Impacts of Inflation on Tourism Industry: A Case Study of Opodo

This presentation discusses the impacts of inflation on the tourism industry with a case study of Opodo. It covers the causes of inflation, inflation management strategies, and the impacts of inflation on company operations and performance.

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Introduction
Tourism industry which can be also known as the
travel industry. People from different countries travel
to explore the culture by utilising their vacations to
enjoy their own time. The travelling can be
domestically or either internationally (Osinubi et.
Al., 2021). These industries are relatively connected
to the hospitality industry as when travelling
everything includes such as accommodation, food
and many more. Tourism industry in general are
affected due to economic reasons where one of the
main reasons were in recent was COVID-19.
Inflation is also a major part of the economy where
these industries gets affected.
Key operations
and markets
The key operations of Opodo is it
provides subscriptions over flights
with extra discounts up to 50% off.
it also launched prime hotels with
2.1 million in case of
accommodation and holiday offers
as well.
Conclusion
By concluding, it has been realised that inflation in the economy can put the direct impact on the commodity as
the prices becomes naturally higher. The issue of the pandemic also affected the common man by the hike in the
price of goods and services. When the product is in high demands then the price also come into rise in the sectors
like tourism and travels. There is a high chance of profits when the people needs to travel during the inflation as
the prices are high leading to higher revenue of the tourist companies. But at some cases the travellers choose not
to travel due to high prices. There are certain causes and strategies that can cause and balance inflation in the
economy such as cost push, demand pull, savings, expense minimisation and many more. These strategies can
benefit the public as during the inflation there is lack of money due to increase in the demand and low growth in
the purchasing. So to deal with the inflation there must be proper strategies and methods to be followed by the
government as well the public.
Inflation management strategies deployed
As the rise in inflation can bring a situation to the country as it is
suffered by the citizens as customers that does not allow the customers to
lower their purchasing power (Anggayana, 2022). So to control this
economic situation there are some steps that is needed to take mainly in
two broad methods that is monetary method and fiscal measures.
Monetary measures are the most common method used to control the
inflation where the banks tend to increase the interest rates to balance the
inflation. The second is fiscal measures by controlling tax policy, the
expense occurred in the government and the money taken from the
public. The government takes special, measures which involves reduce
the export of goods that is essential and rather distributing domestically.
The imports are encouraged by reducing the import duties on items. The
bank rate policy during the inflation increase the rate of interest and the
borrowing cost gets reduced from commercial to central banks (Page and
Connell, 2020). The money is delivered to the customers are low
compared to the non-inflation times. The rise in cash reserve ratio which
slow down the commercial banks to lend money. The purchase of the
government securities and bonds by the central banks by selling to the
customers through commercial banks that ends up in decreasing the
credit creation by the merchant banks and transferring the deposits to the
main bank (Su, 2020). The deferred payments also do not let the public
spend the money but to save and can return after a certain period of time.
The government to launch new schemes and policies to reduce inflation
to the public by providing lottery tickets as the general public might
takes interest to win and the effect of the inflation may not affect rigidly
in the economy. The surplus budget method is also an effective method
to put in control as the income earned by the public tends to increase and
eventually the expense decreases without focusing on the deficit
financing. The control in the spending can also take turns during the
inflation as by cutting off the unnecessary and unwanted products can
save more money that can be utilised in a productive way (Icoz and Icoz,
2019).
Company background and overview
The company Opodo is an agency deals with travel
and tourism that renders the services from regular
flights to low cost airline and chartered flights. Its
headquarters is situated in Spain and operates in 14
countries in Europe. In this project, the impacts of
inflation will be discussed as in what ways it affects
the tourism industry.
References
•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
•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, T.T., Osinubi, O.B., Tabash, M.I., Ajayi, A.O. and Tran, D.K., 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, pp.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.
•Sulasmiyati, S., 2019. Analyzing inflation influence toward the number of foreign tourists visiting Indonesia and their impact on Indonesia’s economic
growth. Media Bina Ilmiah, 14(3), pp.2181-2186.
Inflationary periods and main causes
Impacts of inflations on company’s
operations and performance
In general, the companies those who deal with the supply with the essential goods
are tend to be less affected. But the tourism industries are impacted by the inflation
both good and bad reason (Nguyen, Binh and Su, 2020). The price of tickets is high
as compared to the normal cost as in case the customers chose not to travel in the
high cost or go for postponing the trip. The company Opodo, naturally the prices
incline to be in low cost where the customers often choose to travel and had a good
revenue but in case of the inflation the company had to raise the prices and the
customers are taking a step back from travelling. Regardless of the price, some of
the travellers choose to travel as a part of their business or job. In case of these
travellers the cost of travelling with the additional charges including accommodation
or food does not really matter as travelling is a part of their income source (Lee,
Chen and Peng, 2021). Moreover, the people who travel for business purpose have
to pay less as compared to other travellers. The company Opodo give discounts to
these travellers as they are considerably target these customers because during the
inflation these travellers choose to travel regardless of the situation. These can give a
good revenue to the organisation. As in case of lowering the price charges the
company decreases the salary or wages of their employees as to normalise the travel
charges and make affordable to the customers. This also hinders the organisation in a
negative way the employee dissatisfaction takes place. Never an employee is
satisfied when the salary turns to be low so they express their concerns by their
quality of work that shows the ineffectiveness in the tasks dome by the employees
can also lead to employee turnover.
Inflation in a country’s economy cause a huge hike in the price of goods and services in which
the value of wholesale price index is changes in yearly basis. The inflation is measured in
percentage value (Sulasmiyati, 2019). The demand and supply in a country when changes cause
the fluctuations in the rate of inflation. By other means it means when the price of production
and the cost of distribution changes, the economy of the country faces inflation. This results in
the decrease of the value of currency but rise in price of the goods and services. These changes
in the rate are being suffered by the customers. The customers during the inflation cannot buy
the goods in larger quantity as the price of goods tend to be higher than the normal terms. The
customers are often price sensitive as they prefer to buy the cheaper products rather than
expensive ones. The buyers face difficulties during the period of inflation as they have to
minimise their purchase by prioritising their needs instead of their wants. There are some
following reasons that causes inflation in an economy are mentioned below:
Demand-pull inflation: This cause of inflation takes place when the supply of money or credit
rises above the demand of goods and services as to escalate the production capacity of the
country’s economy. The consequence for the rise in supply of money increases the demands
which in turns increases the price. For instance, when the buyer with more money automatically
increases the purchasing power which in results to the rise in rises as the spending is high.
Opodo also face such challenges as there is rise in price of the tickets during the economical
inflation.
Cost push inflation: This inflation causes the rise in price during the production process. The
intermediate goods price gets increased by adequate amount in the supply of money. When the
sudden rise in price of certain raw material like oil, coal, petrol leads to the overall high
production cost which gives a direct impact in the final goods. The final goods prices are
naturally rising in which the customers are left with no choice to buy in less quantity or even not
to buy it. The company in case buying the raw materials in high price ten the overall cost of
production tends to change naturally.
Built in inflation: This is also called wage price spiral. As in case the inflation is caused by this
reason as this affects the company when the workers raise their demand to increase their wage
or salary. The company when encounters this problem there will be an increase in the price of
the final goods produce which leads the customers to pay as per the increased price set by the
company. In context to the company Opodo, the employees demand the increase in the salary
then it is liable to increase the price of tickets as well as the accommodation charges.