MGBBT0FYP Research Project: Inflation's Impact on Tourism Industry

This research project investigates the multifaceted impacts of inflation on the tourism industry, focusing on the case of Hays Travel. The project begins with an introduction that outlines the background, aim, objectives, and rationale for the study. A comprehensive literature review explores the basic concept of inflation in the tourism context, examining both its positive and negative effects on businesses like Hays Travel. The research then delves into the methodology, outlining the quantitative approach and the use of secondary data collection. The study analyzes the impact of inflation on consumer behavior, business costs, and profitability. The project concludes with a discussion of effective solutions to mitigate the negative effects of inflation, such as cost reduction strategies and operational adjustments, to ensure the tourism industry's sustainability. The project aims to identify and analyse the impacts of inflation and suggests strategies for businesses to navigate these challenges and maintain their competitiveness in a fluctuating economic environment.

Assessment
(“What are the typical impacts that
inflation can have on the tourism
industry and what solutions, to ease the
negative impacts, can be
implemented?”)

Table of content
INTRODUCTION.........................................................................................................................3
Background information of topic.............................................................................................................3
Research Aim..........................................................................................................................................3
Research objectives.................................................................................................................................3
Research Questions.................................................................................................................................3
Research Rationale..................................................................................................................................3
LITERATURE REVIEW.............................................................................................................5
The basic concept of inflation in context of tourism industry..................................................................5
The positive and negative impact of inflation can have on the Hays Travel............................................6
The effective solutions that can be ease for Hays Hotel to reduce negative impact of inflation..............7
RESEARCH METHODOLOGY.................................................................................................8
CONCLUSION..............................................................................................................................9
REFERENCES............................................................................................................................10

INTRODUCTION
Background information of topic
Inflation is defined as an increase in the prices that can be translated as the reduction of
purchasing power over time. It can be considered as the rate at which purchasing power drops
can be showed in the average price increase of a basket of chosen goods and service over some
period of time (Van, 2019). Inflation affects the economy in both adverse and significant
manner. High inflation rate in the country is harmful for its economy. On the other hand small
amount inflation can help in deriving economic growth. It also affects the many industries and
businesses too. Thus, the current research has been conduct to examine its negative and positive
impacts on the tourism impact along with the solutions to reducing its negative impact.
Research Aim
To examine the impacts that inflation can have on the UK tourism industry along with the
solution for reducing its negative impact. “A study on Hays Travel”
Research objectives
 To understand the basic concept of inflation in context of tourism industry.
 To examine the positive and negative impact of inflation can have on the Hays Travel.
 To analyse the effective solutions that can be ease for Hays Hotel to reduce negative
impact of inflation.
Research Questions
 What is the basic concept of inflation in context of tourism industry?
 What is the positive and negative impact of inflation can have on the Hays Travel?
 What are the effective solutions that can be ease for Hays Hotel to reduce negative
impact of inflation?
Research Rationale
The reason behind for the selection of research topic is to find out the negative and
positive impact that inflation have on the country. Due to high inflation rate on the economy the
purchasing power of the consumer is reduced and it directly affects the sales of the company

(Lin, 2021). It leads reduction in sales as well as total revenue of the business. The current
research collects information that helps company to reduce the negative impact of inflation on
their business.

LITERATURE REVIEW
The basic concept of inflation in context of tourism industry
According to the view of Salmerón, García and García (2018) inflation is a term which
means the rate that shows increase in prices over a given period of time. It can be also defined as
the percentage change in the value of the Wholesale Price Index (WPI) on daily year basis. Due
to imbalance in between the demand and supply, increase in taxes on products or changes in
production and distribution cost, inflation occurs in the economy. When the price level of goods
and service rises and the value of currency reduce, then the economy experiences inflation in
their country. It means that the each unit of currency purchases fewer products and services.
Inflation provides negative or worst impact on consumers. Daily increase in the prices of goods
and services make it difficult for consumers to afford even with the basic commodities in life. It
leaves them with the no choices but to ask for higher incomes. It becomes important for the
government to focus on keeping the inflation under control. Up to rate of 2 to 3% the inflation is
beneficial for an economy because it encourages people in order to buy more and narrow more
during the period of low inflation rate and this time the level of interest rate is also remains low
(Wen, Zhang and Gong, 2021).
Figure 1 UK inflation jumps to highest level in 30 years, 2022

The positive and negative impact of inflation can have on the Hays Travel
As per the view of Singh (2022) inflation is considered as one of the factor that affect the
success of business as well as their bottom line too. It affects the businesses and industry in many
ways. Tourism industry is also affected from the inflation. It becomes a major concern for the
owners of company in order to manage carefully to deal with the inflation in better manner. It
affects the both positively and negatively to the tourism industry. It increases the consumer price
index because the consumer has to pay higher prices for products and service. It leads rise in
costs and decrease in buying power of consumers and businesses similarly. Inflation increase the
interest rates that leads to higher borrowing costs of businesses as well as decrease in their
profitability. It decreases the consumer spending that cause decline on the revenue of the
businesses because the consumer has to pay higher prices for availing the particular product and
service (Awe, Sule and Awarun, 2022). Inflation increases the overhead and inventory costs of
the company that also affects the profits and bottom line of the company. Positive impact of
inflation is it helps in decreasing the value of old debt, which is beneficial for the company to
repay it in better manner.
Figure 2 3 Effects of Inflation, 2022

Figure 3 How is inflation impacting travel demand and hotel rates across Europe? 2022
The effective solutions that can be ease for Hays Hotel to reduce negative impact of inflation
` In the opinion of Shakil (2020) inflation affects the tourism industry in both positive and
negative manner. Negative impacts affect the sales and profitability of the businesses in adverse
manner. It became important for the businesses to find effective solution that help company in
order to reduce the negative impact of inflation in their business. Reduction in consumption is an
effective solution that helps company to deal with the negative impact of inflation in better
manner. With the increased spending visibility as well as the ability for isolating drivers,
companies can tailor their approach in order to match the inflationary environment. Another
effective solution is to eliminate work. Companies need to use a clean-sheet mindset or zero-
based redesign that helps in resetting the way through which work has been done (Iqbal, Gan and
Nadeem, 2020).

RESEARCH METHODOLOGY
In the current research study, the researcher selects quantitative research method for
conducting the current research. It helps researcher to gain in-depth and detailed information
about the research (Hennink, Hutter and Bailey, 2020). This research method generates more
reliable and factual outcomes data for the research. It allows researcher in order to use and
explore concepts and experiences in detail. In the current research, qualitative research method
allows researcher in order to use existing data for finding answers for research questions. The
researcher used secondary data collection method for the current research. It allows researcher to
collect data from the various published sources such as books, journals and scholarly articles. It
help researcher to gain understanding about the views, ideas, perception and opinion of other
authors that are relevant to the current research (Köhler, Smith and Bhakoo, 2022). The most
effective advantage of secondary data collection method is it saves efforts and expenses of the
researcher which means that the data can be collected more easily from several sources. Due to
this, time of the researcher is also save that help researcher in order to conduct the whole
research in better manner. The researcher uses systematic literature review strategy in order to
analyse the negative and positive impact of inflation on tourism industry.

CONCLUSION
From the above information it has been concluded that inflation provides both positive
and negative impact on the businesses. But the negative impacts are harmful for the company in
order to operate their business in appropriate manner. It reduces their profitability and sales as
well as declines their bottom line also. Basically inflation means decrease in the purchasing
power of money which is reflected in a general increase in the prices of goods and service in an
economy. Due to high rate of inflation, purchasing power of consumer declines that directly
affects the sales and profitability of the company. Thus, it makes important for the company in
order to find effective solution that helps in reducing its negative impact and ensure that their
business run more smoothly and effectively. The above research examines the negative and
positive impact of inflation on the business. It affects the business in many ways such as it
increase the consumer price index, increasing rate of interests, decrease consumer spending,
increased overhead and inventory costs and increased competition. Due to certain these impacts
companies many difficulties in order to operate their business more smoothly. The sales and
profitability of the business reduces as well as their decline their bottom line also. Becoming old
debt cheaper is the positive impact that the inflation creates on the businesses. Due to increases
in inflation on economy the value of older debt decreases which can be beneficial for the
businesses in order to payer their older debts in easy manner. One of the great losses that tourism
industry faces due to inflation is reduction in customer base. Due to inflation customer’s feels
difficulty to purchase their necessities goods so, they cannot think to make their travel decision.
It directly affects the sales and profitability of tourism industry. This makes important for the
tourism industry to find effective solutions to reduce the negative impact of inflation on
businesses. By reducing consumptions and eliminating work help company to reduce the
negative impact of inflation on business.

REFERENCES
Books and Journals:
Van, D.D., 2019. Money supply and inflation impact on economic growth. Journal of Financial
Economic Policy.
Lin, N., 2021. Analysis of the impact of inflation expectations based on machine learning
intelligent models. Journal of Intelligent & Fuzzy Systems, 40(4), pp.6581-6592.
Salmerón, R., García, C.B. and García, J., 2018. Variance inflation factor and condition number
in multiple linear regression. Journal of Statistical Computation and Simulation, 88(12),
pp.2365-2384.
Wen, F., Zhang, K. and Gong, X., 2021. The effects of oil price shocks on inflation in the G7
countries. The North American Journal of Economics and Finance, 57, p.101391.
Singh, G., 2022. Short-term market reaction to inflation announcement: evidence from the Indian
stock market. Macroeconomics and Finance in Emerging Market Economies, 15(1),
pp.86-108.
Awe, E.O., Sule, O.K. and Awarun, O., 2022. Inflation and Housing Property Ownership in
Nigeria: 1999–2021. Available at SSRN 4171232.
Shakil, M.H., 2020. Environmental, social and governance performance and stock price
volatility: A moderating role of firm size. Journal of Public Affairs, p.e2574.
Iqbal, U., Gan, C. and Nadeem, M., 2020. Economic policy uncertainty and firm
performance. Applied Economics Letters, 27(10), pp.765-770.
Hennink, M., Hutter, I. and Bailey, A., 2020. Qualitative research methods. Sage.
Köhler, T., Smith, A. and Bhakoo, V., 2022. Templates in qualitative research methods: Origins,
limitations, and new directions. Organizational Research Methods, 25(2), pp.183-210.
Online:
UK inflation jumps to highest level in 30 years, 2022 [Online]. Available through: <
https://www.ft.com/content/9188e191-4c1c-4968-a3af-9a43f086de6b>
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>