Impact of Inflation on Tourism Industry and Solutions to Ease Negative Impacts

This research project delves into the impact of inflation on the tourism industry and explores solutions to ease the negative impacts. The report discusses the positive and negative impacts of inflation on the tourism industry, with a focus on SMEs. It also examines the events that lead to inflation and the strategies that companies can adopt to deal with inflation. The report concludes that while inflation has negative effects, it also has some positive effects on the economy.

Research project
(Impact of inflation on tourism industry
and solutions to ease negative impacts)

Table of Contents
Topic: " What are the typical impacts that inflation can have on the tourism industry and what
solutions, to ease the negative impacts, can be implemented?".......................................................3
INTRODUCTION...........................................................................................................................3
Concept of research................................................................................................................3
Events that leads to inflation .................................................................................................3
Aims and objectives of research.............................................................................................4
MAIN BODY...................................................................................................................................4
Quantitative research.......................................................................................................................4
Impact of inflation on SME's..................................................................................................4
Qualitative research.........................................................................................................................5
Positive and negative impact of inflation on tourism industry...............................................5
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

Topic: " What are the typical impacts that inflation can have on the tourism
industry and what solutions, to ease the negative impacts, can be
implemented?"
INTRODUCTION
Concept of research
Tourism industry rely mainly on tourists this include hotels, restaurants, transportation
etc. Tourism industry create great impact on economy Inflation is rate of increase in price of
goods and services in the economy (Andriansyah, 2019) . Their are many factors which affect
the tourism industry negatively in which inflation is one of the main reason. At the time of
inflation purchasing power of customers will decline for particular time period. In inflation
money supply in the market will increase due to which prices of products and services increase
from general. There are many causes of inflation but mainly causes of inflation are demand-pull
and cost push inflation. Demand-pull inflation means when the price for product and services
will increase but supply will remain same or decrease, in this case the price of product or
services will increase. Another cause is cost push inflation in which prices of products and
services will increase due to increase in cost of wages or when production cost will increase, in
this situation seller or producer increase the prices which should be indirectly bear by the
customers.
Events that leads to inflation
Interest rate is one if the reason of inflation, when interest rates are low at that time
people will borrow more money take more loans in this situation money supply will increase in
the market and demand for products and services will increase (Asgary and Ozdemir, 2020) . But
during inflation government will increase the interest rates so people will borrow less money and
money supply in market in control because during inflation people start saving money and try to
spend money on essential goods.
Along with interest rate many events are happening globally which cause inflation.
Every country is part of import or export from another country because no single country is able
to produce all products and services to fulfil demands of the people of country. Like one country
import some goods from another country because they won't able to produce that products in

own country and if exporting company will not able to export the goods in this situation the
supply of products will affect in importing country and this will cause inflation.
Aims and objectives of research
Aim- Evaluate the impact of inflation on tourism industry and its solutions, to reduce the
negative impacts, that can be implemented.
Objectives:
 Discuss the positive and negative impacts of inflation in refer to tourism industry of UK.
 Find out the solutions to reduce the negative impacts of inflation in context to tourism
industry of UK.
MAIN BODY
Quantitative research
Impact of inflation on SME's
SME are small and medium enterprises who have limited amount of capital and deal in
limited range of products (Ghosh, 2019) . At the time of inflation these small-medium enterprises
are badly affected because these industries are not that successful to survive the inflation. When
prices rises it not only affect the customers, the wages of employees and price of raw material
will also increase and SME don't have that much of capital to paid the high prices. Inflation
affect the every industry and many people think that inflation has negative effect on business and
economy because in this price of product and services will increase and supply of products will
decrease and demands and needs of the people is not fulfilled. Many tourists visit UK which
develop successful tourism industry over their but during inflation these tourism industries are
badly affected. At this time UK is facing the inflation rate of 9.9% due to which hike in prices of
all services and products like prices of fuel, oil, food and beverages which affect the tourism
industry because the prices of hotels and services like restaurants will increase and indirectly the
holiday package of tourists will increase (Icoz and Icoz, 2019) . At this situation whether tourists
will delay their plans or plan to visit different destination which is not affected by inflation and
also affordable to tourists. In UK many small tourism companies are working which are all
depend on number of tourists visit the country but during inflation when the number of tourists
will decrease than this will affect these small tourism companies.

Qualitative research
Positive and negative impact of inflation on tourism industry
As per view point of Patrick Whyte (2021). Accordingly inflation have all negative
effects but inflation has also some positive effects on the economy (Kisswani and Harraf, 2021) .
At the time of inflation the producers or sellers charger high prices for goods and services
because when the supply will decrease in the market than customer is able to pay even high
prices for products and services to fulfil the needs (Whyte, 2021) . In refer to tourism industry
when prices are increased due to inflation, people start changing their plans of travelling but
some individuals are their who travel at the time of inflation also because their job is travelling
which can't be stop due to inflation and also for many people source of their earning is travelling
like travel bloggers who travel to different different place make videos and give information in
video about the place and in return they will earn the money (Kumar and Gupta, 2019) . These
type of people travel at the time of inflation also and pay higher prices which become sources of
travel company or tourism industry. Along with these travellers some rich business men are also
their who travel at the time of inflation also and ready to pay higher prices because inflation not
affect them much, mostly inflation affect common people and small-medium industries.
As per view point of Marius Mayer and Luisa Vogt (2016). Inflation has many negative
effects on economy and all the industries of the economy. In tourism industry inflation cause
many negative effects. The main negative effects of inflation is it will reduce the buying power
of customers as people not able to spend that amount of money which they spend before the
inflation (Page and Connell, 2020) . In refer to tourism industry at the time of inflation all the
prices of product and services will increase due to which people start changing their plans of
holidays because inflation will increase their prices of holiday packages. Along with tourism
industry economy of the country will affect because tourism develop lots of revenue and foreign
exchange reserve of the country will increase when tourists came from another country.
Additionally with tourism industry many industries will also affect because when tourists visit
country they spend money on different places like on hotels, restaurants for foods, they do
shopping etc. These industries has link with tourism industry and will affect when tourism
companies will affect due to inflation (Scarlett, 2021) . Tourists generate revenue in country for
many peoples. Along with this unemployment is also the negative factor of inflation, when due
to inflation tourism industry will not performing well then in this individuals engage in this

industry will start loosing their jobs (Schmude, Karl and Weber, 2020) . Mainly SME will affect
with this because they don't that much of funds so they afford the expenses of the company
without earning during the inflation. At the time of inflation people will prefer to save the more
money and try to spend on essential goods only and in this travelling become the last options for
the individuals because this is not necessity and can be delayed.
CONCLUSION
From the above report it has been concluded that at the time of inflation buying power of
customers will decrease because price of goods and services is increase in the market. Inflation
will affect the whole economy and all the industries in the economy. At the time of inflation
supply will decrease and demand for products and services will increase (Su, 2020) . Inflation is
caused due to many reasons but main reasons of inflation are demand-pull inflation and cost plus
inflation. In context to tourism industry it is one of the industry which is most affected by the
inflation because at the time of inflation people avoid travelling as budget of travelling is
increase in this situation people delay their travelling plans. At the time of inflation SME will
affect more because they don't have not much capital to survive the inflation. Many tourism
companies which has negative impact like Insight is a travelling company facing negative effects
from inflation because customers are not ready to pay higher prices and revenue of the company
will reduces (Wang and Zhang, 2019) . To deal with situation of inflation companies has adopted
many strategies like the best strategy to attract customer at the time of inflation also is to reduce
the cost, it means companies will reduce the cost of the business so they can offer more
affordable packages to customers and make customers think about travelling. Hays LTD is also a
travelling company in UK which reduces the wages of employees at the time of inflation so they
can survive at the time of inflation and able to bear the expenses and after the inflation again pay
fair remuneration to employees (Zaroki, Ezoji and Sadati Amiri, 2018) . Along with negative
effects inflation has some positive effects also.

REFERENCES
Books and Journals
Andriansyah, A., 2019. Impact of environmental policy factors on tourism industry: A study
from Indonesia over last three decades. 670216917.
Asgary, A. and Ozdemir, A.I., 2020. Global risks and tourism industry in Turkey. Quality &
Quantity. 54(5). pp1513-1536.
Ghosh, S., 2019. Uncertainty, economic growth its impact on tourism, some country
experiences. Asia Pacific Journal of Tourism Research. 24(1). pp83-107.
Icoz, O. and Icoz, O., 2019. Economic impacts of tourism. In The Routledge Handbook of
Tourism Impacts (pp95-108). Routledge.
Kisswani, K.M. and Harraf, A., 2021. Asymmetric impact of oil price shocks on tourism:
Evidence from selected MENA countries. In Economic Development in the MENA
Region (pp 45-63). Springer, Cham.
Kumar, S. and Gupta, A., 2019. Trend analysis of foreign direct investment in tourism industry
in India: An empirical study. Review of Professional Management. 17(1). pp70-83.
Page, S.J. and Connell, J., 2020. Economic impacts. In Tourism (pp356-374). Routledge.
Scarlett, H.G., 2021. Tourism recovery and the economic impact: A panel assessment. Research
in Globalization. 3. p100044.
Schmude, J., Karl, M. and Weber, F., 2020. Tourism and Terrorism: Economic impact of
terrorist attacks on the tourism industry. The example of the destination of
Paris. Zeitschrift für Wirtschaftsgeographie. 64(2). pp88-102.
Su, X., 2020. Simulation of economic development of tourism industry based on FPGA and
machine learning. Microprocessors and Microsystems. p103523.
Wang, L. and Zhang, H., 2019. The impact of marine tourism resources development on
sustainable development of marine economy. Journal of Coastal Research. 94(SI).
pp589-592.
Zaroki, S., Ezoji, H. and Sadati Amiri, S.R., 2018. Analysis of the role of tourism on economic
welfare using panel data. Journal of Tourism Planning and Development. 7(26). pp96-
121.
Online
Mayer M. and Vogt L., 2016. Economic effects of tourism and its influencing factors[Online]
available through:
<https://www.degruyter.com/document/doi/10.1515/tw-2016-0017/html?lang=en/>
Whyte P., 2021. UK inflation hits 3.2% - what does this mean for hospitality sector?[Online]
available through:
<https://www.hospitalityinsights.com/content/uk-inflation-hits-3-2-what-does-mean-for-
hospitality-sector/>