Tourist Demand

  • Post last modified:25 December 2022
  • Reading time:41 mins read

The success of any business depend upon the equilibrium that has to be created between the products, attractions, facilities and services which can be, or are, offered by the destination and the level of interest and acceptability these generate amongst the groups of persons to take a positive purchase decision.

Further, an economic system comprising of spectrum of different activities positioned in different locations generates movements that must be supported by the tourism system in order to fulfill the expectations and needs of the visitors. Without movements infrastructures would be useless and without infrastructures movements could not occur, or would not occur in a cost-efficient manner.

This interdependency can be considered according to two concepts, which are tourism demand and supply. In this module we are going to have an insight into these two most vital pillars of tourism industry.


Tourism Demand

Let us begin with understanding the very concept of tourism demand. Interestingly, tourism demand is perceived differently by different persons. Some of the definitions are being noted down to have an insight into the assortment of expressions regarding this term:

Dictionary defines “demand as the desire of people for particular goods or services”

Economists consider demand to be “the schedule of the amount of any product or service that people are willing and able to buy at each specific price in a set of possible prices during a specified period of time.”

Geographers view tourism demand as “the total number of persons who travel, or wish to travel, to a specified geographical area; in a given duration of period; to use tourist facilities and services at places other than their places of work and residence.”

According to Goeldner and McIntosh: “Tourism demand for a particular destination is a function of the propensity to travel and the reciprocal of the resistance of link between origin and the destination areas.”

Thus D= f (P/R)

Tourism demand, thus, can be understood as an expression of the tourism and travel related needs, even if those needs are satisfied, fully, partially or not at all. Further, most commonly, it is expressed in terms of number of people, volume, or tons per unit of time and space.

Conclusively, tourism demand can be defined as, “either the number of tourists who visit or may visit a particular attraction or region, with a definite set of expectations, OR the volume of services/products/facilities that is purchased or might be purchased from a specified geographical area, for a certain pricerange and in a given period of time.”


Types of Tourism Demand

Scholars have categorized tourism demand in different manners. Following are two most commonly established categories of the same:

On the basis of actual or perceived purchase

Many a times the actual volume of services, products or attractions purchased, or utilized, from an earmarked geographical area, during a specific time period and at a given prize range is considered to be the demand for the said products, services or attractions. In such a case the generated, or measured, demand is categorized as effective or actual demand.

There can be another situation where we anticipate the volumes that might be used or purchased by the traveling tribe in future. Obviously such estimations are based on application of tested and tried measures of forecasting. The probability factor is quite high in this case. This type of guesstimated demand is kept in the category of potential or latent demand.

On the basis of cause and effect

At times the reasons behind taking a travel decisions might be controlled by our very own desires to go to a place to, may be, relax or break the monotony or get involved in activities we like, i.e. our decisions are not influenced by any external pressures. Such a touristic occurrence is usually put in the category of impulsive demand.

The contrast to it is the situation where one has to compulsorily undertake a travel as a tourist. Example of this type of phenomenon is travel due to business or unavoidable social reasons. This type of travel is a consequence of what is called compulsive demand.


Factors Influencing Demand

Change is the name of the game and every entrepreneur plays the same. Every industry is influenced by variations and these have higher degree of effect in case of service industry, mainly because of higher degree of intangibility. By now you might have understood that tourism has emerged as one of the major service industry all around the world.

So, any internal or external change, in TGR, TTR or TDR, affects tourism and travel industry too immensely. Holiday demand is driven by needs, motives, and expectations; its realization depends on the individual economic situation and the freedom to travel. Thus:

External factors

External factors may have an impact on tourism demand by affecting the ability to travel (freedom, time, money, fitness) and the motivation to do so.

Consumer Behaviour

Consumer Behaviour is not a reaction on a single factor but on the whole set of influencing external factors. In addition it is driven by internal factors (e.g. motives, abilities etc.). Thus, the impact of a change in a single external factor is limited.

We have experienced in past that the tourism demand has either gone up or down with even slight alteration in sociocultural, political, climatic or even economic set-up. Now the question arises as to how these developments have an impact on tourism demand. In the following discussion, we are going to discuss the same.

Economy

Economic health of the Tourist Generating Region (TGR) is the most important factor affecting tourism demand. Simply, the stronger the economy = the higher would be the income = more would be the disposable income and resultant spending power = elevated will be the travel propensity and, hence, tourism demand. The contrast in economic conditions will result in just the reverse equation.

Economic health of the Tourist Generating Region (TGR) is the most important factor affecting tourism demand. Simply, the stronger the economy = the higher would be the income = more would be the disposable income and resultant spending power = elevated will be the travel propensity and, hence, tourism demand. The contrast in economic conditions will result in just the reverse equation.

Politics

This factor has two dimensions, viz. political stability (which results in creating a conducive environment for outward or inward movements) and political willpower to promote tourism (this will be helpful in laying down tourism and tourist friendly policies and, obviously, will result in increased touristic appeal).

Crisis and threats

Crisis and threats are the most unforeseen of these factors. No body can predict with surety as to when a calamity would take place. For example, there can be out-break of an infectious disease, or sudden tsunami, or land slides, or a parallel to 09/11 episode etc. the best and most effective measure is to be ready with effective and implementable crisis management strategies.

Demographic Change

Demographic factors include variables like age structure, education level, occupation etc. Tourism demand varies with changes in these. For example, statistics have revealed that the demand is ascending in the age brackets of 25 – 34 years and 55 – 64 years due to lesser liabilities and better financial and physical health of the persons in these age groups.

Education, for that matter, enhances knowledge and working spectrums, as well as level of awareness; all these factors combined together enhance the chances of increased tourism demand. As discussed earlier, some times in order to enhance the business, occupational compulsions increase the propensity to travel.

Technology

This point has also been discussed; any advancement in any technological area had always had, and will have, a positive impact on tourism demand.

In addition to the above, we have to take into account the influences coming from general changes in consumer attitudes and, finally, the tourism industry itself, of course influencing the demand side of tourism (e.g. standardization of products, information channels, capacities and price strategies).

As we can’t limit our attention to a single external factor and its impacts, we look at several of the emerging factors, new trends in tourism emerging from the whole set of influences and the endogenous dynamics of tourism. These emerging trends will not change tourism overnight. Trend research has shown that future developments will most probably come as a step-by-step development, not as a revolution.

Giving the global and nearly unlimited offer in tourism with capacities still on the rise the power in the market is clearly with the consumer. He will only choose products which fit into his motivation and expectations. Taking the efforts to reduce seasonality in tourism as an example, we clearly see that the limitations to these efforts are only partly due to e.g. school holiday regulations.


Tourism Supply

Tourism supply is the expression of the capacity of tourism-related infrastructure and tourist plant facilities (this includes accommodation, F and B facilities, Guiding and Escorting services etc.), generally over a geographically defined tourism system, in different price ranges and for a specific period of time. Therefore, supply is expressed in terms of infrastructures (capacity), services and networks.

The number of passengers/ volume that undertakes any movement for touristic purposes per unit of time is commonly used to quantify transport supply. Further, tourism supply can be simplified by a set of functions representing what are the main variables influencing the capacity of any given tourism system. These variables are different for each component.

So, tourism supply refers to the amount or volume of the goods, services and facilities; in addition to the level of comfort and conveniences (i.e. infra and super-structure) and the spectrum of attractions and activities that a destination system can offer to the groups of tourists during a given unit if time (period), at a specified price range, in order to satisfy sets of varied needs and requirements.


Supply Chain

The supply chain comprises the suppliers of all the goods and services that go into the delivery of tourism products to consumers. It includes all suppliers of goods and services whether or not they are directly contracted by tour operators or by their agents (including ground handlers) or suppliers (including accommodation providers).

It should also be considered that some tourism goods and services are supplied direct to tourists and are purchased by consumers themselves and it should not be forgotten that tour operators can influence their customers in this area too. The initiatives reviewed in this report focus on improving benefits to the destination, consumers and the tourism industry.

These initiatives are focused around four main points in the tourism supply chain:

  • Accommodation
  • Transport
  • Ground handlers, excursions and activities
  • Food and crafts

Supply chains operate through business-to-business relationships, and supply chain management delivers sustainability performance improvements alongside financial performance, by working to improve the business operations of each supplier in the supply chain. Tour operators have enormous influence over activities throughout the tourism supply chain, since they direct and influence the volume of tourism, the tourist destinations and facilities that are used.

Tour operators can use this to help in promoting general improvements in sustainability performance as part of good commercial practice. In planning actions for sustainable supply chains, tour operators and The Travel Foundation should note that there are examples of good practice throughout the direct supply chain of tour operators as well as in a variety of tourist destinations but these are only implemented by some companies and many others can learn from them.

It will be easiest to implement sustainability requirements in accommodation and most difficult in transport, most visible in excursions and activities while most beneficial to the local economy when this supports food and craft production. Destination sustainability efforts will require wider stakeholder partnerships and if only for this reason will be more time consuming to implement.

A secure income stream, with stable contracts and foreseeable contracting conditions including prices is paramount, both to facilitate the necessary investments by the supplier, and to cement the trust in the relationship. Projects require time for companies to build knowledge and develop relationships, and tour operators tend to require a steady and significant volume of operations with a supplier or destination if they are to make a significant contribution and expect changes in local operations.

Three conditions in the tour operator-supplier relationship are particularly important for the success of supply chain initiatives: long-term partnership, fair pricing and a consistent volume of operations. Successful supply chain relationships between companies and their suppliers are developed and implemented according to a defined series of steps:

  1. To establish a sustainable supply chain policy and management system.
  2. To support suppliers in reaching Sustainability Goals, including raising awareness on sustainability issues amongst suppliers and demonstrating why sustainability performance is important.
  3. To integrate sustainability criteria into suppliers’ contracts and preferentially contract suppliers that meet those criteria.

Tourism supply chains involve many components – not just accommodation, transport and excursions, but also food and beverages, souvenirs and handicrafts, and the infrastructure that supports tourism in destinations.


Components of Tourism Supply

Components of tourism supply basically refer to the organizations or individuals who are instrumental in materializing the ultimate product, say for example tour package. Keeping tour packages in the focal point, let us discuss the components of the supply. The components, in this case, consist of attractions, accommodation, transportation, refreshments, shopping and entertainment and recreation. Following is the description of these:

Attractions

Being the basic pull factors, attractions are the core of touristic experience. The very nature of the attractions is responsible for the image creation of the destination.

Typology

  • Natural
  • Built/ Man-made
  • Entertainment
  • Sports and Sports facilities
  • Rides and Transport

Accommodation

Accommodation is supposed to be the most vital component, as safe and comfortable accommodation tops the list of need hierarchy of the tourists. Usually this particular component acts as a catalyst to get a favorable response from the target segment and accounts for approximately 33% of the total trip expenditure (Cooper et al).

Typology

  • Hotels and similar establishments
  • Supplementary accommodation
  • Alternative accommodation

Transportation

Right from the ancient period accessibility and mobility have hold a very high importance in tourism development. Safety, comfort, speed and costs have been the crucial attributes for this particular component. Interestingly, transportation has the potential of being an attraction in itself, for example Palace on Wheels, Euro-rail etc.

Typology

  • Land transport
  • Air transport
  • Water-based transport

Refreshments

There is a popular saying that “Road to heart goes through the stomach” and the same stands true in case of tourism as well. Being the necessity of the traveling tribe, refreshments are the inevitable component of the packages and are instrumental for both the favor and abhorrence of the tourists and, thus, can make or break the tour.

Typology

  • Different plans: AP/ MAP/ EP
  • General and theme restaurants
  • Fast food establishments
  • Pubs

Shopping

Shopping, in Indian context, has been the most used and abused component. Used, because everybody looks at it as a source of long cherished memories and, hence, shopping is an integral part of the vacations. Usually tourists look for unique and indigenous souvenirs and, therefore, can be an effective contributor to the destination economy. And since there is no specific mechanism regarding commissions and pricing, cases of fleecing and over-charging are quite frequently observed.

Entertainment and Recreation

Tough generally not included in itineraries prepared in India, entertainment and recreation are the extremely essential components of the packages. After the tiring day trips, everybody looks forward to an unwinding evening. In fact carefully planned entertainment features can become an attraction themselves and, if the local artists are hired, can lead to more economic benefits for the regional economy of the destination.


Demand

Before going further, it is very important to have a clear idea about tourism demand. Following are some of the prominent characteristics of tourism demand:

Spontaneity and uncertainty

Tourism demand is characterized by great deal of uncertainty and spontaneity, i.e. it is very difficult to predict the requirements for any given period. Past trends are useful but not very reliable. When demand is greater than the supply, customers are usually unhappy. In a perfect match of supply and demand the load factor would be 100%, any thing less gives an indication of over capacity.

Variability

Tourism demand is not same each hour of each day of each month. It remains fluctuating and is marked by crests and valleys. More capital needs to be invested if we want to cover demand in peak times. The Pricing strategies have to be planned strategically. Attempts of marketing like- peak pricing, mid-season pricing and off-peak pricing are commonly adopted in tourism and at times work as an attraction also due to lucrative tariffs.

Segment-wise multiplicity of demand

Any tourist destination, product or attraction has multiple usages at any given point of time. Meaning thereby is that a place or attraction or facility is frequented by groups of persons with different sets of motivations and requirements. Consequently, we experience a gamut of demand generated by the same destination or resource or attraction.

For example, throughout the year Goa attracts millions of tourists. Now at any period of time some of the tourists are interested in sunbathing, few are keen in the cultural panorama of the state, many might be present due to business or corporate meetings, while there might be groups enjoying the beverages and cuisine of the place. The motivations, frequencies and responses to price change are different in different segments.

Elasticity

The sensitiveness to the price change in generally termed as elasticity. The Elastic demand is sensitive to substitution and an inelastic demand is not. Pleasure travel is more elastic, than business travel that means the primary or impulsive demand is elastic and derived or compulsive demand is relatively inelastic.

Ever-increasing competition

One of the note-worthy attribute of tourism industry is that it lacks patronage, i.e. tourists tend to use the services that provide them the best benefits irrespective of the company. Obviously, value for money and quality of services top the list of the factors affecting the decision making of the customers. Interestingly every year many new players, with innovative ideas, are joining the main stream.

This causes a situation where competition touches new heights; means the business ambience is highly competitive and any intelligent move by a player might affect the whole equation. We need to apply strategic policies, which are bound to change with the emerging conditions. Like different trains operating between two points pose stiff competition to each other. Small change in departure time can capture significant number of passengers.


Supply

Tourism supply, curiously, is much different from that for fast moving consumer goods (FMCG) or any other type of product. Let us discuss some of these.

Pricing flexibility

The price of the supplies in tourism varies due to certain factors. For example, price generally reduces with the size of the group. That is, with increasing number of group members the price decreases. Else, depending upon the type of season; i.e. peak, middle or lower; the price is, respectively, highest, moderate and minimum.

Perishability

Every component involved with tourism supply has specific capacity. The percentage of this capacity which is used (or sold) on a specific day gets converted into actual sale and remaining part is business lost for ever because, unlikely to the consumer goods, the lost sale can not be compensated in future. In other words supply cannot be stored for future use. So management has to sell, sell and sell. Say, if an aircraft having 100 seats has only 60 passengers on a particular flight cannot sell the unsold 40 seats in the next flight.

Independent, yet complementary components

The components, which when combined together ensure a wholesome tourism product; can effectively work independently as well. For example, a hotel can be promoted without it being packaged with transportation or any involvement of a tour operator, yet the association results in ensured and better business yields because these components are complimentary to each other and, together, increases the value, in addition to attractiveness, of each other.

The independent nature of these components also makes the coordination quite challenging. Thus, ensuring a smooth coordination between these components calls for lots of effective managerial skills.

Fixed in space

The supplies in case of tourism can not be carried physically to the customers. Rather the users have to come all the way to the product, facility or attraction to utilize the same. For example, we can not take Taj or Hotel Maurya Shereton to the place where our clients are located. This is, obviously, different from the consumer goods (say tea leaves) which can conveniently be taken to the place of location of the clients.

Inflexibility in shorter period

Demand is instantaneous but Supply is not. There is long time between planning and placing order for a component, between placing order and getting it, between putting it into service and scrapping it. Thus demand can shift quickly, but it takes great deal of time to adjust supply.

High ratio of fixed costs to variable costs

Tourism is highly capital intensivethe accommodation units, infrastructure, manpower etc. cost great deal of money. Because of high level of costs, the incremental costs of operation are small.

Combination of tangibility and intangibility

Tourism supply is a curious combination of tangible (that can be physically touched and felt) and intangible (that can’t be physically seen or touched, but experienced). Though the food in a restaurant can be put in the category of tangible things, yet the ambience is a good example of intangibility.


Measuring the Tourism Demand and Supply

Measurement of tourism demand is a cumbersome process. One has to apply extremely effective methods to calculate the demand. This process being a futuristic one, there is always a high degree of probability. Meaning thereby is that it is very difficult to estimate the demand accurately. Refer to the characteristics of demand discussed earlier to assign reasons behind this fact.

Volume statistics

Volume statistics refer to the calculation of the number of tourists coming to or going out of a place. So, this measurement gives us an idea about the movement of inbound (i/b) and outbound (o/b) tourists. This is enormously significant, keeping in mind that the number of tourists, inbound or outbound, provides us the lead to the level of infra and super structure, facilities and activities to be planned to accommodate the tourists.

Value (expenditure) statistics

Value (expenditure) statistics is an indication of the monetary gains a destination does make as a result of visit of tourists. This also includes gathering the information on the spending power and expenditure pattern of the tourists. Spending power indicates the amount of money that could be spent by the tourists on their touristic pursuits. Whereas expenditure pattern is the detail of component-wise expenses of the tourists (means how much a tourist spend on accommodation, transportation, food and beverages, shopping etc.)

Visitor profile

Usually it is stated that “a tourists’ brain is like a black hole”. It is very difficult to predict as to what is going on inside the tourists head and heart? Simply putting, it’s very hard to ascertain the perceptions, expectations, likings and disliking of a tourist or group of tourists. Therefore, it becomes mandatory to keep a record of the behavior and requirements related aspects of the tourists.

Study of visitor profile provides us with the vital qualitative insight into the psyche of the tourists, which is important to establish equilibrium between demand and supply in order ensure higher levels of customer satisfaction, as well as being optimally benefited a link in the supply chain.


Why is Tourism Demand and Supply Measured?

The following are the major reasons behind measuring tourism demand and supply:

  • To asses the contribution of tourism to indigenous community
  • To assist in preparation of effective area and product development policies and planning  For marketing and promotion
  • To study the trends
  • To predict the changes in future

Methods of Measurement

Volume Statistics

  • By using counting procedures at entry and exit points: This is one of the most commonly used procedures and is highly effective in case of the destinations and attractions which have well defined and manned entry and exit points. The counting provides the month-wise number of the persons who have thronged a particular area and the same is translated into demand.

  • From records of international carriers: All the carriers (i.e. Airlines) have precise information on the number of passengers visiting a particular country, as the passengers are supposed to fill up embarkment and disembarkment cards while boarding and getting off a flight. The VISA reveals the reasons of the trip(s).

  • From records of Government offices: Almost in all the countries, Government establishments keep a record of the tourist traffic, and that too is analyzed under different parameters; like country and region of origin, age-group, interests and motives etc. In India Department of Tourism, Govt. of India and some of the State Governments maintain such records that are very effective sources of information about the present demand, and when statistically analyzed for trends can give clues about the future demand, as well.

  • Collection of registration records at accommodation establishments: Another popular way of gathering information that can be interpreted in terms of tourism demand related to the volume of the visiting clients.

Value Statistics

  • Through sample surveys: Very commonly used a technique. In this the researcher picks up samples; i.e. respondents; randomly and seeks information from them. One has to be extremely conscious about the questions to be framed, because there are chances of misinterpretation of on the part of the respondent.

  • By analyzing Forex statements: The foreign exchange statements of the tourists provide information on the expenditure and expenditure patterns of the tourists. This is a very effective method, as this lead the way to the level and typology of infra and super structure to be created to cater to the tourists, in addition to the foreign exchange earnings of the destination and transit regions.

  • By conducting surveys of suppliers: The volume of the products or services sold is directly proportional to the demand generated. Hence, this method too has proved to be an important one to gather the required information.

Tourist Profiles

  • By conducting tourists’ surveys: Surveys of the tourists may reveal information on their personal profile, expectations and buying behavior. Though commonly used, yet is complex one as it is difficult to seek time and correct information from the tourists.

  • Through study of the tourists’ behavior at establishments and attractions: This basically is an observational technique. In this tourists are closely watched and their behavior is studied on the basis of certain pre-established yard-sticks. The observers need to be highly knowledgeable about human behavior and should possess analytical skills.

  • From the information provided by the suppliers: Suppliers are enormously vital source of collecting information on tourist behavior, as these are a link between demand and supply and do know about the present and future trends. In fact information provided by the suppliers is translated in terms of the qualitative demand and is highly useful to impart lead to plan the future supplies effectively.

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