Chapter 4 Tourism Demand Determinants and Forecasting

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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 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 entitlements

• 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 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 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 TourismDemand 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 Demand

• Causes 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
demand Source Ulysal, M. (1998) The
determinants of tourism demand a theoretical
perspective, pp. 7998 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 tourism a
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
(contd) 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 Models

• These models are often known as time series
  models . 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 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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DELPHI 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 process Source 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, 19502002 Source WTO,
annual
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Table 4.10 Regional share of international
tourism, 19502000 Source Based on WTO data,
annual
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Table 4.10 Regional share of international
tourism, 19502000 (contd) Source Based on
WTO data, annual
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World Patterns ofTourism 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