Researching the Impact of Inflation on SMEs in UK Tourism

This report examines the impact of inflation on the UK tourism industry, focusing on SMEs. It identifies the causes and consequences of inflation, particularly its effects on the operational costs and profitability of tourism-related SMEs. Both quantitative data, illustrating inflation rate changes and their effects, and qualitative research, exploring the perspectives of businesses within the sector, are utilized. The report highlights challenges such as increased raw material costs and wage demands, alongside potential strategies like competitive pricing and sustainable practices to mitigate the negative impacts. The research concludes that understanding and addressing inflation is crucial for the sustainability and growth of SMEs in the UK tourism industry, emphasizing the need for adaptive strategies and effective marketing approaches.

Research Project
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Table of Contents
INTRODUCTION...........................................................................................................................3
Concept of Inflation................................................................................................................3
List of the events that can lead to inflation.............................................................................3
Aim and objective of research................................................................................................3
MAIN BODY...................................................................................................................................4
Quantitative research.......................................................................................................................4
Impact of inflation on SMEs with the UK tourism industry..................................................4
Qualitative research.........................................................................................................................5
Impact of inflation on business performance within UK tourism industry............................5
CONCLUSION................................................................................................................................8
REFERENCES:...............................................................................................................................9
Books and Journals.................................................................................................................9
Online.....................................................................................................................................9
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INTRODUCTION
Concept of Inflation
Inflation can be understood as increase in prices of products and services available in
market. It also enhances the overall cost of living over a period of time. It takes place with the
rise in price of production cost and raw materials (Su and et.al., 2020). The overall cost of
operations becomes costly causing inflation. Along with that, rise in demand of a particular
product is another reason of inflation. This leads to rise in process and due to this reason the
customers are not able to spend money on the particular commodity. There are various problems
that takes place due to inflation and it is necessary to take measures that will control inflation.
The imbalance in the prices of commodities is the reason for inflation. The changes in the
income level of the consumers is also a reason that causes inflation.
List of the events that can lead to inflation
There are various events that cause inflation. It becomes necessary to have knowledge
regarding those events so that proper precautions are taken. The primary cause of inflation is
when demand for a commodity exceeds its supply then it leads to inflation. The demand pushes
the price level up and is a major cause (Nyoni, 2018). At the same time, growth in population
rate is also a cause of inflation. There is need of understanding that the rise in population also
enhances the demand of the products and that is the reason there is inflation. At the same time,
another event that can raise the price are rise of prices in international market. this leads to rise in
the market due to having trade relations with them.
A recent event of Covid-19 pandemic has impact on the price rise. The pandemic caused
lockdown situation around the world and there was shortage of raw materials and well problem
in transportation facility. This lead to price rise as there was no labour to carry on the process of
manufacture. The shortage has led to high prices and inflation. In tourism industry, there was low
occupancy rate seen in hotels. No one was ready to go out of their houses and this enhances the
rate of products.
Aim and objective of research
Research aim
To examine the impact of inflation on the tourism industry.
Research objectives
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 To understand the impact of inflation on SME’s of tourism industry
 To determine the strategies that will help to solve the negative impact of inflation.
MAIN BODY
Quantitative research
Impact of inflation on SMEs with the UK tourism industry
Inflation has impact on the overall nation and all the businesses that have operations. The
SME’s also face the issues due to rise in prices of the commodity. They to get the products at
higher rates. The SME’s do not have much capital investments and inflation has negative impact
on their performance (Lorusso and Pieroni, 2018). Due to this reason, they also enhance the
prices and this decrease the sales. The inflation rate in 2009 was 1.96% and then it raises to
2.49% in 2010. In 2011 It was around 3.86%. There is continuous rise in the rate of inflation and
this reduces the profits earned by the business entities (U.K. Inflation Rate 1960-2022, 2022).
The SME’s in tourism sector have enhanced since the past years and there is regular rise in
prices. The rate of rooms provided by them is also enhancing with the rise in process of the
commodities.
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It is analysed that the graph of inflation keeps on changing. In regard to 2009 to 2011 there is
continuous rise in the inflation rate. The slight change in the rate also have impact on the SME’s
and the cost of services provided by them gets enhanced. As per the data of National Statistical
Office increased 1.5 percent before seasonal adjustment. The rate of CPI slowed down in 2010.
Qualitative research
Impact of inflation on business performance within UK tourism industry
Tourism industry plays a critical role in today’s time. It is one of the fast growing industry
and contributes food amount to GDP. It is analysed that the industry provides various
employment opportunities and hires the people. They also take care of the external factors that
have impact on the industry so that they are able to take all the necessary actions. There are both
negative and positive impact that are caused by tourism industry (Rehman Ali, and Shahzad,
2020). It is seen that there are people who like to travel and they do not care about the money.
This causes positive impact on the working of SME’s in tourism industry. They are able to get
good occupancy rate by the people who are ready to spend in travelling. The originations are
able to get more profit due to high bookings. The tourism industry is seasonal and in the time of
season the SME’s are also able to earn good amount of money. There is key role of earning good
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amount of profit as it is motivating the employees to work effectively. The employees are able to
enhance their level of productivity so that all the customers are satisfied. The good productivity
of the employees helps them to get better monetary benefits. There is positive impact of having
proper knowledge regarding needs and wants of the customers (Barnett, Jawadi and Ftiti, 2020).
It is necessary to provide them effective products that will help them to satisfy their
requirements. If the customers are being provided quality products at the time of inflation, then
they are satisfied with the services. The SME’s must assure that they take get all the products
that will help them to satisfy the requirements of the customers.
There is negative impact of inflation in SME’s in tourism sector as well. The prices of
products get higher and that is the reason customers are not ready to make purchases. It is
analysed that living cost enhances at the time of inflation and people only focus on fulfilling their
important needs and wants (Matthews and Ong, 2022). This has negative impact on the SME’s
and their operations. It is important to note that there is hike in the prices of raw materials and
other necessary production materials. This is the reason of increase in process and the SME’s
face problems in purchasing them. At the same time, the employees start demanding higher
salary so that they are able to sustain their living. The currency value start decreasing and all the
people focus more on savings rather than spending their money. It is observed that most of the
people who have high income want to take the services from bug hotels and SME’s have to face
issues.
Gantt Chart
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CONCLUSION
From the above report, it has been concluded that there is key role of inflation on the
economy and all the sectors working within. There is need of carrying research regarding the
external factors so that the business organisations are able to know about the changes that will
take place. It is analysed that inflation can be understood the rise in prices of the overall products
and services. There is need analysing the causes of inflation and know about the major events
that cause inflation. The tourism is a huge industry and works to provide quality services to the
customers. The use of both qualitative and quantitate research is done in order to know about the
details effectively. The rate of inflation rises and that is the reason there are a lot of problems
faced by the organisations operating in the sector. The negative and positive impact of inflation
on the tourism sector is important part of this report. It is important to analyse the impact and
take all the actions effectively. There are various negative issues being faced by the organisations
in tourism sector because of inflation.
One of the major strategy that the organisations in tourism sector must take is to analyse the
prices of competitors at the time of inflation. Then setting process lower than the competitors
will help to attract the customers towards the company. At the same time, the business
organisation must focus in sustainability as the customers prefer the organisation that follow the
concept. This helps to provide the customers with effective reasons to avail the services from the
organisation. The use of proper marketing strategies must also be done at the time of inflation as
it will enhance the expenditure but will attract the customers. It is necessary to take the actions
that will attract the customers and help the hotels to earn profit.
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REFERENCES:
Books and Journals
Barnett, W.A., Jawadi, F. and Ftiti, Z., 2020. Causal relationships between inflation and inflation
uncertainty. Studies in Nonlinear Dynamics & Econometrics, 24(5).
Lorusso, M. and Pieroni, L., 2018. Causes and consequences of oil price shocks on the UK
economy. Economic Modelling, 72, pp.223-236.
Matthews, K. and Ong, K., 2022. Is inflation caused by deteriorating inflation expectations or
excessive monetary growth?. Economic Affairs, 42(2), pp.259-274.
Nyoni, T., 2018. Modeling and forecasting inflation in Kenya: Recent insights from ARIMA and
GARCH analysis. Dimorian Review, 5(6), pp.16-40.
Rehman, M.U., Ali, S. and Shahzad, S.J.H., 2020. Asymmetric nonlinear impact of oil prices and
inflation on residential property prices: a case of US, UK and Canada. The Journal
of Real Estate Finance and Economics, 61(1), pp.39-54.
Su and et.al.,2020. A review of resource curse burden on inflation in Venezuela. Energy, 204,
p.117925.
Online
U.K. Inflation Rate 1960-2022, 2022. [Online] Available through: <
https://www.macrotrends.net/countries/GBR/united-kingdom/inflation-rate-cpi>
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