Research Project: Inflation's Impact on UK's Tourism SMEs like COSMOS

This report investigates the impacts of inflation on the UK tourism industry, particularly focusing on Small and Medium Enterprises (SMEs) like COSMOS Tours. It begins by defining inflation and its broad economic effects, highlighting the challenges it poses for consumer buying power and organizational productivity. The report uses the Consumer Price Index (CPI) to measure inflation rates in the UK, noting significant increases in 2022 compared to previous years, especially during the COVID-19 pandemic. It identifies both negative impacts, such as reduced purchasing power and increased cost of living, and potential positive impacts, like increased spending and investment. The report concludes by emphasizing the importance of government regulations and industry strategies to mitigate the adverse effects of inflation, suggesting measures like lower tax rates and customer satisfaction initiatives to support the tourism sector and broader UK economy. Desklib provides access to similar reports and resources for students.

Foundation Year
Research Project -
Report

Contents
INTRODUCTION...........................................................................................................................3
Aim and Objectives .........................................................................................................................4
Objectives....................................................................................................................................4
2. MAIN BODY...............................................................................................................................4
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Inflation is the rate of increasing in prices over a given period of time that directly
impacts on living standard of society in a country. This is important to country to identify the
regulations and policies that directly affect the business environment. The environment is
changing where needs and wants of people geeing change, it became important for organization
to introduce the kind of products and services as it could influence the number of customers and
increase sales. It has seen that occurrence of any pandemic within country could be affect the
economy and businesses negatively (Hesami, Rustamov, Rjoub, and Wong, 2020). The people
should have proper information regarding market and needs of people which can help to offer the
products accordingly. In economics, inflation is a general increase in the price of goods and
services within the economy that creates the challenges for individual to make the buying
decisions. This is typically a broad measure, such as the overall increase in prices and cost of
living. There are certain events such as interest rates, global events, pandemic, and others leading
to inflation in an economy. COSMOS Tours is selected company which offers different types of
tourism and travelling services to their customers (Athari, and et.al., 2021).
Inflation can occur when production cost of products and services increases then prices
also increases. It has seen that some people who earns good ready to pay more but others not.
This directly affected the organizational sales and productivity negatively. To understand the
impact of inflation in UK on SMEs report has been prepared that defines how does it affect
economy. The government of UK has changed the regulation as cost of products and services are
increasing continuously that reduced the buying power of customers. Inflation has impacted
on tourism industry SMEs in positively and negatively. The positive impacts of inflation on
economy is higher profits since producers can sell at higher prices, provides better investment
returns since investors and entrepreneurs receives incentives for investing in productive
activities, increasing production, more employment and better income that supports UK
economy (Seiler, 2020). Oppositely, inflation has impacted negatively on tourism industry such
as inequality in income distribution, upsets the planning process, increases in speculative
investment, lower sales and productivity of organization and others (Khan, Tan, Azam, and
Hassan, 2022).

Aim and Objectives
Aim- To identify the impacts of typical impacts that inflation can have on the tourism industry of
UK.
Objectives
 To determine the conceptual framework of inflation.
 To identify the typical impacts that inflation can have on the COSMOS Tours industry.
 To provide the possible solution can be use by tourism industry to ease the negative
impacts of inflation.
2. MAIN BODY
Inflation is the major issue for each economy as it limits the buying power of customers
and affects organizational sales as well as productivity. This is important to industry to analysis
the environment as it states what is happening around and how problems could be resolve by
managing the all functions and following the government regulations. For example, J COSMOS
Tours is tourism industry of UK that offers travel and tourism services to their customers at
friendly budget (Su, 2020). Consumer price Index is the technique which is used by researcher
to measure the rate of inflation in an country. It has seen that if rate of interest is higher than then
it could be challenging for tourism industry to sale their products and services (Syed, and et.al.,
2021).
According to government statistics and ONS, Consumer price index involving owner's
occupiers housing cost rose by 8.8% in one year to July 2022, increased from 8.2% in month of
June. It has seen that annual rate was less 1.2% from April 2020, while the starting of pandemic
in 2019 to march 2021. It has affected the tourism industry negatively in Covid-19 period such as
government declared the lockdown where no business activities were allowed that have reduced
the number of customers in UK tourism industries (Inflation rates in UK, 2022).
The figure recorded in month of July 2022, is highest also shown in the National Statistic
series, which began in January 2006. The rate was last higher in our constructed historical
estimates in December 1990, when it stood at 9.2%. The largest contributions to the annual rate
in July 2022 are from housing and household services, transport, and food and non-alcoholic
beverages (Tien, 2021).

Illustration 1: Inflation rates in UK, 2022.
In statistics it has shown that consumer price index is increased in 2022 as compared to
last year that means people is spendings in tourism industry and increasing buying power. The
government is having major role as it identify the natural issues and bring out the optimum
solution that could help to regulate the business (Gnangnon, 2020). During Covid, government

declared the lockdown where all hospitality and tourism industry closed for next updates that
affected the business negatively (Nguyen, Binh, and Su, 2020).
Illustration 2: Contributions to the annual CPIH inflation rate, UK, July 2020 to July 2022
In tourism industry major contribution of sectors are food and non-alcoholic beverages,
clothing and footwear, furniture and household goods, alcohol and tobacco, furniture and
household goods, transport, recreation and culture, restaurant and travel, tour and travels that
influences the number of customers in changing environment and encouraged to make buying
decisions (Haryanto, 2020). The contribution of lower-level spending categories to the annual
rate depends on both the price movement in those categories as well as their weight.
Contributions help to understand what is driving the inflation rate by expressing it as the additive
sum of its parts. After conducting the quantitative research it found that economic condition of a
country depends on inflation rates that rises due to increasing interest rate, global event,
occurrence of pandemic and other natural disaster that directly affect the business industries
(Contributions to the annual CPIH inflation rate, UK, July 2020 to July 2022).

The quantitative research explained that negative impacts of inflation rates on tourism
industry is the loss of purchasing power of customers, shows as due to increasing inflation and
interest rates in UK could be challenging for people to make buying decision as prices of
products go up, and it affect the organizational sales negatively. Inflation creates a great pressure
on COSMOS Tours to invest their capital and resources excessively. Lower interest rates
incentivized consumers to find best returns and increase the sales (Icoz, and Icoz, 2019).
Increase the cost of living is another effect of increasing inflation in tourism industry as
companies could lost their potential customers due to increasing cost of living (Irani, Athari, and
Hadood, 2021). This also affect society where number of people living and makes decision to
buy the products and services. Low skilled workers also affected as their wages are sticky due
having high level of competition in COSMOS Tours. It reduced the number of employment in
changing environment that generate lower profits (Contributions to the annual CPIH inflation
rate, UK, July 2020 to July 2022).
The positive impacts of inflation
Increased spending and Investment – As inflation increases, consumers are incentivized
to move purchasing decision forward. The people spending more on necessities to find out the
best returns. Thus, it could help to increase in spending and managing all functions (Shang, Li,
and Zhang, 2021).
Reduces the effective level of debt – Whether a government, consumers, or businesses
have high level of debts could help to ease by increasing sales and increasing prices of products
and services (Banga, and et.al., 2022).
In UK, government can ease the negative impacts of inflation on economy by formulating
effective regulations such as lower tax rates, sustainability, low CPI, and level of spending that
could help to reach the larger number of customers in tourism industry and supports to increase
sales (Kisswani, Zaitouni, and Kisswani, 2022).

CONCLUSION
From the report it can be concluded that inflation is the situation where prices of products
and services go up and affected buying power of customers. This impacts negatively on economy
of tourism as low employment rates, less number of consumers, increasing cost of living,
increasing cost of borrowing, exchange rate fluctuation and others that reduced the economy. To
overcome this issue, government should run supportive programmes and provide subsidiary to
business industry so that they could buy raw material at lower cost and provide to their
customers. Moreover, provide the customer satisfaction is another effective way could be used
by companies to influence people and increase buying power. Inflation can predominantly hurt
low-income households. Spending largest amount of their incomes, prices will go up more that
creates a situation of inequality as poor people is not able to pay more. It has seen that prices of
necessities like food and housing go up, poor people have no choice but to pay that creates a
consequences of inequality. This is important to organization to analysis the environment and
introduce the kind of services that could help to influence the number of customers. Tourism is a
part of the United Kingdom economy. It is growing at faster rate than the overall UK economy.
The important aspect for an economy is to find out the reasons of inflation and bring out
effective solutions that could help to grow the business opportunities.

REFERENCES
Athari, S. A., and et.al., 2021. The (Un) sticky role of exchange and inflation rate in tourism
development: insight from the low and high political risk destinations. Current Issues in
Tourism. 24(12). pp.1670-1685.
Seiler, P., 2020. Weighting bias and inflation in the time of COVID-19: evidence from Swiss
transaction data. Swiss Journal of Economics and Statistics, 156(1), pp.1-11.
Nguyen, C. P., Binh, P. T. and Su, T. D., 2020. Capital investment in tourism: a global
investigation. Tourism Planning & Development, pp.1-27.
Irani, F., Athari, S. A. and Hadood, A. A. A., 2021. The impacts of country risk, global economic
policy uncertainty, and macroeconomic factors on the Turkish tourism
industry. International Journal of Hospitality & Tourism Administration, pp.1-24.\
Icoz, O. and Icoz, O., 2019. Economic impacts of tourism. In The Routledge Handbook of
Tourism Impacts (pp. 95-108). Routledge.
Haryanto, T., 2020. COVID-19 pandemic and international tourism demand. JDE (Journal of
Developing Economies), 5(1), pp.1-4.
Gnangnon, S. K., 2020. Impact of international tourism receipts on public revenue in developed
and developing countries. Tourism Review.
Shang, Y., Li, H. and Zhang, R., 2021. Effects of pandemic outbreak on economies: evidence
from business history context. Frontiers in Public Health. 9. p.632043.
Banga, C., and et.al., 2022. The role of clean energy in the development of sustainable tourism:
does renewable energy use help mitigate environmental pollution? A panel data
analysis. Environmental Science and Pollution Research, pp.1-11.
Hesami, S., Rustamov, B., Rjoub, H. and Wong, W. K., 2020. Implications of oil price
fluctuations for tourism receipts: The case of oil exporting countries. Energies. 13(17).
p.4349.
Syed, Q. R., and et.al., 2021. Does geopolitical risk mitigate inbound tourism? Evidence from
panel quantile regression. Journal of Public Affairs, p.e2784.
Kisswani, K. M., Zaitouni, M. and Kisswani, A. M., 2022. On the asymmetric link between
exchange rate variability and tourism inflows: recent evidence from the asean-5
countries. Journal of Policy Research in Tourism, Leisure and Events, pp.1-30.
Su, X., 2020. Simulation of economic development of tourism industry based on FPGA and
machine learning. Microprocessors and Microsystems, p.103523.
Khan, I., Tan, D., Azam, W. and Hassan, S. T., 2022. Alternate energy sources and
environmental quality: The impact of inflation dynamics. Gondwana Research. 106.
pp.51-63.
Tien, N. H., 2021. Relationship between inflation and economic growth in Vietnam. Turkish
Journal of Computer and Mathematics Education (TURCOMAT). 12(14). pp.5134-
5139.
Online
Contributions to the annual CPIH inflation rate, UK, July 2020 to July 2022. Online. Available
through:
<https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/
consumerpriceinflation/july2022>

Inflation rates in UK, 2022. Online. Available through:
<https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/
consumerpriceinflation/july2022>
Hesami, S., Rustamov, B., Rjoub, H. and Wong, W. K., 2020.Syed, Q. R., and et.al., 2021.
Kisswani, K. M., Zaitouni, M. and Kisswani, A. M., 2022Su, X., 2020.Khan, I., Tan, D.,
Azam, W. and Hassan, S. T., 2022.Tien, N. H., 2021.

APPENDIX
Gantt Chart – This could be explained as type of bar chart that illustrate project schedule and
time. This require to design as it helps to complete the task in certain period so that organization
could operate their business effectively. The project schedule in relation to current project is
explained below: