Impacts of Inflation on Tourism Industry and Solutions

This research project explores the impacts of inflation on the tourism industry and provides solutions to ease the negative impacts. It defines inflation, discusses reliable statistics of its impact, and highlights the positive and negative impacts of inflation. The project concludes with solutions that the tourism industry can use to reduce the negative impacts of inflation.

Typical impacts that inflation
can have on the tourism
industry and what solutions, to
ease the negative impacts, can
be implemented?”

Table of Contents
INTRODUCTION ..........................................................................................................................1
Definition....................................................................................................................................1
Reliable statistics of impact inflation has had in recent years....................................................2
Positive and negative impact of the inflation .............................................................................2
Negative impact of the inflation .................................................................................................3
Using research conclude with solutions that the tourism industry can use to reduce the
negative impacts of inflation aims to identify solutions for tourism companies to help ease the
pressure of inflation.....................................................................................................................4
Gantte chart ................................................................................................................................5
References:.......................................................................................................................................8

INTRODUCTION
Definition
Tourism sector consist of several other industries such hotel, food, transportation,
beverage and other etc. There are various developed nation where tourism contribute greatly in
uplifting the economy (Anggayana, 2022). By observing the market circumstance, it has been
analysed that, due to increase in product's prices, customers purchasing power has also get
impacted. Specially, after COVID 19 and lockdown, every industry get impacted adversely. Due
to this, there are many kinds of the preventive measures used by the tourism sector with the
motive to deal with the adverse or negative issues. It has been also identified that inflation is key
reason that has capability to impact the tourism industry within different nations. Inflation occur
when, supply of the money get exceeds the available services and product. In any nation or
economy, it has been considered as main issue because it can be understood as such situation in
which prices of the product and services tend to rise. Beside it, it has been also analysed that
inflation has power to increase amount of the money related to supply of the available goods.
Furthermore, inflation has been considered as a measure of rate of the rising prices of
services and goods within an economy. Due to this, inflation has been known to take place
within economy or nation when product's price increase because of increased production cost.
For instance, if there is an increment in the employees wages and raw material then, production
cost get increased, due to which inflation take place (Icoz and Icoz, 2019).
It has been identified that when there is high demand for the services and product within
economy, then it lead to the inflation. This is because during such time period, customers get
ready to pay more or whatever amount of money that market charge form them. Beside it, there
are various other reasons due to which inflation take place. Cost push inflation and pull inflation
re another major reason of the inflation within economy. Producer price index, consumer price
index and consumption expenditure index are some tool through which inflation can be
measured effectively.
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Reliable statistics of impact inflation has had in recent years
It has been identified that inflation has power to impact the small & medium size
business. This is because around 85% of the business owners has show their concern towards the
inflation (Lee, Chen and Peng, 2021). Reality is that, inflation is a big & considerable concept
and every business owner of medium and small size enterprise has get prepare to face impact of
the inflation on their business. Beside it, it has become very crucial to gain a clear understanding
about how inflation can influence the business and through what strategy organisation can win
over the challenges. Mostly individuals believed that inflation is a bad aspect because it increase
the product's prices. For instance, Federal Reserve aims for an inflation rate of 2% each year as if
inflation is too low-level, it weakens the country's economy. But it has been analysed that
inflation has become a financial burden for the market share and SMEs when it is extremely
high. Since the COVID 19 has began, small and medium size business are struggling to deal with
increased cost of the inflation. Few of the most common way through which, small and medium
size business get impacted by inflation mainly include rising price, tighter profit margin, rising
price, higher cost, cutting overhead and other etc.
Positive and negative impact of the inflation
Positive impact of the inflation
when inflation take place, then producers of the goods and services get an advantages of
charging high money form the customer because during inflation, customer get ready to pay high
amount to avail the products and service. Moreover, by selling the product and services at high
price, organisational profitability also goes up that improve their financial position.
Along with this, when prices get increase, then inflation take place and based on the
several economists, inflation result form an expansion of the money supply relative to supply of
the accessible goods. Beside it, it has been also observed that a little bit inflation lead to
economic growth that is beneficial for any nation (Nguyen, Binh and Su, 2020).
On the other hand, deflation that is opposite to the inflation is a situation in which
product's price get declined. additionally, it has ben identified that it create a negative
relationship between the unemployment & inflation that lead to a great rise in inflation that may
offset increasing unemployment within nation.
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Negative impact of the inflation
Major adverse impact of the inflation is that it decline the individual's purchasing power.
This is because in this situation, individuals could not Purchas the goods or services that they
purchase before inflation. Thus, inflation mainly influence the lower class individuals as it
become very difficult for them to afford or buy the basic stuff form the market (Osinubi et. Al.,
2021).
Another adverse impact of the inflation is linked with the loss of good and services
because mostly tourism and other organisation get impacted by the inflation. Main causes
behind it is that individuals prefer to spend on only such products that fulfil their basic needs.
Apart from this, due to inflation, income & saving become less valuable. It is because
individuals are not capable to save much amount of their income. It has been observed that, it is
one of the major and complex issues within any nation. When the product's prices get higher,
then employees also want to have an excellent amount of the salary and wage. Due to which,
company have to increase price of their product more. Along with this, due to the inflation,
money also loses it vales when product's price get higher.
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Using research conclude with solutions that the tourism industry can use to reduce the negative
impacts of inflation aims to identify solutions for tourism companies to help ease the
pressure of inflation.
The tourism industry includes other industries too such as transportation, hotels, food, beverages
and many more. It can be seen that in development of any country, the tourism sector plays a
major role. It has been contributing to make various places more unique and attractive in order to
attract more customers (Page and Connell, 2020). In relation to the market situation, due to
increase in prices the purchasing power of customers has affected. Along with it, due to Covid-
19 the lockdowns and new preventive measures has impacted all the industries adversely. The
impact of inflation helps in reducing the purchasing power of families that too because of
increase in prices. The influence of inflation can be seen across various sectors in the economy
and such are favourable to others and some are unfavourable to others. Due to price uncertainty
it may lead to depress the level of investment and also the saving for the future. Along with it,
there are various solutions provided for Hays travel which can be utilised to get rid of the
adverse impact of inflation are listed below:
 A proper financial plan must be built with the aim of performing better at the time of
inflation. Along with it, proper training must be provided to the employees in order to
deal with main situations. The another solution is to target on elevating the level of
output because it can be seen that when workers contribute more in the company then it
will tend to increase the profit margin.
 The chosen company must attract new customers in the business. It is noticed that when
more customers are involved in the business then the cost for the company will be lower
and also the rates. Due to which the consumer segments and the market segment that was
unattainable can now be reached. In that process the reverse of inflation is deflation
which leads to lower the cost of many products, comprises of food. It can also be said
that deflation appears to be helpful as it elevates the value of the money. Along with it,
the share prices of the company will serve as the main element component in the stock
market and economy. Deflation can be avoided by having some inflation.
 Another solution is to keep the target on stocking up of supplies or related to services
so that the chosen company will be able to resolve the issues linked with inflation and
supply chain (Su, 2020).
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 Furthermore, another solution is to revamp the price model because when the price is
modified then the customers notice the lower price. For example, in any environment the
level of spending must be taken care of as it is must to make a difference between
strategic and non strategic cost reduction. It will lead to impact the preservation of unique
employee and customer experiences, and fiduciary requirements.
Gantte chart
Appendix
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References:
Books and Journals
Anggayana, I.W.A., 2022. ENGLISH FOR SELLERS IN THE TOURISM SECTOR English for
Specific Purposes. Penerbit Lakeisha.
Icoz, O. and Icoz, O., 2019. Economic impacts of tourism. In The Routledge Handbook of
Tourism Impacts (pp. 95-108). Routledge.
Lee, C.C., Chen, M.P. and Peng, Y.T., 2021. Tourism development and happiness: International
evidence. Tourism Economics, 27(5), pp.1101-1136.
Nguyen, C.P., Binh, P.T. and Su, T.D., 2020. Capital investment in tourism: a global
investigation. Tourism Planning & Development, pp.1-27.
Osinubi, Tolulope T., Olufemi B. Osinubi, Mosab I. Tabash, Adedoyin O. Ajayi, and Dang Khoa
Tran., 2021. "The impact of corruption on tourism sector in Nigeria: Empirical insights
by using an autoregressive distributed lag bounds (ARDL) testing
approach." International Journal of Hospitality & Tourism Administration (2021): 1-20.
Page, S.J. and Connell, J., 2020. Economic impacts. In Tourism (pp. 356-374). Routledge.
Su, X., 2020. Simulation of economic development of tourism industry based on FPGA and
machine learning. Microprocessors and Microsystems, p.103523.
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