Travel and Tourism Business Dynamics

Introduction

Tourism is travel for recreational, leisure or business purposes and has become a popular global
leisure activity. Tourism is generally thought of as an activity in which individuals explore a
culture that is foreign to them. (Theobald, William F. (1998). This assignment is based on the
assumption that tourism is a system, which is a function of supply and demand interaction. It
examines the trends within the travel and tourism destination. It also show solutions to the
problems given related to price elasticity and cross elasticity of demand.

1. In the trends of world top tourism destinations, some are most popular destinations in
terms of its attractions, culture, education, and business .Tourism is concerned with why people
travel to a certain destination. Many attractions are educational in nature, others are solely for
entertainment.

a) Tourism attractions

Every province and territory of tourism destinations has major and minor attractions that attract
visitors and generate tourism revenue. Attractions include historic sites, heritage homes,
museums, halls of fame, art galleries, botanical gardens, aquariums, zoos, water parks,
amusement parks, casinos and cultural attractions. (Theobald, William F. (1998)

France is the most popular tourist destination in the world. France offers mountain ranges,
coastlines along the Mediterranean Sea, cities with a rich cultural heritage and vineyards.Villas
in France, the French wine and weather make a fantastic reason to see the country. Spain is the
second most visited country in the world. A tour of Spain would include a visit to its famous
cities Barcelona and Madrid. They have the most beautiful architectural designs on the buildings
of Spain. USA is a top destination for tourists. Holidays in USA are an experience in diversity as
the country having a distinct identity of their own. Russia has tourist attractions for the visitors to
watch the spectacular cathedrals, gigantic monuments majestic buildings and green parks
(Conrady, Roland / Buck, Martin, 2008)
b) Culture

Cultural tourism has been defined as 'the movement of persons to cultural attractions away from
their normal place of residence, with the intention to gather new information and experiences to
satisfy their cultural needs. Cultural tourism includes tourism in urban areas, particularly historic
or large cities and their cultural facilities such as museums and theatres. It can also include
tourism in rural areas showcasing the traditions of indigenous cultural communities (i.e.
festivals, rituals), and their values and lifestyle. (Theobald, William F. (1998).Cultural tourists
spend substantially more than standard tourists do. This form of tourism is also becoming
generally more popular throughout the world.

Aside from casual tourism France is the most visited country by tourists as the country is rich in
culture and has some of the finest places to see France attracts a lot of religious pilgrims. China
has grown as a top tourist spot as the people of the country and their unique culture attract people
from far and wide.

c) Business Investment

This type of tourism is undertaken by business people or sometimes individual. The business
people go on tour to satisfy their lust for traveling. They may sometimes mix business and
leisure tourism in business tourism.

The United Kingdom has many unique advantages as a destination for business events. Business
tourism in United Kingdom continues to grow from strength to strength. (Conrady, Roland /
Buck, Martin, 2008)

d) Tourism Products (Medical, Education etc.)

Medical tourism is a term initially coined by travel agencies and the mass media to describe the
rapidly-growing practice of traveling across international borders to obtain health care. In
educational tourism, the main focus of the tour or leisure activity includes visiting another
country to learn about the culture. (Theobald, William F. (1998)

The availability of advanced medical technology and sophisticated training of physicians are
cited as driving motivators for growth in foreigners traveling to the U.S. for medical care.
Germany is a destination for patients seeking advanced medical technology, high standards,
safety, and quick treatment. China is fast emerging as a desirable destination for individuals
seeking medical care in a wide range of medical specialties, including cardiology, neurology,
orthopedics and others. (Conrady, Roland / Buck, Martin,2008)

2.

Given Data;

Country Arrivals(Millions) Percentage Percentage

2006 2007 Change Change

2005/2004 2006/2005

France 75.9 79.1 1.0 4.2

Spain 55.9 58.5 6.6 4.5

Calculation

France: Change in quantity (in Millions) = 79.1 - 75.9 = 0.04

75.9

: Change in quantity (%) = 0.042*100 = 4.2

Spain: Change in quantity (in Millions) = 58.5 - 55.9 = 0.04

55.9

: Change in quantity (%) = 0.046*100 = 4.6

Here, price increased by 15%,

France: Difference in price (% Change) +15 (%) = 4.2 – 1.0 +15% = 0.18

Spain: Difference in price (% Change) +15 (%) = 4.5 – 6.6 +15% = 0.13

Country Quantity Price

(%) (%)

France 4.2 0.18

Spain 4.6 0.13

Where the percentage change in demand is greater than percentage change in price there the
demand is elastic. (Case, Karl E. & Fair, Ray C. (1999). Here the percentage in demand for
destinations is greater than the percentage change in price and so it clearly mentions that the
demand thus is perfectly elastic.
 Price (%)

P1 0.18

P2 0.13 Demand

0 2 4 Q1-4.2 Q2-4.6 6 8

Quantity (%)

DEMAND AND SUPPLY DIAGRAM (ELASTIC)

Here the demand and supply diagram clearly shows that it is perfectly elastic which means the
price increased by 15% for France and Spain holidays would make a fall down in the demand of
numbers of customers.

3. Price elasticity of demand (PED) is defined as the responsiveness of the quantity demanded of
a good or service to a change in its price.

Formula for used to calculate coefficients of price elasticity of demand for a given product is:
 PEoD = % Change in Quantity demanded

% Change in Price

Calculations

The data provided by a private beach resort operator is given below;

Price (Old entrance fee) = $150

Price (New entrance fee) = $200

Quantity Demanded (Old Number of Customers) = 2000

Quantity Demanded (New Number of Customers) =1500

% Change in Quantity demanded

The formula used to calculate the percentage change in quantity demanded is:

[QDemand (NEW) - QDemand (OLD)] / QDemand (OLD)

= 1500 - 2000/200 = -0.25

% Change in price

The formula used to calculate the percentage change in price is:

[Price (NEW) - Price (OLD)] / Price (OLD)

= 200 - 150/150 = 0.33

We have both the percentage change in quantity demand and the percentage change in price, so
we can calculate the price elasticity of demand.

PEoD = % Change in Quantity demanded

% Change in Price
 = - 0.25/0.33 = -0.75

Therefore;

• If PEoD > 1 then Demand is Price Elastic (Demand is sensitive to price changes)

• If PEoD = 1 then Demand is Unit Elastic

• If PEoD < 1 then Demand is Price Inelastic (Demand is not sensitive to price changes)

Here, the price elasticity of demand is less than one and so the demand is sensitive to the price
changes and is said to be price inelastic.

4. The cross elasticity of demand and cross price elasticity of demand measures the
responsiveness of the demand of a good to a change in the price of another good. Case, Karl E. &
Fair, Ray C. (1999).It is measured as the percentage change in demand for the first good that
occurs in response to a percentage change in price of the second good. The formula used to
calculate the cross elasticity of demand is

= % Change in Demand of Product A

% Change in Price of Product B

% Change in price = [Price (New ticket) - Price (Old ticket)] / Price (Old ticket)*100

= 8 - 5/5*100 = 60%

Given that the wax work exhibition in museum experiences a rise of average attendance figure

That is % Change in Demand = 10%

Cross price elasticity of demand= % Change in Demand of Product A = 10 / 60= 0.16

% Change in Price of Product B

Where the two goods are substitutes the cross elasticity of demand will be positive, so that as the
price of one goes up the demand of the other will increase.
Here, the cross elasticity of demand is positive .So in response to an increase in the ticket price
of the local country museum, the demand for ticket price will rise. In the case of perfect
substitutes, the cross elasticity of demand is equal to infinity.

Conclusion

The paper concludes that tourism is the world’s largest industry providing an indication of its
global importance being vital to the world economy. It also clearly shows that the market price is
determined by the interaction of supply and demand and an equilibrium price and quantity is
determined in the market place through the interaction of buyers and sellers.

References

Conrady, Roland / Buck, Martin: Trends and Issues in Global Tourism 2008, Springer-
Verlag.

Case, Karl E. & Fair, Ray C. (1999). Principles of Economics (5th ed.). Prentice-Hall.

Theobald, William F. (1998). Global Tourism (2nd ed.)Oxford [England]: Butterworth–

Heinemann