Project Specification - Dissertation Example

?THE INFLUENCE OF CHANGING CURRENCY RATES ON CONSUMERS TRAVEL BEHAVIOUR: EXPLORING UK CONSUMERS TRAVEL TO EUROPE Literature Review The consumers’ behaviour is complex in the case of tourism product because a tourism product is a combination of services/goods, transportation of consumers and spending on purchases in foreign currency (Crouch, 1996). The key aspects of consumer travel behaviour include tourist destinations, hospitality, tourists’ attractions; tour operation, transport and retail travel (Swarbrooke & Horner, 2006). Various factors have affected the consumer travel behaviour in 2009/2010 including the economic conditions like consumer confidence, rising wealth in emerging economies; focus on frugal living; exchange rates; unpredictable events, emphasis on consumer health; increasing online travel packages; greener travelling; Gay tourism and demographic trends (Euromonitor, 2010). The researchers have always been very interested in evaluating the relationship between currency exchange rates and consumer travel behaviour. From theoretical perspective, currency exchange rate is directly associated with the consumer travel demand and behaviour. The demand of travel is sensitive to the exchange rate changes and generally, the increase in the cost of one’s currency in terms of another currency of another origin reduces the expected tourism demand from that origin, assuming all other factors constant (Frechtling, 1996, pp.138). In other words, when the increase in the value of one currency (domestic) against another (foreign currency) makes the foreign products or services cheaper for the consumers, the travel demand increases. The value of US dollar was high against foreign currencies for three decades after World War II, which encouraged the American travellers to travel abroad and the appreciation in US dollar discouraged the foreign travellers from travelling to US (TSE, 2001). The empirical research of Canadian Tourism Research Institute (2004) found that a 10 percent appreciation of Canadian dollar against US dollar increased the overnight Canadian travel to the United States by 15 to 16 percent and a 10 percent appreciation of US dollar against the Canadian dollar increased overnight US travel to Canada by 3 to 4 percent. The decline in the exchange rate makes overseas products expensive and local products cheaper whereas, the increase in exchange rate of local currency makes overseas products cheaper as compared to local products (Reisinger, 2009, pp.299). Therefore, a significant relationship exists between currency exchange rate and consumer travel. Richard studied the impact of economic factors including sales taxes, exchange rates, trade barriers, inflation and recession on shopping patterns and cross-border tourism of Canadians in the United States. He argues that people plan the trip in advance if it is for more than one day and Same-Day trips are less sensitive to short-term economic factors like exchange rate fluctuations. Baggs et al (2010) have investigated the impact of real exchange rate movements on Canadian retail firms as a result of change in travel behaviour. They argue that consumers frequently travel between Canada and US boarder for shopping however, fluctuations in the exchange rate movements influence the demand faced by retailers. Inflation in the prices of goods and services has a negative impact on tourism (Rowe, Smith & Borein, 2002). The statistical evidence suggests that travellers are sensitive to the cost of travel and the increasing cost of travel encourages the tourists to spend their vacations at home. The price elasticities suggest that a 10 percent increase in cost of travel lead to 15 percent decrease in tourists’ arrival for example if the cost of travelling from UK to Europe increases from ?550 to ?633, the number of UK travellers will fall by 10 percent (Pearce, 2008). The British pound depreciated against Canadian dollar and the cost of seven-night stay, airfare, meals, hotels etc in Canada for UK people increased by 1.3 percent. This increase influenced the travel demand of UK travellers to Canada and the number of UK visitors to Canada declined by 17.5 percent in the first four months of 2009 (Canadian Tourism Commission, 2009). The decisions of the tourists prior to the departure are based on their knowledge of currency exchange rates however; tourists may change their level of spending or planned length of stay on arrival after adjusting to local currency prices. Moreover, tourist demand is more sensitive to exchange rates in the short-run and expected income and exchange rate are more significant as compared to the current ex post values (Tse, 2001). It means that currency exchange rate influences the behaviour of consumers and their duration of trip. Europe is the first preference for the UK consumers from travelling perspective. However, the decline in the value of the UK pound and strengthening value of Euro is negatively influencing the UK travelling volume to Europe especially the typical holiday destinations in Southern Europe. The primary effect of currency fluctuations is on property which has become 20 percent more expensive and secondary impact is on the hotel pricing (Duggan, 2008). Euro is strengthening against pound which is creating various concerns for the Euorpe-UK tourism. One of the factors based on which UK is being encouraged to adopt Euro is to avoid the negative impact of Euro strength against pound. The initiative of introducing Euro as a European currency would replace the sovereign currencies, increase the tourism and reduce the travel and trade barriers within Europe (Boniface & Cooper, 2001, pp.359).The fluctuations in exchange rate influences international tourism and more fix the regime of exchange rate is, the more is the influence on tourism (Gallego, Ledesma-Rodriguez & Perez-Rodriguez, 2007). There is a need to conduct a study in which the impact of currency exchange rate on the UK consumer travel behaviour to Europe could be investigated in the recent environment. Most of the studies evaluate the impact by considering historical trends in exchange rates and there are very few studies which have evaluated the behaviour of travellers towards currency fluctuations. Aims and Objectives The primary aim of conducting this research is to highlight the changing currency behaviour on consumer travel behaviour. Some other aims and objectives which will be also achieved through this research study are as follows: Another aim of this report is to determine whether British pound exchange rate influences the travel behaviour of UK consumers travelling to Europe or not. The research study will determine how the appreciation of British pound exchange rate against Euro influences the travel behaviour of UK consumers travelling to Europe. The research study will determine how the depreciation of British pound exchange rate against Euro influences the travel behaviour of UK consumers travelling to Europe. The research study will determine how the appreciation or depreciation of British pound exchange rate against Euro influences the UK consumers’ travel demand to Europe The research study will determine how the appreciation or depreciation of British pound exchange rate against Euro influences the UK consumers’ travel demand shopping patterns when they travel to Europe The research study will determine how the appreciation or depreciation of British pound exchange rate against Euro influences the UK consumers’ duration of trip to Europe The research study will determine how the appreciation or depreciation of British pound exchange rate against Euro influences the UK consumers’ demand for recreational and cultural activities in Europe Research Methodology and Design This research study will be a descriptive kind of research, in which the impact of British pound exchange rate against Euro will be determined on travel behaviour of UK consumers travelling to Europe. Both the qualitative and quantitative research methodologies will be used in this research study. The data for this research study will be collected both through primary resource and secondary resources. Quantitative research approach will be used by collecting numerical data to investigate the research hypotheses and to analyse the data through deductive process. To collect the primary data, a survey will be designed, in which questionnaires will be got filled from the selected sample. The aim of conducting the quantitative research is to collect primary data through which findings would be drawn and original analysis would be presented. Since an extensive narrative data will be collected to gain insights into the proposed research question, therefore, qualitative analysis will be conducted. Qualitative method will be used to support the findings drawn from primary research. The secondary resources, theories and concepts will be used for qualitative analysis. Actually, most of the studies conducted on impact of exchange rate on tourism are empirical based. Consequently, these studies have more focused to quantify the impact such as impact of price elasticity and cost of travel on consumer behaviour. The aim of the qualitative analysis will be to evaluate the impact of currency rate fluctuations on UK consumers in the current macro-environment when Euro has become the major currency for European members. Moreover, qualitative analysis of secondary data will also help to analyse the factors which have been contributing towards changing behaviour of UK travellers. Therefore, the findings drawn from the primary research will be backed by secondary sources. And finally analysis will be done, based on which, recommendations will be provided. To investigate the research question, a survey will be designed. Two year data of exchange rate between British Pound and Euro will be taken. The exchange rate will be the independent variable in the research study. The consumers’ travel behaviour will be measured through four variables including shopping patterns, travel demand, length of stay and spending on cultural and recreational activities. The population of the survey will be the travel agents and travellers. The sample will consist of 100 participants which will be selected randomly. Random sampling methodology will be used to select the sample. Since the total UK travel agents and travellers’ population will be very large therefore, it will be either difficult or impossible to select every member of the population; therefore, random sampling has been suggested. To get the questionnaires filled, the nearby travelling agencies will be visited. The participants will be given questionnaires by hand and email only. A significant chunk of information will be taken from the survey therefore; it will be difficult to quantify the impact of currency exchange rate on consumer travel behaviour towards cultural and recreational activities. The socially acceptable and self-interest based answers of respondents can influence the findings of the report; however, the respondents will be taken into confidence by properly conveying them the aim and purpose of the study. Bibliography Boniface, BG & Cooper, CP 2001, Worldwide destinations: the geography of travel and tourism, Edition 3, Butterworth-Heinemann, Britain. pp. 359. Baggs, J et al 2010, Exchange rates movements and firm dynamics in Canadian retail industries, viewed 24 February, 2010, . Canadian Tourism Commission 2009, Tourism intelligence bulletin, viewed 25 February, 2010, < http://en-corporate.canada.travel/sites/Corporate/images/pdf/Research/Trends-outlook/Current-status/Tourism%20Intelligence%20Bulletin/TIB_04_2009_en.pdf>. Canadian Tourism Research Institute 2004, Exchange Rates: The potential impact of a stronger Canadian dollar on international travel to/from Canada in 2004, viewed 24 February, 2010, < http://www.lib.monash.edu.au/tutorials/citing/harvard-websites.html >. Crouch, GI 1996, 'Demand elasticities in international marketing: A meta-analytical application to tourism', Journal of Business Research, vol. 36, no.2, pp. 117-136. Duggan, S 2008, Background on today’s ADR reality, viewed 26 February, 2010, . Euromonitor 2010, The way we travel: How global travel behaviour has changed in the wake of the recession, viewed 24 February, 2010, . Frechtling, DC 1996, Practical Tourism Forecasting, Elsevier, Great Britain. pp.138. Pearce, B 2008, What is the driving travel demand? Managing travel’s climate impacts, viewed 25 February, 2010, < http://www.mcrit.com/transvisions/documents/new/Air_Transport_Demand_Drivers.pdf>. Reisinger, Y 2009, International Tourism: Cultures and Behaviour, Butterworth-Heinemann, UK. pp.229. Gallego, MS, Ledesma-Rodriguez, FJ & Perez-Rodriguez, JV 2007, On the impact of exchange rate regimes on tourism, viewed 24 February, 2010, < http://www.aeefi.com/RePEc/pdf/defi07-07-final.pdf>. Reisinger, Y 2009, International Tourism: Cultures and Behaviour, Butterworth-Heinemann, UK. pp.229. Richard, WE (n.d.), Cross boarder tourism and shopping: the policy alternatives, viewed 24February, 2010, . Rowe, A, Smith, JD & Borein, FB 2002, Travel and tourism, viewed 25 February, 2010, . Swarbrooke, J & Horner, S 2006, Consumer Behaviour in Tourist, Butterworth-Heinemann, Britain. TSE, RY 2001, Estimating the impact of economic factors on tourism: evidence from Hong Kong', Tourism Economics, vol. 7, no.3, pp. 277-293. Read More