Analyzing Inflation's Impact on Tourism: Solutions and Strategies

This report examines the effects of inflation on the tourism industry, detailing both positive and negative impacts, particularly following the COVID-19 pandemic. It highlights challenges such as increased costs and supply chain disruptions, referencing data on hotel room price increases in major European cities. The report suggests solutions, including leveraging digital transformation, implementing new pricing models, and focusing on skilled labor and technology to mitigate negative effects on SMEs. It concludes that by strategically analyzing market conditions and implementing proactive measures, tourism businesses can navigate inflationary periods effectively and sustain growth. Desklib provides access to similar reports and study tools for students.

Research Project
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Introduction......................................................................................................................................3
Main Body.......................................................................................................................................4
What are the typical impacts that inflation can have on the tourism industry and what
solutions, to ease the negative impacts, can be implemented?...............................................4
Conclusion.......................................................................................................................................4
References........................................................................................................................................5
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Introduction
Inflation is defined as extent of measure at which services and products get expensive over a
particular time. According to the International Monetary Fund inflation is termed as a rate of
increase in price or service over a particular period of time (Inflation: Prices on the Rise. 2022).
In addition to this, inflation is a broad measure such as dramatic increase in this cost of living as
well as overall prices of commodities in a particular economy. Along with this has been
evaluated that commonly used inflation index include customer price index and wholesale price
index. Furthermore it has been underlined that inflation can be viewed in a positive and negative
manner. Inflation can be significantly viewed positively or negatively according to the individual
point of view along with the rate of change. The present report duly discuss the impact of
inflation on tourism industry. Furthermore, significant solutions along with negative impact that
can be overcome it’s also being discussed in this report. The report also include various forms of
event which causes inflation such as dramatic increase in the interest rates global events.
Inflation can be due to several causes for example increase in supply of money or printing or
giving away more money to citizens in a particular economy. Along with this higher pressure on
supply and demand side of economy is also the major cause of inflation. The primary aim of this
report is to analyse the typical impact of inflation on tourism industry along with significant
solutions to overcome the negative impact. Furthermore valuation of statistics to determine the
inflation which is undertaking and information that state the measured impact of inflation on
SME is also being discussed in this report supported with government statistics reports. Along
with this the present research also discusses qualitative research analysis. that further aid in
evaluating the positive as well as negative impact of inflation which disrupted the organisations
in tourism industry.
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Main Body
What are the typical impacts that inflation can have on the tourism industry and what solutions,
to ease the negative impacts, can be implemented?
The sudden outbreak of COVID-19 created various challenges in front of business organisations
in nearly all industries around the world. Government of organisations across the globe
implemented various strict measures such as lockdown which affected the continuous business
process of many companies in different segments. In this the travel and tourism is among the
worst hit industries that faced many challenges (Alegre and Sard, 2015). However after the
situation started to ease the reopening of economy however provided various opportunities to
companies in tourism sector to influence consumer needs and demands with various tactics and
strategies, but the sky rocketed inflation as well as dramatically affected supply chain put
forward number of adverse challenges in front of the organizations operating in the particular
sector. It has been evaluated at the global customer price inflation reached its maximum 5.6% in
November and December 2021. This is the highest rate since 2008 (Dogru, Isik and Sirakaya-
Turk, 2019). Furthermore according to the reports of IHS Markit, the rate of inflation
significantly continues to remain high in the year 2022. The analysis of these facts states that
inflation had drastic impact on organization in hospitality in tourism sector (Goodhart and
Pradhan, 2017). This rate not only created challenges in front of organisations to conduct their
business operations but also affected them with increase in supply chain challenges. Along with
this it has been evaluated that companies in different sector has been affected due to inflation
which affected the daily basis operations (Hartley, 2016).
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Figure 1Pricing recovery destination comparison - Major European cities
Source: https://www.otainsight.com/resources/blog/inflation-hotel-rates-europe
Furthermore, it has been underlined that as compared to the average room rate of hotel
prices across major cities in Europe from the year 2019 to 2020 summer the date states that the
room prices for the month of key European destination city increased dramatically, Rome is up
51.4%, Berlin 50.2%, Dublin 44.5%, London 44.3%, Barcelona 29%, Amsterdam 12.1% and
Paris 19.8% (How is inflation impacting travel demand and hotel rates across Europe?. 2022). In
depth evaluation of the qualitative accounts and data from many hoteliers determine the fact that
inflation played major role in creating challenges in front of business organisations and affected
their ability to conduct operations. Furthermore according to the office for National Statistics
data and information continuous increase in the rate is likely to be affected temporarily as the last
summer it out to help out scheme prices in the café and restaurants lead the inflation continue to
create challenging path. The inflation created adverse impact on companies such as increased
their overall price of transportation which created challenges in front of them to acquire raw
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material. This affected their overall revenue generation ability. Furthermore it also caused
dynamic impact such as increasing the cost of food, shortage of labours which put forward many
challenges.
The inflation caused many serious impacts, however there are some certain positive impacts
that inflation brings in front of companies in which tourism organisations and take advantage of
conducting proper analysis of their business operations and can align them with the current trend
in the market (Khalid, Okafor and Shafiullah, 2020). With the help of undertaking opportunities
from inflation time period organisations in this sector can grab many opportunities through
which they can assure favourable impact such as in increase better investment return as
investors in entrepreneurs, receive investing for productive activities. With the help of this
company’s can enhance employment production as well as better income. Furthermore by taking
use of information and opportunities organisations in the respective sector can make significant
increase in investment spending. With the help of taking use of appropriate strategies
organisations can grab the opportunities prevailing during the time period of inventory. However
company needs to emphasise on certain negative elements that inflation brings, as this will help
them to analyse the situation and further overpower them with positive impact. It essential for
organization to does not neglect the negative impact of inflation as in this they can undertake use
of technologies such as robotic process automation, intelligent document processing and other
technology. This will help them to undertake use of digital tools during the time period of
inflation which brings them to reduce the cost of resources and expenditure. The digital
transformation have tendency through which companies can deliver more effective results
through which they can assure consumer satisfaction (Kim, Park and Chen, 2021). Organisations
in the tourism sector can also undertake use of new pricing model to satisfy as well as encourage
investors to increase revenue. With the help of this organization can assure strategic response
through which they can overcome the situation. Along with this it has been organisations in the
tourism sector can also undertake use of new pricing model to satisfy as well as encourage
investors to increase revenue. With the help of this organization can assure strategic response
through which they can overcome the situation. Along with this it has been evaluated that
inflation impact on SMEs in negative way. However according to the government statistics as
well as other sources (Kumar and Hussain, 2014). It has been underlined that the rate of inflation
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however is causing destructive impact on companies in small scale sector but with the help of
analysing the negative and positive impacts companies in tourism sector can grab positive
opportunities and can assure growth (Pratt and Alizadeh, 2018). For this they need to take use of
expert reliance on digital transformation to analyse the situation effectively in proper time with
less cost of expenditure.
Gantt Chart
Conclusion
As per the above mentioned analysis of the report it has been concluded that inflation have
positive as well as negative impact on the growth and performance of a business organization. In
context with tourism industry inflation severely affected companies operating in this sector.
However business organisations needs to determine significant opportunities that inflation bring
as to exploit the advantages of the situation. Businesses also need to implement effective
strategies to handle the situation of inflection effectively as to make sure that consumers and
employees does not get affected at higher interest rate. In this by taking advantage of cost of
input and utilising resource to smooth out prices when input cost for cyclic business
organisations can undertake operations without facing any drastic impact on its financial
resources. Along with this organization also requires to focus on input cost and skilled labour
technology as to make sure that inflation does not affect their overall operation due to lack of
labour force. Furthermore, with the help of undertaking use of analysing the market to conduct
operations while evaluating issues in the market will also allow to overcome the inflation. The
situation of inflation brings many severe impact on SMS and companies to overcome them
companies need to undertake use of solutions and strategies, along with skilled labour, resources
and techniques to deal with the inflation time period. With the help of this companies can operate
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effectively in a positive way without facing any drastic impact on their business operations and
performance.
References
Books and Journals
Alegre, J. and Sard, M., 2015. When demand drops and prices rise. Tourist packages in the
Balearic Islands during the economic crisis. Tourism Management, 46, pp.375-385.
Dogru, T., Isik, C. and Sirakaya-Turk, E., 2019. The balance of trade and exchange rates: Theory
and contemporary evidence from tourism. Tourism Management, 74, pp.12-23.
Goodhart, C. and Pradhan, M., 2017. Demographics will reverse three multi-decade global
trends.
Hartley, K., 2016. UK defence inflation and cost escalation. Defence and peace
economics, 27(2), pp.184-207.
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>
Inflation: Prices on the Rise. 2022. [Online]. Available
throughhttps://www.imf.org/external/pubs/ft/fandd/basics/30-inflation.htm
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Khalid, U., Okafor, L.E. and Shafiullah, M., 2020. The effects of economic and financial crises
on international tourist flows: A cross-country analysis. Journal of Travel
Research, 59(2), pp.315-334.
Kim, Y.R., Williams, A.M., Park, S. and Chen, J.L., 2021. Spatial spillovers of agglomeration
economies and productivity in the tourism industry: The case of the UK. Tourism
Management, 82, p.104201.
Kumar, J. and Hussain, K., 2014. Evaluating tourism's economic effects: Comparison of
different approaches. Procedia-Social and Behavioral Sciences, 144, pp.360-365.
Pratt, S. and Alizadeh, V., 2018. The economic impact of the lifting of sanctions on tourism in
Iran: A computable general equilibrium analysis. Current Issues in Tourism, 21(11),
pp.1221-1238.
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