Impact of Inflation on Tourism Industry: A Case Study on Hays Travel

This research project analyzes the impact of inflation on the tourism industry of the UK, with a case study on Hays Travel. It explores the concept of inflation within the tourism industry, positive and negative impacts of inflation on Hays Travel, and solutions to deal with negative impacts of inflation for Hays Hotel.

Foundation year
research project

Table of Contents
INTRODUCTION.......................................................................................................................................3
Background of topic:...............................................................................................................................3
Literature Review:.......................................................................................................................................3
Concept of inflation within tourism industry...........................................................................................4
Positive and negative impacts of inflation on Hays Travel organization.................................................4
Solutions to deal with negative impacts of inflation for Hays Hotel........................................................5
Research Methodology................................................................................................................................6
Conclusion...................................................................................................................................................6
References...................................................................................................................................................8

INTRODUCTION
Background of topic:
Inflation refers to increase in the overall price of products that can minimize the
purchasing power of buyers significantly. Further, this shows the rate by which purchasing
power of individuals drop due to average price increase in the products or services during a
particular period of time. Inflation is likely to have both positive as well as negative impacts on
the economy. High inflation can minimize the overall spending capacity of individuals on other
side lower inflation is helpful in economic growth & enlargement. Level of inflation is also
likely to affect industries within the economy in profound manner (Kim, Zheng and Arendt,
2019). In context of present study, the chosen organization is Hays Travel that is a popular travel
planner based on UK. They are likely to plan tour packages for different locations like Portugal,
USA, Turkey, Greece and more. The present study is based on analyzing the impact of inflation
on tourism industry along with suitable solutions to get rid from these challenges effectively.
Research Aim: “To analyze the impact of inflation on tourism industry of UK along with
suitable solutions to minimize negative impacts”. A case study on Hays Travel organization.
Research Objectives:
 To acknowledge the concept of inflation within tourism industry.
 To assess how inflation affects Hays Travel in positive and negative way.
 To develop suitable solutions to deal with negative impacts of inflation for Hays Hotel.
Research Questions:
 What is the concept of inflation within tourism industry?
 What are the positive and negative impacts of inflation on Hays Travel organization?
 What are the suitable solutions to deal with negative impacts of inflation for Hays Hotel?
Literature Review:

Concept of inflation within tourism industry
According to Naidu, (2017), inflation refers to increase in the price of particular products
or services during a given period of time. Due to inflation, price of products get enhanced which
directly affects purchasing power of buyers. Further, inflation can also be defined as change in
the value of Wholesale Price Index on annual basis. The main reasons of inflation are imbalance
between demand and supply, increase in taxes on products, change in distribution as well as
production cost and more. With increasing price level of products or service, demand of such
product reduces down as people are not in such capacity of purchasing such extreme costly
products. During inflation, customers are can buy fewer products for each unit of currency than
earlier. It puts negative impact on buying capacity of consumers as they cannot afford the
products or services (Wang, Feng, and Huang, 2021). Daily increase in price makes it complex
to buy even basic necessity commodities. Therefore, individuals start to look for options to earn
more income. In this situation, it becomes imperative for government to keep control over
inflation for the betterment of the entire economy. Inflation upto 2% or 3% can be bear by the
people of an economy as it stimulates them to buy more products which drive revenue for the
economy in significant manner. In context of tourism industry, they are highly affected with
inflation. Due to the COVID-19 pandemic, the rate of tourism services has been increased. It has
enhanced the aireline fair, rates of hotels rooms and other such facilities. As a result, individuals
need to pay higher amount for the services, they are availing. Therefore, tourism sector is highly
affected with inflation.
Positive and negative impacts of inflation on Hays Travel organization
According to Tan, (2017), inflation puts direct impact on the success of an organization.
Here, inflation affects industries and business organizations in different ways. Tourism industry
is also significantly affected due to inflation as it caused enhancement in the overall rates of
hospitality services which cannot be afforded by all individuals. Now, increasing rate of inflation
has become a profound point of concern for the owners of business companies. Due to increasing
price and rates of hotels, it is quite complex for the customers to avail their services which
creates direct impact on the overall sales and revenue of the hospitality companies as they are not
able to attract more number of customers like earlier. Further, inflation becomes commodities
expensive hence it is quite complex for the hotel owners to keep the price lower (Dimopoulos,
Queiros and Van 2019). Also, it increased interest rate so that the business entities cannot take

loans for further enhancement & growth of the entity. In terms of positive impact, inflation
increases the overall price of services being offered by the hospitality companies. As a result, the
hotels have opportunity to charge high price from their customers which increases their overall
profit significantly.
Figure: Effect of Inflation, 2022

Figure 1How is inflation impacting travel demand and hotel rates across Europe? 2022
Solutions to deal with negative impacts of inflation for Hays Hotel
According to Ghosh, (2021), it is analyzed that inflation is likely to create positive as well
as negative impacts. Here, adverse impacts are likely to affect the performance of the entities in
direct manner by minimizing their existing level of sales and revenue in significant manner. In
terms of negative impact, sales and profit margin of the entity gets affect adversely. Here, it
becomes important for the business entities to identify suitable solutions to deal with such issues.
For this purpose, they need to structure suitable strategies so that the company can easily grow
even during the tough times (Akbulaev and Aliyev, 2020). In this situation, reduce level of
consumption can be understood as one of the effective solutions to deal with the negative impact
of inflation. Further, it is possible to control the inflation by lowering down the energy, trade and
cost of procurement. It is wise to control the production cost while there is inflation. In context
of the selected hotel, there is requirement to increase labor supply, capital supply, productivity
and personal saving to reduce the pressure of inflation in significant manner.
Research Methodology
Research methodology is considered as highly imperative part in order to conduct a
project report in successful manner. It includes ample of components in terms of collecting,
analyzing and evaluating the data so that valuable inferences can be made in future period of
time. In addition to this, research methodology is also useful in guiding and supporting
researcher in completing the project work within stipulated period of time. In present scenario,
the chosen philosophy is positivism philosophy as it base on objective analysis of the available
data to get better outcomes. In terms of research approach, deductive approach has been selected
so that the researcher get proper guidance in terms of successful completion of the research
work. Here, survey strategy has been chosen as it is useful in collecting wide range of data from
the respondents. In addition, wide range of data has also been collected for timely and systematic
completion of the project report.

Conclusion
After going through the above-mentioned information, it can summarized that inflation
can also be defined as change in the value of Wholesale Price Index on annual basis. The main
reasons of inflation are imbalance between demand and supply, increase in taxes on products,
change in distribution as well as production cost and more. With increasing price level of
products or service, demand of such product reduces down as people are not in such capacity of
purchasing such extreme costly products. Due to inflation, price of products get enhanced which
directly affects purchasing power of buyers. The above-study is based on Hays Travel that is a
popular tour operator company based on UK. They are likely to create tour packages for different
locations including Greece, Portugal, USA and more. Along with this, they ensure to offer the
best possible experience to their customers. However, the respective company is significantly
affected due to presence of high inflation in market. It is analyzed that inflation creates
significant impact in tourism industry by increasing the overall price of hotel services including
rooms and more so that individuals also have to pay high cost in terms of availing the services.
Furthermore, It is found that inflation might crate positive as well as negative impact as well. It
might increase the cost and make things expensive for buyers. While, it also makes the hotel
administration enable to charge high prices from customers which will increase their overall
revenue and profit margin significantly. Moreover, in the above-report, there is discussion
regarding suitable ways to deal with negative impact of inflation. In this regard, the company
need to structure suitable strategies so that the company can easily grow even during the tough
times. In this situation, reduce level of consumption can be understood as one of the effective
solutions to deal with the negative impact of inflation.

References
Books and journals
Akbulaev, N. and Aliyev, V., 2020. The effect of coronavirus sars-cov-2 in the tourism industry
in Africa. Journal of Environmental Management & Tourism, 11(8), pp.1938-1947.
Baiev and et. al., 2019. Strategic analysis of development of medical tourism macro-
destinations. Journal of Environmental Management & Tourism, 10(4 (36)), pp.801-808.
Dimopoulos, D., Queiros, D. and Van Zyl, C., 2019. Sinking deeper: The most significant risks
impacting the dive tourism industry in the East African Marine Ecoregion. Ocean &
Coastal Management, 181, p.104897.
Ghosh, S., 2021. Business Confidence and Business Tourism in Japan. Journal of International
Commerce, Economics and Policy, 12(01), p.2150003.
Kim, J., Zheng, T. and Arendt, S.W., 2019. Identification of merger and acquisition waves and
their macroeconomic determinants in the hospitality industry. Journal of Hospitality &
Tourism Research, 43(2), pp.249-271.
Naidu, S., 2017. Exploring the dynamic effects of urbanization and real effective exchange rate
on tourism output of singapore. Tourism analysis, 22(2), pp.185-200.
Sapovadia, V.K., 2020. Terrestrial and celestial forces expose vulnerable economists: financial
crisis 2008 vs. 2020. Available at SSRN 3547745.
Tan, Y., 2017. Hotel-specific, industry-specific and macroeconomic determinants of profitability
in London Hotel industry: Structure-Conduct-Performance or Efficient-Structure
hypothesis?. Available at SSRN 2943487.
Wang, Y.C., Feng, Z.Y. and Huang, H.W., 2021. Corporate carbon dioxide emissions and the
cost of debt financing: Evidence from the global tourism industry. International Journal
of Tourism Research, 23(1), pp.56-69.
Online
3 Effects of Inflation, 2022,[Online]. Available through:
https://www.forbes.com/advisor/personal-finance/why-is-inflation-bad/>
How is inflation impacting travel demand and hotel rates across Europe? 2022, [Online].
Available through: <https://www.otainsight.com/resources/blog/inflation-hotel-rates-
europe>