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Leisure tourism has long been a pursuit of the wealthy, but it is only since the 1980s that the majority of the population has become involved, either as tourists or as workers catering for their needs—a phenomenon that has raised tourism to the position of one of the world’s largest industries. Domestic tourism is estimated to be ten times greater in volume than international tourism, and yet relatively little is known about it; closer attention has been paid to international tourism. With developments in world trade, better means of transport and communications, intensive marketing, rises in disposable income, improvements in political ties, technological advances, and increased leisure time, international tourism has grown rapidly, as is reflected in the global trend of inbound tourist arrivals and receipts. The number of international arrivals rose from 25 million in 1950 to 763 million in 2004, and receipts rose from $2 billion to $623 billion during the same period (World Tourism Organisation 2006).
Globalization has also contributed to the rapid expansion of tourism, via such changes as deregulation of air transport. The growth of charter flights, low-cost airlines, and package-tour holidays provided a major boost to this expansion. International and domestic tourism combined generate up to 10 percent of the world’s gross domestic product (GDP) and a considerably higher share in many small nations and developing countries.
The tourism product comprises a combination of goods and services supplied by the tourism industry, as well as nonpriced features that motivate tourism, such as natural sites (such as beaches, mountains, and forests), historic sites, and cultural features. The welcome provided to tourists by industry employees and by the local population is also of fundamental importance. The tourism industry includes hospitality (e.g., accommodation, restaurants), transportation (e.g., airlines, car rental), travel facilitation and information (e.g., tour operators, travel agents, tourist information centers), and attractions and entertainment (e.g., heritage sites and theme, national, and wildlife parks). Thus the scope of tourism supply is wide-ranging and influenced by market conditions that affect the environment in which tourism businesses operate.
The market structures within which tourism businesses operate vary from highly competitive (akin to perfect competition) to monopoly. Key features indicating competitive status are the number and size of firms, degree of concentration, entry and exit conditions, pricing strategies, profit levels, product differentiation, cost structures and capacity, and interaction between firms (Sinclair and Stabler 1997). The classification of the supply components is not straightforward; for example, the transport and accommodation sectors are themselves divided into subcategories with different market structures.
The accommodation sector is dominated by large chains (e.g., Cendant Corporation, Bass Hotels, Marriott, Accor, Choice, Hilton), giving the impression of an oligopolistic structure, and each firm’s strategy takes account of the past and predicted future strategies of the others. This sector also encompasses a large number of other establishments with diverse attributes, including hotels, motels, holiday centers, timeshares, and camping facilities, and the diversity of the products that they provide, and a degree of price control, indicate monopolistic competition. In contrast, a highly competitive market structure characterizes the sales of souvenirs and knickknacks by numerous small businesses, including street-based sellers, who have very limited control over the prices they can charge tourists.
Tour operators negotiate deals with hotels, airlines, and other service operators to assemble holiday packages primarily for the mass market, facilitating a link between suppliers and customers. The packages are retailed through travel agents or directly to the customer. In the United Kingdom, the inbound and outbound tour-operator organizations, UK Inbound and ABTA (Association of British Travel Agents), respectively, defend their interests. ABTA had 6,310 travel-agent office members and 1,052 tour-operator office members in 2005, generating a combined turnover of ?26 billion. Eighty-five percent of all package holidays sold in the United Kingdom were sold through ABTA members. The four dominant tour operators in the United Kingdom are Thomson, First Choice, My Travel, and Thomas Cook. Large tour operators are primarily linked to the mass market, whereas specialized tour operators that cater for ecotourists, older tourists, and gay and lesbian travelers are growing rapidly. Although the large tour operator market structure is highly concentrated, suggesting an oligopolistic structure, there is relatively easy entry into and exit from the sector, so it has many of the characteristics of a competitive, con-testable market. The fact that many tour operators tend to experience low profit margins also indicates a competitive structure. High sales volumes have enabled the large firms to achieve substantial economies of scale and scope, but they are experiencing intense competition from Internet travel sites.
Travel agents are, in effect, retailers providing travel services to customers for commission. Some are linked to tour operators, and others function independently. This intermediary sector has experienced substantial growth. In the United States there has been an almost fivefold increase in agency outlets since the early 1970s. In the early 1990s more than two-thirds were single-office agents, and just one-fifth were branches of multiple firms. This is in contrast with Europe, where single outlets account for no more than one-third of the total, with the major multiples owning just over one-quarter (Sinclair and Stabler 1997). Like the tour operators, travel agents are facing a major challenge from the rapidly growing Web-based companies that sell a wide range of holiday packages over the Internet.
Transport is a crucial factor in the growth of tourism. With the wide range of transport modes (air, rail, car, bus, coach, ferry), the market structure is diverse. Air travel is of key importance in terms of passengers carried and revenue generated. Since the 1960s air travel has grown tremendously, and with technological change the potential for growth has increased further. With deregulation, privatization, low-cost airlines, and globalization, competition in the air industry is fierce, although oligopolistic conditions and domestic monopoly still exist in some long-haul destinations, and airline alliances such as the Star Alliance and One World have facilitated collaboration. The structures of the bus, coach, ferry, and rail sectors are similar to the air sector’s in that they have problems of high capital costs, fixed capacity, peaked demand, and the need for feeder routes to sustain profitable ones.
The source markets for international tourism are concentrated in the industrialized countries of Europe, the Americas, and Asia and the Pacific. The main tourist-generating countries are in the world’s industrial core: The United States and Germany are the major markets, followed by the United Kingdom, Japan, France, and Italy. With rising levels of disposable income many emerging economies, such as those of Central and Eastern European countries, have shown fast growth in recent decades, and China is becoming a major source market.
Europe remains the most visited of all regions of the world; since the new millennium it has received almost 60 percent of all international tourists and more than half of total tourism receipts. France is the most popular destination visited by tourists worldwide, followed by Spain, the United States, Italy, China, and the United Kingdom. In terms of international tourism receipts, the United States has been the major recipient, accounting for around 12 percent of the total, followed by Spain (8 percent) and France (7 percent).
Outbreaks of disease or political unrest or terrorist attacks have recently hit the tourism industry with some severe and unexpected downturns in demand. Examples include the Gulf War in the early 1990s, the terrorist attacks at Luxor in Egypt in 1997, the Kosovo conflict in 1999, foot-and-mouth disease in the United Kingdom in 2001, the September 11 terrorist attacks in the United States in 2001, and the tsunami in the South Pacific in 2004. All of these events had negative impacts on the number of international tourist arrivals. In 2003 world tourist arrivals were 691 million, compared with 703 million in 2002. Tourist arrivals from the United States fell from a high of 128 million in 2000 to 113 million in 2003. Despite the volatility in demand over the short term, the World Tourism Organization forecasts that international arrivals will reach more than 1.56 billion by the year 2020, with Europe being the top destination, followed by East Asia and the Pacific, the Americas, Africa and the Middle East, and South Asia.
The recent high growth in tourist arrivals and expenditures affects host destinations in various ways, contributing to higher exports of services, bringing in foreign currency, increasing the level of income, and generating tax revenue. Tourism also generates large numbers of jobs, although remuneration in many parts of the tourist industry is low compared with other industries. There is significant gender structuring in employment. For example, in the United Kingdom in 1995, 76 percent of jobs in the transport sector were filled by men, whereas 62 percent of those in accommodation and catering were undertaken by women (Purcell 1997). Furthermore, in the hospitality sector staff often live on premises and are expected to work long and “unsocial” hours. Many receive low pay, and there is a large proportion of young, female, and part-time and casual staff, as well as high staff turnover in many establishments.
Although the tourism industry has great potential for benefiting recipient countries, major criticisms have been leveled at its impact on the environment as well as on social norms and cultures. Construction of resort hotels and theme parks, for instance, has led to significant changes in the environment and some reduction in the biodiversity of native flora and fauna. Damage to coastal areas has been a cause for concern, with construction of marinas and other water-based activities. Other environmental issues relate to noise and air pollution (for example, from aircraft, vehicles, nightclubs) and to water contamination by discharges from hotels, boats, and cruise ships. These pose serious challenges for destination managers.
Industry problems, ranging from increasing competition between destinations to environmental concerns, have encouraged destinations to introduce structural changes and to think about sustainable tourism. Many destinations have stressed the importance of ecotourism. Tourism is a sensitive industry with respect to changes in economic, social, and political conditions, and tourism activities are hampered by disease, political unrest, and climatic changes. A further challenge for the tourism industry is to consider how to integrate tourism into society such that the economic benefits are equitably shared without significantly damaging the environment.
Bibliography:
- Purcell, Kate. 1997. Women’s Employment in U.K. Tourism: Gender Roles and Labour Markets. In Gender, Work, and Tourism, ed. M. Thea Sinclair, 35–59. London and New York: Routledge.
- Sinclair, M. Thea, and M. Stabler. 1997. The Economics of Tourism. London and New York: Routledge. World Tourism Organization. http://www.world-tourism.org.
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