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Chapter 4 Tourism Demand Determinants and Forecasting


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Title: Chapter 4 Tourism Demand Determinants and Forecasting

Chapter 4Tourism Demand Determinants and
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
  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

Determinants of Tourism Demand at the Individual
  • 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

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.

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
  • Individual levels of paid holiday entitlement
    would seem to be an obvious determinant of travel
  • The pattern of entitlement is also responsible in
    part for seasonality of tourism in some

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.

Race and gender
  • These are two critical determinants of tourism
  • Most surveys indicated that whites and males are
    the highest levels of effective demand for
  • However changes in society acting to complicate
    this rather simplistic view.
  • For example in Japan, office ladies are important
    consumers for travel.

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
  • Each stage of the life cycle has
  • Preoccupations mental absorptions from
  • Interests feelings of what an individual would
    like to do
  • Activities actions of an individual

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

Figure 4.1 Traditional leisure paradox
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

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.

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
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

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,
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
Forecasting Tourism Demand
  • Quantitative techniques
  • Causative models
  • Non-causative models
  • Qualitative techniques
  • The Delphi technique
  • Scenario writing

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
  • 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

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.

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.

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...

Figure 4.3 The Delphi process Source Witt and
Martin, 1989
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

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.

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
  • 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

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

Table 4.9 International tourism trends arrivals
and receipts worldwide, 19502002 Source WTO,
Table 4.10 Regional share of international
tourism, 19502000 Source Based on WTO data,
Table 4.10 Regional share of international
tourism, 19502000 (contd) Source Based on
WTO data, annual
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

  • 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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