the wealthy, but it is only since the 1980 s that the majority of the population has become involved, either as tourists or as workers catering for their needs— a phenomenon that has raised tourism to the position of one of the world’ s largest industries. Domestic tourism is estimated to be ten times greater in volume than international tourism, and yet relatively litt le is known about it; closer attention has been paid to international tourism. With developments in world trade, better means

of transport and communications, intensive marketing, rises in disposable income, improvements in political ties, technological advances, and increased leisure t ime, international tourism has grown rapidly, as is reflected in the global trend of inbound tourist arrivals and receipts. The number of international arrivals rose from 25 million in 1950 to 763 million in 2004, and receipts rose from $2 billion to $623 billion during the same period (World Tourism Organisation 2006 ). Globalization has also contributed to the rapid expansion of tourism, via such changes as deregulation of air t ransport. The growth of charter flights, low- cost airlines, and package- tour holidays provided a major boost to this expansion. International and domestic tourism combined generate up to 10 percent of the world’s gross domestic product (GDP) and a considerably higher share in many small nations and developing countries. The tourism product comprises a combination of goods and services supplied by the tourism industry, as well as nonprice features that motivate tourism, such as natural sites (such as beaches, mountains, and forests), historic sites, and cultural features. The welcome provided to tourists by industry employees and by the local population is also of fundamental importance. The tourism industry includes hospitality (e.g., accommodation, restaurants), transportation (e.g., airlines, car rental), travel facilitation and information (e.g., tour operators, travel agents, tourist information centers), and attractions and entertainment (e.g., heritage sites and theme, national, and wildlife parks). Thus the scope of tourism supply is wide- ranging and influenced by market conditions that affect the environment in which tourism businesses operate. The market structures within which tourism businesses operate vary from highly competitive (akin to perfect competition) to monopoly. Key features indicating competitive status are the number and size of firms, degree of concentration, entry and exit conditions, pricing strategies, profit levels, product differentiation, cost structures and capacity, and interaction between firms (Sinclair and Stabler 1997). The classification of the supply

components is not straightforward; for example, the transport and accommodation sectors are themselves divided into subcategories with different market structures. The accommodation sector is dominated by large chains (e.g., Cendant Corporation, Bass Hotels, Marriott, Accor, Choice, Hilton), giving the impression of an oligopolistic structure, and each firm’ s strategy takes account of the past and predicted future strategies of the others. This sector also encompasses a large number of other establishments with diverse attributes, including hotels, motels, holiday centers, t imeshares, and camping facilit ies, and the diversity of the products that they provide, and a degree of price control, indicate monopolistic competition. In contrast, a highly competitive market structure characterizes the sales of souvenirs and knickknacks by numerous small businesses, including street- based sellers, who have very limited control over the prices they can charge tourists. Tour operators negotiate deals with hotels, airlines, and other service operators to assemble holiday packages primarily for the mass market, facilitating a link between suppliers and customers. The packages are retailed through travel agents or directly to the customer. In the United Kingdom, the inbound and outbound tour-operator organizations, UK Inbound and ABTA ( Association of British Travel Agents), respectively, defend their interests. ABTA had 6,310 travel- agent office members and 1,052 tour- operator office members in 2005 , generating a combined turnover of £26 billion. Eighty- five percent of all package holidays sold in the United Kingdom were sold through ABTA members. The four dominant tour operators in the United Kingdom are Thomson, First Choice, My Travel, and Thomas Cook. Large tour operators are primarily linked to the mass market, whereas specialized tour operators that cater for ecotourists, older tourists, and gay and lesbian travellers are growing rapidly. Although the large tour operator market structure is highly concentrated, suggesting an oligopolistic structure, there is relatively easy entry into and exit from the sector, so it has many of the characteristics of a competitive, con- testable market. The fact that many tour operators tend to experience low profit margins also indicates a competitive structure. High

sales volumes have enabled the large firms to achieve substantial economies of scale and scope, but they are experiencing intense competition from Internet travel sites. Travel agents are, in effect, retailers providing travel services to customers for commission. Some are linked to tour operators, and others function independently. This intermediary sector has experienced substantial growth. In the United States there has been an almost fivefold increase in agency outlets since the early 1970s. In the early 1990 s more than two- thirds were single- office agents, and just one- fifth were branches of multiple firms. This is in contrast with Europe, where single outlets account for no more than one- third of the total, with the major multiples owning just over one- quarter (Sinclair and Stabler 1997 ). Like the tour operators, travel agents are facing a major challenge from the rapidly growing Web- based companies that sell a wide range of holiday packages over the Internet. Transport is a crucial factor in the growth of tourism. With the wide range of transport modes (air, rail, car, bus, coach, ferry), the market structure is diverse. Air travel is of key importance in terms of passengers carried and revenue generated. Since the 1960 s air travel has grown tremendously, and with technological change the potential for growth has increased further. With deregulation, privatization, low- cost airlines, and globalization, competition in the air industry is fierce, although oligopolistic conditions and domestic monopoly still exist in some long- haul destinations, and airline alliances such as the Star Alliance and One World have facilitated collaboration. The structures of the bus, coach, ferry, and rail sectors are similar to the air sector’ s in that they have problems of high capital costs, fixed capacity, peaked demand, and the need for feeder routes to sustain profitable ones. The source markets for international tourism are concentrated in the industrialized countries of Europe, the Americas, and Asia and the Pacific. The main tourist- generating countries are in the world’s industrial core: The United States and Germany are the major markets, fo llowed by the United

Kingdom, Japan, France, and Italy. With rising levels of disposable income many emerging economies, such as those of Central and Eastern European countries, have shown fast growth in recent decades, and China is becoming a major source market. Europe remains the most visited of all regions of the world; since the new millennium it has received almost 60 percent of all international tourists and more than half of total tourism receipts. France is the most popular destination visited by tourists worldwide, followed by Spain, the United States, Italy, China, and the United Kingdom. In terms of international tourism receipts, the United States has been the major recipient, accounting for around 12 percent of the total, followed by Spain (8 percent) and France (7 percent). Outbreaks of disease or polit ical unrest or terrorist attacks have recently hit the tourism industry with some severe and unexpected downturns in demand. Examples include the Gulf War in the early 1990 s, the terrorist attacks at Luxor in Egypt in 1997 , the Kosovo conflict in 1999 , foot- and- mouth disease in the United Kingdom in 2001 , the September 11 terrorist attacks in the United States in 2001 , and the tsunami in the South Pacific in 2004 . All of these events had negative impacts on the number of international tourist arrivals. In 2003 world tourist arrivals were 691 million, compared with 703 million in 2002 . Tourist arrivals from the United States fell from a high of 128 million in 2000 to 113 million in 2003 . Despite the volatility in demand over the short term, the World Tourism Organization forecasts that international arrivals will reach more than 1.56 billion by the year 2020 , with Europe being the top destination, followed by East Asia and the Pacific, the Americas, Africa and the Middle East, and South Asia. The recent high growth in tourist arrivals and expenditures affects host destinations in various ways, contributing to higher exports of services, bringing in foreign currency, increasing the level of income, and generating tax revenue. Tourism also generates large numbers of jobs, although remuneration in many parts of the tourist industry is low compared with other

industries. There is significant gender structuring in employment. For example, in the United Kingdom in 1995 , 76 percent of jobs in the transport sector were filled by men, whereas 62 percent of those in accommodation and catering were undertaken by women (Purcell 1997 ). Furthermore, in the hospitality sector staff often live on premises and are expected to work long and \"unsocial\" hours. Many receive low pay, and there is a large proportion of young, female, and part- time and casual staff, as well as high staff turnover in many establishments. Although the tourism industry has great potential for benefiting recipient countries, major criticisms have been levelled at its impact on the environment as well as on social norms and cultures. Construction of resort hotels and theme parks, for instance, has led to significant changes in the environment and some reduction in the biodiversity of native flora and fauna. Damage to coastal areas has been a cause for concern, with construction of marinas and other water- based activities. Other environmental issues relate to noise and air pollution ( for example, from aircraft, vehicles, nightclubs) and to water contamination by discharges from hotels, boats, and cruise ships. These pose serious challenges for destination managers. Industry problems, ranging from increasing competition between destinations to environmental concerns, have encouraged destinations to introduce structural changes and to think about sustainable tourism. Many destinations have stressed the importance of ecotourism. Tourism is a sensitive industry with respect to changes in economic, social, and political conditions, and tourism activities are hampered by disease, political unrest, and climatic changes. A further challenge for the tourism industry is to consider how to integrate tourism into society such that the economic benefits are equitably shared without significantly damaging the environment. PRICING STRATEGIES FOR TOURISM Setting pricing for tourism businesses is a strong mix of marketing strategy and financial analysis. Is there a formula for developing pricing for tourism businesses?

Not really – tourism products are very rarely identical, often because of location, but also because of the people and the components that make up the experience you provide a traveller. It can be incredibly diverse and pricing strategies can evolve as a tourism business develops its brand and market share. Even star ratings for accommodation only give a general guide for travellers on what the pricing will be – there are not set criteria. So the purpose of this article is not about helping you with a formula to devise your pricing, but more of an outline of the things you should consider, components of your pricing strategy, different pricing types and ways to stimulate demand. Things to consider when setting your pricing strategy • How unique is your business? The more unique your tourism product the more flexibility you will have to decide your pricing. • What value added services do you provide inclusive of the experience? • What market do you want to attract and what positioning in the market do you want to establish? • What are your operating costs (fixed and variable)? Using your costs, get your accountant to help you calculate your break- even point and therefore what your minimum pricing should be for profit goals (estimates of revenue, occupancy rates etc will be needed). • For most tourism businesses setting prices will be more market based – that is, what do competitors with similar products and services charge within your market? Be careful however, you must be aware of your own financial position (debt levels, cash flow etc) before you can decide whether you should compete in this way. Ideally being competitive is not price driven, it ’s product driven. Where to start Knowledge of your break- even point is an important place to start, but on

launch of a new tourism business it may be that pricing is set lower than your longer term pricing expectations in order to attract volume, credibility and establish your brand. Then as you become more established with a regular booking base you can consider increasing prices. Of course this is wholly dependent on your overall marketing strategy. For tourism businesses that cater to the exclusive/ luxury traveller pricing may not fluctuate much at all. While those targeting the budget travel market may not have too much room to move on pricing and they will rely on volumes of bookings. Pricing Components Your pricing strategy may be made up of the following components: Rack Rates All tourism businesses should have a rack rate – this is your “ full rate” before any discounts are applied and typically is what is provided to wholesalers and printed on brochures for the season ahead. For activity and attraction operators their full rate is more likely to be charged all the time without any day to day discounting, however accommodation operators – particularly those in the middle of the market will be changing pricing almost daily for the month or 2 months ahead to fill gaps. Seasonal Pricing Using a mix of pricing throughout the year to cover low, high, and shoulder seasons is a standard way for tourism businesses to cater for differing levels of demand due to the time of year. Typically these will be the same date periods each year but may also apply for school holiday dates and for local events where the dates vary each year. Last Minute Pricing A common method for accommodation suppliers to fill those last minute gaps in inventory availability, last minute pricing is basically discounting daily

prices according to forward bookings and promoted on last minute booking websites. Common Pricing Types • Per Person pricing: A set price per person e. g. Adult and Children prices. Commonly used by activity/attraction and transport operators or backpacker accommodation and camp sites. Options may include an adult, child and senior cit izen price. • Per Unit pricing: – A set price for 1 unit of the product e. g. Price per night, this is the standard way to price accommodation, usually the advertised price is for 2 people so if the accommodation fits more than 2 guests it can have a mix of the per person pricing with extra adult and extra child rates. • Single or double occupancy – common for B&B’s there is a single rate and a double rate (which is not double that of the single rate). Discounting While discounting has its place, and often unavoidable in a competitive market such as tourism, be very wary about continually discounting your prices to stimulate demand – it can become a rocky road to reducing profitability or even missing that vital break- even point. Be selective with last minute pricing deals – don’ t make every day reduced, just select those where you really do need extra bookings. Consider adding conditions to a discounted price like a minimum stay or number of travellers in the booking. While a booking is better than no booking at all, customers do become used to a certain price level and you therefore run the risk of not only making it hard for you to charge your normal rack rates, but it will also devalue your product – remember perception is everything in tourism! Package Deals Developing packages with complimentary tourism partners in your area or

with value added components is a good way to stimulate demand without having to discount. Strike up deals with local businesses to provide a full package and share business with each other – you should be able to get their products or services at a “net” rate so the package pricing is better than if they had purchased each component separately. Packaging can also be used to target niche markets effectively e.g. golf weekend, food and wine tours, pampering packages etc. Commissions Many bookings will come via some sort of third party who will charge you a commission such as a retail travel agent, wholesaler, inbound tour operator or online travel agent (OTA). Many tourism operators are tempted to add the value of the commission on to the pricing for these providers but this should actually be considered in the setting of your rack rates anyway – if you have different pricing across different distribution channels it just confuses both travellers and can jeopardise industry relationships, so keep it simple. SUPPLY TRENDS IN TOURISM Tourism supply has to do with the provision of the key elements of the tourism industry by the host governments or destinations. Such provision should extend to maintenance, promotion and management of the tourism facilit ies and resources. Tourism resources that are necessary for tourism supply range from natural to man- made. Infrastructure required would include telecommunication, accommodation and transportation. Tourism reception services include travel agencies, tourist offices, hire companies and visitor managers. The one underlying characteristic of tourism supply that distinguishes it from other services is the way in which the mobile population who visit destination areas consume a tourism product, service or experience. In contrast, the supply elements are often fixed geographically at certain places (e.g. hotels, restaurants or visitor attractions). This means that businesses are required to sink considerable capital costs into different forms of tourism services and centres of production on the basis of the expectation that the destination will appeal to visitors and assist in the promotion of their

individual product and service. The “ tourism supply chain” concept originated from economics. It has been used to explain how different businesses enter into contractual relationships to supply services, products and goods, and how these goods are assembled into products at different points in the supply chain. Tourism is well suited in the supply chain because the product, service or experience that is consumed is assembled and comprises a wide range of suppliers. The supply of tourism products basically involves how various components of the tourist product are placed at the disposal of tourists. Tourism suppliers can be classified under the following headings: Hospitality, Transport and Attractions/Products. As far as hospitality is concerned, this is where a tourist will look at the appropriate forms of accommodation, different types of food service provisioning, entertainment and leisure activities. The suppliers of hospitality products, such as accommodation, service, entertainment or gaming must be well located in relation to other components of tourism product. The suppliers of accommodation vary from privately owned organizations to large hotel chain groups or consortiums. On the other hand, the food service industry, which includes drinking places, restaurants, coffee shops and other food outlets, is strongly linked to the accommodation sector. Ultimately, accommodation forms the core of the tourism supply chain (Figure 3.2 ) where it occupies a more central position. Tourism supply can also be explained through the “ distribution system” in tourism analysis. The distribution system makes the supply of tourism available and accessible to the demand side. Because tourism is an intangible product, information is the only thing on which potential tourists can base their decision to make their arrangements. There are four components in the tourism distribution, system namely, suppliers of tourism services, the distributors of information, travel intermediaries and consumers. Gunn and Var (2002) suggest that tourism supply components can be classified according to the following four different elements (natural, human, [email protected] lo gical and cultural reso urces): Figure is missing. Which figure ?? 3.2??

Natural or environmental resources that constitute the fundamental measure of supply. With the contemporary rise in environmental awareness, nature conservation, eco- tourism and natural resources are being used more sustainable to ensure they continue to be of benefit in the future. Tourism supply in this regard embraces elements like the physiographic of the area, landforms, flora, fauna, water bodies, air quality and similar natural phenomena. In essence, the availability of such resources is of paramount importance to the success and continuity of tourism as a spatial industry. Built or man- made resources such as infrastructure. Infrastructure includes all underground and surface development constructions such as water supply systems, sewage disposal systems, power lines, roads, communication networks and many other commercial and recreational facilities. Particularly needed by tourism is a superstructure to include facilit ies constructed primarily to support visitation and visitor activities. Primary examples are airports, parking lots, parks, hotels and other places of entertainment. • Transportation is a crit ical component of tourism supply, as without it tourists cannot reach their tourism destinations. Aero planes, trains, buses and other modes of t ransportation are part of this category. Hospitality and cultural resources are integral to a tourism offering. It is the people and the cultural wealth of an area that makes it possible for tourism 61 to take place. Tourists are hosted where there is security and often comfort. The attitudes of residents to visitors need to be desirable. The fr iendliness, courtesy, sincere interest and willingness to serve and to be better acquainted with visitors are crucial factors in tourism supply. Activities Marketing influences visitors' demands, but not all visitors are influenced by marketing activities. For example, marketing may not have influenced domestic travellers who travel by private car or who stay with friends and relatives. Some economic activities depend on tourism for their survival, e. g. tourist accommodation, travel agencies and long- distance passenger t ransport. Other activities such as restaurants and bars, car rental services, entertainment and

attractions services also tend to rely strongly on tourism. The dependency of certain activities or enterprises on tourism may also depend on their location. Thus the supply of tourism activities comprises diverse economic activities, and, when presented as a sector, it is very heterogeneous, encompassing different activities, some of which are directly dependent on tourism and others only partly. A global approach to the analysis of tourism products deals not only with those that are direct results of economic activities, but also with any product, diversion, entertainment, commodity or service enjoyed or bought by visitors. The products supplied represent more than just tourism expenditure. Not every good or service has to be paid for by the consumer. The use of assets, such as roads, historical areas, national parks, natural environment, in many cases is indirectly free, but in some instances visitors have to pay for the facility offered as a service. In fact, most assets offer ‘services’ to their users or to the people enjoying them, regardless of whether visitors have to pay for them or not. Nevertheless, free 'services' such as nice weather, fresh air, beaches, mountains, landscapes and roads belong to the supply of tourism products. SUMMARY The current interpretation of the definition of “ the tourism supply” concept needs to be reconsidered because the whole concept seems to involve so much. Many other aspects could still be fitted in and ultimately tourism marketing might sound like it means ‘ everything’ to tourism. In this generation of new information distribution technology, demand and supply are brought onto the virtual market simultaneously. It has thus become impossible to talk about the promotion and distribution of tourism products without considering the impact of new developments in the field of information technology. The Tourism branch of the DEAT aims to create the right conditions for responsible tourism growth and development by promoting and developing tourism, thus increasing job and entrepreneurial opportunities and encouraging the participation of previously disadvantaged individuals. Its focus is on facilitating the growth of the tourism industry by providing

support to the public and private sectors and the broader community. KEYWORDS • International tourism: International tourism comprises inbound tourism and outbound tourism, that is to say, the activities of resident visitors outside the country of reference, either as part of domestic or outbound tourism trips and the activities of non- resident visitors within the country of reference on inbound tourism trips • International visitor: An international traveller qualifies as an international visitor with respect to the country of reference if: (a) he/she is on a tourism trip and (b) he/she is a non- resident travelling in the country of reference or a resident travelling outside of it • Sample survey: A survey which is carried out using a sampling method. • Sampling error: That part of the difference between a population value and an estimate thereof, derived from a random sample, which is due to the fact that only a subset of the population is enumerated. • Response and non- response: Response and non- response to various elements of a survey entail potential errors. LEARNING ACTIVITY 1. Discuss about the Supply trends in tourism in your country 2. Discuss and compare the demand supply of tourism products in your country UNIT END QUESTIONS A. Descriptive Questions

1. Define supply 2. Define market structure 3. Define price strategies 4. What are the strategies for price distribution in tourism 5. Explain supply trends in tourism. B. Multiple Choice Questions (Mcq’s) 1. Deferred Demand is demand unfulfilled because of a a. Problem in the supply environment b. Problem with the individual c. Illness d. Poverty 2. Travel propensity is a measure of a. The percentage of a population engaging in tourism b. The ratio of day trips to overnight visits c. Tourism market share of a country d. Frequency of travel of a population 3. The majority of international tourism is generated by countries of which of economic development a. Take off b. High Mass Consumption c. Drive to maturity d. Traditional society

4. Baby Boomers belong to which phase of the demographic t ransition a. Low Stationary Phase b. High Stationary Phase c. Early Expanding Phase d. Late Expanding Phase 5. The most useful discriminator of income to participate in tourism is a. Gross Income b. Disposable Income c. Tax Income d. Discretionary income Answer 1. a 2. a 3. b 4. a 5. d SUGGESTED READINGS • Gartner, W.C. (1993). \"Image formation process\". Journal of Travel and Tourism Marketing. 2: 191 –216. doi:10. 1300 /j073v02n02_12. • Hughes, H.L. (1989). \"Tourism and the arts\". Tourism Management. 10 (2): 97 – 99. doi:10.1016 /0261- 5177( 89) 90050 -2 . • Phelps, A (1986). \"Holiday destination image: The problem of

assessment— an example developed in Minorca\". Tourism Management. 7 (3): 168 – 80. doi:10. 1016 /0261- 5177( 86) 90003 -8 . • Richardson, S.; Crompton, J. (1988). \"Cultural variations in perceptions of vacation attributes\". Tourism Management. 9 (2): 128 – 36. doi:10.1016 /0261- 5177( 88) 90022 -2 .

UNIT -9 TOURISM AND ECONOMICS STRUCTURE 1. Learning objectives 2. Introduction 3. Definition of Sustainable Tourism 4. Sustainable Tourism Development 5. Need for Sustainable Tourism Development 6. Principles of Sustainable Tourism 7. Three Dimensions of Sustainable Tourism 8. Social Dimension 9. Tourism as a strategic dimension of economic development 10. Economic advantages and disadvantages 11. Summary 12. Keywords 13. Learning activity 14. Unit end questions 15. Suggested readings LEARNING OBJECTIVES After studying this lesson, you will be able to: • Understand the sustainable tourism • Understand about dimensions of tourism

• Understand the supply trends INTRODUCTION Sustainable tourism is the form of tourism that meets the needs of tourists, the tourism industry, and host communities today without compromising the ability of future generations to meet their own needs. According to The World Tourism Organization (WTO), sustainable tourism should: 1) Make optimal use of environmental resources that constitute a key element in tourism development, maintaining essential ecological processes and helping to conserve natural heritage and biodiversity. 2) Respect the socio- cultural authenticity of host communities, conserve their built and living cultural heritage and t raditional values, and contribute to inter- cultural understanding and tolerance. 3) Ensure viable, long-term economic operations, providing socio- economic benefits to all stakeholders that are fairly distributed including stable employment and income- earning opportunities and social services to host communities, and contributing to poverty alleviation. DEFINITION OF SUSTAINABLE TOURISM The World Tourism Organization defines sustainable tourism in the following manner: “Sustainable tourism development meets the needs of present tourists and host regions while protecting and enhancing opportunities for the future. It is envisaged as leading to management of all resources in such a way that economic, social and aesthetic needs can be fulfilled while maintaining cultural integrity, essential ecological processes, biological diversity, and life support systems.” While tourism is welcomed almost universally for the benefits and

opportunities it creates, there is a growing recognition of the need to see tourism in its environmental context, to acknowledge that tourism and the environment are interdependent, and to work to reinforce the positive relationship between tourism, the environment and poverty reduction. Sustainable tourism means tourism which is economically viable but does not destroy the resources on which the future of tourism will depend, notably the physical environment and the social fabric of the host community. According to Richards, “ Sustainable tourism is tourism which develops as quickly as possible, taking account of current accommodation capacity, the local population, and the environment. The development of tourism and new investment in the tourism sector should not detract from tourism it self. New tourism facilit ies should be integrated with the environment.” Butler defines environmentally sustainable tourism as, “ tourism which is developed and maintained in an area ( community, environment) in such a manner and at such a scale that it remains viable over an infinite period and does not degrade or alter the environment (human and physical) in which it exists to such a degree that it prohibits the successful development and wellbeing of other activities and processes.” The relationship between sustainable tourism and other terms. SUSTAINABLE TOURISM DEVELOPMENT The World Commission on Environment and Development (The Brundtland Commission) brought the term ‘ sustainable tourism development’ into common use in its seminal report (1987) called ‘ Our Common Future.’ “Sustainable Development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” The definition has within it two concepts: • The concept of ‘ needs’, especially the needs of the poor.

• Ability to meet the present and future needs. Basically, when we talk about sustainable development, the easiest definition is what we, the present generation, have inherited a certain amount of ecology and environment surrounding in terms of land, water, and air; when we leave it to the next generation, we should leave it at least in the same condition, of not in a better condition than what we inherited. This is the sum and substance if sustainable development, putting it in elementary terms.” NEED FOR SUSTAINABLE TOURISM DEVELOPMENT Until the beginning of last decade tourism was seen as a profitable sector of business with no obvious constraints to growth, few barriers to entry to the market, an almost, universal welcome from governments and, for the most part, entailing few effective regulatory requirements to take the environment into account. Commercial organizations, large and small, act on the Dawkin’ s principle of self- interest. They do not make significant changes to the way they do business, which could be because of exhortations or out of good intentions, except in response to the pressure of external factors that cannot be avoided or to seize a competitive advantage. International tourism has brought in a phase in which the opportunities of making quick profits from exploiting what was regarded as freely available natural resources dazzled the eyes of government and businessmen, as well as many local residents. As there are many economic, social, ecological and political limits to tourism development, sustainable strategies are necessary to eradicate these problems. PRINCIPLES OF SUSTAINABLE TOURISM Tourism Concern, 1991 in association with the Worldwide Fund for Nature (WWF) gives 10 principles for sustainable tourism. These are following as: 1) Using resources sustainably. The conservation and sustainable use of

resources- natural, social and cultural – is crucial and makes long- term business sense. 2) Reducing over- consumption and waste. Reduction of over- consumption and waste avoids the costs of restoring long- term environmental damage and contributes to the quality of tourism. 3) Maintaining biodiversity. Maintaining and promoting natural, social and cultural diversity is essential for long-term sustainable tourism and creates a resilient base for the industry. 4) Integrating tourism into planning. Tourism development which is integrated into a national and local strategic planning framework and which undertake environmental impact assessments increases the long-term viability of tourism. 5) Supporting local economies. Tourism that supports a wide range of local economic activities and which takes environmental costs and values into account, both protects these economies and avoids environmental damage. 6) Involving local communities. The full involvement of local communities in the tourism sector not only benefits them and the environment in general but also improves the quality of the tourism experience. 7) Consulting stakeholders and the public. Consulting between the tourism industry and local communities, organizations and institutions are essential if they are to work alongside each other and resolve potential conflicts of interest. 8) Training staff. Staff training which integrates sustainable tourism into work practices, along with recruitment of personnel at all levels, improves the quality of the tourism product. 9) Marketing tourism responsibly. Marketing that provides tourists with the full and responsible information increases respect for the natural, social and cultural environments of destination areas and enhances customer satisfaction.

10) Undertaking research. Ongoing research and monitoring by the industry using effective data collection and analysis are essential to help solve problems and to bring benefits to destinations, the industry, and consumers. THREE DIMENSIONS OF SUSTAINABLE TOURISM Tourism has environmental, economic and social impacts. Sustainable tourism is about maximizing the impacts which are positive and minimizing the negative ones. It seems that the environmental impacts are negative, the economic effects positive, and the social impacts a combination of both. However, it is also important to recognize that there are clear links between the three aspects of tourism – the environmental, economic, and social dimensions – and these are below Three dimensions of sustainable tourism are: 1. Environmental 2. Economic 3. Social Environmental Dimension To many people, sustainability is about the environment, primarily the natural, physical environment, and its protection. However, there is far more to the environment than just the natural landscape. Let us now move on to look at the five aspects of the environment: The Natural Resources Tourism makes use of a range of natural resources, and in many cases, the core attraction of a destination’s product may be natural resources such as clean air, land, mineral waters, and the water in lakes and seas. The Natural Environment

There are few natural landscape or wilderness areas left in the world. Almost all natural landscapes have been affected to some extent by the actions of man through the centuries. Tourism is only one industry or activity which changes landscapes. The natural landscape represents the core of the tourism product in many areas including natural forests, mountains, and regions which attract tourists because of their rivers and lakes. The Farmed Environment The farmed environment can cover a diverse range of agricultural systems including agriculture landscapes, man- made forests, and fish farms. Wildlife Wildlife has a number of dimensions such as land- based mammals and reptiles, flora, birds, insects, fish, and marine mammals. Tourism can clearly be very harmful to wildlife through the destruction of habitats, affecting feeding habits, disrupting breeding patterns, fires in woodlands and people picking rare plants. The Build Environment We also need to recognize that, in term of tourism, there are several dimensions to the built environment such as individual buildings and structures, villages and townscapes, transport infrastructure, dams, and reservoirs. Economic Dimension In the debate over sustainable tourism, the economic dimension is often given relatively scant attention compared to the environmental issues. Tourism is an economic phenomenon because: It is a major industry and foreign currency earner.

It is the basis of the growth of many transnational corporations. It accounts for a significant proportion of the annual disposable income. Economic Benefits of Tourism Tourism contributes to the economy of a country in various ways. Economic benefits of tourism are following as: • Job creation • Injection of income into the local economy through the multiplier effect. • Helping keep the local business viable. • Infrastructure development. • Attracts the foreign direct investments. Economic Costs of Tourism There are many economic benefits of tourism as well as costs. Economic costs of the tourism are following as: • Many jobs are low paid and seasonal. • Opportunity costs. • Congestion. • The need to invest in expensive infrastructure which may only be required for part of the year. • Over- dependence on tourism makes the host economy vulnerable. SOCIAL DIMENSION The social dimension of tourism has been given less attention in the

sustainable tourism debates, than the environmental impacts of tourism. This is because the socio- cultural impacts of tourism usually occur slowly over time in an unspectacular fashion. They are also largely invisible and intangible. The social impact of tourism is usually permanent with litt le or no opportunity to reverse the changes once it has taken place. When the social impact of sustainable tourism has been considered the focus has normally been upon the host community. There are a number of factors that determine whether or not the balance of socio- cultural impacts will be positive or negative in a particular location including: The strength and coherence of the local society and culture. The nature of tourism in the resort. The level of economic and social development of the host population in relation to the tourists. The measures were taken by the public sector in the destination to manage tourism in ways which minimize the socio-cultural costs of tourism. TOURISM AS A STRATEGIC DIMENSION OF ECONOMIC DEVELOPMENT Tourism and the Economy in General The most important economic feature of activities related to the tourism

sector is that they contribute to three high- priority goals of developing countries: the generation of income, employment, and foreign- exchange earnings. In this respect, the tourism sector can play an important role as a driving force of economic development. The impact this industry can have in the different stages of economic development depends on the specific characteristics of each country. Given the complexity of tourism consumption, its economic impact is felt widely in other production sectors, contributing in each case toward achieving the aims of accelerated development. A major difficulty in defining the boundaries of the tourism sector is to ascertain what investment costs should be ascribed to the development of tourism. Although heretofore not treated by international agencies as a “sector” in national accounting terms, tourism entails a collection of goods and services that are provided specifically for visitors and would not have been provided otherwise. Because of its interdependence with other sectors of the economy, it is difficult to analyze and plan for tourism. The lack of reliable statistical data hampers identification of the mechanisms by which tourism generates growth, as well as its potential for development. Yet, in those instances where analysis has been carried out and research has preceded planning, tourism’ s priority in competing for scarce investment funds has been established. In these cases, long- term programs for tourism development have been designed. Nature and heritage tourism development has investment needs that differ, in certain respects, from traditional tourist hotel development. There may be a greater need to improve access to the attraction site or facility, and for a mode of development that does not interfere with a sensitive habitat or historic area. a. Elements of Supply and Demand Three primary factors influence the level of nature and heritage tourism demand: overall tourism growth, the growth in specialty travel, and increasing awareness of and concern for the environment. Each of these

factors is in turn influenced by a number of elements. Overall tourism, for instance, is expected to continue to grow more rapidly than world economic output as a result of factors such as population growth, rising incomes and employment, shorter work weeks in many parts of the world, and the increasing integration of the world’ s economies and societies. The rapid growth of specialty travel is fuelled by some of the same factors, but there are a number of additional explanations: the boom in outdoor recreation and the new interest in health and fitness, for example. Environmentalism is another of the elements that have changed people’ s attitudes about how they should spend their vacations. b. Tourism and GDP The tourism sector in the Latin American and Caribbean countries contributes significantly to GDP earnings, though this contribution is not reflected in the domestic income and product accounts of most countries. In the Bahamas, tourism accounts for about one- third of GDP, and most sectors of economic activity are directly or indirectly linked to it. In Barbados, tourism is the leading economic sector, accounting for 15 percent of the GDP in 1992 . In Jamaica, the tourism contribution to GDP was 13 .4 percent in 1992 , while in Mexico it was only 4 percent. Not all tourism receipts are retained within the economy. In fact, there is an outflow of foreign exchange for some of the goods and services consumed by visitors, as well as for capital goods invested in tourism and for payments abroad. Import needs depend on the level of development and the degree of diversification of a country’s economy. These needs are also dependent on the availability of substitutes for imported products and on the qualitative level of the tourist supply in each country. c. Tourist Income Multiplier and Value- Added The tourist income multiplier (tim ) is a coefficient that expresses the amount of income generated by a unit of tourism expenditure. 6 In Jamaica, a stopover visitor spending one dollar creates a ripple effect of US$1 .60 within the local

economy, while a dollar spent by a cruise-ship visitor generates US$1 .20 . In the Dominican Republic, the tim has been estimated at US$1. 70. 6 The calculations are based on the familiar Keynesian multiplier K = 1/MPS + MPM, where MPS is the marginal propensity to save and MPM the marginal propensity to import (or to spend on tourism abroad), The value- added concept is particularly important when considering the impact of tourism in the Caribbean region. Value is added when a product is developed, processed, refined, or marketed in a manner that allows it to be sold at a higher price than the prices of the raw materials, services, and components bought for its production. Countries with large domestic agricultural sectors supplying tourist consumption are well positioned to achieve higher levels of value- added in the tourism sector. When a country’ s natural resources are packaged by foreign tour operators and sold through sophisticated marketing techniques, a substantial portion of the value- added is created and captured by those tour operators and therefore not returned to the country. To increase the value- added of tourism, host- country businesses and residents must offer travel services such as packaged tours (“ land services”), offering locally owned accommodations and providing the necessary means to visit natural areas. d. Income Distribution Effect (IDE) and Employment The IDE offers one of the strongest socioeconomic arguments in favour of tourism development. It describes how income generated by the sector is distributed. The analysis can be undertaken at a spatial and at a functional level. At the spatial level, tourists prefer to travel in regions with litt le industrial development. They also tend toward areas of litt le agricultural value. For these reasons, tourism can become a dynamic force in regional economies. Within a country, tourism demand originates in urban concentrations where the highest incomes are found. A percentage of such incomes is normally set

aside for tourism in areas that are geographically different from the visitors’ home base, reinforcing the process of internal income redistribution. Internationally, a portion of the tourism consumption by developed countries occurs in developing countries, favouring the process of international income redistribution. At the functional level, the income generated tends to favour employment, which is estimated to contribute more to the total value- added of the industry than other factors do, because so much of tourism involves personal services. It has been estimated that, worldwide, tourism directly or indirectly supports sixty- five million jobs, including hotel managers and staff, taxi drivers, tour operators, and shop attendants, among others. Secondary employment is generated in agriculture, industry, handicrafts, and services. Tourism compares favourably with other economic activities as a generator of both employment and income, both directly and diffused through the economy. An OAS study on new hotel development in the Caribbean estimates that every investment of US$80,000 in the tourism industry in the region generates forty-one jobs 7 . The same investment would create only sixteen new jobs in the petroleum industry and fifteen in metallurgy. According to the CTO, the 77,319 hotel rooms in fifteen Caribbean countries equalled 88,697 jobs, or almost 1.15 per room 8 . 7Organization of American Slates. The Optimum Size and Nature of New Hotel Development in the Caribbean, Washington, D.C., 1987. 8Caribbean Tourism Organization, Caribbean Tourism Statistical Report, 1992 . Hotels account for about 75 percent of tourism employment (distribution, transport, finance and insurance, and entertainment make up the other 25 percent). Every room in a three- or four- star hotel in Venezuela generates one job, according to the IDB; for five- star hotels, each room creates 1.3 jobs. According to the OAS study, one job generated by a hotel generates one more job elsewhere in the tourism trade and two in the rest of the economy; thus

one job generates an estimated three others. The tourism sector, particularly hotels, can play an important role in attracting foreign investment and providing training for nationals. Many tourism ventures include foreign equity participation and technical knowledge about the construction and operation of hotels. The former represents a mobilization of international financial resources, which can be regarded as a desirable substitute for foreign borrowing. Outside management can be used to train large numbers of nationals who would not otherwise have access to training. Furthermore, tourism provides a stimulus for the development of other ancillary businesses catering to tourists. An illustration of this can be found in Mexico, where foreign companies are seeking investment opportunities in the tourism sector because it is perceived to be less sensitive to trade agreements than, for example, manufacturing. Recent and prospective foreign investors in Mexico include the following: · Japan’ s Aoki Group, a major shareholder in the Westin chain of U.S. hotels, will build a hotel and golf course in Cancún catering to foreign tourist groups, including Japanese vacationers. · Another Japanese group will invest US$20 million in the Ruinasdel Rey tourism project. · Investors from Germany’ s Robinson GmbH have signed an agreement to develop a US$30 million ecologically oriented project south of Cancún, in the midst of Mayan archaeological ruins. · France’s GrupoDipe is investing in the US$560 million Puerto Loreto project in Baja California. · Italy’s SocietàEsercizio Cantieri signed a contract with Fonatur, the national tourism development agency, to jointly develop a US$1. 5 billion marina in Cancún. It is expected that the projects will bring in US$2 .2 billion in foreign-

exchange revenues annually. The tourism sector in Mexico attracted 40 percent of total foreign investment in 1991 and at least US$3 .5 billion, or 14 percent of total foreign direct investment in all sectors, over the last five years. In Venezuela, six debt- equity swaps totalling nearly US$360 million are benefiting the tourism industry. The funds are being used to develop four resorts on Margarita Island, where approximately 60 percent of all tourism projects under development are located. Spain’ s Grupo Once is building a US$50 million resort named Isla Bonita on the island’ s northern coast. Posadas de Mexico and Club Aguasal are planning a US$150 million hotel and housing project nearby. Ramada Inn will soon be operating the third project, a US$57.2 million hotel called Complejo Porlamar, owned by Promenade and Nocal N.V. of Curacao. The fourth project, owned by Grupo L’ Hermitage, is the US$88 million L’Hermitage Hills, in Pampatar. e. Tourism and Balance of Payments Tourism can make an important contribution to a country’s balance of payments. The IDB estimates that in the Latin American and the Caribbean five- star hotels can generate US$5 .4 for each dollar spent in their operation. The figure for three- and four- star hotels averages US$4 .2. 9 From an economic viewpoint, services performed in tourism are classified as exports. Tourism activity in the Caribbean does not usually require sophisticated technology, and can absorb more personnel without skilled training than other industries. 9Inter- American Development Bank, Evaluation Report on IDB Lending for Tourism Projects, Washington, D.C., March 1989. Tourism offers developing countries the possibility of diversifying their export earnings, particularly given that (i) t raditional exports are subject to price fluctuations and (ii) there is a trend toward reducing the administrative, monetary, and border formalities that affect international tourism mobility.

The tourism sector has the capacity to recover foreign- currency investments in a very short period of time. The World Tourism Organization (WTO) estimates, for instance, that a medium- class beach hotel in a developing country will earn back in one year the entire foreign exchange required to build and equip it. In the case of tourist vehicles, such as buses, this period is even shorter. Import factors vary from 3 to 10 percent of total tourist receipts in Mexico, Venezuela, and Colombia. This jumps to about 30 percent in Jamaica and more than 40 to 50 percent in the smaller Caribbean islands. Where the amount earned exceeds the amount paid to provide the product - a positive net balance of payments - tourism development merits strong consideration. The OAS estimates that to produce a unit of value of Jamaican currency in the tourism sector, 0.37 units in direct and indirect imports are needed, which means that 37 percent is imported. This figure is smaller than in any other sector except mining. By contrast, the industry sector imports 73 percent of its inputs. Therefore, a unit of investment in tourism would have more than double the impact of an equivalent amount in other industries. In bigger countries, with a better capacity to provide food, transportation, and varied cultural attractions, tourism would presumably involve fewer imported inputs. With only a few exceptions, the terms of trade for developing countries, i.e., the ratio between the prices that a country receives for its exports and the prices it pays for its imports, have traditionally been unfavourable, because of fluctuations in the prices of raw- material exports. But in the case of international tourism, if the index of average international tourist expenditure is taken as the expression of the price of the international product, the prices received have enjoyed greater stability than the prices of raw materials - in fact, prices have tended to increase in a stable manner, because, among other reasons, of the demand for holidays, the growth of business travel, and the rigidity of destination supply in the short and medium term. Whereas the prices of other products are affected by speculative or strategic offers, this is generally not the case with tourism. It is therefore a sector that tends to

improve the terms of trade of an economy in the medium as well as the short term. II. The Conventional Tourism Industry in the Caribbean For many Caribbean islands, tourism has become the most important economic activity, especially as the major earner of foreign exchange. This is in part the result of the declining importance of sugar, bananas, bauxite, and oil as engines of growth. But it is also a reflection of the increasing importance given to recreation and leisure as a result of rising world income levels. In addition, unlike many goods and services, tourism has no exact substitutes, meaning that the demand for holidays will grow rather than be traded for something else. a. Recent Trends During the period 1985 -1992 , the Caribbean region registered a 52.1 percent increase in tourist arrivals (6. 2 percent in annual terms), compared with only 16 percent for 1980- 1985 (3 percent in annual terms) 10 . In 1992 , the Caribbean islands recorded over twelve million tourist arrivals and nearly nine million cruise- passenger visits- an increase of 2.9 percent and 7. 7 percent, respectively, over 1991 . The main originating areas in 1992 were the United States (52 . 1 percent), Europe (16 . 9 percent), and Canada (6. 5 percent). Intra- regional tourism represented 8.8%. The remaining 15.7 % is mainly composed of visitors from Central and South America 11 . The revenues generated by visitors were estimated at about US$9 .8 billion in 1992 , an increase of 8 percent over the previous year. 10 The figure for worldwide tourist arrivals in the same period was 46.4 percent (5. 8 percent in annual terms). 11 The source of all figures related to Caribbean tourism is Caribbean Tourism Organization, op. cit. Although the majority of tourists to the Caribbean are from the United States, the percentage is dwindling as other countries discover the islands. In 1988,

58 percent of visitors to the Caribbean had been from the United States. Between 1988 and 1992 , the proportion of European tourists had increased from 13 to 17 percent. Moreover, since Europeans generally stay longer, each arrival from Europe accounts for a higher average number of tourist days. With respect to the United States market, about 6. 3 million tourists visited the Caribbean in 1992 . Over one- third (35. 6 percent) went to U.S. territories (Puerto Rico and the U.S. Virgin Islands); another third (35 percent) visited the Bahamas, Jamaica, and the Dominican Republic. The dependence of Caribbean destinations on the U.S. market is most noticeable in the Bahamas, Bermuda, and the U.S. Virgin Islands, where it represents nearly 80 percent of all U.S. travel to the Caribbean. In 1991 , 20 percent of all U.S. overseas travellers went to the Caribbean. b. Accommodations It is estimated that the Caribbean has approximately 145, 800 hotel rooms, distributed among 32 countries and territories (end 1992 ). The Bahamas, Cuba, Jamaica, and the Dominican Republic accounted for about 50 percent of the total and were the only destinations with more than 10,000 rooms. The number of hotel rooms in the Caribbean has increased by 74 percent since 1980 . During the last decade, the hotel capacity of the region increased by nearly 62,000 rooms (about 6 percent a year). However, the growth has been concentrated geographically: 77 percent of the new rooms were constructed in the Dominican Republic, Jamaica, Cuba, Guadeloupe, Aruba, and Martinique. In some countries the total number of rooms has remained unchanged or even declined. With regard to establishment size, over 50 percent of the hotel rooms are in hotels of 100 or more rooms. However, this proportion varies from country to country. In Aruba, Puerto Rico, and Cuba, over 70 percent of the rooms are in establishments of more than 100 rooms. By contrast, seven Caribbean destinations have no hotels of this size.

The Dominican Republic is the largest destination in terms of room capacity, with 24,410 in 1992 . There has been a rapid increase in capacity in Aruba and Puerto Rico in recent years. Also, a high level of hotel construction is under way in Cuba, mostly in association with Western European consortia. c. Cruise Ships The number of cruise tourists has increased vigorously in the last ten years. Total cruise- passenger visits to the Caribbean have increased by nearly 40 percent since 1988 , equivalent to an annual growth rate of 8.5 percent. During 1992 , 8.9 million cruise- ship passenger arrivals were registered at Caribbean ports - a 7.7 percent increase over the 8.2 million of just a year before. In 1992, about 53 percent of total North American berths were allocated to the Caribbean. The three largest cruise destinations in the region are The Bahamas, the U.S. Virgin Islands, and Puerto Rico, which recorded growth rates averaging 4.2 percent. On the other hand, very large increases were registered in Aruba, Bonaire, The Cayman Islands, Dominica, Jamaica, and St. Kitts and Nevis. The individual performance of these destinations in terms of cruise- passenger visits was impressive, recording rises of over 25 percent. The cruise- ship sector is expected to continue growing rapidly during the remainder of the decade. Much of this growth is likely to take place in the Caribbean, increasing its share of a growing market that could represent 15 million visits to the region by the end of the 1990 s. d. Visitor Expenditures It is estimated that visitors to the Caribbean spent US$9 .8 billion in 1992. This represents an 8 percent increase over the previous year and reflects a continuing rise in average expenditure per visitor (although this is partly due to inflation). Gross tourism receipts represented some 25 percent of all export receipts. For many countries, it is the dominant productive sector and generates the most foreign exchange. Over the same period, the value of the

region’ s main commodity exports (sugar, petroleum, bauxite, and manufactured goods) declined sharply. In 1992 , Caribbean tourists spent the most in the Dominican Republic, The Bahamas, and Puerto Rico, over US$1 billion in each. Together, these countries accounted for nearly 40 percent of the region’ s total receipts in 1992 . The other major beneficiaries of tourist expenditures during that year were Jamaica (US$850 million), the U.S. Virgin Islands (US$790 million), Barbados ( US$460 million), Aruba (US$ 450 million), and Bermuda (US$ 440 million). Stayover visitors accounted for almost 95 percent of total spending by visitors to the region in 1992 . III. Factors Affecting the Caribbean Tourism Industry Global tourism has become the largest industry in the world, with nearly 500 million consumers of tourism services per year spending hundreds of billions of dollars. The industry provides employment to over 100 million people worldwide. The 1986 total of US$2 trillion in world tourism receipts is expected to grow by 4 percent annually to nearly US$3 trillion by 1996 . 12 The WTO reported that 364 million international tourists spent US$150 billion (excluding airfare) in 1987 . 12 Travel Industry World Yearbook, 1989 . International Tourist Arrivals 1984 -1989 (‘ 000s) CARIBBEAN MEXICO AND SOUTH TOTAL PERCENT CENTRAL AMERICA CHANGE AMERICA 1984 7, 364 5,735 6,403 19,502 1985 7, 765 5,477 6,747 19,989 2.5 1986 8, 203 5,903 7,818 21,924 9.7

1987 9, 301 6,749 7,780 23,830 8.7 1988 9, 797 7,151 7,998 24,946 4.7 1989 10 ,016 7,199 8,199 25,414 1.9 Source: World Tourism Organization. In view of tourism’ s increasing role in economic activity, the factors affecting its performance should be analyzed. An understanding of these factors is crucial to determine the ways in which national and international financial institutions, NGOs, and other entities can play the most value- adding role. a. Demand FACTORS The Importance of Location. People with incomes high enough for foreign travel are concentrated in a few countries. Most developing countries are far from key points of origin. In this regard, countries like Mexico and some Caribbean islands that are close to the United States and Canada benefit from a comparative advantage. These tourist destinations reaped early success in promoting their attractions. In 1989 , for example, the Caribbean region captured 2.58 percent of the world’s 450 million tourist arrivals, with gross expenditures estimated at more than US$3 billion. Tourists have since ventured to further Caribbean islands and coasts such as those of Venezuela and Costa Rica. Travel between neighbouring regional countries is also expanding. Foreign- exchange receipts in Paraguay, which receives over 85 percent of its visitors from Argentina and Brazil, increased eightfold between 1976 and 1986 . Income Elasticity. In several countries, travel receipts have been the fastest- growing export item. The tourism sector represents over two thirds of the value of total exports of goods and services from the Bahamas, three fifths of those from Barbados, and over one third from the Dominican Republic and

Jamaica. As national incomes increase, expenditure on travel increases even faster. 13 As a result of this trend, international receipts from foreign travel have been increasing by nearly 11 percent a year (over 8 percent in constant prices) or at more than twice the rates of national incomes. 13 A model developed by the IDB for seventeen major source countries gave a weighted average of 1.7 for the income elasticity of tourism demand. Decreasing Travel Costs. There is evidence that tourism demand is also price- elastic, particularly below certain price levels. The two major costs of a trip abroad are transport charges and expenditures in the destination country. For short- distance traffic, such as from the eastern United States to the Bahamas, the Dominican Republic, or Jamaica, destination expenditures have the greater weight in the total cost of a trip. In these particular countries, however, they are generally lower than in other, competing Caribbean destination areas; the present study found empirically that their cost structure in general also tended to be lower, probably because of the larger scale of their tourist industries and the greater self- sufficiency of their economies. For long- distance traffic, air t ransport is predominant, and average air transport costs have been declining. Where such transport costs constitute a high proportion of the total cost of a trip, this decline is of great significance for the potential for long-distance travel growth. b. Supply Factors Public and Private Sector Involvement. Tourism is mainly a private- sector enterprise, but the timely provision of hotel and other visitor services, such as entertainment, food, and sport facilit ies, requires public- sector participation in the form of infrastructure, promotional support, and fiscal and financial incentives, so as to attract private investment to the sector. Another important factor directly related to tourism facilit ies is the availability of credit. As in any commercial activity, the availability of credit on suitable terms is an essential catalyst for sound tourism investment. In a number of countries, when the private financial system does not provide it,

the public sector has established credit lines for tourism investment. Tourist Destination Attributes. Tourist demand is spurred by innovation in the type of holidays offered (new commodities) and by improvements in transport, accommodations, and attractions (quality changes). The tourism sector offers a multidimensional product that, if vigorously promoted, is likely to lead to changes in the pattern of demand and generate new demand for services. Yet, as in any other sector of economic activity, a minimum set of parameters needs to be in place in order to make an investment viable. In this sense, it is important to identify those attributes of a destination area that are necessary to attract tourism projects and make them viable. Such attributes relate to at least six different categories: climate, natural resources, infrastructure, amenities, culture, and socioeconomic and polit ical factors. The table below presents these categories with their related attributes. An ideal combination of these attributes should result in forms of tourism development that maximize returns to the economy, to the investors, and to the consumers of tourism services. Tourist Destination Attributes CLIMA NATURA INFRASTRUC AMENITIE CULTU SOCIAL- TE L TURE S RAL ECONO RESOUR MIC CES POLITI CAL Temperat Beaches Water/ energy Accommoda Historic Industrial ure Lakes supply tions features structure Rainfall Rivers Drainage Tourism Theatres Governm Humidity Forests Telecommunica Organizatio Concert ent Sunshine Mountains tions ns halls structure Flora Roads Restaurants Art Planning Fauna Railways Shopping galleries system Ports Sports Museums Language

Airports facilities Architect Religion Waste removal Recreational ure Gastrono parks Exhibitio my Zoos ns Hospitalit Entertainme Festivals y nt ECONOMIC ADVANTAGES AND DISADVANTAGES Many places in the world rely heavily on tourism as a key source of income and employment. Unfortunately, tourism can also be a source of problems, especially if it is not managed well. A huge influx of visitors can gradually deplete the beauty, uniqueness, character, environment, resources, and social coherence of a tourist destination over time. It is easy to underestimate the scale of tourism. Every year, about a billion tourists take trips: That makes 30 tourists arriving every second. There were around 76.9 million tourists visiting the US In 2017 . That many t ravellers can easily present huge challenges for many destinations. Transporting, providing places to stay, feeding, entertaining, policing, and cleaning up after that many additional people is not a simple or straightforward task. Is it worth it? This article lists the main advantages and disadvantages of tourism. The Advantages of Tourism • Economic. It brings in money. This is probably the main advantage of tourism and the reason why it has been promoted so much, especially in developing countries. The income generated can make up a significant proportion of both private, local, and national incomes. • Opportunistic . It provides jobs. Hotels, bars, transport, activities, shops, and restaurants all need staffing. Tourism can provide much- needed employment for people. [email protected] ---------------------------•-----I--n--f--r-a--s--t-ructu ral . It provides a means and an incent ive for investment in Not recommended. infrastructure such as roads, rail networks, and local medical and