Critical Issue in Tourism Jean-Louis CACCOMO Economist at Perpignan Via Domitia University

PART I. Economics and Tourism Basic economic tools and concepts

Tourism and environment Political and institutional stability Economic growth Climate and ecological environment Tourism potential Question : Comment on the different links between tourism and environment

Structural conditions Tourism depends on economic development and open, free societies These conditions are very localized but diffuse with globalization.

Tourism as a market

Free time Tourism and growth Income Productivity Economic growth Tourism demand Power of travelling

The market analysis The main laws (supply, demand, equilibrium) The definition of shocks Exercises : illustrate different kind of possible shock with the following table.

Market shock in international tourism : make the corresponding graph. Nature of shock Economic effect Example Positive supply shock P – and Q +Technological innovation Positive demand shock P + and Q +Fashion, tastes Negative supply shock P + and Q -Taxes, legal restriction Negative demand shock P – and Q -Terrorism, war

Example of adaptation process Technological innovation Decreasing price Increasing quantity Causality (like the demand law, or the supply law) 2.Correlation: price and quantity are both affected by technological shock 3.Question : give the difference between the demand law or the supply law And the equilibrium law

The Price effect The price-elasticity measure the sensitivity of supply or demand (Q) to a change in price (P). Price (P), receipt (R) and elasticity ( )

The income effect The income elasticity of tourism demand - Definition - Give the mathematical formulation - the distinction between primary/luxury good : for luxury good, income elasticity of demand exceed 1. Question : In which category do you range tourism goods & services ?

Real world demand elasticities in international tourism International travel is a luxury good with income elasticities of demand exceeding 1. Consumers appear to be more price sensitive to the cost transportation and currency change rather to destination price. Demand for international travel is generally not very responsive to the promotional or marketing expenditures of national tourist offices.

The Maslow pyramid (1954) The basic concept is that the higher needs (tourism) in this hierarchy only come into focus once all the needs that are lower down in the pyramid are mainly or entirely satisfied. Growth forces create upward movement in the hierarchy. How does the Maslow pyramid illustrates the connection between income and demand ?

Exercises Exercises 1 and 2

Public and private interactions in tourism supply Tourism goods & services Private components (tourism strategy) Public components (tourism policy) Transportation Hospitality entertainment & services Heritage, climate Institutions Infrastructure Generic information Question: Describe the objective of each area

Dynamical interactions The state produces public Good & services Firms combines public input with privates input To create wealth Wealth increasing Public sector Private sector Taxes Revenue

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