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DEMAND AND SUPPLY TRENDS IN TOURISM

DEMAND AND SUPPLY TRENDS IN TOURISM. PROF. Dr. N VANHOVE. DEMAND TRENDS. HIGH GROWTH RATE. E xpansion incessante du tourisme international . De 25 millions en 1950 à 694 millions Moyenne de croissance 1990-2003 : 3,3 % / an Moyenne du taux annuel de croissance : 1950-1960 : 10,6 %

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DEMAND AND SUPPLY TRENDS IN TOURISM

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  1. DEMAND AND SUPPLY TRENDSIN TOURISM PROF. Dr. N VANHOVE

  2. DEMAND TRENDS

  3. HIGH GROWTH RATE

  4. Expansion incessante du tourisme international • De 25 millions en 1950 à 694 millions • Moyenne de croissance 1990-2003 : 3,3 % / an • Moyenne du taux annuel de croissance : • 1950-1960: 10,6 % • 1960-1970: 9,1 % • 1970-1980: 5,6 % • 1980-1990: 4,8 % • 1990-2000: 4,2 %

  5. Growth: 2000-2020 -WTO

  6. The maindeterminants • economic factors • comparative prices • demographic • geographic • socio- cultural attitudes to tourism • mobility • government/regulatory • media communications • information and communication technology

  7. Economic factors • Disposable and discretionary income • 30 countries of origin account for over 90% of world travel • Income elasticity of demand: the market is judged to be elastic • Income distribution • Expectations • Marginaldiscretionaryspending

  8. Comparativeprices • price or perceived price of a destination is very important • exchange rate ( see rates $ to £ or €) • comparative level of inflation in the destination and country of origin • price of oil

  9. DEMAND Trends • Globalisation • Fragmentation • Growing importance of eco-tourism • Changed values • Changing lifestyles (e.g. bourgeois bohemian) • More independent tourists as opposed to mass tourism • New types of holidays and special interest • quality-consciousness (value for money) • More experienced and educated holidaymakers • More flexible tourists • From products to experience • Enough is enough

  10. The irreversibleprocessof globalisation • GENERIC TERM • THREE BASIC ELEMENTS : • GEOGRAPHICAL • CONVERGENCE IN WORLD TASTE • INTERNATIONALLY SIMILAR PRACTICES

  11. Int. Tourist Arrivals- Long Haul(%) • RECEIVING REGION

  12. Part du tourisme de longue distance dans le nombre total des arrivées du tourisme international, 1995-2020

  13. The more demandingconsumer • more affluent • better educated • more healthy and more interested in active pursuits • older • more travelled • more exposed to the media and information • more computer literate • more heterogeneous and individualistic • more culturally diverse in terms of ethnic origin

  14. Staggering of holidays • Why? • consumer interest • social aspect • public expenditure • employment • inefficient use of tourism assets • ecological factors • Why concentration? • climate • School-holidays ( most important factor) • organization annual leaves in business • psychological factors

  15. How tosolveconcentration? • German rolling system • Complementary measures • promotion off season • price policy • accompanied measures in the tourist centres • Final considerations • European solution? • Staggering and price

  16. SUPPLY TRENDS

  17. MORE PURPOSE BUILT ATTRACTIONS • TYPE: • PRIMARY NATURAL ATTRACTIONS • PRIMARY MAN-MADE ATTRACTIONS • PURPOSE- BUILT ATTRACTIONS • SCOPE: • LONG STAY OVER • TOURING CIRCUIT • STOPOVER • DEGREE OF PERMANENCY • SITE ATTRACTIONS • EVENT ATTRACTIONS

  18. SUPPLY COMPONENTS -UNWTO • ATTRACTIONS • PUBLIC AND PRIVATE AMENITIES • ACCESSSIBILITY • HUMAN RESOURCES • IMAGE AND CHARACTER • PRICE

  19. SUPPLY TRENDS • MORE DESTINATIONS • NEW TYPES OF ATTRACTIONS • CONCENTRATION • MARKET STRUCTURES – OLIGOPOLY • MOVEMENTS IN THE HOTEL SECTOR • THEME PARKS • TIMESHARING • INDOOR RESORTS • ALL INCLUSIVE RESORTS • BRANDING • TECHNOLOGICAL EVOLUTION AFFECTING T.

  20. Typology of markets Number of buyers a few one many bilateral one monopoly monopoly number suppliers a few oligopoly many monopsony oligopsony competition

  21. MARKET STRUCTURES AND PRICING

  22. TOURISM SUPPLY AND MARKET STRUCTURE • PERFECT COMPETITION • MONOPOLY • MONOPOLISTIC COMPETITION • OLIGOPOLY

  23. OLIGOPOLY • SMALL NUMBER OF PRODUCERS DOMINATE THE INDUSTRY ( e.g. INTERNATIONAL AIRLINE INDUSTRY). • EACH FIRM HAS SOME CONTROL OVER ITS PRICE AND OUTPUT DECISIONS AND THERE ARE SOME BARRIERS TO ENTRY AND EXIT. • THE KEY CHARACTERISTIC IS THE INTERDEPENDENCE BETWEEN PRODUCERS SO THAT EACH FIRM’S PRICE AND OUTPUT DECISIONS DEPEND, IN PART, ON THOSE OF ITS COMPETITORS. • THE PREVAILING MARKET PRICE IS THE PROFIT-MAXIMIZING PRICE FOR THE FIRM

  24. MARKET STRUCTURES AND ACCOMODATION • GREAT DIVERSITY • LARGE CHAIN HOTELS BUT HOLIDIDAY TOURISM IS MOSTLY FRAGMENTED • WIDE RANGE IN QUALITY (CAMPING, TIMESHARE) • FIXED CAPACITY: • HIGH FIXED COSTS DRIVE OPERATORS TO ATTAIN HIGH OCCUPANCY RATES THROUGH SUCH DEVICES AS DIFFERENTIATION AND SEGMENTATION. THESE CHARACTERISTICS TEND TO INVOLVE ELEMENTS BOTH MONOPOLY AND OLIGOPOLY (e.g; LUXURY)

  25. MARKET STRUCTURES AND TO • IN USA AND IN EUROPE THERE ARE SOME LARGE PLAYERS; THEY CONTROL A LARGE SHARE OF THE MARKET • LOW ENTRY COST • FIERCE COMPETITION, LOW MARGINS • ECONOMIES OF SCALE AND SCOPE • THE DEGREE OF CONCENTRATION OF MARKET SHARE IN THE PACKAGE HOLIDAY SEGMENT SUGGESTS AN OLIGOPOLISTIC STUCTURE (REALITY IS MORE COMPLEX; NICHE PLAYERS)

  26. MARKET STRUCTURES AND TA • RELATIVE HIGH CONCENTRATION - FIRM WITH MULTIPLE OUTLETS ( IN UK 5 CONTROL A THIRD) SOME ARE INTEGRATED WITH TOS OR CARRIERS • LOW ENTRY COSTS • ECONOMIES OF SCALE AND SCOPE • LOCATION IS IMPORTANT • OLIGOPOLISTIC AND COMPETITIVE SITUATIONS

  27. MARKET STRUCTURES AND AIRLINES • AIRLINES ARE HIGH FIXED COST ENTERPRISES WITH FIXED CAPACITIES - HIGH PAYLOADS • SHORT-HAUL FLIGHTS ARE RELATIVELY MORE EXPENSIVE THAN LONG-HAUL CARRIAGE ( FEWER HOURS IN THE AIR) • TO MAXIMIZE THE PAYLOAD THE AIRLINES APPLY ‘YIELD MANAGEMENT’ (IS AKIN TO PERFECTLY DISCRIMINATING MONOPOLY PRICING) • MORE CONCENTRATION IS LIKELY- HIGHER PRICES • OLIGOPOLISTIC MARKET; SOMETIMES MONOPOLY POWERS

  28. CONCENTRATION MOVEMENT • AIR CARRIERS • AIR FRANCE - KLM • BRITISH AIRWAYS - IBERIA • UNITED – CONTINENTAL • AIRLINE ALLIANCES • STAR ALLIANCE • SKY TEAM • ONEWORLD • TOUR-OPERATING • HOTEL SECTOR

  29. TYPES OF ALLIANCES • COMPLEMENTARY ALLIANCES • PARALLEL ALLIANCES

  30. ALLIANCES AND IMPROVING THE EFFICIENCY AND SERVICES OF AIRLINES • JOINT PROCUREMENT • JOINT OPERATIONS • JOINT BACK OFFICE • CO-MARKETING • CO-SERVICES

  31. ALLIANCES AND COST-REDUCTION OPPORTUNITIES • FINANCE AND UTILIZATION • AIRLINE OPERATION • EXTERNAL ( e.g. AIRCRAFT MANUFACTURERS) • RISK-SHARING

  32. ALLIANCES AND CONSUMERS • ‘SEAMLESS’ TRAVEL (SERVING A LARGE NUMBER OF CITIES) • ITINERARY AND ROUTING CHOICES • FREQUENCY AND CONVENIENCE OF CONNECTING • CONSUMERS CAN BENEFIT FROM LOWER FARES

  33. MOVEMENTS IN THE HOTEL SECTOR • GROWING CONCENTRATION • FRANCHISING/INCREASING CHAIN PENETATION: TOP TEN BRAND COMPANIES

  34. TOP SEVEN HOTEL GROUPS- 2008 (x 1000 ROOMS)

  35. FRANCHISING • DEFINITION • ADVANTAGES FRANCHISEE • ADVANTAGES FOR THE FRANCHISER • TYPICAL FRANCHISERS

  36. Franchising • DEFINITION: “FRANCHISING CAN BE DEFINED AS A CONTRACTUAL BOND OF INTEREST IN WHICH THE FRANCHISOR, WHICH HAS DEVELOPED A PATTERN OR FORMULA FOR THE MANUFACTURE AND/OR SALE OF GOODS/SERVICES, EXTENDS TO OTHERS ( THE FRANCHISEE) THE RIGHT TO CARRY ON THE BUSINESS, SUBJECT TO A NUMBER OF RESTRICTIONS, CONTROLS AND CONSIDERATION “ ( T HUDSON) • “ FRANCHISING CAN BE DESCRIBED AS THE SELLING BY THE FRANCHISOR OF THE RIGHT TO MARKET A PROVEN PRODUCT…; FRANCHISING MUST BE LOOKED AT AS A TWO-WAY STREET: THE FRANCHISOR PROVIDES CERTAIN SERVICES AND CONVEYS CERTAIN RIGHTS TO THE FRANCHISEE, AND THE FRANCHISEE IN TURN HAS CERTAIN OBLIGATIONS TO THE FRANCHISOR”( GRAY & LIGOURI)

  37. Franchising - characteristics • DEFINITION: IT IS A LICENSE FOR A SPECIFIC PERIOD OF TIME TO TRADE IN A DEFINED GEOGRAPHIC AREA UNDER THE FRANCHISER’S NAME AND TO USE AN ASSOCIATED TRADE MARK OR LOGO • FORMULA HAS ALREADY BEEN TRIED AND TESTED • THE FRANCHISER PROVIDES THE ENTIRE BUSINESS CONCEPT - MANUAL • THE FRANCHISER EDUCATES THE FRANCHISEE • THE FRANCHISER PROVIDES BACK UP SERVICES - E.G. ADVERTISING • THE FRANCHISEE IS EXPECTED TO MAKE AN INITIAL INVESTMENT AND TO PAY A ROYALTY TO THE FRANCHISER

  38. Franchising - cont’d • REMUNERATION • DIFFERENT FORMS: BASIC FEE, FIXED AMOUNT PER OCCUPIED ROOM, % ON ROOM SALES, OPTIONS….. • FINANCIAL ADVANTAGES • LESS RISK • EASIER ACCESS TO LOANS • PROTECTION FRANCHISEE • WORKING IN A DEFINED GEOGRAPHIC AREA

  39. Franchise services • METHOD OR OPERATIONL PROCEDURE • MANUAL • TRAINING OF STAFF • TECHNICAL ASSISTANCE • RESEARCH POTENTIAL LOCATIONS • ARCHITECTURAL SERVICES, INTERIOR DESIGN • FINANCING • FURNITURE AND EQUIPMENT • MARKETING • NAME • RESERVATION SYSTEM • PROMOTION ( E.G. JOINT ADVERTISING)

  40. Obligationsfranchisee • “ TO MEET THE STANDARDS OF THE CHAIN” • SIZE OF THE ROOMS; FURNITURE, PARKING, SWIMMING POOL, SIZE OF THE BEDS ETC. • OPERATIONAL-QUALITY STANDARDS • RATES CHARGED • CHECK-OUT TIMES • CLEANLINESS • POLITENESS OF STAFF • QUALITY OF SERVICE • CHANGING OF LINEN • USE OF IDENTITY ITEMS

  41. MOVEMENTS IN THE HOTEL SECTOR (2) • MANAGEMENT CONTRACTS • HOTEL COMMERCIALISATION • BUDGET HOTELS • PS: MICE TOURISM AND HOTELS • SUCCESS CAPITAL CITIES DEPEND ON MANY FACTORS

  42. BRANDING • POSITIONING AND BRANDING • MANY BENEFITS • SINGLE-BRAND PHILOSOPHY • RANGE OF BRANDS • THE TEN BIGGEST HOTEL BRANDS • DESTINATION BRANDING – CORPORATE IDENTITY

  43. BIGGEST HOTEL BRANDS 2008

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