Effects of High Exchange Rate on the Influx and Exit of Travellers in Australia - Research Paper Example

Running Head: The Effects of the High Exchange Rate on Australians Travelling Overseas and Travellers Visiting Australia A Paper on the Effects of High Exchange Rate on the Influx and Exit of Travellers in Australia In APA Style Name University Executive Summary The main purpose of the research that was conducted is the determination of the effects of the economic factors on tourism. It specifically tackles the relationship of the high exchange rate in Australia and the inbound and outbound behaviours of travellers in the said country. The results were gathered through quantitative survey research. In addition, preliminary background information for comparative analysis is library based, focusing on the trends of studies conducted prior to the study. There are different factors that became the focus in the said study. The baseline information is composed of the natural trend in travel movements. The trend of the changes in exchange rates are then considered. The main target is to analyse the fluctuations in trend related to the high exchange rate. Acknowledgement I, the author, would like to extend my sincerest gratitude to the people who contributed to the completion of the research project possible. To my immediate supervisor and mentor for the chance given to be able to conduct the study and the guidance throughout the process. This research project taught lessons on the importance of the awareness on the effects of economic factors such as the exchange rates on other issues in the society and human activities in the community such as tourism. To my family for the guidance and support that was given throughout the project. Great appreciation is extended to my parents for continuously giving advices and moral support and sharing all the wisdom in working diligently to be able to achieve desired goals. They had been the inspiration for the determination and strength to be able to face tough times. Special persons such as friends and loved one cannot be ignored for they contribute for the inspiration in moving on and conquering every aspiration. And above all the Supreme Being that gives every chance to experience life and prove ourselves in very trial that is encountered. For the blessing of talent and intellect that are imparted and bestowed to be able to achieve different goals in life. Table of Contents Executive Summary 2 Acknowledgement 3 Introduction 7 Background of the Study 7 Objectives of the Study 10 Literature Review 12 Tourism and the Related Issues 12 Tourism in Australia 15 Composition of Travellers in Australia 16 Summary 17 Methodology 18 Results and Discussion 20 The Survey Process 20 Comparative Analysis 22 Conclusion 23 References 24 List of Tables Number Title Page Table 1. Tourism Share in GVA and GDP 15 List of Figures Number Title Page Figure 1. The Diagram of Research Objectives 11 Figure 2. Diagram of the Tourism Asia’s 13 projection on tourism industry. Introduction Travelling can be considered as one of the most important activity in the human community. Travelling can be for enjoyment and even stipulation. One example is the members of the business sector. For the said groups, travelling can even be considered as a necessity due to the fact that international sales, marketing and profits require the need to travel. Travelling can be considered as one of the important perspectives in tourism. Tourism is the most important parameter in the movement of people across the border. There are different factors that can affect the movement of people across the border. The trend can even be observed as being more evident through the course of history. This can be attributed to the fact that there are interacting effects of the different factors in the economy which is even intensified by the globalization (NZIER, 2007). As the main force that is needed to be taken into account, tourism can be considered to be the superseding. Tourism can be considered as one of the most important factors that can affect the economy. Upon looking at different perspectives it had been considered that tourism can affect almost every aspect of the society, even culture and environment. It ca be perceived that to be able to grasp the interaction of tourism and economy, the study of specific parameters is needed to be undertaken (Gunn and Var, 2002). Background of the Study There are different parameters that can be utilized in the study of interaction of tourism and the economy. One of the said parameters is the exchange rate. Exchange rate can be considered as a specific example of an economic parameter. On the other hand, the movement of the people across a country’s border can be considered as the most important parameter in tourism. This includes the inbound and outbound travellers. There are different interrelated issues that are incorporated in the study of the interaction of the high exchange rate and the movement of people across the border of a country. For the purpose of achieving the goals of the research process, Australia is the main focus of the study. The exchange rate can be considered as an important force in tourism due to the fact that the said parameter can affect the prices and fare, which is considered as the main travel expense and considered as the primary basis of the decision-making process of the travellers. The effect that can be attributed to the travel expenses can be considered to have an effect to the behaviour of the travellers. In this effect, it can be considered that there is a high possibility that the factors related to monetary value and economic aspect can cause great effect to the behaviour of the travellers (Balaguer and Cantavella-Jordá, 2002). Due to the fact that travelling can be considered as a necessity for the majority of the travelling population, it can be considered important to determine the behaviour of the said group, with reference to being inbound or outbound tourists. In this effect, it is important to determine the season and time of the year wherein the highest number of travellers and tourists can be accounted. In terms of the season with the highest number of movement and travel activities, the holiday season can be considered as the most significant period. This can be attributed to the fact that people spend their vacation in other places, thus, during these periods the tourism can be considered as one of the major contributing factor in the economy (Gunn and Var, 2002; Williams and Shaw, 1988). In this regard, there are even nations and localities that maximize tourism to be able to improve the economy and develop the places to be able to serve as a permanent source of income. Countries all over the world are using tourism as one of the major industries. Tourism can even be attributed as one of the most important industries having the high rate of growth and improvement (Binns and Nel, 2002). In terms of the statistical analysis of the contribution of the tourism industry, it can be accounted for approximately 10.7 percent of the GDP of the international economy. In addition, the said industry can also be considered to have one of the highest growth rates being 7 percent per annum. Based on different studies undertaken on the trends related to tourism can be affected by different factors in the economy such as the price-related and non-price related components. Price related factors can be considered as more associated to the factor under study which is exchange rate. In conjunction then, the relationship between tourism and economic factor can be described (Crouch, 1992). The price-related factors can be considered as the main priority of the travelers due to the fact that it includes fare and other expenses. Due to the importance and attention given by the public in the determination of the price-related parameters, it can be considered as a vital issue considered (Edwards, 1995). In the study then, the sensitivity of the people to the factors related to price, monetary values and economy is needed to be considered as one of the focal points. Generally, although the price-related factors can be considered as an encompassing subject, it is important for the determination of interactions of the different notions, factors and parameters (Binns and Nel, 2002). Objectives of the Study The main aim of the study is to be able to examine and present the effect of exchange rate fluctuations in the inbound and out bound tourism in Australia. The study is undertaken through research of a variety of primary and secondary resources. The main focus presented through the course of the research process is the effect of the changes in exchange rate on the number and behaviour of travellers in Australia Through the course of the study, the specific objectives and aims of the study are projected by segregating the inbound and outbound tourists. The objectives include: For Inbound Tourists: 1. To be able to present the information on the duration of stay of visitors in Australia and the changes that can be perceived due to the variation in the exchange rate. 2. To be able to gather information on the ways and possible reasons for international travellers to alter travel plans and decide on the travel destination, specifically based on the exchange rate. 3. To be able to determine the countries that comprises the inbound travellers in Australia and the relative exchange rate between the country and Australia. 4. To be able to present the opinions of the travellers in relation to their travel expenditures as well as the changing exchange rates. 5. To be able to determine the main reasons for travelling. For Outbound Tourists: 1. To be able to present the information on the duration of stay of Australians in other countries and the changes that can be perceived in relation to the changes in the exchange rate. 2. To be able to determine the priorities of the travellers in terms of buying and spending on things. Through this the main reaction to the changes in exchange rate can be extrapolated, relating on the issue of spending more or spending less due to the decrease in the value of money. 3. To be able to present the data related to the length of stay and the destination country of the people from Australia. 4. To be able to gather information on the reasons of travelling. Research Objective Chart: Figure 1. The Diagram of Research Objectives Literature Review The study that was conducted is based on the interaction of the factors of tourism and the factors of the economy. Specifically, the research conducted is on the interaction of the exchange rate and the movement of people across the Australian border, thus, including the inbound and outbound travellers. In relation to the issue under study, there are different aspects that are needed to be given attention. Such aspects are important in the development of the information gathered and presented. Also such data that is vital in the analysis of the relations between the exchange rate and the movement of people due to travelling. Tourism and the Related Issues With respect to the determination of the factors that affect the movement of people across a nation’s border, it can be considered that tourism is the main encompassing classification. When tourism is perceived it can be classified as an industry due to the fact that it can be considered as a means of income for a certain locality and nation. Historically, tourism was recognized as an industry through the 19th and 20th century when the contribution of the said industry was becoming of increasing significance. It can be considered as one of the most important industry specifically in the developing countries (Binns and Nel, 2002; Coccossis and Nijkamp, 1995). In terms of tourism, Australia can be considered to possess the resources that can be an asset when it comes to the field of tourism. There are different factors in the study of tourism such as the economic, social and environmental aspects. These factors are then related to sustainability of the nation. With the interaction of the said factors, it was analyzed by different studies that in the international and domestic visitation can lead to the ultimate growth in the economy. Also, factors such as the number of visitors, the length of stay, the amount spent per person and the amount spent per day (Morrison, n.d.). Source: (Morrison, n.d.). Figure 2. Diagram of the Tourism Asia’s projection on tourism industry. In the study of the issues related to tourism then, it can be perceived that the factors considered in the economic development are also important in the determination and achievement of results of the projected study. Evidences from studies conducted prior to the research undertaken presented the most important priorities and factors considered by the travellers in terms of finding the destination are related to the destination as was as the vacation budget (Crompton and Ankomah, 1993). In the study conducted then, the characteristic of the destination can also be described specifically on the basis of the expenditures and the length of stay of the travellers the level of exchange rates can also be determined. This can be attributed to the fact that travellers determine destination through the characteristic of the destination in combination with the price and other price-related factors. The price-related factors can be attributed to the expenses that can be related to the way of life of the traveller. Specific factors include income of the person and the family, the possible expenses that can be incurred and other personal factors such as age and attitude of the travellers (Dadgostar and Isatalo, 1992). The priority of price related factors then based on the different studies takes frontline compared to the characteristics related to the destination. Also aside from the price-related factors, other components are needed to be considered such as competitiveness of prices in the international community, the relationship of the different countries mainly the destination and the country where the inbound travellers came from. These important factors are considered in addition to the income-related factors that are needed to be considered in terms of the exchange rate in the market (Webber, 2001). In this effect, the main target of the different locality and country that targets tourism sustainability is the utilization of the strategies to be able to maintain the inbound tourists (Clay and Mokhtarian, 2004). This is important on the basis of the determination of the determination of the perspective of the travellers on the priorities and criteria in the choice undertaken. Tourism in Australia The tourism industry of Australia can be commended for the performance through the past years. Although tourism cannot be considered as an industry in the true sense of the term, the income that is contributed to the GNP can be significant thus it is labelled as such. The tourism industry in Australia, as observed and studied through the Tourism Satellite Account (TSA) through the measurement of GVA and GDP, the country has a 3.2% GVA in 2004 – 2005. But the said data cannot be considered the peak statistics since in 1997 – 1998 and 1998 – 1999 wherein there is a 4.1% share (Australian Bureau of Statistics, 2007). Mainly the target of tourism organizations is to achieve sustainability in the international and domestic tourism arena. The objectives are the maintenance of the high tourism statistics of the country, which is known for having one of the biggest revenues through 2002-2004. In 2002-2003, the profits achieved by the said sector approximately 16.6 billion dollars (ABS 2004) Table 1. Tourism Share in GVA and GDP Units 2000-01 2001-02 2002-03 2003-04 2004-05 Tourism characteristic industries GVA(a) Travel agency and tour operator services $m 992 966 975 962 961 Taxi transport $m 218 207 210 214 210 Air and water transport $m 3,727 3,592 3,557 3,521 3,617 Motor vehicle hiring $m 284 287 298 293 325 Accommodation $m 2,775 2,855 2,917 2,941 3,115 Cafes, restaurants and food outlets $m 2,501 2,601 2,689 2,599 2,644 Total(a) $m 10,498 10,509 10,646 10,531 10,872 GVA of tourism connected industries(b) $m 11,572 11,769 12,152 12,360 12,574 GVA of all other industries(c) $m 2,974 2,973 3,140 3,125 3,032 Tourism GVA $m 25,044 25,250 25,939 26,016 26,479 Tourism share of GVA % 4.0 3.8 3.6 3.4 3.2 Net taxes on tourism products $m 5,817 5,637 6,041 5,935 6,083 Tourism GDP $m 30,861 30,887 31,980 31,952 32,562 Tourism share of GDP % 4.5 4.2 4.1 3.8 3.7 (a) Tourism characteristic industries have at least 25% of their output consumed by visitors. (b) Tourism connected industries are those industries not classified as characteristic that have products which are consumed by visitors in volumes which are significant. (c) The share of GVA of all industries that provide outputs to visitors not included in characteristic or connected industries. Source: (Australian Bureau of Statistics, 2007). Under the Australian government, the main objective of the Tourism Australia is to be able to achieve the maximization of the objectives of tourism. The said organization is only one of the many organizations aimed to gain profit in the tourism industry. The study of the objectives of organizations of that mission is important to be able to determine the view of the authorities on the possible effects of high exchange rates in Australia and the possible ways to overcome its effects (Australian Bureau of Statistics, 2007; Morrison, n.d.). Composition of Travellers in Australia Based on the results of the different studies undertaken by different groups, more than half of the inbound tourists in Australia have the main purpose of having a vacation, comprising 2.9 million which is specifically equivalent to 58% (Collins and Tisdell, 2002). In 2002, the composition of the inbound tourists was largely of other Asian countries, 26 percent; European countries, 24 percent; and New Zealand which is 17 percent. This can be considered as the international tourists. The remaining then are domestic travellers. On the other hand, the outbound travels are composed of 40 percent holiday travellers and migration (Collins and Tisdell, 2002). In terms of composition of travellers, the currency and economic effect is always taken into consideration. This can then be attributed to the relationship between the economic factors such as the exchange rate and the movement of travellers, both inbound and outbound. Summary Based on the gathered information, exchange rate and other economic issues are greatly connected to the behaviour of the travellers and the number of inbound and outbound travels is related. Also the methodology that can be used can serve as basis, such as primary qualitative data gathering and library based research on the authorities and organizations that are undertaking research and development related to economic issues and tourism. Methodology To be able to determine the influence of the exchange rate and economic issues on tourism, specifically the movement of people across the borders specifically the inbound and outbound travellers in Australia, there are different methods undertaken. In the attainment of the set goals of the study, a primary qualitative study was undertaken on the travellers in Australia. The behaviour and priorities were noted first hand research process undertaken through a survey technique. Also, to be able to achieve a comparative analysis, the data from published research of different agencies are included. The main focus in the achievement of qualitative data from published references is to accumulate and utilize of concepts and information gathered from references and published reports. The survey research is one of the types of descriptive research that is used to determine the view of the people. Survey determines the allocation of the position of each member of the sample population. The objective of a descriptive qualitative type of research is to present the overview of the topic of interest. Another focus is the possible factors that can affect the subject that is described. Other types of descriptive qualitative research are correlational and naturalistic research. The naturalistic observation determines the incidence of the particular situation or condition in the environment. The correlational research studies more than one variable, subject or condition (Krosnick, 1999; Phillimore and Goodson, 2004). The data gathered from the views of the sample population are composed of inbound and outbound tourists belonging to different age groups. This is due to the fact that this type of research process can obtain the needed information on the stance of the society regarding this matter. Its main rationale is to quantify the responses given by the sample population. The method targets the characteristic or issue of interest by soliciting answers through directed questions. Responses are recorded, measured, organized and analysed to be able to come up with the output. Although data gathered are mostly qualitative, it employs quantitative techniques to aid in the course of the research (Krosnick, 1999; Phillimore and Goodson, 2004). Data are gathered on the basis of the set objectives. Primarily, a population of travellers are interviewed and surveyed on the basis of a set of questions. Another is data gathering from the different agencies for comparative analysis. The agencies include Australian Bureau of Statistics. On the first part of the data gathering, the determination of the priorities of the travellers is determined. For the inbound tourists, this is undertaken by direct surveys of random tourists and surveys of random different tourist establishments such as hotels, food joints, entertainment areas or shopping complexes. A total of 50 inbound and 50 outbound respondents are surveyed on the basis of their demographic information and priorities in travel. Results and Discussion Based on the on the results of the research undertaken, there are different points that are needed to given attention. The Survey Process The results of the survey are divided on the basis of the inbound and outbound tourists. The demographic information and the major opinions are included in the data gathered. Inbound Tourists The frequency of travel was determined to be able to have a general idea on the possible purpose of travel. Upon query it was known that the large portion of the respondents, more than 50% or 27 respondents travel once a month. It can be deemed relatively frequent. The remaining 23 respondents are distributed among the other categories: 6 travels once a week, 8 travels up to 10 times a year while the other 9 travel less than 5 times a year. The purpose of the travel was also determined. Out of the 50, 35 respondents are travelling because of business and work related reasons. The remaining part of the 50 chosen passengers travel due to personal reason. The frequency of the travel then can be indicated by the purpose that most are due to work and business. The age of the passengers are also related to the results of the demographic investigation. The largest portion of the population is young members of the work force aged 21-24 and the other group are the more established working age group 35-44 years old. This can be deemed in-lined with the fact that a large part of the population is composed of passengers that travel on business-related purposes. A larger part of the respondents are male, 30 of the 50 respondents are male. In terms of the country of origin, the travellers of European origin comprise the largest portion of the sample population which comprise 16 of the 50 respondents. It is followed by travellers of Asian countries, 12 of the 50 respondents. Nine respondents are from the United States. On the other hand, 8 and 5 respondents are from South America and Africa respectively. When asked about the main priority choosing a destination, 20 respondents are considering their budget while 17 gives priority to the quality of the destination. The remaining respondent, 13 people, considers the exchange rate in the country of destination due to the fact that the consideration of more value to the travel funds. Outbound Tourists Fifty Australians that are travellers are also chosen as respondents for the outbound sample population. There are 48 percent or 24 respondents travel up to 10 times a year. Fifteen respondents travel once a month. Other respondents travel less than 5 times a year, 8 respondents and 3 travels weekly. Frequency of travel can be attributed to the purpose. Most of the outbound travellers, 32 of the 50 respondents, travel on the basis of work-related reasons. The remaining respondents are travel for leisure and other personal reasons. A larger part of the population is of age 25-34 followed by 35-44. Both age ranges are of working class. Of the 50 respondents, 34 are male. In terms of the destination country, 25 of the 50 respondents are commonly going to adjacent Asian countries. Ten of the 50 respondents chose European countries as the destination. Fifteen respondents are geared to the US. When asked about the main priority choosing a destination, 25 respondents give priority to the income of the family to be able to afford travel. On the other hand 14 respondents give priority to the characteristics of the destination. Other respondents consider the exchange rate, composed of the 11 remaining respondents. Comparative Analysis From the results of the survey research that had been conducted it can be determined that the population gives more importance to the income and travel expenses in terms of the choice for travel. The characteristics of the destination are the next priority. Although the travellers consider the money related factors in choosing a travel destination, the high exchange rate in Australia can only be considered as an indirect affective factor since it is economic in nature. For example in the income of outbound Australian travellers, any changes in exchange rate lack immediate effect to their income if domestic travel is considered. On the other hand, if international travel is considered, a high exchange rate can even be an advantage. But though this is the case, it is still an indirect factor. As evidence, the high exchange rate in Australia has little or no effect on the international inbound tourists. In fact that an increase of 1% from 2005 statistics can be perceived in 2006, 5.1 million international travellers out of the 806 million travellers visited Australia. In terms of outbound travellers, 4.4 million trips are made by Australians in 2006 (Australian Bureau of Statistics, 2007). Conclusion Based on the gathered data from the research that had been conducted, although the main consideration of the inbound and outbound travellers in choosing a destination is income and money related the exchange rate can be considered as an indirect factor in their choice. The said notion can only mean that in making a decision, the people that are knowledgeable to the economic issues can consider the high exchange rate in making a choice. The effects that can be inflicted on other travellers are then in terms of the expenses or the concluding stage of travelling and not in the decision making process. Thus, although Australia has a high exchange rate, the inbound tourism increases every year due to factors considered and are given more priority by the travellers such as characteristics of the destination and the expenses that can be incurred in travelling. References Australian Bureau of Statistics (2007). Year Book Australia. Retrieved September 22, 2007 from http://www.abs.gov.au/Ausstats/abs@.nsf/0e5fa1cc95cd093c4a2568110007852b/8C0C9434779416ABCA2572360004F5AF?opendocument Balaguer; J. and Cantavella-Jordá, M. (2002). Tourism as a long-run economic growth factor: the Spanish case. Applied Economics, 34 (7), May 2002, 877-884. Binns, T. and Nel, E. (2002). Tourism as a local development strategy in South Africa. The Geographical Journal, 168 (3), 235–247. Clay, M. J. and Mokhtarian, P. L. (2004). Personal travel management: the adoption and consideration of travel-related strategies. Transportation Planning and Technology, 27 (3), June 2004, 181 – 209. Coccossis, H., and Nijkamp, P. (editors) (1995). Sustainable Tourism Development. Aldershot, UK: Avebury. Collins, D. and Tisdell, C. (2002). Gender and Differences in Travel Life Cycles. Journal of Travel Research, 41 (2), 133-143. Cooper, C. and Wahab, S. (2001). Tourism in the Age of Globalisation. London: Routledge. Crompton, J.L., and Ankomah, P. 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Hausmann, R. (2007). The Pros and Cons of Dollarization. Inter-American Development Bank. Retrieved September 22, 2007 from http://www.dallasfed.org/news/latin/00dollar_hausmann.pdf Krosnick, J. A. (1999). Survey Research. Annual Review of Psychology, 1999. Morrison, S. (n.d.). Tourism Australia. Innovation Australia. Retrieved September 23, 2007 from http://www.stroudgate.net/innovation/article/article.php?id=11,202 NZIER (2007). Exchange Rates and Tourism Relationships in New Zealand. Ministry of Tourism. Phillimore, J. and Goodson, L. (2004). Qualitative Research in Tourism: Ontologies, Epistemologies and Methodologies. NY: Routledge. Webber, A. G. (2001). Exchange Rate Volatility and Cointegration in Tourism Demand. Journal of Travel Research, 39 (4), 398-405. Williams, A. M., and Shaw, G. (editors). (1988). Tourism and Economic Development: Western European Experiences. London, UK: Belhaven. Appendix Appendix 1. Survey Questions A. Inbound Travelers 1. Age a. below 21 b. 21-24 c. 25-34 d. 35-44 e. 45-54 f. 55-64 d. older than 65 2. Country of origin 3. Frequency of travel a. Once a week b. More than once a week c. Once a month d. 5-10 times a year e. less than 5 times a year 4. Number of times visiting Australia a. frequent b. a few times c. this is the first time 5. Purpose of travel a. business b. personal 6. Priority in choosing destination a. budget b. exchange rate c. quality of destination B. Outbound Travelers 1. Age a. below 21 b. 21-24 c. 25-34 d. 35-44 e. 45-54 f. 55-64 d. older than 65 2. Country of destination 3. Frequency of travel a. Once a week b. More than once a week c. Once a month d. 5-10 times a year e. less than 5 times a year 4. Number of times visiting Australia a. frequent b. a few times c. this is the first time 5. Purpose of travel a. business b. personal 6. Priority in choosing destination a. budget b. exchange rate c. quality of destination Read More