Structural Change and the Industrial Organization of Tourism - Term Paper Example

Structural change and the industrial organization of tourism Introduction Global tourism industry has been evolving through a number of complex and dynamic structural phases and in the process has encountered numerous systemic constraints and industry-specific positive and negative developments. As far back as in 1941Hunziker and Krapf, defined tourism as "the sum of the phenomena and relationships arising from the travel and stay of non-residents, insofar as they do not lead to permanent residence and are not connected with any earning activity” (Haedrich, Kasper, Klemm and Kreilkamp, Editors, 1998, p.18). World Tourism Organization (WTO) has been instrumental in forging these positive developments while negative ones occur as a result of unanticipated failures. Global tourism as an industry has some entrenched characteristics both in structure and geographical region. While the former is classified into industry-specific and firm-specific characteristics, the latter is classified into country-specific and region-specific characteristics. A complete restructuring effort of the global tourism industry will be required in order to meet the contingency demands arising from the current paradigm shift in the industry. Structural changes as would befit the whole industry have to be effected through a refocus of priority and strategy in respect of a series of issues. The most pressing issues right now are the strategically significant security, demand-related constraints, supply-related constraints, marketing bottlenecks, rising advertising and promotion budgets, rising costs, environmental problems (e.g. climate change) and sustainability problems. The typical industry related structural problems such as variations in seasonal demand elasticity and supply elasticity have a greater impact on the strategic orientation of the market and industry (Glaesser, 2006, p.15). This is particularly marked in the causative relations between growth and capacity planning and rationalization. Irrespective of the nature of the industry, there can still be a whole range of factors that bear on the decision making process at the individual organizational level and determine the strategic orientation of the whole industry thus reinforcing the existing belief that ‘global tourism industry has come to crossroads in its most critical growth phase in years’. Analysis Analytical perspectives on the subject here begin on the last mentioned concern in the above introduction. Apart from the directional thrust, there is also a multifarious array of strategic decision choices facing the average decision maker in the industry. Such perplexing choices would inevitably lead to confusion and indecision in most of the instances. Articulate decision making efforts need equally far-sighted approaches. While emphatically stating the need for sustainable tourism, the adoption of Global Code of Ethics for Tourism by every country concerned can be of paramount importance. Strategic decision making efforts in the sphere of tourism management and development on a global scale presuppose the adoption of proper planning and design of new structures and changes to the existing structures so that both organizational and national/international goals could be achieved within the stipulated time frames. This is none so well apparent than in the often debated issue of climate change. Assuming that there is a reasonable amount of impact on the tourism industry arising from the debate on climate change, it’s all the more pertinent to dissociate congruent elements in the industry’s structure from the burning issues of climate change and overburdened eco-tourism industry, so that the relevance and the relative importance of tourism can be studied with detachment. Therefore this analysis will focus on the correlations between the essentially diverse strategic decision choices faced by the industry and the existing structural shortcomings that can be changed with determination and planning. The analysis will follow a structured framework of presentation on persuasive and dissuasive elements of the current developments in the industry at a global level. Tourism industry has many faceted elements in it such as ecotourism, medical tourism, sex tourism, nautical tourism and so on. France still is the leading destination for many outbound tourists. According to available statistics for 2006 and 2007, out of the top ten tourist destinations 7 are European. These structural shortcomings show how skewed the world travel and tourism industry is in favor of a fewer destinations. Even though various governments have been promoting tourism for a longer time now, the fascination with some exotic destinations remains so high that many others are receive fewer tourists annually. This phenomenon has also been considered to be a structural deficiency in the planning and design process. Promotion activities based on location appeal are subject to the usual roller coaster effect. Winter tourists swarm into the tropics during the winter. However even this phenomenon has now gone on the reverse gear. Many people in North America and Europe prefer to stay at home even during the winter now. Despite a global economic slowdown people who travel abroad for leisure have not dropped in numbers. This trend if continues in the years to come, the current levels of investment carried out by governments to promote tourism through infrastructure development and improvements to existing facilities, would not come down; in fact they are likely to increase. The outcome is well known in advance for some tourist resorts while for others it’s uncertain. For instance according to forecasts countries like France and the USA are more likely to attract a greater number of tourists in the coming months while most of the regions like Africa and South Asia are less likely to register a rise in the number of arrivals in comparison to the last year. Thus the following structural measures can be considered as more crucial at a time when global demand and supply trends are misaligned due to mismatches between the two variables caused more by poor planning and design in structural overhauling. Cultural and operational factors also would be considered to make it a holistic approach. Structural changes that have to be introduced can be classified as follows: Globalization has become such an integral factor in the planning process and the execution process and therefore any strategic initiative has to take it into consideration. Regulatory frameworks that have been put in place have not produced the kind of intended results in many instances. Thus sustainable strategic choices depend on good regulatory regimes. As a corollary of the above competition related measures that bear on structural changes have to be put in place to achieve a greater degree of flexibility in outcomes. Sustainability related measures and strategic policy initiatives have to factor in the environmental factors such as climate change and the subsequent negative impact on society, i.e. social costs as against private costs. Some analysts have proposed an environment management approach based on the systematic removal of structural impediments such as those related to social, economic, cultural, political, technological, competitive and operational environments. While this approach has received a greater degree of attention from planners and policy makers, there is no unanimity as to what form and direction this approach should take. Finally globalization and sustainability have more antithetical features inherent in them than any convergent elements. This particular aspect leads to further structural anomalies in the industry as well, e.g. conflicting ideological perspectives on development. Here for instance, the emphasis on neoliberal economic ideology is waning while nationalist tendencies are gaining momentum. Globalization has shrunk continents into global villages and national borders of countries have shifted away from physical boundaries. These developments have been taking place over the years irrespective of individual national/governmental efforts to change the course of events and their outcomes. Desirable structural measures in the global tourism industry related to globalization can be categorized as: (a). Policy measures (b). Operational measures (c). Strategic measures (a). Policy measures Globalization has particularly impacted policy measures of individual governments and firms. At the national level tourism policies have been designed with priority on national interests such as the protection of local culture against possible inroads that foreign influences could make into the former. Vast amounts of money have been spent by governments to do so. Yet at the individual organizational level such efforts are no more than mere political gimmick because governments have tendency to adopt populist policy measures in order to remain in power. Thus economic policies such as those intended to discourage travel and tourism are not uncommon. Governments tend to adopt nationalist economic and social policies such as those related to exchange rates, the balance of payments and culture. While local citizens are discouraged from travelling abroad by adopting stringent foreign exchange rules, foreign visitors are discouraged by adopting rigid rules on behavior and customs, e.g. limits on liquor and access to sites. However a majority of countries except a few have adopted liberal policies that go far to accommodate wishes of the foreign traveler. Yet the WTO has a strategically important role to play here by encouraging the removal of such structural impediments. Despite an ever increasing number of tourists venturing out of their own countries, a few destinations have been able to offer anything substantial to attract these tourists. The Disneyland concept of tourism is less likely to kindle interest continuously in the adventurous tourist. Thus both organizational and governmental policy measures must change to accommodate demands of a fast changing world. Economic and social policies must be designed to remove existing barriers. For instance exclusively higher prices being charged to foreign tourists by local resort operators and other service providers have a negative impact on the industry’s development. Individual governments ought to seriously think of adopting white papers on tourism so that a comprehensive national policy on the subject can be put in place to achieve national goals within predefined time limits. The inability of governments to do so reflects the lack of will and initiative on the part of governments. While organizational policy perspectives on the subject have a clearly defined series of connotations and denotations, government policy directives in some instances lack clarity and purpose. There is very little doubt about the directional flow of tourist traffic, i.e. from which type of countries such higher volumes of traffic originate? But there is a doubt about to which countries such traffic goes and so on. Countries which have liberal tourism policies with something to offer attract many of them while those with a poor record attract less and less. Societies which are stratified on the lines of class and wealth tend to identify themselves with respective ideological tags such as the proletariat and the bourgeoisie. The net result is the existence of an unacknowledged struggle between the two. Thus according to some scholars tourism is an industry by the rich for the rich. Developing third world countries have mostly failed to shake off this identity though there is a considerably growing interest among policy makers of these societies to adopt far reaching structural changes in the economy. Such policy initiatives are more desirable in the tourism sector. (b). Operational measures Operational measures include a host of activities that both authorities concerned with promoting tourism and organizational players in the industry within the country have to put into effect. A range of such measures ranging from education and training programs to security have to be adopted. As much as such measures are essential for any ongoing program, structural changes in the first place require them to be adopted because they signify the extent of planning and design parameters intended to develop tourism industry. Organizational commitment is essentially linked to the organizational outcomes and therefore the operational environment must be based on clearly defined government initiatives. These initiatives such as sustainability programs have received world-wide attention despite obvious negative implications for the organization’s own interests. Sustainability has been included as an inevitable cause and effect paradigm in the whole process of planning and execution of programs. Education and training in tourism industry is little backward when it comes to implementation of programs. Both governments and organizations (profit making and non-profit) have played a crucial role in this respect. Education and training related to tourism is an inherent aspect that needs to receive greater attention even though there are no tangible direct returns associated with such programs. They are primarily intended to promote and sustain awareness among people about various issues related to tourism. For instance creating awareness among people about such diseases as AIDS and social crimes like child-sex is desirable. These changes in attitude have to be accompanied by positive consequences. Private organizations like charities have a very important role to play in this respect. Their involvement in organizing awareness-creating programs goes a long way by education the very core elements in the society. Security related issues in the operational environment of the tourism industry have been receiving much greater attention in the past few years. For instance security has become a major concern among both tourists and host countries. While for the former it’s about their personal security, for the latter it’s about their national security. In the process a sizeable security industry that caters to the tourism industry has sprung up. Tourist hotels and resorts employ millions in security related jobs within the industry as a parallel development. Thus security has become a permanent structural problem for the policy makers. Operational environments demand proper and efficient planning and execution. This requirement is none so well met than by the inclusion of a security program in the organizational planning process. A service industry like tourism depends so much on psychological image for its survival. The associated psychological image against the backdrop of global terrorism acquires much greater significance because it’s this image that either sustains or destroys it. Airlines also have shown much greater concern for their passengers in the recent years by adopting stringent security measures. Operational environments related structural changes are needed now more than anything else. Global tourism industry occupies such an important place when it comes to air travel and hospitality industry. 80% of the hotel sector’s business and 76% of airlines’ business cater to tourism industry in the world today (Hara, 2008, p.3). According to the author at the current rate of industry growth, more resources would be diverted away from other uses into tourism and as a result there would be a strain on supply logistics in the near future. Already the strain is showing in respect of fast rising prices in some related sectors, including labor. The operational environment of the tourism industry has placed an extra burden on these resources by way of a diversion away from other critically important industries. Many more millions of jobs are created annually in this sector while most other sectors have lost their zing. This brings us to the most important requirement in the industry right now, i.e. there must be a self-sustaining effort as the core dynamic of the whole planning process. Sustainability is therefore at the very core of the industry at large. It’s therefore imperative to not e here that structural changes that are needed in this industry have to come from a united stance on the part of both national governments and organizations. Resources have to be sustained despite the relentless demand on them by various sectors in the economy (Buhalis and Costa, 2005, p.6). According to the authors sustainability related issues have a greater bearing on the planning process and tourism management strategy. However at the same time it must be noted that sustainability related issues are not confined to the resource utilization process but it goes further than that in transferring resources from the most needed sectors to a leisure sector. Therefore it’s all the more a pressing requirement to rationalize the use of resources within the industry. This in turn requires structural changes in such spheres as marketing, supply chain management and product development. (C). Strategic measures Global tourism industry has been developing steadily despite a global recession. Thus the strategic orientation of this industry invites the attention of policy makers and strategists on a larger scale. Strategic shifts that an industry’ structure undergoes during a revolutionary change could be visible even to the most casual observer. Global tourism industry is not an exception to this rule. Its current strategic transformation is the result of some very far reaching policy initiatives made by individual governments and organizations. Strategic transformation is the outcome of all important policy changes that are rooted in the very structure of the industry. Again sustainability plays a very significant role in determining the overall structural shift. Sustainability issues that have been discussed so far are related to the organizational and governmental concerns proper. But here they are connected with strategic decision making process. Strategic decisions made by both organizations and individual governments have both positive and negative outcomes. The brunt of such decisions is borne by the society at large. For instance social drivers of change do not come from individual proposals alone. Collective strategic decisions made at organizational level tend to influence governments that otherwise refuse to consider the importance of organizational strategy (McCabe, 2008, p.74). The author particularly emphasizes the strategic decision making environment’s influences on the structural shapes of the industry. They tend to change both the directional thrust and the outcomes in the long run. As for the definition of long run there is very little agreement by scholars on its duration though they tend to converge on the contingency requirements of the organization in the process of decision making. Thus strategic decisions such as those related to organizational outcomes and governmental policy directives play a bigger role in shaping the outcomes related to structural shifts in tourism industry. But also operational environment cannot be detached from this outcome. Conclusion Global tourism industry has been evolving through a turbulent period of economic upturns and downturns and in the process has been subject to some structural deficiencies. These structural shortcomings are related to policy, operational and strategic environments. Therefore any change in its structure needs not only far reaching changes in these three elements but also a change in sustainability related programs. For instance policy measures that individual governments adopt as of an obligatory requirement have more often than not produced results that are not only questionable but also have led to other developments that have hampered structural changes at both organizational and national levels. The most formidable problem faced by the industry remains the shortcomings related resource utilization process. Structural deficiencies lead to such outcomes while redress lies in both the willingness and capacity shown by organizations and governments to bring about change. Finally global tourism industry has been faced with the strategic decision making related implications. Both at the governmental policy making level and the organization’s strategic decision making level there must be some far reaching changes so that the desired structural changes would be achieved against the backdrop of fast changing operational environment. Both the operational environment and the related security environment have to be aligned with the strategic decision making environment in order to achieve positive structural changes in the industry. REFERENCES 1. Buhalis, D. and Costa, C. 2005, Tourism Business Frontiers: Consumers, Products and Industry (Tourism Futures), Butterworth-Heinemann, Oxford. 2. Glaesser, D. 2006, Crisis Management in the Tourism Industry, Second Edition, Butterworth-Heinemann, Oxford. 3. Haedrich, G., Kasper, C., Klemm, K. and Kreilkamp, E. (Eds.), 1998, Tourismus- Management: Tourismus-Marketing Und Fremdenverkehrsplanung (German Edition, Walter De Gruyter Inc, New York. 4. Hara, T. 2008, Quantitative Tourism Industry Analysis: Introduction to Input-Output, Social Accounting Matrix Modelling and Tourism Satellite Accounts, Butterworth-Heinemann, Oxford. 5. McCabe, S. 2008, Marketing Communications in Tourism and Hospitality: Concepts, Strategies and Cases, Butterworth-Heinemann, Oxford. Read More