Tourism Demand

Tourism Demand Research & Analysis International Tourism Demand Estimation Demand Theory Switzerland Tourism Attraction Sales Cambodia Tourism Attraction Sales Tourism & Employment Suggestions Tourism Demand Tourism may be defined as, "The sum of the phenomena and relationships arising from the interaction of tourists, business suppliers, host governments and host communities in the process of attracting and hosting these tourists and other visitors," (McIntosh and Goeldner, 1990, p. 4). From the above definition, it can be seen that the development of tourism in any area involves multiple players.

In addition, tourism is made of up numerous activities, services, and industries that contribute to the tourists' experience. These include the provision of transportation and accommodation; eating and drinking establishments; entertainment facilities; and shops, among others (McIntosh and Goeldner, 1990). Edgell (1990, p. 12) adds that, "The full scope of international travel and tourism, therefore, encompasses the output of segments of many industries. The travel 'industry' consumes the output of and creates a far-reaching base of wealth for feeder industries such as agriculture, fishing, food processing, brewing, construction, airports, automobiles, and furniture.

In addition, tourist activities make use of the services of other industries such as insurance, credit cards, advertising, and data processing." The tourism industry is therefore not a 'stand-alone' industry, but has relations that cut across industry, product and service lines. This is a fact that has significance when considering the impacts of tourism on a host country. In much of the current literature, tourism development is usually linked to the activities of developing countries. However, Roche (1992, p.

566), made the observation that while the development of tourism has been viewed as a symbol of 'westernization' and progress, particularly in what are known as developing countries, its "role as both a symbol and vehicle of economic and socio-cultural change and 'modernization' is potentially just as significant for the advanced industrial countries." 2. Tourism Demand The key challenge in measuring tourism impacts on an economy is that tourism is part of many different industries, but comprises 100% of no one industry (Global Insights, 2003).

Conventionally, tourism has been measured from the demand side, reflecting the amount of expenditures made by visitors to local areas. Other economic sectors have traditionally been measured from the supply side, looking at production inputs and outputs to determine their effect on the overall economy. This has made comparison difficult. There have been a number of attempts to bring tourism in line with other industry measurements internationally.

The most common form of economic impact measurement is the input/output model (I/O), which only looks at the products and services produced by the tourist sectors and how this production impacts the regional economy. It does not take into account tourism spending patterns, only the production of commodities by industries assigned to tourism sectors. The next step was the development of the tourism satellite account (TSA), which incorporates demand in the form of tourism expenditures when assessing impacts.

The final impact model approach is computable general equilibrium modeling (CGE), including tourism policy and forecasting models. Each model is a step closer in the comprehensive measurement of assessing the true impacts of tourism on local economies, and each model is based on adjustments to previous models. Edgell reports that in 1989, there were 403 million international tourist arrivals worldwide, and that the international tourist receipts exceeded U.S. $208 billion. According to the World Tourism Organization's (WTO) Tourism Highlights 2006 Edition, the total number of worldwide international tourist arrivals in 2005 was 806 million.

With the number of wars, natural disasters, terrorist activities that occurred between 1989 and 2005, this doubling of the scale of tourism is no doubt significant. The total international tourist receipts in 2005 tripled to U.S. $680 billion. Looking at the international tourist arrivals by region in 2005, Europe took the lead with 441.5 million, followed by Asia and the Pacific, the Americas, the Middle East and Africa with 155.4 million, 133.5 million, 39.1 million, and 36.7 million respectively.

The ranking of the international tourist receipts was similar to that of the arrivals with Europe receiving more than half (U.S.$348.2 billion), and Africa bringing up the rear with U.S.$21.5 billion. While these figures do not specifically detail the totals for individual countries in arrivals or revenue, it can be seen that the distribution of both is skewed among global regions.

Tourism is a very complex phenomenon which has been viewed from various perspectives and studies by disciplines, such as economics, psychology, sociology, marketing, geography, and political science (Lundberg, Krishnamoorthy, & Stavenga, 1995; Przeclawski, 1993). Consequently, each discipline has provided a partial rather than a holistic point-of-view regarding the factors that influence tourism activities including choice of destinations, and expenditure patterns (Song & Wong, 2003). International Tourism Demand Estimation Depending on the objectives and circumstances of the research, various functional forms have been used in empirical international tourism demand studies.

Until the mid-1980s, most of the international tourism demand studies adopted a causal econometric approach that is represented by the single equation method, either in a linear or in a power equation format (Barry & O'Hagan, 1972; Gray, 1966; Stronge & Redman, 1982). As new economic theory and econometric methods have developed, tourism researchers applied those techniques in an attempt to develop an international tourism demand model, which was expected to include the most appropriate variables in the model and provide significant estimation results.

Since the introduction of the Almost Ideal Demand System (AIDS) method (Deaton & Muellbauer, 1980b), tourism researchers and applied economists adopted the AIDS method to analyze international tourism demand particularly in a region where many competing tourism destinations adjoin each other. Over sixty percent of the previous international tourism demand studies adopted the number of international tourist visitations (or arrivals) as the measure of international tourism demand (Crouch, 1994). Both tourist arrivals and tourism expenditure have their own limitations.

Song and Witt (2000) indicated that tourist visitation data are collected via frontier counts, or registration at accommodation establishments, but this procedure does not account for day-trippers or visitors with friends and relatives especially when the data relied on the record from lodging facilities. Demand Theory In general, demand theory suggests that consumers respond to a price decline by buying more of a product. In the tourism industry, the demand for tourism theoretically increases when trip costs decline (Loomis & Walsh, 1997).

But the actual degree of consumer responsiveness to a price change can vary considerably depending on product or destination. Economists measure how responsive, or sensitive, consumers are to changes in the price of a product by employing the concept of price elasticity. Loomis and Walsh (1997) suggested that price elasticity of demand is a convenient way of comparing how price changes affect demand. Basically, price elasticity of demand is the ratio of two percentages: percentage of the change in the demand, and percentage of the change in price.

Based on the economic theory that luxury products have elastic price demand, one can assume that international, being luxury product has price sensitive demand. In the literature, however, one finds the results of price elasticity of international tourism demand studies to be highly varied. Tourism demand appears to be price elastic for some international destinations and inelastic for others. In 1995, a White House Conference on travel and tourism expressed the concern in the difficulty of linking demand-side side measurements of tourism with the measurement of other economic sectors.

The result was a partnership between the U.S. Department of Commerce and the travel and tourism industries through which the travel and tourism satellite account was developed. This model provided the needed consistency between U.S. national economic accounts. In 1997, the Tourism Industries Office of the International Trade Administration, the U.S. Department of Commerce and the Bureau of Economic Affairs formalized the Travel and Tourism Satellite Accounts (TTSA). The Tourism Satellite Account (TSA) was revised by the World Tourism Association and ratified by the United Nations in 2000.

Since then, numerous TSAs have been developed both nationally and globally. At this time, Alaska, Delaware, South Carolina, Virginia, Hawaii, New Jersey, Rhode Island and North Carolina have completed similar studies (Global Insights, 2005). The World Tourism Association has sanctioned numerous international studies, including TSAs for New Zealand, the United Kingdom, China, Philippians and the European Union. Computable general equilibrium modeling (CGE) is an alternative modeling approach to assess changes in economic factors to determine the impacts on the local economy.

CGEs derive their strength through tourism planning, policy analysis and forecasting. CGEs use data provided by TSAs, but provide added instruments in their flexibility, such as measuring changes in demand due to price or regulatory changes within the industry.

Whereas the I/O and TSA models rely on an initial stimulus which is traced through the economic system in a deterministic way, CGE models tell how economic agents react to changes in the economy and then solve a system of equations simultaneously for all markets, production sectors and economic agents (Blake, 2004). 3. Data Analysis Switzerland The world economic forum report has included Switzerland amongst for having the most attractive environments for developing the tourism sites.

Travel and tourism is a viable economic development alternative as it injects money from outside sources into the local economy, primarily through visiting tourism spending on locally produced goods and services. As an export-based industry, tourism generates regional income that contributes to the development of other services and amenities, such as housing and retail that are used by local residents. Such industries are characterized as having a "competitive advantage." During the last five years Switzerland received an average 15,810 arrivals annually.

Statistics show a gradual but slow increase in the number of tourists arrived at Switzerland with 11,878 tourists in 2005 and 13,747 in 2010. (Euro monitor, 2011) Considering the business and leisure arrivals, the number of leisure arrivals is greater. On an average of 8, 757 tourists visited Germany annually during the last five years while the average number of leisure tourists has been 19m946 per year. Tourism Attraction Sales Five years data on tourism attraction sales show that sales increased by USD 1250 Million to USD 1330 Million which is a proof of improvement in Switzerland tourism industry.

Tourism attractions in Switzerland include Casinos which generated highest amount of revenue (USD 909.7 annually) followed by Theme/Amusement Parks (USD 117.5 Annually); Museums (USD 100.8) and National Parks (USD 85.2) Table 1-Tourism Attraction Sales 2005-2010 (Switzerland) Categories 2005 2006 2007 2008 2009 2010 Average Tourist Attractions 1,252.9 1,347.3 1,434.4 1,454.1 1,330.6 1,360.4 1,363.3 Art Galleries 34.2 36.1 37.6 38.2 37.1 38.1 36.9 Casinos Circuses 0.0 Historic Buildings/Sites 15.5 16.1 16.9 17.1 16.2 16.4 16.4 Museums 93.5 96.7 99.4 National Parks/Areas Of Natural Beauty 77.7 83.1 86.5 87.5 88.0 88.2 85.2 Theatres 0.0 Theme/Amusement Parks Zoos/Aquariums 73.0 76.8 82.4 84.3 83.6 93.7 82.3 Other Tourist Attractions 13.5 14.0 15.1 15.2 14.9 15.4 14.7 Source: Travel and Tourism: Euro monitors from trade sources/national statistics Cambodia As compared to Switzerland we see lesser number of international arrivals at Cambodia received with an average of 2290 arrivals annually.

The five years (2005-2010) data show that international business and leisure increased during this time period, as in 2005 the number of international arrivals at Cambodia was 1421 which rose to 2386 in 2010 (Euromonitor, 2011) While seeing the arrivals by purpose of visits we see that an average of 2,125 individuals visited Cambodia for leisure purpose while remaining 165 arrived at Cambodia fro business purpose. Similarly, in Switzerland an average of 13,151 persons arrived for leisure purpose and remaining 2659 visited Switzerland for the purpose of business.

(Euromonitor, 2011) Tourism Attraction Sales The author chose to conduct data analysis sales during 2005 to 2010 to explore the tourism demand and growth of Cambodia. Table-2 presents six years data on tourism attraction sales and it is clear that sales increased by USD 49.3 Million to USD 140 Million which is a proof of improvement in Switzerland tourism industry. 4.

Tourism & Employment Attempts at measuring the economic impacts of tourism on economies have been made since the early 1990s (see Maki, 1989, Fletcher, 1989, Fletcher and Archer, 1991) and the frustration in accurate measurement techniques shortly followed (see OECD, 1991, Zhou. 1997, Okubo and Planting, 1998). Additionally, empirical studies showed that impact variables, such as regional multipliers, varied substantially. Attempts to allocate state-wide measurements at the regional or county level were affected by the size of a region and its local population (Weirsma, 2004).

Chang (2002) established that tourism multipliers have a significant relationship to the natural log of a region's population. Chang also determined that employment multipliers have an inverse relationship to population and output multipliers have a positive relationship to population. Fletcher. (2001) ranked income multipliers by country and found that multipliers were larger for larger and more developed economies An examination of the literature reveals a number of benefits that are gained by host countries through the promotion of their tourism industries.

One of the most commonly listed is the creation of jobs (Edgell, 1990; Poirier, 1995; Teo, 2003; Vanegas Sr. & Croes, 2003). Edgell states that in the late 1980s, the tourism industry in the United States generated approximately 6 million jobs with total estimated payrolls of about $74 million. He adds that not only does the tourism industry require high numbers of highly skilled workers, but it also provides employment for "hard-to employ lower-skilled labor." Additional variation can be found by tourism type.

In a study for the Scottish Parliament (2002), tourism was defined through two categories; hard tourism such as accommodations, and soft tourism; such as land-based tourism including estates, farms and forests. Based on a study by Slee (1997), the money spent in hard tourism was found to leave the economy much quicker than money collected through soft tourism. This was explainable because the large firms associated with hard sectors were less connected to the local economy. However, traditional economic measurement techniques were unable to separate hard tourism from soft tourism expenditures.

Tyrell (1999) found that while day trippers had similar multipliers as overnight visitors, seasonal residents have a lower impact because a large proportion of their purchases were out of state. Finally, seasonal variations in a country's gross domestic product create unreliable effects of tourism spending. Roche (1992) also remarks that, "probably the main political and social stimuli and motivations for developing a tourism industry at all derive from its assumed potential to generate employment," (p. 567).

Hall (1994) writes that tourism's importance to European Economic Community's development plan has to do with the perception that it is a labor-intensive industry that provides greater opportunities for employment unlike other industries that have replaced human labor with machinery. Another benefit Edgell talks about is the multiplier effect that results from tourism-related activities. For instance, as tourists pay for their meals in restaurants, the restaurant operators in turn use a part of that revenue to purchase more food items from local grocery stores and suppliers.

They, in turn, use part of their revenue to purchase more items from agricultural producers. Therefore, in effect, the initial revenue generates a ripple effect in the economy. Another aspect of the multiplier effect that occurs has to do with the fact that the tourism industry is not isolated, but closely linked to other services and industries. So that as the tourism industry expands, there is an accompanying expansion in these associated industries with the potential to generate additional employment.

There is also the provision, development and/or upgrade of tourism-related infrastructure that can be seen as a benefit of tourism (Hall, 1994). This can involve housing, transportation, and health facilities and services. 5. Suggestions "Despite its recent difficulties, the T&T sector is widely recognized as a critical sector worldwide and one that provides significant potential for economic growth and development.

A growing national T&T sector contributes to employment, raises national income, and can improve a country's balance of payments" (World Economic Forum, 2011) In order to construct a successful tourism development strategy, it is necessary to understand both the supply and demand sides of the industry. It requires the voluntary commitment of tourism companies to apply environmentally sustainable management practices as well as demand for these practices from consumers (Dewhurst & Thomas, 2003; Liu, 2003; Rivera, 2004).

Research confirms a trend toward consumer preference for environmentally friendly products, such as ecotourism and sustainable tourism practices (Luzaz & Cosse, 1998b). Van den Bergh and Van der Straaten (1994) defined sustainability as "the ability to be continued indefinitely in time." Although it had been previously mentioned in the literature, sustainability in relation with impact of human on the natural environment has especially attracted the attention of researchers during the past two decades. Sustainability also concerns economic development. In developing countries, environmental problems seem to result from overpopulation and poverty.

Under the burden of increasing population, most developing countries have no choice but to overexploit natural resources for food and energy (Parikh & Parikh, 1998). "Sustainable tourism" is an -- specific topic of sustainable development. From this perspective, tourism contains elements of both economic growth and the desire to sustain the resources upon which this growth depends for a long period of time. However, some researchers have argued that the impacts of tourism on the natural environment are insignificant compared to the impacts from the other industries (Gee, 1989).

For this reason, (M.Honey, 1999) suggests that sustainable tourism development should focus more on sustaining the social and cultural structure rather than on the ecological dimension of sustainability. However, another point of vie in the tourism literature argues that ecological dimensions are as important as social and economic aspects of sustainable tourism because tourism itself has been repeatedly shown to impose significant impacts on the natural environment (Nelson, 1999; Peters, 1969; Nowforth & Munt, 1998). Tourism, by its nature, requires constant interaction between tourists and host communities.

As a result, cultural and social disruption is a serious issue (V.L. Smith, 1977). In addition to economic measurement such as income and economic growth, a free of crime, politically stable and maintaining moral values living environment is more desirable than a society that is unstable, unsafe and morally corrupts (Butler, 1974). Switzerland is already considered in developed countries and it has been found to be amongst the most attractive destinations for tourists.

The data shows a growth in tourism in Switzerland as well as in Cambodia during the years 2005-2010 but the growth ratio has been slow in Cambodia as compared to Switzerland. The suggestion for both the countries are; First of all, it would be helpful to look into the impact of the dominance of foreign capital on tourism industry in both country and the economy as a whole;.