Role of Tourism in enhancing economy

This assignment discusses the role of tourism in enhancing the economy by generating revenue through foreign exchange and providing employment opportunities. It explores the economic concepts of tourism and its impact on economic development. The assignment focuses on the tourism sector in the UK, with Trailfinders as a case study.

Economics For Tourism

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Role of Tourism in enhancing economy.....................................................................................1
Economic concepts of tourism....................................................................................................4
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Tourism in any country plays a major role in improving and developing economy, that also
contributes in giving the employment and significant source of income (Cohen and Spector,
2019). It also generates the revenue through foreign exchange, where more investment in
development of infrastructure aid to enhance more tourism. The present assignment is based on
this concept of tourism and its role in developing economy. For this purpose, fundamental
principles of economic theory in terms of micro and macro are discussed. The main reason
behind conducting this investigation is to analyse how tourism gives support to a nation for
economic development. Concerning on the tourism sector of UK, Trailfinders is chosen, which is
the largest independent British tour operator and provide worldwide services. Through this
purpose, concepts regarding with aggregate supply and demand, behaviour of organisations
within different models of market system can be illustrated.
MAIN BODY
Role of Tourism in enhancing economy
Tourism is considered as the most important global industry, where arrivals of
international in a country leads to enhance more economy (Towse, 2019). As a means of earning
and generating foreign exchange, today nations are more focusing on promoting tourism. This
would help in increasing better employment opportunities, with attracting the development
capital and enhancement of society development and economic independence. From the poverty
reduction perspective within the developing country, international tourism also assumes the great
significance (Fan, Liu and Qiu, 2019). For attracting the tourism, this characteristic provides the
strong potential for implementing a number of strategies like offering holiday destination on
attractive discounts, for development of society. In this regard, tour operators which combines
various travel related services like accommodations, transportations, sightseeing of areas around
destination, etc. contributes main role in enhancement of tourism (Gallego, Rodríguez-Serrano
and Casanueva, 2019). To attract tourists, they offer holiday packages with a range of services on
different-different price rates. As people also seek to visit a city on reasonable price and always
awaited for best offers, this made tour operators more able to offer holiday packages at cheap
rates. In context with Trailfinders, this firm has established its business in 1970 and mainly
specialised in tailormade worldwide tour services (Arghutashvili and Gogochuri, 2019). It has
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won a number of awards for providing best travel services to visitors, that aid in retaining and
attracting the both national and international tourists towards famous destinations of UK.
It has been evaluated that tourism has been one of the fastest growing sector within
developing countries like UK in terms of employment (Long, Liu and Song, 2019). It has been
estimated that in UK, contribution of major organisations like Trailfnders, TUI and more, leads
to earn over more than £257 billion till 2025 (Britain's visitor economy facts, 2019).
(Source: Britain's visitor economy facts. 2019)
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(Source: Britain's visitor economy facts. 2019)
With increasing growth in tourism and more capital investment for promoting the same in UK, it
has predicted that annual rate of revenue will increase by approx. 3.8% in 2025. This would
directly contribute to improve and enhance development of economy, by providing near about
3.7 million jobs to local people (Towse, 2019) (Cohen and Spector, 2019). Furthermore, impact
of tourism is amplified through the economy, where in the year 2018, about 37.9 million visitors
have come in UK from overseas that has generated near about £22.9 billion. This has made
respective nation accounted to receive global arrivals of 2.8% in 2017, with ranked on seventh
position in the list UNWTO (United Nation World Trade Organization) international tourist.
While in terms of revenue other than arrivals, UK was also received the fifth place within
international tourism, which was accounted for approx. 3.7% of total international tourism
receipts (Fan, Liu and Qiu, 2019). Among all nations, London is only accounted that city which
has received 54% of overall inbound visitor spend, while remaining ones include England by
33%, Scotland by 10% and Wales with 2%.
Furthermore, according to current Statistical Report on the recent trend of tourism, it has
been analyzed that Tourism at both global and domestic level, is still considered as one of the
fastest growing sectors which has reached over $1.6 trillion till 2017 (Long, Liu and Song,
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2019). Travel and tourism industry in 2017, has contributed to more than 10.4% to global gross
domestic product) which is more than 4.6% as compared with last year data (Tourism industry
statistics for 2018 and beyond, 2018). So, it has expected that this sector will continue grow and
reach at highest among other industries in upcoming years, which significantly improves and
enhance the living standard of people, by developing infrastructure and giving more employment
to people.
Economic concepts of tourism
In terms of economy, tourism can be defined as a set of activities which allocated the
resources in a society for enhancement of efficiency of destinations (Long, Liu and Song, 2019).
Here, Efficiency refers to a procedure that a society or community is getting the most by
allocating the use of land for building infrastructures for promoting tourism purposes (Gallego,
Rodríguez-Serrano and Casanueva, 2019). As per Invisible Hand Theory, tourism service
industry defined as services which enriches one’s own interest, by serving the interests of society
in unintentional manner as a whole (Long, Liu and Song, 2019). For this purpose, Government
of UK allowed people to work in own way as per their interests by providing a “free market”
scenario. For example, if a firm offers a product on high rate then buyers usually move towards
their competitors that provide the same on reasonable rates. This would show that producers
supply a commodity which are high in demand by people at a reasonable price. This will
guarantee that such firms can keep their production at low cost for earning high revenue.
Microeconomics in Tourism
Microeconomics refers to that branch of economic discipline which helps in studying the
behaviour of consumers, firms and markets for analysing the economic state (Arghutashvili and
Gogochuri, 2019). It mainly focused on the manner they cooperate as well as interact with each
other on the various markets. Along with this, it also concerns on factors which affects the
relationship between firms, their consumers and market where they interact with each other. As
every business seeks to offer its products at higher rates for earning more profitability, therefore,
microeconomics has a number of effects, in terms of demand and supply. This would state that in
tourism, price is considered as the most important factor which impacts on demand of services.
Demand and supply theories in tourism
In general, Supply defines the relationship between quantity and price of a commodity
which is supplied at particular marketplace (Cohen and Spector, 2019). While in tourism, supply
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includes overall accommodations, transport and other services which are to be purchased by the
visitors. Therefore, in enhancing tourism, what a company supplied by designing the tour
packages and how a country serves its visitors, considered as the main factor. Whereas, Demand
refers to the amount of services and goods that buyers are mostly willing for purchasing at
different price rates as per their level of income (Towse, 2019). But in tourism demand defines as
total of number of people who visit a domestic or global destination by purchasing the tourist
facilities and services. Therefore, from both concepts of demand and supply in microeconomics,
it can be stated that price a reflection of their relationship in tourism.
Demand analysis –
Figure 1Demand of tourism services
Suppose, horizontal axis shows the number of demanded rooms and vertical axis
indicates the price of accommodated services, then it has been analysed that with every price
factor, demand of number of rooms in hotels also fluctuates. Where, high in rates shift the
demand line ZZ towards left and decrease in price rates, leads to occupy more rooms (Fan, Liu
and Qiu, 2019). Therefore, price is considered as the main factor which raises or decreases the
travel and tour industry services. Along with this, demand for a service also get affected by other
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factors also like changes in disposable income of travellers, where an increase per capita income
may lead to raise demand to visit a destination or vice versa.
Supply analysis –
Figure 2 Supply Curve
As per this supply curve, it has been determined that with increase in demand, quantity of
supply also increases, where increasing number of hotels at a particular area leads to fluctuates
the price of each, this would increase demand of people to purchase services of hotel rooms as
per their level of income (Gallego, Rodríguez-Serrano and Casanueva, 2019). So, under such
case, availability of hotels, taxation rates and more, impact on supply of tourism facilities
accordingly. Thus, at equilibrium point as per law of demand and supply, it has been evaluated
that price of services is directly vary with supply rates and vice versa.
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Figure 3 Equilibrium point
In this regard, it has evaluated that Microeconomic in tourism focuses mainly on supply
and demand theories, by explaining the way tourists either at individual or in groups takes
decisions for visiting a particular destination by purchasing the services of travel agencies
(Arghutashvili and Gogochuri, 2019).
Macroeconomics in Tourism
This branch of economics, deals with studying the reason about how and why economy
of a nation fluctuates, by considering the investment, demand and supply as a whole, rather than
on individual basis (Gallego, Rodríguez-Serrano and Casanueva, 2019). In context with tourism,
as it is one of main growing sector that contributes to improve and enhance economy of a
country. Therefore, macroeconomic theory plays the major role in elaborating this concept, in
terms of its impact on employment as a whole, price stability as well as balance of payment
(Arghutashvili and Gogochuri, 2019). In this regard, as Tourism offers a number of employment
opportunity where government of a nation also spends more on developing infrastructure, so this
would lead to develop society as well, by raising their standard of living. This satisfies the
macroeconomic theory by reducing unemployment and creating a balance within the whole
economy, jobs are created, and this leads to a balance in the whole economy (Fan, Liu and Qiu,
2019). Furthermore, increase or decrease in employments also fluctuates the Gross Domestic
Product (GDP) of a country, therefore, increasing and promoting tourism will directly raise to
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GDP. However, even employment contributes to raise economy of a nation, but it has some
negative consequences also which might affect the same. It includes cultural conflicts where
different-different opportunity of employment that varies with post and education, also fluctuates
the economy (Towse, 2019). For example - When employment is offered to expatriates rather
than local residents like in case of Trailfinders, it has operated business in many countries and
offer tour packages of various destinations, so instead of local residents, it has given employment
to those people who have potential to deal with visitors in their own language for enhancing their
visiting experience, so it leads to raise issues regarding with racism (Cohen and Spector, 2019).
Along with this, in tourism industry, some jobs are also provided to people on contract or
seasonal basis, because visitors mostly visit a particular destination on a particular season due to
some defined characteristics. So, under this situation, it also affects the employment rates, where
people who are less skilled seems not be able for holding their jobs on permanent basis (Long,
Liu and Song, 2019).
CONCLUSION
It has been concluded from the all above discussion that as far as the travel and tour industry
go, tourism will truly grow in a nation and at global level also. With continued growth of
organization that deal in this industry, including uptake of technology, it has been estimated that
economy of both developed and underdeveloped countries will highly raise. This will provide
more job opportunities with development of infrastructure of societies.
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REFERENCES
Books and Journals
Long, W., Liu, C. and Song, H., 2019. Pooling in tourism demand forecasting. Journal of Travel
Research. 58(7). pp.1161-1174.
Arghutashvili, V. and Gogochuri, M., 2019. Characteristics of the Long-Term Regional Tourism
Development in Georgia. International Journal of Economics and Management
Engineering. 13. pp.646-650.
Gallego, Á., Rodríguez-Serrano, M. Á. and Casanueva, C., 2019. Dynamic panel data models in
tourism. Current Issues in Tourism. 22(4). pp.379-399.
Fan, D. X., Liu, A. and Qiu, R. T., 2019. Revisiting the relationship between host attitudes and
tourism development: A utility maximization approach. Tourism Economics. 25(2).
pp.171-188.
Towse, R., 2019. A textbook of cultural economics. Cambridge University Press.
Cohen, E. and Spector, S. eds., 2019. Space tourism: The elusive dream. Emerald Group
Publishing.
Online
Britain's visitor economy facts. 2019. [Online] Available Through:<
https://www.visitbritain.org/visitor-economy-facts >.
Tourism industry statistics for 2018 and beyond. 2018. [Online] Available Through:<
https://www.tourwriter.com/travel-software-blog/2018-tourism-stats/>.
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