Changes in Tourism Demand: External Factors - Literature review Example

Tourism Demand Name Course Instructor’s Name Institution Date Contents Changes in Tourism Demand: External Factors 3 Tourism Demand Prediction and Forecasting 4 Emerging Tourism Products 5 Emerging Tourism Destinations 6 Introduction 7 Theoretical Models That Predict Tourism Demand 8 Economic, Geographic and Psychological Perspectives on Tourism Demand 9 Factors That Influence the Current and Future Tourism Demand 11 Changing Demand Patterns of Emerging Tourism Markets 12 The growth of emerging tourism 14 The barriers to the chosen tourism 15 Conclusion 16 References 17 PART A: 4*250 WORDS PORTFOLIO Changes in Tourism Demand: External Factors Tourism demand is the willingness and ability of people to visit certain places. According to Chan et al, variations in tourism demand depend on changes in economic, political and technological environments. Technological factors include transport technology and computer reservation systems. Computer reservation systems help improve e-marketing of a nation’s tourist attractions, ensure tourists get reliable services, provide flexibility of the tourism industry and help potential tourists get reliable and unbiased information regarding tourist destinations. On the other hand, transport technology helps increase production and consumption of tourism in several ways. It ensures tourist movements are cheap and fast. Transport technology also helps tourists have easier and faster access to transport facilities and services. In keeping with Prideaux (2005), changes in tourism demand may also be caused by political and government controls. Government policies manage the mobility of tourists in a country. Favorable government policies improves tourism demand by reducing taxes on tourism-related expenses and products, minimizing visa restrictions and lowering user-pay charges. Political stability also affects tourism demand in that it provides a favorable environment for tourism activities. It helps show government’s commitment and support to ensure there is tourism development. Other external factors that affect tourism include: global relations and accessibility, environmental factors and crisis problems. Globalization brings important international business alliances and relations which increases tourism demand. Nonetheless, any country should be capable of dealing with crisis and preserving the environment if it intends to ensure it achieves maximum tourism demand. Tourism Demand Prediction and Forecasting Tourism demand forecasting helps in the decision making of tourism related businesses. It involves very diverse econometrics models. Nevertheless, no model has proved to have more forecasting accuracy than other models and outperform them in all situations. This is because when constructing and estimating these models, forecasters mainly base their study on secondary information. In accordance with Song & Li (2008), complicated research methodologies are preferred because they ensure availability data and more geographical coverage that bring about reliable forecasts. One such forecasting model is the VAR model written as: Yt Where is a k by 1 observation vector, is a k by 1 white noise vector, C is a k by 1 vector of parameters, and is a k by k matrix of first order autoregressive parameters. Several countries have benefited from favorable tourism policies to formulate favorable tourism policies to increase tourism demand. The USA, which is considered in the case study, is one of the most researched tourist destinations and has benefited from it to become one of the main markets for international tourism. USA has been attracting substantial attention in latest empirical research due to stead growth and potentially prosperous future. In keeping with Frechtling (2012), tourism demand prediction and forecasting has also benefited the USA by helping take advantage of the seasonality of tourism demand. The Tourism industry is able to handle seasonal fluctuations that occur in the tourism sector. It has also helped analyze impact of future events in tourism and forecast risks. This has enabled the tourist industry to be ready with disaster management methods due to accurate predictions. Emerging Tourism Products The tourism industry has been evolving over time with new products and markets emerging. Tourism products are interrelated objects and services that attract tourists. They are either made by the community, cultural or natural. How effective a tourism industry is depends on the products it offers and the production process used. There can be either total or specific tourism products. Total products include everything consumed by tourists during their visits while specific products are those sold individually such as accommodation, entertainment and transport. In line with Buhalis & Law (2008), one of the main emerging tourism products is the e-tourism service. Future growth of tourism in USA, as outlined in the case study, lies in the emerging products. Development of such new products has been due to attempts to build and identify several key elements in these destinations: attractiveness destination brought by the product, ease of destination and improvement of facilities in destinations. For prosperity and market breakthrough of these products, destinations must ensure the products provide the elements above. Leisure-rated tourism demand is increasing in most parts of the world since destinations have adopted emerging products to attract more tourists. In the United States of America, for example, new products have brought about product diversification and tourists get a wider variety of tourism packs to choose from in order to satisfy emerging demands. Emerging Tourism Destinations Tourist destinations are places of interest that are attractive to tourists. A destination contains either have a historical, cultural or natural value that is attractive to visitors. Tourist destinations include national parks, beaches and mountains among others. Some of the emerging tourist destinations in the USA include: Kailua-corner in Hawaii, Santa Fe in New Mexico, Destin in Florida and Galveston in Texas. According to Law et al (2011), the emergence of a ‘green’ economy has presented most tourism destinations with more challenges than opportunities. This has affected the tourism demand in these destinations forcing them to adopt and utilize theoretical frameworks and models to help them sustain their customers. Most tourism destinations in U.S. have emerged due to emergence of new products. Weight loss programs and cosmetic surgery have led to emergence of destinations offering wellness tourism and medical tourism respectively. New destinations have provided tourists with a variety of more diversified and specialized services there fore increasing tourism demand. TOURISM DEMAND: A CASE OF JAPANESE VISITORS IN THE UNITED STATES Introduction Tourism has grown to become one of the most active elements of the global economy over the past two decades. It accounted for 9 % of the global GDP in 2009. In order to protect the achieved global importance of tourism, it is important to utilize the demand concept to predict tourism trends. Tourism demand has been at the fore front of help deal with the changing tourism demands, products and destinations (Chan et al, 2005) The demand concept helps increase networking between consumers. The tourism marketplace is becoming increasingly competitive and suppliers need to act fast and seize every emerging opportunity. Demand concept helps them gain a competitive advantage by ensuring partnership and cooperation of tourism suppliers in coping with new tourism trends. According to Ritchie & Crouch (2003), knowledge of tourism demand is necessary in helping ensure host nations have favorable technological factors that help deal with new trends. The knowledge has helped suppliers use various econometric models to understand the key drivers of the tourism industry. This has enabled them to predict future occurrences such as crisis and threats and how to counter them e.g. by changing value chains from the traditional one to new complex ICT based tourism value chain (p. 104). This case study was based on information from U.S. Department of commerce ITA Office of Travel & Tourism Industries .Demand patterns in the USA have been changing over time which has forced the tourism industry to adopt the demand concept. New trends that have been emerging in the United States include increasingly networked consumers, increased need for coordinating mechanisms, growing importance of new value chains and increased networking between producers. This has also forced the demand patterns to change due to tourists’ new needs and wants. In the recent years, demand for luxurious and cheap goods has become polarized. Tourists are demanding more of middle priced tourism products and services. Most of tourists are also demanding more of leisure-related expeditions since USA and Japan, as considered in the study, have become a beehive of activities. Tourists need more leisure time in their holidays to get away from their busy schedules. Such demand patterns have hit the United States tourism industry forcing it to use theoretical models and perspectives to predict new trends. Theoretical Models That Predict Tourism Demand One of the most important theoretical models being used by the United States to predict new trends is the supply-and-demand model. This model is used to predict the effect of change in demand or supply of one product on the supply/demand of another product. For example, an increment in the ‘package’ price to Disneyland reduces the demand of such trips; this means fewer people will purchase these trips. The model illustrates that change in prices of tourism products affects the purchasing decisions made by consumers. The supply-and-demand model also stipulates that change in income of consumers, their individual tastes and preferences and government regulations also help predict tourism demand. For instance, for normal tourism products and destinations, an increase in income will lead to more tourists wanting to purchase such products and vice versa. This model also helps predict tourism demand by assessing effect of increasing information about tourist products and information on demand. If United States invests more on advertising their products in Japan, tourism demand by Japanese nationals will increase. The second major model is the Hedonic price model. In studying the number of Japanese visitors in the United States, the model evaluates correlation between climatic conditions in the U.S and subsequent cost of holidays. Hedonic valuation uses cost of tourism products as a variable which is equated into a distinct indicator: Zij= Pj +ti,j Where i is place of origin, j is destination of tourists, ti,j is transportation cost from point i to j and Pj the average cost of one night stay in a hotel at the destination. However, when using this model, it is important to use control variables to increase accuracy in predicting tourism demand. Use of sample data from destinations, helps show considerable fluctuations in the number of Japanese arrivals in the United States. This model has therefore been important in helping predict demand for tourism by Japanese visitors in the United States. Economic, Geographic and Psychological Perspectives on Tourism Demand Economic perspectives Most economists define tourism demand as the number of tourism products that specific people are willing and able to buy at a given price. Economists believe tourism demand is affected by numerous of price and non-price factors. According to Crotts & Raiij, 2004, tourism demand and elasticity helps relate demand for specific tourism products and overall tourism packages currently and in future. In relation to economic theory, tourism demand is inversely related to the price of tourism products. Geographic perspectives Most geographic studies consider omission of Geography in tourism improbable. This is because most of all tourism destined nations, not only in the United States, have to consider the environmental and geographical aspects of their destinations. Water availability, accessibility of destinations, climatic conditions and mobility of diseases, among others are some of the geographic conditions that affect tourism demand. In keeping with Ivanovic & Wassung (2009), tourism mainly involves geographical movements since the main supplies of tourism include the environment and natural resources. Geographers are mainly concerned with the location characteristics of the destinations so as to know the new facilities they need to build and which destinations require more investments. Psychological perspectives Psychologists consider tourism demand as more of propelled by behavior and amount of motivation on buyers (tourists). In order to increase tourism demand, marketers apply various psychological approaches to understand the tastes and preferences of tourists and identify how to segment and motivate these buyers to buy their products. Tourists are more motivated when they have adequate information and need for relaxation (Crouch, 2004). Factors That Influence the Current and Future Tourism Demand Tourism demand is affected by both internal and external factors. Internal factors are those that are within the tourism industry such as management while external factors are those that occur outside the tourism industry such as crisis and governmental factors. The first external factor that currently affects tourism demand of Japanese nationals in the United States is technology. Availability of computer reservation systems and transport technology in the recent status of USA as a developed country has increased its prominence as a tourist destination for people from Japan. United States has formulated government policies that have encourages tourism. Additionally, in the last two decades, U.S governments have been incredible in dealing with threats, crisis and terrorism. This has to a great extent ensured that there is the required political stability to motivate tourist into the country. This has provided a firm foundation for future governments to carry on with the required stability thus forecast and prediction shows more Japanese tourists will visit USA in future. United States suffered a terrorist attack on September 11, 2001 (9/11). However, the succeeding governments have worked very hard to prevent the repeat of such a political crisis. In keeping with De Freitas (2003), environmental factors have also been affecting tourists’ choice of United States as a destination. Tourism is more or less seasonal. Most of tourists who have recently visited USA prefer the warm seasons rather than cold seasons. Internal factors include tastes and preferences of customers and prices of products. Tourism demand is inversely proportional to the price of tourism products. According to Nicolau & Mas (2006), an increase in the total price of a tourist package causes reduction in the number of tourists who are willing to purchase it. However, this goes hand in hand with the tourists’ tastes and preferences. Most tourists prefer fascinating destinations and warm beaches such as in Hawaii. This means that tourism demand is higher in such destinations. Changing Demand Patterns of Emerging Tourism Markets This analysis will critique the consumer behavior in relation to emergence of new tourism markets. With regard to consumer groups, success of the tourism industry lies in the ability of the United Sates to maintain a high tourism demand irrespective of many tourism markets emerging globally. Majority of tourists are becoming more interested in the new markets rather than their usual destinations. This is because the destinations have invested more i providing motivating information to their target markets (Swarbrooke & Horner (2007). In accordance with a report from the Japanese Cabinet Office, the number of Japanese nationals visiting the U.S. has been decreasing in almost every year since 2000 to 2012. This shows that most of tourists from Japan have changed their destinations from U.S. to other parts of the world. On the other hand, Real GDP in Japan has been increasing showing that the decline in tourist arrivals in the U.S. has not been due to low incomes in Japan. According to the Japanese Ministry of Land, Infrastructure, and Transport, more of Japan tourists have been visiting China and Korea rather than USA and Europe. It is relatively cheaper for them to visit neighboring countries with the same products as those in distant countries. Emergence of homogenous tourism products and markets around the world has reduced the popularity and uniqueness of U.S. as a tourist destination. The growth of emerging tourism One of the fastest growing emerging types of tourism is the wellness tourism. Products in wellness tourism include massage, facial and body treatments and exercise programs. In most countries, it is practiced locally but tourists prefer to try new wellness programs from abroad. However, tourists from Japan prefer exercise programs and facilities in Asia such as the Pattaya soapy massage in Asia. In the United States, wellness tourism has not been very popular for Japanese tourists and thus reduced demand for tourists. On the other hand, U.S. has been investing a lot in this tourism and therefore its tourism demand will be high in future. There are numerous factors that will lead to growth of this tourism over the next ten years. Tourist destinations are investing in providing mind, body and nutrition programs to tourists. Destinations offering this tourism have also been providing information and advertising their products in Asia. This will increase their popularity due to their low costs and as they are designed as per consumers tastes and preferences. U.S. tourism industry believes these efforts will help wellness tourism in U.S. grow. Barriers To Wellness Tourism The U.S. government has put procedures as to how weight loss programs must be conducted. This has become a barrier to the industry as destinations have to use only authorized exercise programs. Wellness tourism also faces a challenge lack of proper advertising methods. The huge distance between USA and Japan is a communication barrier for destinations intending to advertise their services in Japan. This has given neighboring countries in Asia a competitive advantage when mobilizing tourists to buy their products. The growth of emerging tourism The case study report aims at discussing change on demand patterns (actual demand and forecasted demand) in U.S as tourism destination. United States offers various types of tourism to tourists such as wellness tourism, sports tourism, leisure tourism and business tourism. The Actual demand of business tourism in the U.S has been in a constant state of recovery. USA has grown to a business hub attracting many tourists from all over the world to come and enjoy its products such as seminars, exhibitions, buying of goods and contract negotiations. Conversely, demand is expected to increase rapidly over the next ten years with more emerging products and markets emerging for this tourism in the U.S. The U.S government has also launched a national tourism strategy launched by President Obama in 2012. In keeping with Weed & Bull (2012), sports tourism has been doing relatively well presently. Tourism demand has been relatively high with high number of tourists visiting U.S and their expenditure also being high. Weed & Bull (2012) also postulate that there are bright skies in this sport with the country’s basketball, soccer and athletics facilities e.g stadiums becoming very famous. U.s is investing in state-of-the-art stadiums and equipment to host major tournaments such as Olympics and marathons which makes projected demand for this tourism very high. Notably, wellness tourism is one of the fastest growing tourism in the U.S. With a rapidly increasing obese and overweight globe, the need for exercise programs, body treatments and other wellness programs has led to a high actual demand. This industry reported major growth in 2012 with spas and medical tourism destination making gains (Voigt & Pforr, 2013). Over the ten years forecast period, a constant CAGR of 3% is expected which will result to about $ 13.1 billion in sales on 2017. Markets for this tourism seek to reach this prospect through broader agendas focusing on wellness and all-inclusive experiences in spas. Other diverse factors expected to bring the projected demand in the above chosen tourism include: sustainable trends in transport with American Airlines winning a battle against bankruptcy, good legislative environment with legislators in 2012/2013 fighting to reduce the number of barriers in international travel and international televised advertising. The barriers to the chosen tourism Tourism stakeholders are tasked to solve the outstanding barriers and issues facing the industry if they are to succeed in meeting the projected tourism demand over the next ten years. First, wellness tourism lacks adequate follow up care. This tourism requires a lot of follow up on those who have undergone wellness programs with post care instructions. With most tourists coming from abroad, lack of enough follow up presents a barrier for the success of wellness tourism over the next ten years. Present demand is dictated by the economic conditions. However, volatile economic conditions around the globe are a barrier to the success of business tourism. Lack of linkages and partnerships with the private sector presents a challenge to the growth of tourism. Spending patterns and nights stayed in U.S are reducing due to the high cost of living and businesses in the country barring projected success of tourism (Witt et al, 2013). Another barrier is the changing demographics. The population size and composition have been changing negatively which is projected to become worse over the next decade. This has caused emigration and exportation of talents e.g. sporting and skilled labor to destinations such as Europe, Australia and Middle East where there is less competition. Conclusion The assignment is in two main sections. The first section critically analyzes four topics in relation to the case study on Japanese visitors in the U.S. It includes a summary of key issues in the topics discussed during week 7, 8, 9 and 10. The section also includes in text citations of reading materials used which are indicated in the reference section. The second part is a case study report. The report is based on information from different ministries in Japan regarding the number of Japanese visitors in the U.S. The case study has been organized into various parts such as introduction and analytical discussion of the case study. The discussion has confirmed that tourism demand is affected by many technological, environmental and transport factors among others. However, the case study outlines that the major cause of shift in tourism demand is emergence of new markets and products. The case study involves observation and study of consumer behavior of Japanese tourists visiting the United States. The study involves information of tourism trends for approximately one decade. This section also involves a discussion of an emerging type of tourism i.e. wellness tourism; factors that contribute to its growth and its barriers. References Buhalis, D., & Law, R. (2008). Progress in information technology and tourism management: 20 years on and 10 years after the Internet—The state of eTourism research. Tourism management, 29(4), 609-623. Chan, F., Lim, C., & McAleer, M. (2005). Modelling multivariate international tourism demand and volatility. Tourism Management, 26(3), 459-471. Crotts, J. & Raaij. (2004). Economic psychology of travel and tourism. New York: Haworth Press. Crouch, G. I., C.A.B. International., & Symposium on the Consumer Psychology of Tourism, Hospitality, and Leisure. (2004). Consumer psychology of tourism, hospitality and leisure, volume 3. Wallingford: CABI. De Freitas, C. R. (2003). Tourism climatology: evaluating environmental information for decision making and business planning in the recreation and tourism sector. international Journal of Biometeorology, 48(1), 45-54. Frechtling, D. (2012). Forecasting tourism demand. Routledge. Ivanovic, M., & Wassung, N. (2009). Tourism development 1: Fresh perspectives. Cape Town: Pearson/Prentice Hall. Law, A., DeLacy, T., McGrath, M., & Whitelaw, P. (2011). Tourism destinations in the emerging green economy: Towards blending in brilliantly. In CAUTHE 2011: National Conference: Tourism: Creating a Brilliant Blend (p. 1171). University of South Australia. School of Management. Nicolau, J. L., & Mas, F. J. (2006). The influence of distance and prices on the choice of tourist destinations: The moderating role of motivations. Tourism Management, 27(5), 982-996. Prideaux, B. (2005). Factors affecting bilateral tourism flows. Annals of Tourism Research, 32(3), 780-801. Ritchie, J. R. B., & Crouch, G. I. (2003). The Competitive Destination: A sustainable tourism perspective. Wallingford: CAB International. Song, H., & Li, G. (2008). Tourism demand modelling and forecasting—A review of recent research. Tourism Management, 29(2), 203-220. Swarbrooke, J. & Horner, S. (2007). Consumer behaviour in tourism. Amsterdam London: Butterworth-Heinemann. Read More