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 growthClimate 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 oftravelling

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

Technologicalinnovation

Decreasingprice

Increasingquantity

1

2

1. Causality (like the demand law, or the supply law)2. Correlation: price and quantity are both affected by technological shock3. Question : give the difference between the demand law or the supply lawAnd 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 producespublic

Good & services

Firms combinespublic input with

privates inputTo create wealth

Wealth increasing

Public sector Private sector

TaxesRevenue

References

Bull A. [1995] The Economics of travel and tourism. Longman Australia Ltd.

Caccomo J.L., Solonandrasana B. [2006] L’innovation dans l’industrie touristique. Deuxième édition, L’Harmattan, Paris.

Caccomo J.L. [2005] L’épopée de l’innovation, L’Harmattan, Paris.

Crouch G.I. [1995] « A meta-Analysis of tourism demand », Annals of Tourism Research, vol. 22,103-118.

Medlik S. [1995] Managing Tourism. Butterworth-Heinemann Ltd, Oxford.

Pizam A., Mansfeld Y. [1999] Consumer behaviour in travel and tourism. The Haworth Hospitality Press, New York and London.

Tisdell C. [2000] The Economics of Tourism. Edward Elgar Publishing Limited, Massachusetts.

Tribe J. [1995] The Economics of Leisure and tourism. Butterworth-Heinemann Ltd, Oxford.