UNDERSTANDING TOURISM DEMAND

TOPIC 5
Learning Objectives:
• 1. Recognize the different forms of tourism demand

• 2. Understand the range of factors influencing tourism demand

• 3. Recognize the procedures for measuring tourism demand

Introduction
Tourism demand is defined as the number of people that plan
to buy tourism products supported by sufficient purchasing
power and spare time in order to meet tourism needs of people.

It also refers to the total number of people who travel or wish

to travel and use tourist facilities and services at places away
from their places of work or residence (Cooper et al. 1993).
ELEMENTS OF TOURISM DEMAND

1. Actual demand aggregates or total number of tourists recorded at a given

destination or location at a point in time. This is the type of demand that is easily
recognized. This is because it is just by reference to the tourism statistics at hand on
which the total number of tourists is shown. Either by purpose of visit or be origin.
ELEMENTS OF TOURISM DEMAND
2. Suppressed demand is the portion of the population that do not travel for some
reason. They have the willingness to travel. However, they are not able to do so due
to some reasons. They are divided into two: potential and deferred.
Potential demand is that he people that are more likely to travel or become actual
demand in the future when circumstances that are preventing them from travelling
change or allow.
Deferred demand is that the problem comes from the supply side such as the lack
of accommodation facilities, the weather condition at the destination, disease
outbreak among others.
ELEMENTS OF TOURISM DEMAND

3. No demand are the people who do not want to travel for tourism
purposes or simply do not participate in tourism activities. These kinds of
people are unwillingly to part-take in any tourism activities because of
insufficient time, lack of money, and their preference to spend their income
to non-tourism activities.
Factors influencing demand in the TGR
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.

Lifestyle determinants includes income, employment, holiday entitlement,

educational attainment and mobility.
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.
 Life Style Determinants
Paid Holiday Entitlement
• 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.
Education and Mobility

• The better educated the individual, the higher the

awareness of travel opportunities and susceptibility to
information, media, advertising and sales promotion.
Personnel mobility has also an important influence on
travel propensity especially about domestic travels.
The car is dominant recreational tool for both
international and domestic tourism. Ownership of car
stimulates travel for pleasure.
 Life Cycle Determinant

• Race and gender

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.
Factors Affecting Demand in TDR
1. DEMAND FOR INTERNATIONAL TOURISM
International tourism directly affects the balance of payments as an
invisible export entry. The significant contribution of international tourism appears on
the balance of payments account under the entry of international services. In order to
discuss the favorable effect of tourism on the balance of payments, the amount of
foreign currency revenues for a country must exceed the amount of foreign currency
expenditures.
Outbound Tourism – negative effect on resident country and positive on country
visited.
Inbound Tourism – positive effect on country visited and negative effect on resident
country.
2. DEMAND FOR DOMESTIC TOURISM
Domestic tourism demand is less susceptible than international tourism
demand to external factors such as exchange rate fluctuations and international
political events, and therefore is likely to be less volatile.
 CONCEPTS OF DEMAND MEASUREMENT
Product Level – This can be measured with regards to total product and the
tourism items being offered.

Geographical Level – A demand measurement on a world, regional, country or a

destination level.

Time-level – It could be on a time-being, short, medium or long term.

Levels of Market Definition
Market Measurement aids marketing executives in
understanding market or sales potential which is relevant
to a specific geographical area, period of time, product
and/or market segment.
For tourism, many of the applications of market
measurement relate to the size of the pleasure travel
market (overall) and the potential pleasure travel market
for a specific destination.
There are five levels of market definition:
 Level 1: TOTAL MARKET
• The total market consists of the total number of individuals
residing in the geographical area of interest. These
population figures are usually available from census data
produced by the government statistical agency.
• It is important to ensure that the population estimates
provided by the government statistical agency exactly match
the target population for the study. In doing so, it is
important to consider whether any of the screening criteria –
such as age, gender and region – for the target population
needs to be considered before establishing an accurate total
market population.
 Level 2: AVAILABLE MARKET
• Using the total market as a base, the next step is to
determine the available market, i.e., how many of these
individuals have no constraints (financial, access, or
otherwise). The available market often also stems from the
screening criteria that is in place for the study – i.e., whether
they are travelers (those who have taken, or plan to take, a
vacation trip within a certain timeframe), the distance of the
trip (e.g., outside the immediate region), having the means
to travel long-haul (defined by socio-economic or income
level), etc.
 Level 3: POTENTIAL MARKET
• The potential (or target) market is a broader estimate of the
market size based on expressed interest among all of the
available market. This is usually based on those very or
somewhat interested in visiting the destination in a certain
timeframe. Depending on whether immediacy comes into
play, the potential market can be taken one step further to
include only those who are definitely or very likely to visit
the destination in a certain timeframe. This Immediate
Potential is a more conservative method of calculating
market potential.
 Level 4: SERVED MARKET
• Once the potential market is known, it can be used to
determine the potential for the served market, that is a
particular region (based on current levels of interest in
visiting the region), a particular product (based on overall
interest levels for the product), or a particular segment
(based on the number of potential travelers in that segment).
 Level 5: PENETRATED MARKET

• The penetrated market is the final layer that

looks at the number of committed travelers –
those who have made a purchase decision.
A lot of time working through the numbers usually results in a simple table, but
the simple table shouldn’t imply it was a simple task to accurately work through
the steps. Using the results from the 2010 Global Tourism Watch summary
report and statistics from the 2011 Annual Report , the market definition for
China was:
Satisfaction with Tourist Destination
Tourist satisfaction is one of the most widely studied
factors in literature on tourism and hospitality. From this
perspective, specialized literature reveals the key role of
tourist satisfaction at the time of choosing a tourist
destination. In this regard, achieving customer
satisfaction could lead to a successful tourism industry.
As a matter of fact, considering the key role of
satisfaction in a tourist destination, it has been argued
repeatedly that, on one hand, the feeling of satisfaction
experienced by the tourist in a destination will be a
valuable antecedent to recommend or return to a place. In
other words, satisfaction will be an explicit antecedent to
tourist loyalty to a place.
When destination management is not satisfied with the present
demand:

 Lowering the price to have growth in the available market

 Extension of the served market

 Promotion campaign within the potential market

• Tourism Demand Measurement
Demand is made of all those travelling to some place (tourists
and destination). It can be measured by taking into account four
elements: people (tourists), money (expenditure, receipts), time
(stays and travels durations) and space (distances, lengths of
trips) (Song et al., 2010).
There are three variables in measuring tourism demands:
1. Volume Statistics
2. Value Statistics
3. Visitor Profile
1. Volume Statistics
“Tourism Statistics refers to applying statistical techniques to the
collection, computation, analysis and distribution of data on tourism” It is
the total number of individual tourist arrivals and the total number of
tourist departures.
No. of trips = (no. of individuals) (no. of trips per individual)
Total tourist nights = (no. of trips) (average length of stay)
This includes arrival in accommodation establishment, business trip,
country of residence, domestic tourism, duration of trip, inbound tourism,
internal tourism, outbound tourism, domestic tourism, and, national
tourism.
Travelers not included in the tourism statistics are border workers,
immigrants, nomads, transit passengers, refugees, members of armed
forces, consulates and diplomats.
 2. Value Statistics
Measurement of economic value of foreign visitors and outgoing visitors
(expenditure). For this to be measured the following has to be taken account to:
International tourism expenditure, international tourism receipts, and leisure trip.

International tourism expenditure is defined as: "expenditure of outbound

visitors in other countries including their payments to foreign carriers for
international transport.
International tourism receipts are defined (by WTO) as expenditure of
international inbound visitors including their payments to national carriers for
international transport. They also include any other payments or payments
afterwards made for goods and services received in the destination country.
A leisure trip refers to the purpose and motive of a visit. Trips (visits) for leisure,
recreation and holiday purposes outside the usual environment are mainly
undertaken for relaxation. ... This category covers trips to own holiday home,
visits to friends and relatives, as well as leisure cruises and same-day visits.
2. Visitor Profile
 Visitor’s name  Origin and Destination
 Mode of Transportation
 Age  Purpose of Visit
 Length of Stay
 Sex
 Accommodation used
 Group type  Activities
 Nationality  Tour od independently
 Occupation organized
 Income
Tourism Market Trends
 1. Solo Travel

Leisure travel used to be a family affair or something that couples

undertook together. While that’s still the case for many, more and more
people are choosing to strike out on their own. Enjoying a solo trip is
no longer so unusual and tourist trends increasingly reflect this. The
needs of solo travelers are diverse. Some simply want to travel without
the distraction of a companion. Others are young singles looking for
social activities or to find a partner. Some widowed seniors even use
long-term hotel stays or cruises as a luxurious alternative to
conventional elder care. These tourism trends are set to grow and grow.
 2. Eco Travel
Tourism trends are heavily influenced by the concerns and more of
the customer base. As a new generation becomes increasingly relevant in the
marketplace, the ideals driving their purchasing decisions create new tourism
trends. Eco travel is just one example of these tourism trends, reflecting a
growing concern among today’s travelers for ethical and sustainable tourism
options. Eco travel includes simple changes, such as the availability of
carbon credits when booking a flight or the option to rent an electric instead
of a conventional vehicle. More sophisticated examples might include
tourism with a volunteer element, perhaps working on a nature reserve or
engaging in conservation work.
 3. Local experience

Today’s tourists don’t want to be insulated from the places they visit
inside a cultural bubble. They want to engage with and participate in
the local culture. From enjoying local cuisine to celebrating regional
festivals and holidays, local experiences are set to become some of
the top tourist trends to watch. One example of a popular local
experience would be visiting Japan during a major festival, renting
formal Japanese clothes to wear, consuming regional delicacies and
engaging in traditional games or cultural activities. Another might be
a long stay with a host family in the destination country to learn more
about the local culture.
 4. Personalization
You’re probably familiar with those ads that pop up on social
media and certain other websites, ads related to things you’ve looked
at or purchased online. This is just one example of personalization.
As well as in marketing tourism more effectively, personalization can
apply to every aspect of the tourist experience. Today’s consumers
expect experiences that closely match their personal preferences,
from destinations to accommodation and the kinds of activities they’ll
engage in. The more closely an experience can be tailored to a client’s
desires and expectations, the more likely they are to return and to use
the same service again.
 5. Bleisure Travel: A Millennial Tourism Trend
The concept of combining leisure and tourism with travel for business is
hardly new: “bizcations” have been popular for many decades. As the
tourism sector attempts to woo a more frugal customer base, however, the
concept of bleisure travel has become increasingly relevant among tourism
trends. Bleisure travel tourism can take many forms. Sometimes a client
who is travelling for work decides to engage in tourism on their downtime;
in other cases, a company may arrange for tourist activities on work trips as
a perk. Another increasingly popular set of tourism trends relate to the
“digital nomad” phenomenon where online workers engage in travel.
 6. Robots, chatbots and automation
One of the more eye-catching examples of these particular tourism
trends is Connie, the Hilton Hotel chain’s robot concierge. Other
hotels have also got in on the robot-staff trend, installing interactive
robots to handle certain reception duties or even having them serve
food and drink to visitors. This kind of novelty application, however,
is far from the only one. Many customers now book their travel and
accommodation with the help of internet chatbots, specifically
tailored AI who can handle queries and assist customers with useful
information when human operators are unavailable.
 7. Artificial intelligence
As well as the chatbots, artificial intelligence is becoming increasingly
important to the tourism industry. Machine learning technology is now
firmly entrenched in the marketing of the tourism sector, with AI helping to
personalize the experience of finding and booking tours and trips. AI is also
increasingly valuable in contexts such as smart hotel rooms, identifying the
likely needs of guests and fine-tuning the environment and services to fit the
guest’s needs and preferences. Artificial intelligence is finding applications
everywhere, from customer service to security. Future AI tourism trends to
watch out for might include self-driving vehicles and virtual guides for
tourism.
 8. Recognition technology

Recognition technology is one of those increasingly

important travel and tourism trends that’s starting to creep into a
multitude of different areas. One of the most familiar applications of
recognition technology for a frequent traveler is the bank of
automatic gates at some borders. The gates are capable of reading the
data on the traveler’s passport or ID card and matching it to their face
using a camera and facial recognition technology. Recognition
technology is one of the big tourism trends in the hospitality industry
too, with voice recognition becoming more and more popular as a
method of control in smart hotel rooms.
 9. Internet of things (IoT)

The IoT is relevant to many tourism trends. IoT devices are gadgets
equipped with a microprocessor and some form of digital
connectivity, allowing them to connect to, and be controlled from, the
internet. IoT devices include heating and cooling systems,
entertainment systems and other items often found in a hotel room,
giving rise to “smart” hotel rooms. The IoT is also used to integrate
services in a hospitality setting, for example by allowing guests to
book activities (a session in the hotel’s spa, swimming in the pool,
training in the gym etc.) or request such things as room service or
extra linen via a hub or a smartphone application.
Factors under resistance includes:
o Economic Distance
The travel-cost method (TCM) is used for calculating economic
values of environmental goods. Unlike the contingent valuation
method, TCM can only estimate use value of an environmental
good or service. It is mainly applied for determining economic
values of sites that are used for recreation, such as national parks.
For example, TCM can estimate part of economic benefits of
coral reefs, beaches or wetlands stemming from their use for
recreational activities (diving and snorkeling/swimming and
sunbathing/bird watching). It can also serve for evaluating how
an increased entrance fee a nature park would affect the number
of visitors and total park revenues from the fee. However, it
cannot estimate benefits of providing habitat for endemic species.
o Cultural Distance

A cultural distance measure will be used to differentiate

norms, values, and beliefs from one country to another.
The general view of cultural distance is that as it
increases the costs associated with international trade
increases as well (Hofstede, 2001). The most widely
cited author in the field of cross-cultural research is
Geert Hofstede (Evans & Mavondo, 2001).
o Cultural Distance

Hofstede (2001) have created four cultural measures

which identify countries’ dissimilarities when it comes
to values and norms in society. He supports his
empirical framework on a survey of 117 000 IBM
employees around the world given twice, both in 1968
and in 1972. The staffs of IBM were asked work-related
questions to measure the importance of various goals at
work. From the questionnaires Hofstede (2001)
identified four different cultural dimensions:
o Cultural Distance

Power Distance: the degree to which members of society think that

power and status are distributed unevenly and the extent to which
this is accepted among society as the proper way of organizing
social systems.

Uncertainty/Avoidance: the extent to which members of society are

apprehensive with unknown, uncertain, or unstructured situations.

Individualism vs. Collectivism: the extent to which a society

emphasizes the role of the individual as opposed to team- and group
efforts.
o Cultural Distance

Masculinity vs. Femininity: the degree to which a society

accentuate traditional masculine values such as
competitiveness, assertiveness, accomplishments, ambition,
and the acquisition of money and material possessions. As
opposed to feminine values such as nurturing, helping others,
putting relationships with people before money, not showing
off and minding the quality of life.
o Cost of Services

Cost of Goods Sold, (COGS), can also be referred to as

cost of sales (COS), cost of revenue, or product cost,
depending on if it is a product or service. It includes all
the costs directly involved in producing a product or
delivering a service. These costs can include labor,
material, and shipping. The idea behind COGS is to
measure all costs (which are variable) directly associated
with making the product or delivering the service.
o Quality of Service

Quality in the tourism and hospitality industry involves

consistent delivery of products and guest services according to
expected standards. Delivering quality service is one of the
major challenges the hospitality managers will be facing in the
following years as it is an essential condition for success in the
emerging, keenly competitive, global hospitality markets.
There are various tools that measure and improve quality
service, as well as mechanisms for quality recognition in the
tourism and hospitality industry.
o Seasonality

Seasonality is an important factor in the tourism industry.

Economically, ecologically and socially it can have many
negative influences on a destination, but at the same time it
may provide a time for both the environment and the host
communities to recover from the stress of the peak season(s).
Thank you!!