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

This research project explores the impact of inflation on the tourism industry and suggests solutions to ease the negative impacts. It discusses the concept of research, events that lead to inflation, aims and objectives of research, and the positive and negative impact of inflation on the tourism industry. The report concludes that inflation affects the whole economy of the country and has both positive and negative effects on the tourism industry.

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
Online...............................................................................................................................................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 is a type of industry which act on tourists only. Tourism industry
mainly includes hotels, restaurants, travel companies, hospitality etc. Tourism industry is one of
the largest industry and create great impact on economy of the country (Batayneh, Al Salamat
and Momani, 2021) . Inflation means general increase in price of goods and services for a given
time period. During inflation purchasing power of individuals decline for a particular time. At
the time of inflation demand for products and services increase and supply is still the same, this
cause increase in price of goods and services and eventually become situation of inflation in a
particular country. Their are many reasons of inflations in the country but mainly three reasons
are their: demand-pull inflation, cost push inflation and built in inflation. In demand-pull
inflation increase in demand of product and services and but supply remain the same, in this
situation prices will increase. Another cause is cost push inflation in this overall increase in
prices due to increase in price of raw material and wages of labour, this cause higher cost of
production and supply of products and services will decrease in the market. Built-in inflation
means in which workers demand high wages and companies add on this in price of goods and
services.
Events that leads to inflation
Interest rate is one of the main reason of inflation, at the time of low interest rates people
borrow more money which cause supply of money in the market will increase and people will
demand more goods and services but in this condition supply is remain the same and eventually
increase in price of products (Fauzel and Tandrayen-Ragoobur, 2021) . But to stop the inflation
in country government increase the interest rates and supply of money in market is controlled
and along with this demand in market is also stable.
Another cause of inflation is events which happening globally. Economy of the country is
affected by the events which are happened in another country because every country is part of

import or exports of goods and services. Like two countries are engage in import and export of
goods and services, but one country is not able to export goods to another due to natural disaster
country not able to produce but another another company is depend on that country (Ghosh,
2021) . In this situation price of goods will increase in importing country and situation of
inflation will create in the country.
Aims and objectives of research
Aim- Describe the impact of inflation on tourism industry and its solutions, to reduce the
negative impacts, that can be implemented.
Objectives:
 Analyse 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 with limited amount of capital, assets and number
of employees. Inflation affects these industries in many ways as these industries are small in size
also deals in limited range of products with small areas of selling and not able to survive from
the effects of inflation. During inflation their is increase in operating expenses of company than
before like increase in the salary of employees, raw material prices etc. Inflation affect the every
type of industry and many people think that inflation has only 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 but inflation has some effects also
(Hafidh and Rashid, 2021) . In context to tourism industry in UK, many tourists visit UK and
country has developed tourism industry in which all type small-medium and big companies are
included which all are affected during the time of inflation but inflation create more effect on
small-medium enterprises. At this time UK has 9.9% of inflation rate due to which increase in
prices of products like food prices, fuel, oil, essential goods etc. This increase in prices will
affect the tourism industry because it will increase the prices of holiday packages as hotels prices
are increased, travelling cost and restaurants will also increase their prices of food. In this case

tourists delay their plans for travelling and revenue of tourism companies will affect because
they all depend on tourists and it become difficult task for companies to maintain daily expenses.
Qualitative research
Positive and negative impact of inflation on tourism industry
As per view point of Marius Mayer and Luisa Vogt (2016). Inflation has many negative
impacts on economy and all the industries of the country. In refer to tourism industry inflation
has many negative effects (Majeed and Mazhar, 2021) . During inflation buying power of
customers is reduce and customer's believe in saving and spending on essential goods, in this
travelling become the almost last option in priority list. During inflation in tourism industry
companies affected badly because people start changing their plans and revenue of companies
will reduce. Along with tourism industry other industries which are related to tourism companies
will also affect like: hotels, restaurants, transportation companies etc. Inflation also create
unemployment in the country because at the time of inflation due to less revenue companies are
not able meet daily operating expenses and salaries of employees and companies start firing the
employees from the company. Tourists generate revenue in country for many peoples and also
provide employment opportunities, but all these are affected by inflation. Tourism also improve
improve the foreign exchange reserve of the country (Orleni, 2022) . Mainly during inflation
small-medium enterprises will more affected as they are small in size and not capable enough to
meet the expenses of inflation.
As per view point of Patrick Whyte (2021). Many people think that inflation has only
negative effects on economy but inflation has some positive effects also like inflation increase
the production capacity of the country (Whyte, 2021) . In refer to tourism industry inflation has
some positive effects. At the time of inflation companies charge higher prices from customer's
because of less supply. When prices become high due to inflation individuals start changing their
plans but some individual are their who travel at the time of inflation also because for some
people travelling is their job and for this they also pay higher prices also 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. These travellers become source of income for companies at
the time of inflation. Along with travellers some rich business are also travel during inflation and
ready to pay higher charges because inflation don't affect them to much and travel companies

charge higher prices. Due to less customers at the time inflation companies get time to improve
their productivity and find better ways to serve customers and fulfil needs and wants of
customers.
CONCLUSION
From the above report it has been concluded that during inflation demand for products
will increase in the market and supply remain the same. Inflation affect the whole economy of
the country and at the inflation buying power of customers will decrease as prices of product will
increase (Pashtoon, Zaki and Haqbin, 2022) . There are many reasons of inflation but mainly
there are three reasons which cause inflation in the country: demand-pull inflation, cost push
inflation, built in inflation. Inflation affect every type of industry, but tourism is one of the
largest industry which is affected inflation. Inflation has both positive and negative effects.
During inflation people avoid travelling because the prices are high which increase the budget
and price of holiday packages. In UK many companies are working in tourism which affect
during but mainly small-medium affected more during inflation because these companies not
able to bear operating expenses of the company without earning in 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. To meet this situation company will reduce the prices during the inflation, so
customers can attract from low prices for and travel at different countries. Hays LTD is also one
of the travel company which reduces the salaries of employees during inflation to bear the
expenses of the company and after inflation company will pay the sufficient to employees
(Scarlett, 2021) . Inflation has some positive effects also on the economy, it will enhance the
production capacity of the country.

REFERENCES
Books and Journals
Batayneh, K., Al Salamat, W. and Momani, M.Q., 2021. The impact of inflation on the financial
sector development: Empirical evidence from Jordan. Cogent Economics &
Finance. 9(1). p1970869.
Fauzel, S. and Tandrayen-Ragoobur, V., 2021. Sustainable development and tourism growth in
an island economy: a dynamic investigation. Journal of Policy Research in Tourism,
Leisure and Events. pp1-11.
Ghosh, S., 2021. Geopolitical risk, economic growth, economic uncertainty and international
inbound tourism: an Indian Illustration. Review of Economics and Political
Science. 7(1). pp2-21.
Hafidh, H.A. and Rashid, Z.A., 2021. The Impact of Tourism Development on Economic
Development: The Case of Zanzibar. Asian J. Edu. Soc. Stud. 18. pp41-50.
Majeed, M.T. and Mazhar, M., 2021. Managing economic growth through tourism: Does
volatility of tourism matter?. Decision. 48(1). pp49-69.
Orleni, E., 2022. Importance of Wellness in the Tourism Industry: A Millennial
Perspective (Doctoral dissertation, Royal Roads University (Canada)).
Pashtoon, R., Zaki, Z. and Haqbin, N., 2022. Empirical study on international tourism and
economic growth of Thailand: an ARDL-ECM bounds testing approach. Journal of
Enterprise and Development (JED) 4(1). pp28-48.
Scarlett, H.G., 2021. Tourism recovery and the economic impact: A panel assessment. Research
in Globalization. 3. p100044.
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/>