Factors Affecting Demand in The Tourism Sector

Factors That Affect Demand in Travel and Tourism (Hospitality) Industry

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The global Travel and tourism industry is one of the largest contributors to the world GDP. Apart from that it has also created a very large number of jobs globally. In this way, the travel and tourism industry is a very important part of the world economy. The financial value that it creates annually runs in trillions of dollars. Apart from those employed directly in this sector, it also creates employment for people in the other related sectors. With improving condition of the global economy and technological innovation, demand in tourism has also grown. However, there are several more factors that influence demand in this sector and which will be discussed in this article. As per a report by the world Travel and Tourism Council, it created 7.6 trillion dollars in 2016 which is a little higher than 10 percent of the global GDP.  It employs more than 292 million people which is also nearly ten percent of the employment level of the world. This data shows the large size of the global travel and tourism industry and its importance as a part of the global economy.  It is affected by several global and local trends as well as economic, political and other factors.

Economical factors have a major impact on the tourism industry globally and locally. Fluctuations in the global and local economies can affect the level of demand and supply in tourism in local areas or globally. During the recession, the demand for tourism had been affected at a global scale. Favorable economic situation leads to favorable demand for tourism services globally. When the economic activity and employment are high, people have sufficient disposable income to spend on tourism and travel. This leads to favorable demand and on the other hand lower economic activity and employment lead to low consumption of tourism services and less spending. During the recession demand for tourism services fell because people were forced to cut down on extra costs and the level of employment had fallen worldwide. However, now that the world economy is back on track, demand has rise again and people are spending more on tourism. Fluctuations in the local economies of several countries have still kept happening and they can have short term impact on demand for tourism in these areas. Moreover, the role of economic factors in churning demand in the tourism industry also gets clear from the fact that in the Asian countries where economic activity has grown faster, the demand has also grown. Apart from the Asian countries including China, India, Indonesia and Malaysia, US and neighboring countries like Canada, Mexico etc have also benefited by good economic activity and seen healthy demand for tourism services in the recent years. In this way, the economic factors have a major impact on demand for tourism globally. However, they affect both sides – demand and supply. A healthy economy and its agents serve tourists better.

Geopolitical factors also have a deep effect on the demand for tourism. A stable geopolitical situation can lead to a healthy increase in demand for tourism while instability can affect it negatively. Tourist activity in US was affected in the aftermath of the 9/11 attacks. It resulted in higher surveillance throughout US and such an environment makes tourists feel insecure. Particularly, it can lead to a decrease in the arrival of tourists from Islamic countries. In the middle East too, terrorist activities have affected the demand for tourism. Egypt is a country with several attractive tourist destinations including the pyramids. However, ISIS’ activities have had a negative impact on tourist activity and the overall economic environment. Even if the government takes stringent action against the terrorists, it can lead to a state of chaos and disruption in the country which can bring tourist activity lower. People like to travel to countries that offer a safe environment and where they can enjoy their vacation in peace. However, in a time when civil war or terrorism is disrupting the local economy and polity, such an environment is not very encouraging for tourists. In this way, geopolitical factors can have a major impact on the tourism industry worldwide.. Stable geopolitical environment attracts tourists and leads to higher employment and income and vice versa. If the relationships between two nations are tense, it can also result in negative effect on demand for tourism. If the relationships between two neighboring states/countries are poor, the number of tourists from one to the other remains low.

Technological factors too have a similar effect on the tourism industry and demand for travel and tourism. In the advanced countries, several places despite not being geographically attractive or naturally beautiful, the cities attract tourists in large numbers because of technological factors. Technological factors have led to an entirely new rage of tourist activities. Western cities shave several such tourists hotspots that are attractive because of technology. A beautifully lit Western metro-city with attractive trains and cars and huge malls and entertainment centres tell the story of technological growth. Technology has aided the growth in demand for tourism in other ways too. It has connected destinations and people. People have more options for travelling which have kept growing cheaper with time. Travelling to distant destinations is not a dream anymore but people are taking several vacations every year. Technology has reduced the costs of marketing and helped airlines brands reduce prices of travel. Apart from that, lodging options have also increased for people reducing the cost of overseas stay. People on tour can benefit from Air BnB arrangements which greatly reduce the prices of overseas stay. The internet has brought destinations closer. One can select from thousands of tourists destinations globally. Blogs, websites and social media heavily publicize, each tourists destination and people can gather all the information they need to plan their tour. If the influx of foreign tourists in the Asian nations has increased, then its credit to an extent also goes to the internet. It has made booking, marketing of tourists services easier and also helped people and businesses manage the costs of travel better. Travelling is more secure and people can remain connected with their family and friends through the internet all the time. Hospitality brands are giving their service a personal touch through the use of advanced technology, data and analytics. Falling cots of travel have also led to increase in number of Leisure travellers.

Cultural factors also have a deep impact on the demand for tourism. Millions of people every year go on religious tours like the Muslims going to Mecca or the Christians to their holy cities. Apart from it, people also go on cultural tours to understand the cultures of other nations. Culture is a major force affecting demand for tourism worldwide. In the Asian countries Buddhist and Hindu cultures hold a special appeal for foreign tourists and attract them in large numbers.  Hinduism and Buddhism are very old religions and people take tours to places like China, India, Malaysia etc to understand these religions and their cultures. The Greek culture also has a similar appeal and when you go abroad to any nation there is something distinct and unique in every culture to offer. People do not always go abroad for business or pleasure but also for cultural learning. From Greece to NewZealand, every culture has its own unique appeal and strength. People also understand nations and their social structure through the lens of culture. You cannot understand India, Japan or China without understanding their cultures. It is why several tourist organizations around the world arrange cultural tours of various nations. In the modern world, culture has become a primary attraction for tourists and millions travel to distant nations every year only to know their culture and experience its uniqueness.

Demand for travel and tourism in the 21st century is affected by some other factors too. How nations and hospitality brands market themselves also affects the demand and sales of tourist services. Some nations have invested in heavy marketing of their tourist destinations to churn demand. Dubai is one of such tourist destinations which is marketed around the world through various channels. Apart from its attractive landscape, Dubai also invests heavily in promotion of its tourist attractions. However, not all tourist destinations are as aggressive in terms of marketing. Still, growing competition has made countries and hospitality brands invest more in marketing. The evolution of new physical spaces for accommodation has also changed how people travel. The rise of Air BnB and home sharing spaces has also strengthened the demand for leisure travel. It also gave rise to increased competition forcing the competitors to reduce prices for stay. For many people travelling abroad would not have been possible unless for these cheaper lodging arrangements. Another important factor that affects the demand for tourism internationally is the changing demographic composition of the global population. Globally, the demographic composition of the population has changed and the millenials are more enthusiastic about tourism and travel than the baby boomers. They are more adventure loving and spend more on travel and tourism than the previous generations. Millenials are also more tech savvy than  the previous generations and are more familiar with the new technologies. However, they like more convenience and at lower prices. This is why tourist agencies and hospitality brands are tailoring their services to match the expectations of the millenial generation. In this way, there are several factors affecting demand for tourism internationally including the reduced prices of air travel and overseas stay.  The tourism industry has experienced fast growth after the recession and is expected to grow in the coming years too. However, the tourism landscape globally has improved a lot in the 21st century and is expected to evolve further with evolving technology and political relationships between the various nations.


Based on a report by WTTC

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