Chapter 1 Managing Tourism Demand

Learning Outcomes In this lecture we focus on the basic concepts, definitions and indicators of tourism demand to provide you with: An awareness of how approaches to the management of demand have changed since 1945; A thorough understanding of the concept and definitions of tourism demand; An awareness of the components of tourism demand; A grasp of the importance of indicators of demand such as propensity to travel; and A comprehension of the purpose of demand schedules and an understanding of how to interpret them.

Milestones in Tourism Demand Statements 1948 Universal Declaration of Human Rights 1980 Manila declaration 1994 Osaka Tourism declaration 1999 Global Code of Ethics for Tourism

Contrasting Approaches to Tourism Consumption The public sector: The Global Code of Ethics for Tourism Pressure groups and charities: Oxfam, Partners in Sustainable Tourism The tourism Industry: TUI

We can identify a number of official proclamations (announcements) which affirm (comfirm) every individual’s right to demand tourism. As far back as 1948 the United Nations (UN) stated in its Universal Declaration of Human Rights that everyone has the right to rest and leisure including … periodic holidays with pay.

By 1980 the Manila declaration on world tourism declared the ultimate aim of tourism to be: the improvement of the quality of life and the creation of better living conditions for all peoples (WTO, 1980). With this statement we can see the emphasis changing from the earlier right of everyone to demand tourism to statements of the quality of demand and the form of demand and/or experience.

This observation is supported by declarations in the 1990s which state that if individuals demand tourism, they must take responsibility for the environment and host societies: tourists share responsibility for conservation of the environment and cultural heritage (Osaka Tourism Declaration, WTO, 1994).

Yet as we approach and enter the new millennium it is still true that only a very small percentage of the world’s total population engages in international tourism and although a considerably greater number participate in domestic travel, tourism remains an unobtainable luxury for many individuals.

Definitions of tourism demand Definitions of demand vary according to the subject perspective of the author. For example, economists consider demand to be schedule of the amount of any product or service that people are willing and able to buy at each specific price in a set possible prices during a specified period of time.

Demand Schedules Figure 1.1 Individual’s demand for product X

Definitions of tourism demand In contrast psychologists view demand from the perspective of human motivations and behaviors. Geographers, on the other hand, define tourist demand as: “the total number of persons who travel, or wish to travel to use tourist facilities and services at places away from their places of work and residence”.

Definitions of tourism demand Each approach is useful. The economic approach introduces the idea of elasticity – which describes the relationship between demand and price, or other variable. The geographer’s definition implies a wide range of influences, in addition to price, as determinants of demand and includes not only those who actually participate in tourism, but also those who whish to, but for some reason do not.

On the other hand, the psychologist scratches(describes) underneath the skin of the tourist to examine the interaction of personality, environment and demand for tourism.

Concepts of tourism demand The notion that some individuals may harbor a demand for tourism but are unable to realize that demand suggests that demand for tourism consists of a number of components that make up the total demand for tourism: Effective/Actual Demand Suppressed demand Potential Deferred No demand Substitution Redirection New Supply

Concepts of tourism demand Effective or actual demand is the actual number of participants in tourism or those who are traveling, i.e. de facto tourists. This is the component of demand most commonly and easily measured and the bulk of tourism statistics refer to effective demand.

Concepts of tourism demand 2. Suppressed demand is made up of that section of the population who do not travel for some reason. Two elements of suppressed demand can be distinguished. Firstly, potential demand refers to those who will travel at some future date if they experience a change in their circumstances. For example, their purchasing power may increase, or they may receive more paid holiday entitlement, and they therefore have the potential to move into the effective demand category.

Suppressed demand Deferred demand is a demand postponed because of a problem in the supply environment, such as a lack of capacity in accommodations or maybe terrorists activity. Again this implies that when the supply conditions are more favorable, those in the deferred demand category will convert to effective demand at some future date.

Concepts of tourism demand 3. Finally, there will always be those who simply do not whish to travel, constituting a category of no demand We can also consider other ways in which demand for tourism may be viewed. For example, substitution of demand refers to the case when demand for one activity (say a self-catering holiday) is substituted by another (staying in serviced accommodation).

Concepts of tourism demand A similar concept is redirection of demand where the geographical location of demand is changed – say a trip to Spain is redirected to Greece because of over-booking of accommodation. Finally the opening of new tourism supply- say a resort attraction or accommodation- will: redirect demand from similar facilities in the area; substitute demand from other facilities; and generate new demand.

Concepts of tourism demand Economists refer to the first two of these as the displacement effect – in other words demand from other facilities is displaced to the new one and no extra demand is generated. This can be a problem in tourism and is an important consideration when appraising the worth of new tourism projects.

Travel Propensity A useful indicator of effective tourism demand in a population: Travel propensity: Net travel propensity Gross travel propensity Travel frequency Country Potential Generation Index

Indicators of tourism demand Travel propensity One of the most useful indicators of effective demand in any particular population is travel propensity. This measure simply considers the penetration of tourism trips in a population. There are two forms of travel propensity:

Travel propensity Net travel propensity refers to the percentage of the population that takes at least one tourism trip in a given period of time. In other words it is a measure of the penetration of travel among individuals in the population. The suppressed and no demand components will therefore ensure that net travel propensity never approaches 100 % and a figure of 70 % or % 80 is likely to be maximum for developed Western economies.

Indicators of tourism demand Gross travel propensity gives the total number of tourism trips taken as a percentage of the population. This is a measure of the penetration of trips not individual travelers. Clearly then as second and third holidays increase in importance so gross travel propensity becomes % 200 in some Western European countries where those participating in tourism may take more than one trips taken as a percentage of the population.

Indicators of tourism demand In other words, as second and third holidays increase in importance so gross travel propensity becomes more relevant. Gross travel propensity can exceed 100 % and often approaches 200 % in some Western European countries where those participating in tourism may take more than one trip away from home per annum

Indicators of tourism demand Simply dividing gross travel propensity by net, will give the travel frequency in other words, the average number of trips taken by those participating in tourism during the period in question (see Box 1.1.)

Out of population of 10 million inhabitants : 3.0 million inhabitants take one trip of one night or more i.e. 3 x 1 = 3.0 m trips 1.5 million inhabitants take two trips of one night ore more i.e. 1.5 x 2 = 3.0 m trips 0.4 million inhabitants take three trips of one night ore more i.e. 0.4 x 3 = 1.2 m trips 0.2 million inhabitants take four trips of one night ore more i.e. 0.2 x 4 = 0.8 m trips 5.1 million inhabitants take at least one trip, while total trips reach at 8.0 million.

Box 1.1: Calculation of travel propensity and travel frequency Net travel propensity= Number of population taking at least one trip Total population x 100 = 5.1 10 x 100 = 51 % Gross travel propensity = Number of total trip 8 x 100 = 80 % Travel frequency = = = 1.57 Gross travel propensity Net travel propensity 80 % 51 %

A further refinement to the above calculations is to assess the capability of a country to generate trips. This involves three stages. Firstly, the number of trips originating in the country is divided by the total number of trips taken in the world. This gives an index of the ability of each country to generate travelers.

Secondly, the population of the country is divided by the total population of the world, thus ranking each country by relative importance in relation to world population. By diving the result of the first stage by the result of the country potential generation index (CPGI) is produced.

An index of 1.0 indicates an average generation capability. Ne / Nw Pe / Pw CPGI = Where Ne = number of trips generated by country Nw = number of trips generated in world Pe = population of country Pw = population of world An index of 1.0 indicates an average generation capability. Countries with an index greater than unity(1.0) are generating more tourists than expected by their population. Countries with an index below 1.0 generate fewer trips than average.

Tourism Flows Push Factors – factors affecting tourist decisions to take trips arising from generation area – such as paid holidays, religion, health etc. Pull Factors – some attractions affecting tourism decisions to evaluate and choice destination – such as nature, history, monuments, men made atractions.. The Gravity Model: Destination attraction = ‘pull’ Market size = ‘push’ Distance = friction

The Gravity Model Model takes into account the push and pull factors that influence tourim demand. Model claims that the greater the “mass” of the generating region and the destination, the greater will be the tourist flows. The model also adds a constraining factor, that of distance and intervening opportunities. The greater the time and cost involved in reaching a destination from an origin point, the smaller will be the flow..

End of Chapter Slides