Economics and Tourism Development - Case Study Example

Economics Table of contents Analysis of Japanese Tourist Demand to Guam 3 Case study of China and Tourism Development 6 References 9 Bibliography 9 Analysis of Japanese Tourist Demand to Guam 1. The key determinants influencing demand of Japanese tourists in Guam have been assessed in the referred case study. Firstly and most importantly, it is their income level which matters the most behind their decision to tour. It had been found that the frequency of Japanese tourists in Guam rise as the economy of Japan pass through a boom, while their behaviour about turns during recessionary phases. The second most important factor is the fairness in prices. Though the Japanese tourists tend not to be too sensitive to price changes, they expect the maintenance of a standard price band. However, in certain instances it is observed that they display little concern about their expenses when it comes to purchasing luxury items, as is evident from their craze for “ultra-expensive Gucci bags”. It seems that the richer class of Japanese tourists do not mind little fluctuations in the luxury items, though it is not the same with the relatively lower-income group of tourists who consider even a slight rise in price as a setback. Hence, it is important that the Japanese are convinced about the intrinsic features of a commodity to induce them to pay high for a good. Thirdly, it had been noted that Japanese tourists tend to repeat their travel destinations provided they feel secure enough to do so. The most important factor which guides their decision is the extent to which they feel safe around beaches and hotels (Dougan, 2007, p. 87). 2. Implication of the unit price elasticity of demand is that the Japanese tourists are neither too sensitive towards price fluctuations and nor could they be regarded as insensitive. Actually, the primary area of confusion is that while some posh regions in Guam such as Tumon, attract high consumption demand from tourists, it is not so for many other regions in the province. In Tumon, tourists are found to buy luxury items at soaring high prices despite which prove their preference towards luxury items and hence insensitivity towards price fluctuations. However, in Guam’s K-Mart where many regular consumption goods are available at discounts, do not receive as many buyers as the former region. Thus, the latter region displays a greater degree of price elasticity of demand. It is due to the conjunction of both kinds of goods – luxury and regular, within the same consumption basket that the price elasticity of demand in this case has been evaluated as close to unity. A probable solution to the problem could be to segregate the consumption baskets for two types of commodities. However, the prime issue is that Guam does not even have a proper consumption basket on the basis if which CPI could be measured properly. This might also lead to a miscalculation of the actual price elasticity of demand. 3. The income elasticity of demand had been found to be more influential than price elasticity. The Japanese are found to be highly sensitive to fluctuations in their levels of income rather than the price level ruling over the region where they are touring. For instance, the numbers of visits by Japanese tourists were lowered during periods of recession prevailing in Japan. However, the demand for ultra-expensive luxury and branded items being sold in Tumon, the prime tourist centre in Guam was little affected by a slight change in the price of commodities. On the other hand, the discount kiosks in Guam’s K-Mart attracted more and more number of tourists though the nature of demand fluctuated over time. It rather seemed that a rise in the level of prices for discounted commodities led to a sharp fall in the demand for the same, while the demand for ultra-expensive luxury items were found to be quite inelastic in nature. The prime reason could be presumed to be that the demand for the former commodities comes from tourists belonging to a relatively lower income bracket while that for the latter comes from the richer class who are little affected by slight changes in the price levels. The automatic implication of the same is that fluctuations in income are associated with higher changes in the demand behaviour than changes in price are found to create. 4. The findings of the present paper are targeted at assisting the government policy-makers and tourism operators towards improvement in their marketing, operational and supply-side factors so as to attract more and more visitors in the province of Guam. They reveal that the Japanese are more induced towards travelling during periods of boom and provided a justified price index. These tourists are found to be highly judgemental about the price levels associated with the products they choose to buy; while on one hand, they are prepared to pay a fortune for luxury items, they are sceptic of paying a huge sum for ordinary goods. This very factor could be deployed to plan out strategies to attract more tourists. Firstly, the government policy-makers or the tourism operators need to stay alert about the income fluctuations in Japan given that Japanese tourists are highly sensitive towards fluctuations in their levels of income. In such cases, it is highly essential that the host region maintains a reasonable price index of commodities so that the impact of a reduction in disposable income is reduced. A second factor being evaluated is that the region of Guam must segregate between the types of commodities sold in Guam’s markets. There must be a clear-cut distinction between the commodities of regular use or necessary items and those of a luxury kind. It had been obvious from the study that luxury items invite an inelastic demand while the demand is not so inelastic for regular items sold in the discount shops of K-Mart of Guam. Hence, the authorities need to stay careful about maintaining a low price for the latter, so as to bring down the price index for a basket of necessary consumer items. These however, had been the operational and supply side factors which the government body and tourism operators need to keep a note of in order to attract a regular flow of Japanese tourists. On the other hand, the repeat factor is also found to be highly prominent among the Japanese tourists, which means that the national government must figure out some measures which they could implement to guide the interests of their tourists. For instance, the former could nurture their traditional and cultural aspects and market them so as to stimulate the frequency of tourists. Tourists with a flair for exploration are bound to be attracted by such marketing strategies. However, there are many tourists who desire to relax out of tours and hence, rate the safety and security factor quite highly. It is for their benefit that the government must arrange for packaged tours. Packaged tours come with an assurance of security which attracts the tourists. Hence, marketing strategies must be adapted in view of the two groups of tourists. The cultural and traditional aspects however, are a common factor which instigates travellers to repeat their tour destination. However, for the relatively less exploring people, different categories of packaged tourisms should be arranged which also take care of their pockets. Case study of China and Tourism Development 1. The primary characteristics of different stages in China’s tourism development have been illustrated underneath. Prior to 1949 – Tourism had been a highly unpopular subject of economic concern prior to 1979. It had been a custom, though not a regular one, among wealthy Chinese citizens and “adventurous foreigners”. The existence of the industry however cannot be denied in the nation. Later between 1930s and 1940s, the economy had been indulged in the eight-year war against Japan, which literally drenched the economy out of all its pleasures yielded from leisure. 1949 – 1965 – Tourism had primarily been the privilege reserved for visiting bureaucrats and foreigners. Though travel agencies had been set up in the nation during this period, they were not meant for domestic nationals, primarily because it was prohibited by the doctrines of Communism. 1966 – 1978 – Amidst its political mayhem and struggle only a selected few among the overseas visitors were allowed to visit the nation. Operations of International Travel Service, the only travel agency allowed to operate in the nation, were highly restricted as is evident from a little above than 300 foreign tourists visiting the nation over this time frame. 1978 – 1985 –Deng Xiao-ping advocated the recognition of travel and tourism insisting the industry to be assigned an equivalent importance to that of the other four pillars of the economy, viz., agriculture, industry, national defence, and science and technology. Following the entire line of change, it could be said that the Chinese government gradually understood the true meaning of liberalisation for economic development (Zhang, Pine & Zhang, 2000, p. 282-283). 2. The key factor which operated as the pivotal force behind the development of Chinese tourism sector as an indispensable part of economic development was the national government’s realisation to open up. At the time the nation turned its attention towards the growth of the sector, it had been suffering from a foreign reserve crunch, which made it unable to participate in international trade and hence assure economic stability. Furthermore, a closed-door economic policy can never unravel the path towards economic growth and development in the long run. This is the reason why opening up or liberalisation has attained a high importance around the world today. However China, 20 years ago, had not been in a position to open up and thus, considered modernisation of the tourism industry to be a possible way-out from the looming dilemma. The mysterious environment that had been woven around the economy of China among foreigners, led to a huge influx of foreign tourists within the nation once that it was opened up. Hence, the economy soon unlatched the solution to its impending crisis. Further development of the sector occurred following the national government’s decision to privatise the industry, which assisted in the incorporation of competitive forces and hence betterment of the situation (Zhang, Pine & Zhang, 2000, p. 283). 3. China had maintained a closed door strategy since long which prohibited both foreign tourists from visiting the nation and domestic nationals to involve in outbound travels. However such a stance has taken a toll in the nation’s development strategies as the country realised its shortage of ample foreign resources to support its strategy. Hence, the national government chose to open up to foreign tourists who bring foreign exchange reserves to the national treasury. However, in order to expand its tourism market to the top rank in the world, it is important to adopt some steps than merely opening up and relaxing restrictions upon foreigners in the country. Primarily, it is important that the nation realises its cultural richness and hold it in front of tourists in a manner to attract them. Despite the nation’s rich heritage and natural beauty, it is necessary to nurture some artificial attractions as well which could draw their attention. In fact, the nation is striving hard to create man-made sights in order to attract more and more tourists within the nation. However, as man-made attractions are bound to lose their charisma over time, it is equally important to maintain the nation’s cultural and historical elements whose importance never fades (Dasgupta, 2011, p. 97). Nevertheless, in order to arrange for so many tourist attractions, it is important that the nation spends an equal amount of its wealth for the same which it lacks given its dwindling stock of foreign reserves. In order to make way for a possible solution, it is important that a national team be formed which could actually act together to provide their foreign tourists with the maximum amount of comfort. The national organisations must be taken into confidence and made to operate in unison with each other. It is important to instil in them the love and loyalty towards their motherland which could actually instigate the nationals towards acting up according to the government’s interests. Furthermore, the nation is also striving hard to come into alliance with the WTO which could actually provide it with the resources as well as strategies to bail out of the problem of resource crunch. Tourism today is considered as a part of international trade and is often compared with exports that an economy is involved in. This is because tourism results to an accumulation of foreign exchange reserves within a nation thus propping it up to participate in other economic activities. Hence, China has been acting upon to enhance its trade ties with other nations. This is because better the participation of a nation in trade with its peers more will its popularity grow opening up its chances to attract more tourists. References Dasgupta, D. (2011). Tourism Marketing. India: Dorling Kindersley. Dougan, J. W. (2007). “Analysis of Japanese Tourist Demand to Guam”. Asia Pacific Journal of Tourism Research. Vol. 12 (2): 79-88. Zhang, G. Pine, R. & Zhang, H. Q. (2000). “Chinas international tourism development: present and future”. International Journal of Contemporary Hospitality Management. Vol. 12 (5): 282-290. Bibliography Fyall, A. & Garrod, B. (2005). Tourism marketing: a collaborative approach. Canada: Channel View Publications. Middleton, V. T. C., Fyall, A., Morgan, M. & Ranchhod, A. (2009). Marketing in Travel and Tourism. London, UK: Butterworth-Heinemann. Read More