slide 4.1 cooper et al: tourism: principles and practice, 3e pearson education limited 2005, ©...

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Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors

Chapter 4Tourism Demand Determinants

and Forecasting

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This Lecture will give you

1. Familiarity with the determinants of demand which, at an individual level, are likely to affect propensity to travel;

2. An understanding of social, technological, economic and political influences on tourism demand;

3. An awareness of the reasons for forecasting demand for tourism;

4. An understanding of the major approaches to forecasting demand for tourism; and

5. An appreciation and explanation of the key historic and regional patterns of demand for tourism.

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Determinants of Tourism Demand at the Individual Scale

Determinants of demand – These are the parameters of travel possibility for the individual. They can be categorized into two groups. First group is lifestyle factors, while second group is known as life-cycle determinants. These factors are interrelated and complementary

A) Lifestyle determinants:– Income and employment– Paid holiday entitlement– Education and mobility– Race and gender

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Income and employmentIncome and employment

• These factors have an influence upon both the level and the nature of tourism demand.

• Gross income gives little indication of the money available to spend on tourism.

• The relationship between income and tourism is a complex one.

• Certain tourism activities are highly sensitive to income-such as skiing holidays while others insensitive to income changes –i.e. religious and business tourism.

• As discretionary income rises, the ability to partake (participate) as tourism is associated with the purchase of leisure oriented goods, travel may reach a peak.

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Paid holiday entitlementPaid holiday entitlementss• The increase in leisure time experienced by most

individuals in the developed world since 1950 is very substantial.

• In the developed western economies, individuals have anything from 35 to 50 hours free time a week at their disposal.

• Patterns of leisure time have changed over the past 20 years to allow three-day weekends , flexi time and longer periods of absence for those in employment

• Individual levels of paid holiday entitlement would seem to be an obvious determinant of travel propensity.

• The pattern of entitlement is also responsible in part for seasonality of tourism in some destinations.

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Education and mobilityEducation and mobility• The better educated the individual, the higher

the awareness of travel opportunities and susceptibility to information, media, advertising and sales promotion.

• Personel mobility has also an important influence on travel propensity especially with regard to domestic travels.

• The car is dominant recreational tool for both international and domestic tourism

• Ownership of car stimulates travel for pleasure.

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Race and genderRace and gender

• These are two critical determinants of tourism demand

• Most surveys indicated that whites and males are the highest levels of effective demand for tourism.

• However changes in society acting to complicate this rather simplistic view.

• For example in Japan, office ladies are important consumers for travel.

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Determinants of TourismDeterminants of TourismDemand at the Individual Scale (1Demand at the Individual Scale (1))

• Life cycle determinants can be thought of as either ‘chronological age’ or ‘domestic age’. Domestic age is a powerful travel determinant. The propensity to travel is closely related to an individuals age.

• Life cycle determinants: Domestic age refers to stage in the life-cycle reached by an individual, and different stages are caracterised by distinctive holiday demand and levels of travel propensity. Each stage of the life cycle has:– Preoccupations; mental absorptions from motivations– Interests; feelings of what an individual would like to do – Activities; actions of an individual

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Determinants of TourismDemand at the Individual Scale (2)

Life cycle determinants: Domestic age

The stages of the domestic life cycle are:– Childhood– Young adult/adolescence– Marriage– Empty nest– Old age

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Figure 4.1 Traditional leisure paradox

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Suppressed DemandCauses of suppressed demand include:

• Travel Cost; tourism competes with other products for available funds

• Lack of time; is a problem for some individuals who cannot allocate sufficient time to travel

• Ill health or handicap; is a physical limitation for many people.

• Family circumstance; single parents or who have to care for elderly relatives cannot participate to travel

• Government restrictions or security issues; are the currency controls and visa requirements

• Lack of interest; such as fear to fly by airplane

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Determinants of Demandat the Macro Scale

• Social Factors – include determinants such as population density, growth and distribution

• Technological factors – include determinants such as IT, transport and leisure technology

• Economic factors – include determinants such as level of development

• Political factors – include factors such as government involvement, subsidy and prohibition of travel.

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Table 4.1 The major determinants of tourism demandSource: Ulysal, M. (1998) ‘The determinants of tourism demand: a theoretical perspective’, pp. 79–98 in D. Ioannides and K. Debbage (eds) The Economic Geography of the Tourist Industry, London, Routledge

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The DemographicTransition and Tourism

The phases of the demographic transition are:

• The high stationary(stable) phase

• The early expanding phase

• The late expanding phase

• The low stationary phase

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Table 4.2 Economic development and tourisma Countries that are members of the Organization of Petroleum Exporting Countries (OPEC) are a notable exception in these regions.

Source: Boniface and Cooper 1987, adapted from Rostow, 1959

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Table 4.2 Economic development and tourism (cont’d)b Centrally planned economies merit a special classification, although most are at the drive to maturity stage.

Source: Boniface and Cooper 1987, adapted from Rostow, 1959

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Forecasting Tourism Demand

Quantitative techniques:

• Causative models• Non-causative models

Qualitative techniques:

• The Delphi technique• Scenario writing

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Causative models• These models attempt to predict changes in the

variables that cause tourism demand and to analyse the relationship between those vaiables and demand.

• The most well known of these approaches is econometric modelling, commonly using multiple regression.

• The advantage of this approach is that it allows to understand the underlying causes of demand and to forecast how these will change in future.

• It also allows us to ask “what if” questions to see how demand will change under a set of circumstances.

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Non-causative ModelsNon-causative Models

• These models are often known as time series time series modelsmodels . Essentially they rely on extrapolating future trends from the past and use techniques .

• While these models can be critisized as inappropriate for a volatile industry such as tourism where past situations may not carry forward into the future, they do deliver surprisingly accurate forecasts.

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Qualitative ApproachesQualitative Approaches

• These approaches are mainly used to product long term trends, or to examine specific scenarios in the future such as environmental or technological influences or the likely impact of new product.

• While there are a number of techniques available, the most common ones are the DELPHI technique and SCENARIO writing.

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DELPHIDELPHI technique• This technique relies upon a panel of experts to deliver

a concensus view of the future.• The panel is selected according to their expertise and a

questionnaire is compiled relating to the particular future trend or forecast required.

• Once the panel members have completed the questionnaire, results are combined and circulated to the panel to give them chance to change their views

• This process then goes through a number of iterations (repetitions), often three or four, before a concensus forecast is reached...

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Figure 4.3 The Delphi processSource: Witt and Martin, 1989

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Scenario Writing• This is not only a technique to forecast future

demand, but also an approach that clarifies the issues involved.

• It relies upon creating alternative hypothetical futures relating to particular “states” or sets of circumstances that will impact upon demand in the future.

• The steps are; 1) Baseline analysis, 2) A future scenario and 3) A future path for the future scenario.

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World Patterns ofTourism Demand

The regional pattern:

• Europe and the Americas have dominated world tourism in past decades.

• However, in the future, growth will be in East Asia and the Pacific.

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Issue in ForecastingTourism Demand

Issues in forecasting tourism demand include:• Accuracy – relates to the time horizon, and the

purpose of the forecast• Data – availability of good data is an issue in

tourism• Variables outside the control of tourism – these are

difficult to forecast• Identifying and quantifying variables – this is a

real issue; for example how do you quantify promotion?

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World Patterns ofTourism Demand

The historical pattern.• Since the second world war each decade has

been characterised by particular influences on demand:– 1980s: continued growth despite some setbacks

– 1990s: slowing growth

– 2000s: the challenges of the new millennium – ‘911’, Bali and the Iraq War leading to a ‘new normality’.

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Table 4.9 International tourism trends: arrivals and receipts worldwide,1950–2002

Source: WTO, annual

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Table 4.10 Regional share of international tourism, 1950–2000Source: Based on WTO data, annual

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Table 4.10 Regional share of international tourism, 1950–2000 (cont’d)Source: Based on WTO data, annual

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World Patterns ofWorld Patterns ofTourism DemandTourism Demand

Generating markets for tourism to a country depend on:

• The leading generators in the world• Neighbouring countries and their population• Access and border facilitation• Price• Marketing• Historic links• Attractiveness of the country

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Conclusions

• Determinants are important and all interrelated• Determinants mean that tourism is concentrated in

the developed countries of the world• As a service industry tourism is vulnerable to

changes in demand - this means that demand forecasting techniques are important

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