Emerging Issues in Hospitality and Tourism - Essay Example

Emerging issues in the hospitality and tourism industry Background information Tourism is a very important industry inAustralia; it is the largest service export with international visitor consumption of $26 billion, (Tourism Research Australia, 2012). In 2010/2011 financial year, tourism accounted for 2.5% of Australia’s GDP. This can be translated into $94.8 million per day with the domestic tourism accounting for 73% of the total tourism GDP. In the financial year 2010/2011, the country experienced a record number of overseas arrivals with an extra 588 visitors per day. Tourism and hospitality employed approximately 513,700 people of which 43.7% were part-time. Popular Australian destinations include Sydney, Melbourne, Queensland, the Gold coast, The Great Barrier Reef and Australian outback. The types of tourists include international tourists, backpackers, and the domestic tourists (Weeden, 2011). On the other hand, the hospitality sector cannot be ignored as they go hand in hand with the tourism sector. A part from providing employment to more than 270,000 people across Australia, it is also a major consumer of locally produced goods and services. It provides a valuable service as a meeting place and entertainment hub for both tourists and locals. A report done by PricewaterhouseCoopers (PwC) in 2009, about Australian hotels revealed that the hotel industry provides more than $ 70 million annually in support to sporting and community organizations. The report also reveals that hotels spend more than $70 million each year on staff training and development. This essay will explore the emerging issues facing the hospitality and tourism industry in Australia. Some of the issues discussed include labor and skill shortage, global financial crisis and changes in Australian demographics. Growing shortage of skilled and qualified employees A skill is the ability to perform a productive task at a certain level of competence (Shah and Burke, 2005). Although skills can often be associated with the acquisition through education and training, skills can also be obtained through informal learning mechanism and on the job experience. Tourism is about people to people interactions, that is why skills of the industry’s workforce are very important to its ability in attracting more income. Tourism injects about $41 billion into the Australian economy every year. Recent research has shown that Australia is experiencing a shortage in not only labor but skills in the tourism and hospitality industry such that the government is looking for skilled immigrants who would come and work in Australia (Dwyer, 2008, p. 38). The industry is short staffed and the government needs to attract 36,000 cooks, waiters, and bartenders. There are 530,000 Australians directly employed in this sector yet it is estimated by 2015 the industry will face a shortage of 56,000 workers. The minister for immigration also confirmed that the government is looking for 56,000 immigrants to come and work in the hospitality and tourism industry by 2015 (Costello 2002).This has led to the introduction of strategies such as the 457 Visa Program, which is seen as the fasted way to address the skill shortages and the National Skills Shortage Strategy. The reasons for the shortage are that the hospitality industry has a high rate of staff turnover. Staff turnover produces many costs such as those associated with recruitment, training, and familiarization of new employees. Secondly, working hours in this industry can be unsociable because hospitality staff is expected to work during important holidays such as Christmas and New Year. The third reason is that more students choose to pursue higher education instead of apprenticeship (Hotel Line Special Report 2006). This has made the government to go to extents of encouraging employment of indigenous and disabled people and increase incentives for employers to take apprentices. Global financial crisis The global economic crisis has brought with it many challenges especially in the hospitality and tourism industry. The global financial crisis comes with shrinking capital markets and decreased spending. Businesses have reported a downturn in sales of lodging, foodservice, events other hospitality products. The July 2007 financial crisis saw a downward trend in travel and tourism indicators and revenue in 2008 and 2009.The decline resulted; not only fewer customers in hotels, restaurants, conference and convention centers, but also significant decline in the average expenditure per guest (Pizam, 2009). In October 2008, the international monetary fund (IMF) forecast that the world economy was entering a major downturn in the financial markets and many advanced economies would move into a recession. Global growth was expected to slow substantially in 2008 and a modest recovery would only begin later in 2009. The financial crisis led to increased oil prices, which led to increase in airline fuel, and this made airlines to increase airfares. In addition, the contraction in the real economy made employees face possible lay-offs and loan reduction; therefore, travelers would postpone, change, or even cancel their travel plans. This made international demand for tourism services to contract. According to the World Economic Outlook report, the peak of the financial crisis in March 2009 saw a decrease in international tourists’ arrivals by 12 percent. Since then there has been an improvement and a steady recovery especially during the last quarter of 2009. In 2010, the sector rebounded faster than even expected and fully compensated the losses. This goes to show that the hospitality and tourism industry cannot escape from any threat of the Global financial crisis. The major impacts on the international travel and can cause major downturns in the sector. Changes in Australian demographics Demographics are the characteristics of the population of a given country in terms of age, gender, ration of adults to children as it affects the supply of human resource in a given country and the achievement of the economic potential of the given country. The Australian population consists of just over 20 million people. This is according to the Australian Bureau of Statistics that conducts a census every five years. Reports have shown that the Australian society is aging rapidly and it is increasingly becoming multicultural. It is predicted that over the next few decades Australia’s proportion of people aged 65 years will grow substantially while the percentage of people less than 15 years will decline at a similar, rapid pace, (Australian Bureau of Statistics, 2005). This will have an impact on the level of human capital and hence the economic well-being. As more people retire, the skilled labor force participation will most likely reduce. This will further increase shortage in skilled and qualified employees especially in the tourism and hospitality industry. Australia’s population aged between 15 and 64 that comprises mostly of the working age is projected to decline from 67 percent to between 57-59 percent by 2051, therefore; the labor participation rate is expected to decline. This is a major issue because most of the businesses in the tourism and hospitality industry traditionally look to younger labor for its workforce needs with 45.7% of workers aged 15-24 working in the hospitality industry as compared to other industries that have a less percentage. Although the Australian population is growing, the growth rate is not sufficient to counter this negative effect of the aging population (Costello, 2002). This has forced the government to go to such lengths as offering families financial bonus for having children and increasing immigration quotas. Apart from affecting the labor force, the aging population will determine whether domestic tourism will increase or decrease. As mentioned earlier, the Australian domestic tourism accounts for 73% of the total tourism GDP. The direct correlation between tourism and demography in this sense lies in whether these domestic tourists have wealth and leisure time, which is only accessible when there, is a high level of working population but the statistics point to an augmentation in the aging population. The other demographic issue is internal migration, especially of the old age from metropolitan areas to smaller towns. Statistics show that in the last 35 years, approximately one million Australians have moved to country areas that are not too far from the city. This is what is referred to as Australia’s sea change leading to varied consequences in different areas. Queensland has experienced influx of people causing pressure on its infrastructure while Tasmania has experienced an exodus of younger residents, therefore, increasing the problems associated with the aging population (Bergsma, 2000, pp. 40). The three issues facing the hotel and tourism industry are closely related in that one can be cause but also a consequence of the other. Taking for example demographic factor such as the growing aging population that leads to a shortage of workers as most of them go into retirement. Furthermore, with a decreasing fertility rate, the youth aged between 15 and 24 who make up majority of the employees cannot be able to cater for the increasing demands in the tourism and hospitality sector. The relationship between these factors is that they all have a negative impact on the sector and limit the sector from its full potential. In conclusion, the tourism and hospitality industry in Australia is a lucrative sector that has the potential to increase Australia GDP if efforts are made to rid it of the potential threats, the economy can be boosted (Dwyer, 2008, 48). The emerging issues that have been the focus of this essay are the labor and skill shortage, the global financial crisis and the changing Australian demographics. The government is addressing these very important issues. According to The Restaurant and Catering Australia that undertook a survey in 2006/2007, on average every business in the industry, an additional staff member. The global financial crisis also gives a lot of worry about since it comes with increased interest rates, limited credit due to increase in loan defaults, decrease in interbank trust and most importantly increases in oil prices. Oil is a crucial input in not only air travel but also all kinds of travel. This puts a limit in the number of tourists plus limited investments in the sector. The Australian demography is changing fast especially in light of the aging population, fertility rates, and internal migration of the Australian citizens commonly known as Australia’s sea change, which has seen masses leave the metropolitan areas for smaller towns (James, 29). A place such as Queensland has experienced an influx of people that has put increasing pressure on the existing infrastructure. The government has recognized the contribution of the tourism and hospitality industry and steps have been taken to improve this sector. Works Cited AUSTRALIAN BUREAU OF STATISTICS. (2005). Australian Social Trends 2005, Commonwealth of Australia: Canberra. AUSTRALIAN BUREAU OF STATISTICS, Australian Demographic Statistics March 2012, extracted on 24 Oct 2012, http://www.abs.gov.au/ausstats/abs@.nsf/mf/3101.0. AUSTRALIAN BUREAU OF STATISTICS. (2008). Population Projections, Australia, 2006 to 2101, ABS: Canberra. BERGSMA, M. (2000) ‘The future of tourism and hospitality’, Tourism and Hospitality Research, 2(1): 76-79. COSTELLO, P. (2002). Part II: Australian’s long-term demographic and economic prospects, Commonwealth of Australia. DWYER, L. (2008). Megatrends underpinning tourism to 2020: analysis of key drivers for change, CRC for sustainable Tourism Pty Ltd: Queensland. JAMES, S. (2005). Hospitality: Australia. Ultimo, N.S.W: Career FAQs. TOURISM FORECASTING COMMITTEE AND TOURISM RESEARCH AUSTRALIA, (2012). Forecast, Issue 2, October, Canberra. WEEDEN, C., LESTER, J., & THYNE, M,, (2011). Journal of Hospitality and Tourism Management; Australian Academic Press Pty. Ltd, 2011. Top of Form VERMA, N. (2013). Recession and Its Aftermath: Adjustments in the United States, Australia, and the Emerging Asia. India: Springer, Bottom of Form World Economic Outlook, (2008). 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