Tourism in Switzerland - Dissertation Example

? Tourism in Switzerland Impact of currency fluctuation on tourism in Switzerland Introduction It is nearly incontestable that people across the world always seek to have new experiences and learn new things; tourism usually provides the best opportunity to enable people achieve this end. Tourists, therefore, visit various destinations across the world. Switzerland is one of the most preferred tourist destinations in Europe. Tourism in Switzerland dates back to mid 19th century and has developed over time and become one of the most sophisticated industries in the country. Its tourism infrastructure is highly developed, particularly in the cities and mountainous regions. Tourists are attracted to Switzerland’s landscapes and Alpine climate. Also, being one of the great and diverse commercial hubs in the world, tourists find Switzerland a preferable destination Euromonitor International (2011). Tourism plays a very crucial role in Switzerland’s economy accounting to more than 4% of its Gross Domestic Product (GDP) OECD (2011). Besides, it plays a very crucial role in creating employment opportunities especially in the rural areas. Just like in most countries across the world, tourism in Switzerland is impacted by external environmental factors namely political, economic, socio- cultural, and technological among others. Currency fluctuation is a major economic factor that greatly impacts on tourism in most countries across the world and Switzerland is no exception. According to O’Sullivan and Schifrin (2003), currency fluctuations refer to a tendency of national currencies to change relative to other national currencies at a given period of time. Currency fluctuations can be attributed to the following factors; political and social stability, country’s economic strength, increased of reduced demand for a certain currency, unemployment rates, and country’s interest rates among others. The effects of currency fluctuations are felt far and wide in the tourism industries as it impacts on international and local travel, price of commodities, foreign exchange rates, and cost of visiting destinations in particular countries among others. Theobald (2004) explains that tourism entails the activities of individual or group of individuals travelling to destinations and staying in places that are away from their usual environment for a certain period of time for business, leisure and other purposes. From the definition, it is clear that currency fluctuation in Switzerland not only affects the international tourists but also the local tourists Creel (2007). When the Swiss Franc currency is weak, more tourists are encouraged to visit Switzerland as they will be able to get more Francs for their money. On the other hand, when the Swiss franc is strong, tourists are less likely to visit Switzerland as they will get less Swiss francs for their money Swiss Federal Statistical Office (2011). Tourism is very important in the Switzerland economy. This argument is proved by the efforts that the Switzerland National Bank put in 2010 and 2011 in order to prevent further strengthening of the franc especially against the euro which was impacting negatively on the country’s tourism sector. Also, over the years, tourism sector has proved to be highly sensitive in regards to prices Luzzi and Yves (2003). Therefore, there is need for Switzerland tourist destinations especially the Swiss Alps to be in a better position to compete with other destinations such as those in France, Italy, Germany, and Austria Ewing (2010). The aforementioned countries offer plenty of hiking and skiing opportunities and mountains that also form important features of Switzerland tourists’ destinations. Ewing (2010) further argues that these countries belong to EU and use euro as their currency and most tourists who visit Switzerland come from these regions. Therefore, it is important to pay adequate attention to the fluctuation of Swiss currency in order to avoid losing Swiss- destined tourists to these neighbouring countries who may enjoy relatively lower prices due to weak euro compared to Swiss franc. Aims To identify the impacts of currency fluctuation on tourism in Switzerland To understand how currency fluctuation affects various aspects of tourism To conclude whether currency fluctuation is necessary in tourism or if there is need for currency stability Research Questions The central research question that this dissertation aims to answer is, what are the impacts of currency fluctuation on tourism in Switzerland? This study will also address the following research questions: How does currency fluctuation affect tourism in Switzerland? How does currency fluctuation impact on specific aspects of tourism such as hotels and tour operators in Switzerland? How do the players in tourism industry in Switzerland respond to currency fluctuation? How does the Switzerland government respond to currency fluctuation in general and in regard to its impacts on tourism in particular? Is currency fluctuation important in tourism? Or is there need for maintaining currency stability? Literature Review The appreciating Swiss franc is a cause of concern especially in the tourism industry in Switzerland Datamonitor (2011). Tourism in the country is facing serious threat since appreciating currency is reducing the likelihood of tourists to visit the country in addition to diminishing the number of local tourists visiting various destinations in Switzerland. There has been a continuous rise in the value of Swiss franc against the world’s major currencies such as the British pound, the dollar, and the euro. In order to check the negative effects of strengthening franc, the Swiss National Bank (SNB) bought large amounts of euro in 2009 and 2010. However, this attempt did little to prevent the impact of the strong franc on the exporters and the tourists. Since it was evident that currency stability is important, the central bank is putting in place measures that aim at ensuring stable fiscal environment. Besides, the Swiss government has extended a stimulus package with an intention of offsetting the effect of appreciation of franc on the Switzerland economy Glion Institute of Higher Education (2011). According to Swiss Tourism Federation (2007), the sector of tourism in Switzerland is one of the most important accounting for more than four percent of the GDP. In addition it provides employment to over six percent of the Switzerland’s citizens. However, the Federation notes that despite the crucial role that the industry is playing in the economy, the government input has not been quite significant apart from providing some tax subsidies. The major attractions of tourism in Switzerland are the Alps which provide fantastic opportunities to the tourists to enjoy both the summer and winter periods. Germany accounts for the largest number of tourists arrivals in Switzerland, whereas the US account for the largest number of non- European countries arrivals The Economic Intelligence Unit (2005). It is important to note that the residents of Switzerland are also enthusiastic travellers and contribute greatly to the remarkable performance of tourism sector in Switzerland. That notwithstanding though, there has been a slump in the tourism industry in Switzerland just like in many countries across the world due to various reasons. In Switzerland, this slump can be attributed to the collapse of Swissair, a national air- carrier which resulted to decreased number of direct flights. Also, the global financial crisis has been cited as one of major reasons to global slump in the tourism industry. This is because individuals’ disposable income has diminished hence reduced ability to afford the tourism luxury as they are grappling to meet basic needs. The Economic Intelligence Unit (2011) observes, the strengthening Swiss Franc has resulted to decline in the number of tourists visiting Switzerland. This is because strong franc has meant that the visitors get fewer francs in exchange of their money. Therefore, international and local tourists have found it relatively cheap to visit destinations in other countries such as the US, Germany, Spain, and the UK among others. Glion Institute of Higher Education (2011) notes, even though other factors impacts on tourism in Switzerland, currency fluctuation has in most cases the greatest impact on the tourism industry. The institute attributes strong Swiss franc to reduced tourism activities in the country both in the past and in present times. A strong Swiss franc makes holidays in Switzerland more expensive compared to other destinations across the world. The situation of strong Swiss franc affecting tourism in Switzerland becomes more compounded in difficult economic times such as during the global economic slowdown. Such situations imply that most tourists will opt for destinations that are less expensive since they do not have sufficient money for expensive destinations. Currency fluctuation impacts tourism in a number of ways. For instance, the tour operators find that the amount that they have agreed with the transporters and hoteliers in other countries have either increased or decreased in line with the movements of currency in a given country. Additionally, fluctuations in currency lead to changes in the prices of fuel which is critical in tourism industry especially in regard to tour travel Creel (2007). Moreover, the strength of the Swiss franc has led to increase in the price of food commodities making local and international tourists to shy away from the country’s destinations Webb (2011). Webb (2011) argues that between 2010 and 2011, the price of food commodities have trebled as the appreciating value of the currency makes commodities expensive. Due to this scenario, tourists prefer destinations that uses currencies such as Euros which are weaker compared to Swiss franc Mijuk (2011). Nevertheless, Swiss Tourism Federation (2007) observes that in some instances currency fluctuation do not have much impact in regard to tourists’ choice of their destinations. The federation argues that in some cases some tourists do not mind the cost as long as they obtain quality services and gain access to sites and perform activities that are rare or exclusive to some destinations. For instance, despite the appreciating Swiss franc, Switzerland’s ski resorts are still some of the most attractive across the world especially among the holidaymakers from Europe. Besides, the tourism sector in the country has promoted the country as having excellent environment, top- class facilities, favoured destination for holidays that are health- related, and having clean air. Apart from that, tourism in Switzerland is boosted by the high number of international organizations operating in the country in addition to remarkably large number of multinational corporations The Economist Intelligence Unit (2005). Geneva and Zurich cities record the highest numbers of the business travellers. This is an indication that in some cases, currency fluctuation may not affect the performance of tourism activities in a given country. Research Methodology Research Methods This study will use both the qualitative and quantitative research approaches. Qualitative research approach is that which describe persons, events and other non- numerical aspects scientifically without employing numerical data. Qualitative approach focuses mostly on data that needs more details as it aims at achieving in- depth information. On the other hand, quantitative research approach comprises of those studies whereby the data collected is analyzed numerically Punch (1998). Quantitative approach is used mostly when sets of data is relatively large. Both approaches are useful and valid but are not mutually exclusive. In order for any research to achieve the highest level of credibility and reliability both approaches should be used. According to Curral et al. (1999), the best of both approaches should be combined in order to make the study results more scientific and achieve objectivity. The use of both approaches is essential in understanding the impacts of currency fluctuation on tourism in Switzerland. Quantitative approach will be necessary in measuring the currency rates over period under study in order to obtain the actual fluctuation measurements. Through the approach, precision of measurements will be achieved. Secondly, through sampling and design, quantitative approach will give the study the control necessary for the study. Thirdly, quantitative approach will enable the study to have analysis of the results obtained; for instance, in form of graphs, charts and tables. Besides, qualitative approach will be equally important. This is because the researcher will be involved in the study through qualitative methods such as interviews hence getting deeper understanding of the topic under study. Also, Punch (1998) argues that qualitative approach play a crucial role in suggesting the possible effects, dynamic processes, causes, and relationships. As such qualitative approach in this study will be essential in suggesting the possible effects, causes, and relationships between currency fluctuation and its impacts in Switzerland. Research Philosophy The study will utilize positivist research philosophies as it will measure observable social realities. Hughes (2004) explains that positivist philosophy presumes that social and economic world exists externally and objectively, and that knowledge is only valid when it is based on observations and explained through theories or laws that can be generalized, explains the relationship between cause and effect in addition to lending themselves to outcomes that can be predicted. The philosophy of positivism is based on validity, truth, and reason that are gathered through experience and observation and empirical measurements are done using quantitative methods such as statistical analysis Jackson et al (2008). Therefore, this philosophy will be essential in obtaining the impacts of currency fluctuation on tourism in Switzerland through deductive approach; that is, obtaining the outcomes from the general perspective of Switzerland’s and world economy. The philosophy will therefore be appropriate in meeting the research aims and objectives and address the research questions. Data Collection The study will use data from secondary sources in order to obtain the necessary data. Romney and Weller (2001) argue that secondary data provides the researcher with high- quality and larger databases that would otherwise be unfeasible for researcher to collect on his own. Secondary data is also essential in studying economic aspects because it is nearly impossible to conduct new data collection that captures sufficiently the past and present developments Peter (2008). Besides, secondary data saves time and costs that would have been spent collecting new data. The data will be obtained from Swiss National Bank website and annual reports about currency fluctuation in Switzerland. Additionally, data will be collected from Swiss Tourism Federation and Swiss Federal Statistical Office Websites semi- annual and annual reports regarding currency fluctuation and its impacts on tourism in Switzerland. Moreover, in order to give the study more validity and reliability, interviews will be conducted. The interviews will be conducted with a senior Swiss National Bank official and also Swiss Tourism Federation official to seek their opinion on currency fluctuation and it is impacting on tourism in the country. Interviews enables the researcher obtain detailed information from experienced and knowledgeable persons on certain topics which enriches the researcher’s knowledge and understanding of the topic under study Rassel and O’Sullivan (2005). The interview with each of these officials will last forty minutes to an hour. The interviews will be audio- recorded and key points will be noted down. The interview will consist of four questions that touch specifically on currency fluctuation and its impacts on tourism in Switzerland. Data Analysis Prior to data analysis, the researcher will transcribe all the documents, notes and interviews. This process enables the researcher to become well acquainted with the data Saunders et al. (2009). The data analysis process will include data cleaning to ensure the data is not erroneous. Secondly, the quality of data will be checked through these types of analyses; descriptive statistics and normality. Thirdly, the quality of measurements will be checked through the following two ways; analysis of homogeneity and confirmatory factor analysis. Fourthly, the findings will be documented and where necessary corrective actions. Lastly, the analysis will use exploratory approach as it provides more informative analysis Romney and Weller (2001). In regard to statistical method, general linear model will be used; this model is used in assessing the impact of various predictors on one or more dependent variables that are continuous Veryard (1999). Results, Findings and Discussion The results and findings obtained from the study will relate to impacts of currency fluctuation on tourism in Switzerland. These results and findings will have answered the research questions. The research methods used in the study will ensure that the study obtains the necessary and appropriate data essential to the study and which addresses adequately the research questions. The secondary data from the Swiss National Bank will be important in providing findings on the trend of currency fluctuation. While the data from the Swiss Tourism Federation will be vital in understanding the impact that currency fluctuation has on tourism. Lastly, interviewing method will provide experts opinion on the topic under study hence enriching the study. References Creel, R. S. (2007). An econometric model for international tourism flows: A case study of guam, 1997--2004. Capella University). ProQuest Dissertations and Theses, , n/a. Retrieved from http://search.proquest.com/docview/304722854?accountid=45049 Curral, S, et al. (1999). Combining Qualitative and Quantitative Methodologies. Organizational Research Methods, 2 (1) 5- 36. Datamonitor. (2011). Switzerland: In- depth PESTLE Insights. Retrieved on 15 December 2011, from www.ebscohost.com Euromonitor International. (2011). Travel and Tourism in Switzerland. Retrieved December 15, 2011 from www.euromonitor.com/travel-and-tourism-in-switzerland/report Ewing, J. (2010). Swiss Tourism Suffers as Franc Value Rises. The New York Times. Glion Institute of Higher Education. (2011). Country Forecast: Switzerland. The Economist Intelligence Unit. Hughes, J. (2004). Research Philosophy. Essex: Longman. Jackson, P., et al. (2008). Management Research. SAGE Publications Ltd., London. Luzzi, G., and Yves, F. (2003). An Econometric Estimation of the Demand for Tourism: The Case of Switzerland. Pacific Economic Review, 8: 3. Mijuk, G. (2011). Swiss Franc’s Climb Puts a Chill on Tourism. The Wall Street Journal. Retrieved from www.online.wsj.com OECD (2011). OECD Economic Survey of Switzerland. Retrieved 15 December 2011 from www.oecd.org O’Sullivan, A., and Sheffrin, S. (2003). Economics: Principles in Action. New Jersey: Pearson Prentice Hall. Peter, A. (2008). Sorting Data: Collection and Analysis. Macmillan Coxon. Punch, K (1998) Introduction to Social Research: Quantitative and Qualitative Approaches, London, Sage Rassel, G., & O’Sullivan, E. (2005). Research Methods. Longman. Research and markets: Travel and Tourism in Switzerland. (2010). Business Wire, pp. n/a. Retrieved from http://search.proquest.com/docview/ Romney, A., & Weller, S. (2001). Systematic Data Collection. Thousand Oaks, CA: Sage Publications Saunders, M, et al. (2009). Research Methods for Business Students (5. Ed.). Harlow: Financial Times Prentice Hall. Swiss Federal Statistical Office (2011). Industry and Services. Retrieved 15 December 2011 from www.bfs.admin.ch Swiss Tourism Federation. (2007). Swiss Tourism in Figures. Retrieved 15 December 2011 from www.swisstourfed.ch The Economist Intelligence Unit. (2005). Travel and Tourism Forecast World. Retrieved 15 December 2011 from www.eiu.com Theobald, W. (2004). Global Tourism. Oxford: Butterworth- Heinemann. Veryard, R. (1999). Pragmatic Data Analysis. Oxford: Blackwell Scientific Publications. Webb, S. (2011). Switz: Franc Causes Cross- border Sales to ‘Treble’. Aroq Publishers Read More