How Inflation Affects Australias Hospitality Industry - Research Paper Example

HOW INFLATION AFFECTS AUSTRALIA’ S HOSPITALITY INDUSTRY TABLE OF CONTENTS I. Problem Setting and Situation Analysis 3 a. Introduction 3 b. Background Information 4 c. Problem/ Issue 5 II. Aims of the Study 5 III. Preliminary Literature Review 6 a. Australian Economy 6 b. Australian Hospitality Industry 7 c. Australian Inflation 9 IV. Research Objectives 9 V. Research Plan 10 VI. References 12 HOW INFLATION AFFECTS AUSTRALIA’ S HOSPITALITY INDUSTRY I. PROBLEM SETTING AND SITUATION ANALYSIS A. INTRODUCTION Tourism plays a very big role in the economy of Australia. It was estimated that last fiscal year of 2003-2004, 3.9% or roughly A$32 billion is the share of the tourism and hospitality industry when it comes to the nation’s GDP (ABS, 2002). Indeed, it is safe to say that tourism plays a major role in the maintenance and stability of the country’s economy in all aspects. More than that, Australia’s outstanding performance in the hospitality industry has been recognized globally since Australia, for more than three years now from 2002-2004, the country is always a recipient of the tenth biggest revenue when it comes to being a tourist destination. With this edge among other tourist spot countries, Australia has been developing their tourism goals and objectives, setting up projects and programs which would further lead to more and more tourists stepping in their lands. The Australian Tourist Commission has been devising strategies and plans which would make Australia maintain its tourist spot status globally. This year is one of the most crucial period as to Australia’s tourism since the Tourism Australia targets the A$4 billion mark after the inflation across these four years (Tourism Australia, 2007). This target regarding the performance of Australia in tourism has been brought mainly about by the inflation which, as stated earlier, has been showing up for the past years. Based on the tourism trends of Australia, the flow of tourists has been outstanding at least until 2001. This occurred primarily because of the catastrophes during the year most especially the threats posed by terrorism to the tourists traveling around the globe. More than that, the risks which the people were facing against the biological terrorism such as the severe-acute respiratory syndrome also pulled down the number of tourists visiting the land down under (ABS, 2002). B. BACKGROUND INFORMATION ON INFLATION Inflation, as mentioned earlier, is an “increase in the supply of currency or credit relative to the availability of goods and services, resulting in higher prices” (Encarta, 2005). Based on the Australian Bureau of Statistics, inflation has a very detrimental effect on Australia especially on its international competitiveness. Aside from this, there is also a decrease in the internal household income of the people because of great expenditure (University of Melbourne, 1996). This threat to Australia’s economy made the officials exert great efforts for the past decades to assure the low and stable rate of inflation. In the past decades, inflation in Australia is maintained at a low and stable 2.75% year round average which makes the country commendable because of their efforts to sustain this status (Reserve Bank of Australia, 2006 and Budget Strategy and Outlook, 2004). Preventing inflation is one area which many countries admire and commend to the Australian economy. For the past decades wherein there were observable hang ups when it comes to the CPI or the consumer price index, there were instant remedies which the government undertakes so that the stable status of Australian economy will be maintained if not improved. In summary, the powerhouse tandem of Australia when it comes to the economic success is the low inflation rate and continuous programs which attracts foreign tourists. C. PROBLEM/ ISSUE The primary problem of this research is to provide the rationale behind the positive implication of a low inflation rate regarding Australia’s hospitality industry. Through a careful analysis of this issue, the researchers would provide a scientific explanation regarding the success of Australia when it comes to their hospitality industry and tourism. Through defining the characteristics of a successful tourism program, there would be more strategies by local and even national tourism which would be planned toward the success of their local tourism to that of Australia’s. This is how the significance of this research enters the scene. Aside from connecting the inflation rates to Australia’s hospitality industry and providing the right blend of Australia’s tourism projects and approaches, this paper would also seek the information on other factors which contributes to the success of the aforementioned aspect of their economy. II. AIMS OF THE STUDY This study aims to answer the following questions: GENERAL: 1. Why is there a positive effect to the tourism when the inflation rate is low? SPECIFIC: 1. What are the specific projects of the Australian hospitality industry which makes tourists flock into the country? 2. What other factors lead to the globally-competitive tourism in Australia? III. PRELIMINARY LITERATURE REVIEW AUSTRALIAN ECONOMY Just last year, Australia conquered the 13th spot in the world’s biggest over all economy and the 10th spot in the biggest industrialized economy. More than that, Australia was hailed the 8th richest nation in terms of per capita income (Department of Foreign Affairs and Trade, 2007). Also at the same year, Australia was considered the 6th most competitive economy in the world- a position up by three notches from being the 9th in the year that was (IMD World Competitiveness Yearbook, 2006). Maintaining economic growth has been one of Australia’s primary concerns at the offset of the 1990s. With the effect of high productivity gains and low inflation and interest rates, Australia remained to be an open and innovative haven for many industries all over the world. Australia is a member of the group called Organization for Economic Cooperation and Development which totally eradicates national debt. Based on the statistics of the said organization, the standard of living have positively developed and actually surpassed those of the Great Eight Alliance of countries except the US (DFAT, 2007). According to the Economist Intelligence Unit (2006), five Australian cities are among the top 12 desirable venues for business travel. Statistics reflected the following data: Adelaide (4th), Brisbane (6th), Perth (8th), Melbourne (9th) and Sydney (12th). Australia’s strong economic growth which reaches up to 3.3% per annum has been doubled with low inflation rates which only reach up to 2.5% annual average. More than that, Australia’s GDP last 2006 reached about $1 trillion in terms of value (DFAT). Australia’s strong sense of openness to business investors and small scale enterprises makes it one of the most sought after country to start up a business. The emphasis that the government gives in maintaining and protecting businesses has been Australia’s edge among other nations (DFAT, 2007). AUSTRALIAN HOSPITALITY INDUSTRY Australia is one of the most desired destinations on the planet (Tourism Australia). The committee targets a net $4.0 billion in terms of international tourist spending. The objective of this Tourism Australia is to increase the number of tourists and interstate visits, and most of all, leisure spends. The National Tourism Policy Review released a statement bearing the following data regarding Australia’s hospitality industry: The GDP measure of Australia is at a very high rate most especially when tourism incomes is considered. Just last 2001-2002, the tourism industry accounted for more than $31.8 billion or around 4.5%. Air and water transport, accommodation, food outlet and retail trades were the four highest industries which contributed to the high amount of added gross value by the tourism industry. More than that, long distance travel, shopping, takeaway and food outlets and accommodation services were the highest tourism products according to statistics of tourism. Last 2002, the expenses by the tourists reached up to $17 billion and makes up about 11% of the countries total income on their products. Because of this, the native products of Australia is becoming more and more beneficial to the country since it is becoming the primary things which tourists are searching for in the duration of their trips and vacations. In 2002, out of the $70 billion tourist consumption, almost eighty percent has been accumulated by domestic tourism, followed by international tourism. Most of the expenses come from accommodations during day and night to hospitality institutions. Based on these significant data, we can conclude that indeed, tourism in Australia plays a very significant part in sustaining the strength of their economy and that it contributes a big amount in maintaining their status in terms of economic stability and global competitiveness. AUSTRALIAN INFLATION Inflation is a continuous rise in the general cost of prices and puts costs on individuals and the economy. Inflation reduces the purchasing power of income and wealth (ABS). Inflation is connected with other markers of economic progress. It affects the distribution of wealth among households and therefore, it also affects the decision of investments by many business investors planning to set a business. More than that, the international competitiveness of the country is also affected. High productivity rate and increased competition in goods and services markets are considered to be contributing factors to the low inflation rates of Australia during the 1990s (Reserve Bank of Australia, 2000). Should inflation rates rise in terms of the percent of their increase, there would be a net negative effect on the economy of the country. Several industries would be affected including the tourism industry. In this light, the discussion and clarification regarding the effect of inflation to the tourism industry would be made more vivid and focused. IV. RESEARCH OBJECTIVES This purpose of this research is to evaluate and seek information regarding the effects of inflation to the strengthening in tourism of Australia. By the end of this research, it should reflect several answers to the queries stated earlier in this paper. First, there would be a clarification regarding the contribution of a low inflation rate to a high rate in tourism and hospitality industries. It is necessary to be enlightened with this query since tourism is a big thing when it comes to the economic strength. Through tourism, the country receives income from international visitors and opens its doors to potential businesses to be set up by foreign investors. While we value tourism, it should also be noted that attention should be given to a country’s inflation rate since it has something to do with the increase or decrease in the number of tourists flocking to a certain locale. Second, this research seeks to know information regarding Australia’s top-caliber programs which leads them to be one of the most desired tourist destinations. It is important so that other countries can also be given an idea and baseline for strengthening the tourism in their country. Australia’s tourism and hospitality industry projects would be a prototype for others so that they may have a lead as to what they should do and focus on so that tourism would tend to increase leading to a stronger economy and international competitiveness. Lastly, aside from the low inflation rate and programs of Australia regarding tourism, there are also factors which naturally come out from the country which makes it so desired by tourists. Factors such as the warmth and acceptance of the people and their approach and attitude toward foreigners are examples of this. These and other important keys are part of the queries this research wants to have at the conclusion of this study. V. RESEARCH PLAN 1. Assess the current data on Australia’s tourism, inflation, and over-all economic status quo. 2. Identifying the underlying factors which affect the tourism of Australia. This may be carried out through: a. Research regarding the effect of inflation to the tourism aspect of a country. b. Interview with analysts and authorities regarding tourism and economic impact of inflation. c. Comparison with other countries which suffers a downfall/ upsurge in their tourism. d. Interviewing some tourists regarding their preferences in traveling and their purposes. Also, the researchers could also evaluate the responses of the tourists regarding their impression of the country. e. Interviewing businesses which caters services to the tourists and asking them information regarding the tourist’s likes and dislikes regarding the country and what reasons impels them to pursue going to Australia. 3. Diagnosing the reasons and answers the general and specific problems of this research. 4. Evaluation of the paper by several people who have authority on the matters at hand. LIST OF REFERENCES: Australian Bureau of Statistics. (2002). Measuring Australia's Progress. Retrieved 21 August 2007 from DFAT. (2007). Country and Regional Information - Department of Foreign Affairs and Trade. Retrieved 21 August 2007 from DFAT. (2007). Australia: An Overview. Retrieved 22 August 2007 from Morrison, Scott. (2007). Tourism Australia. Retrieved 22 August 2007 from Voluntourism. (2007). Voluntourism: From Whence They May Come - Part III. Retrieved 21 August 2007 from Budget Strategy and Outlook 2003-04 IMD World Competitiveness Yearbook 2006 Reserve Bank of Australia, 2001 Reserve Bank of Australia Statistics 2006 Read More