SUBMITTED BY: Lagrama, Diane Rose Ann Evangelista, Kristine Joy Ursonal, Christine Joy Pana, Geraleen SECTION: BST 1A1-7 SUBMITTED TO: Mrs. Apsay INTRODUCING TRAVEL & TOURISM TOURISM… Tourism is deemed to include any activity concerned with the temporary short-term movement of people to destinations outside the places where they normally live and work, and their activities during the stay at these destinations. AN OVERVIEW OF TRAVEL AND TOURISM DEMAND This system is discussed in detail in most introductory texts and is based on three overall categories of visitor demand with which any country is concerned; each is a different sector of the total market: International visitors who are residents of countries other than that being visited and travel for tourism purposes . Also known as inbound tourism. International visitors, who are residents of a country visiting other countries and travel for tourism purposes. Also known a southbound tourism. Residents visiting destinations within their own country’s boundaries who travel for tourism purposes. Also known as domestic tourism. THE1993 REVISED DEFINITIONS OF TRAVEL & TOURISM ADOPTED BY THE UNITED NATIONS (UN) STATISTICAL COMMISSION: Visitors to describe all travelers who fall within agreed definitions of tourism. Tourists or staying visitors to describe visitors who stay overnight at a destination. Same-day visitors, or excursionists, to describe visitors who arrive and depart on the same day. Same-day visitors are mostly people who leave home and return there on the same day, but may be tourists who make day visits to other destinations away from the places where they are staying overnight. INTERNATIONAL TOURISM Around the world, measured as arrivals or trips, the numbers of international tourists and their expenditure have grown strongly since the 1950s, notwithstanding temporary fluctuations caused by the three major international energy and economic crises of the early 1970s, 1980s and 1990s. The recent growth and current size of the international market, and the consistently confident projections that international tourism will continue to grow well into the twenty-first century. Although annual fluctuations in volume reflecting economic and political events are certain, current expectations are for annual growth of the order of some 4 per cent per annum over the period 2000–10 as a whole. The growth in shares of international arrivals projected for the Asia Pacific region has major implications for the future of world travel and tourism. INTERNATIONAL TOURIST ARRIVALS DOMESTIC TOURISM People who travel and stay overnight within the boundaries of their own country are classified as domestic tourists. Estimates of the size of this sector of the market vary because in many countries domestic tourism is not adequately measured at present. As an indication, the WTO estimates that domestic tourism around the world outweighs international tourism by a factor of around 10:1 (WTO, 1997). Evidence from surveys of the vacation market in Europe and North America in the 1990s indicates that, in most countries, between a half and three-quarters of the adult population took one or more holidays away from home in any twelve-month period of at least one night’s duration. Market research data analysing the complete tourism experience of the same individuals over periods of more than one year are rarely available although they exist, for example, for France and the Netherlands. THE COMPONENT SECTORS OF THE TRAVEL AND TOURISM INDUSTRY A major difficulty in understanding and dealing with travel and tourism as a total market or industry is the sheer number of private and public sector enterprises involved in supplying services and the extent to which so many of them see tourism as only a part of their total business operations. For example, airlines, trains, buses, restaurants and hotels all deal with a wide variety of market segments, many of which do not fall within the internationally agreed definition of travel and tourism. Hotels have local trade for bars and meals, and transport operators carry commuters. Many visitor attractions, such as museums, and most visitor information bureau1 also provide services to local residents. This mixture of products designed to serve both tourism and other markets has great significance for marketing decisions. THE SYSTEMATIC LINKS BETWEEN DEMAND AND SUPPLY AND THE ROLE OF MARKETING The relationship between market demand, generated in the places in which visitors normally live (areas of origin), and product supply, mainly at visited destinations. A detailed knowledge of their customers’ character-istics and buying behavior is central to the activities of marketing managers in all sectors of the industry. Knowledge of the customer, and all that it implies for management decisions, is generally known as consumer or marketing orientation. THE SYSTEMATIC LINKS BETWEEN DEMAND AND SUPPLY AND THE ROLE OF MARKETING MARKETING: THE SYSTEMATIC THOUGHT PROCESS Marketing means exchanges Customers who choose to buy or use products. Producer organizations, which design, supply and sell the products. Understanding the needs and desires of existing and prospective buyers. Which products they choose, when, how much, at what price and how often. How they get information about product offers. Where they buy products from (direct or through a retail intermediary). How they feel after their purchase and consumption of products. Which products to produce and why, especially new products. How many products to produce (volume of supply). At what price. How to communicate their offers, by which media. When and where to make them available to buyers. MANAGEMENT ATTITUDES AND THE EXTERNAL BUSINESS ENVIRONMENT A positive, outward looking, innovative and highly competitive attitude towards the conduct of exchange transactions (in commercial and non-commercial organizations). Recognition that the conduct of business operations must revolve around the long-run interests and satisfaction of customers rather than on one-off exchanges, and where possible, the selective development of relationships with loyal buyers Understanding that the achievement of profits and other organizational goals results from customer satisfaction and customer retention. An outward looking, responsive attitude to events and conditions in the external business environment within which an organization operates, especially the actions of competitors. An understanding of the strategic balance to be achieved between the need to earn profits from existing assets and the equally important need to adapt an organization to achieve future profits, recognizing social and environmental resource constraints. PRODUCT AND PRODUCTION ORIENTATION This term is often used to summarize the attitudes and responses of businesses whose products are typically in strong and rising demand, and profitable. Because demand does not present problems, there is a natural tendency for managers to focus their main attention on more pressing decisions, such as those concerning production capacity, quality and cost controls, finance for increasing production and maintaining the efficiency and profitability of operations generally. In the short run, where demand is buoyant and growing, an emphasis on production processes and financial controls appears both logical and sensible. Consider the example of a small town with two hotels and one car rental operator. If the town’s business community is prosperous and growing, it is likely that the hotels and the car rental operation will be profitable businesses and they are very likely to be product and production orientated. Such demand conditions are quite commonly found in travel and tourism, even at the beginning of the twenty-first century. SALES ORIENTATION This term is often used to summarize the attitudes and responses of businesses whose products are no longer enjoying growth in demand, or for which demand may be declining to levels that reduce profitability. Production is not now the main problem; surplus capacity is. The obvious management reaction in these conditions is to shift the focus of attention to securing sales. Increased expenditure on advertising, distribution channels and on sales promotion or price discounts is a logical response in an attempt to secure a higher level of demand for available production capacity. CONTRAST WITH MARKETING ORIENTATION As noted above, the focus of marketing orientation is essentially outward looking. In the notional small-town example, suppose there were now five hotels of a similar standard for a current demand that will fill only three of them at profitable levels of room occupancy. In these conditions inward-looking concerns with production and operational efficiency will not make much impact on demand, especially if competitors’ products are of a similar standard and price. Similarly, a strong sales drive with its emphasis on increased promotional expenditure will not increase demand significantly if competitors quickly follow suit with matching expenditure, and the increased expenditure will further undermine profitability. Reducing prices to increase demand will only cause further losses as competitors will have to follow suit. DEFINING MARKETING FOR THE TWENTY- FIRST CENTURY It would be highly convenient if there were just one standard definition of marketing. But, although the subject has now been studied and taught in academic courses for nearly a century (Bartels, 1976), it is still evolving and most consider it as much an art as a science. There are literally dozens of definitions, although most of them are individual variations within a broad consensus that the marketing concept is both consumer led and profit orientated. It is important to stress that consumer orientation does not always mean giving customers what they want, but it has to mean understanding their needs and wants in order to respond more efficiently in ways that make business sense for organizations– both in the short term of six months to a year, and especially in the long term of several years. The British Chartered Institute of Marketing defines marketing as: ‘The management process responsible for identifying, anticipating and satisfying customer requirements profitably, to meet organizational objectives.’ Both these definitions hold good for all forms of consumer and industrial product marketing, whether of goods such as soap powders or pianos, or services such as banking, insurance, hotel rooms and airline travel. Tourism marketing is not a separate discipline but an adaptation of basic principles that have been developed and practiced for many decades across a wide spectrum of consumer products. FIVE MARKETING PROPOSITIONS 1. Marketing is a management orientation or philosophy. 2. Marketing comprises three main elements linked within a system of exchange transactions. 3. Marketing is concerned with the long term (strategy) and the short term (tactics). 4. Marketing is especially relevant to analyzing twenty-first century market conditions and can make a major contribution to sustain- able development. 5. Marketing facilitates the efficient and effective conduct of business. SUMMARY OF MARKETING SYSTEM THE SPECIAL CHARACTERISTICS OF TRAVEL AND TOURISM MARKETING It notes the growth and importance of large-scale service organizations and the contrast with the millions of small businesses that dominate world travel and tourism numerically. It identifies the characteristics common to most forms of service marketing before proceeding to identify the particular characteristics distinguishing travel and tourism services. the basic differences between marketing as a set of principles relevant to all forms of exchange transactions, marketing for services generally and marketing for travel and tourism in particular. MARKETING GOODS AND SERVICES The early contributions to the study recognized the growing importance of sales and distribution functions for manufacturers of consumer goods. They reflected opportunities provided by rapid improvements in rail and road transport and telephone communication systems, and the consequent growth in the size of markets that businesses could reach with their products. Developments in franchising and management contracts for services, together with international mergers, acquisitions and alliances, have also facilitated the speed of growth in large commercial organizations in service industries, both nationally and internationally. LARGE-SCALE SERVICE OPERATIONS DOMINATE TRAVEL AND TOURISM MARKETING Production and sale of purpose-designed, repeatable, quality controlled products. Typically heavily branded with advertising support and bearing standard prices (with variations by place and time). Products available at many places (multiple outlets). Continuous production and availability throughout the year. Most marketing undertaken by corporate head offices, which control and direct the activities at individual outlets. PARADOXICALLY, THE VAST NUMBER OF SMALL BUSINESSES IS ALSO A DOMINATING CHARACTERISTIC OF THE TOURISM INDUSTRY Within the SME sector (defined as businesses comprising less than 250 employees) there is growing evidence in tourism that the group representing the smallest employers (less than ten employees) have unique characteristics that merit special attention. Identified as micro businesses to distinguish them within the SME sector, the smallest employers are by far the largest numerically, estimated at more than nine out of ten SMEs. In fact the majority of them employ less than five people and many comprise only the proprietor and immediate family. There were estimated to be over 2.5 million such enterprises actively trading within European tourism at the end of the 1990s, although this may be a significant underestimate. TYPES OF MICRO-BUSINESS Operating in a very local context, many of them are motivated as much, or more, by a mix of personal, quality of life and community goals, as by the economic/commercial rationale that dominates big business. Numbered in their hundreds of thousands, micro-businesses are unique as individual enterprises and they cannot be standardized– to attempt to do so would destroy their contribution. Unfortunately this makes them amorphous and difficult to measure and ‘badge’ as a coherent sector. It is often very difficult to influence the sector through any of the existing processes of tourism policy consultation. THE IMPORTANCE OF MICRO-BUSINESSES They make up some 95 per cent of all the enterprises providing tourism services. Although the big players dominate tourism expenditure, the smallest players collectively generate perhaps a third of total tourism revenue, and much more locally. The money earned by micro-businesses tends to stay in the local community. They typically purchase locally and are part of the fabric of the local money circulation cycle. They are a vital part of new job creation– especially in areas of rural and urban regeneration. Even without new job creation they perform an important economic stability role in fragile areas. Micro-businesses are part of the lifeblood of local communities– as local residents, neighbors, taxpayers and employers– even where they may be part of the unofficial or ‘black’ economy. Many micro- business proprietors are also found in local politics. To visitors they are often seen as the ‘friendly locals’. They may represent all that most visitors will ever experience of real local character, knowledge and individuality at destinations– reflecting the special values of ‘place’ and ‘host encounters’. Leading-edge small businesses are entrepreneurial role models of success and may inspire young people in their communities by example. Micro-businesses typically express the local character of a destination through their operations, and in many ways also help to sustain that character and communicate it to visitors. They influence the perceived visual quality of the built and natural landscape by their actions and the buildings they use. Their operations impact daily upon local sustainability issues and they are required to implement government requirements for health and safety and environmental good practice, bearing proportionally higher costs than larger businesses. SOME MARKETING IMPLICATIONS The sheer number of enterprises involved in all countries makes micro- businesses a core, not peripheral part of the experience of almost all tourists. The evidence suggests that such businesses are not scaled down versions of bigger businesses, however, and they cannot be treated in the same terms. At the leading edge, they embody the entrepreneurial spirit and vitality of places, and offer some of the best tourist experiences available anywhere. At the trailing edge, which may be a third or more of the total, many exist on the fringes of the industry damaging the environment of the destinations in which they are located, reducing visitor satisfaction and the perceived quality of the overall visitor experience. Indeed, some of the worst visitor experiences will be found in this sector and they can undermine the other attractions and facilities, reducing the marketing potential of a destination. SERVICES AND THEIR CHARACTERISTICS Goods are products purchased through an exchange transaction conferring ownership of a physical item that may be used or consumed at the owner’s choice of time and place. Services are products purchased through an exchange transaction that does not confer ownership but permits access to and use of a service, usually at a specified time in a specified place. The manufacturer or retailer of suits can put his products into warehouses and shops, and it may not be a vital concern if six months or more elapse between the completion of production and sale to the customer. If customers are not available on that day, products are lost and cannot be held over for sale on the following day PARTICULAR CHARACTERISTICS OF TRAVEL AND TOURISM SERVICES Seasonality and other variations in the pattern of demand. The high fixed costs of operations, allied to fixed capacity at any point in time. The interdependence of tourism products. THE MARKETING RESPONSE TO THE CHARACTERISTICS OF SERVICE INDUSTRIES Inseparability and intangibility. Perishability based on a fixed capacity in the short run and inability to create stocks of product. Seasonality. High fixed costs. Interdependence. Simply put, the primary marketing response to these five characteristics is to manage or manipulate demand in the short run. COMPARING MARKETING IN TRAVEL AND TOURISM TO OTHER FORMS OF MARKETING Students of travel and tourism often find it difficult to be clear about the way marketing in travel and tourism differs from other forms of consumer marketing practice. Generally speaking, however, it is common ground that the principles of the body of knowledge about marketing and its main theoretical elements hold good for all types of product. Marketing managers at senior levels of responsibility can, and frequently do, switch between industries with little difficulty. In travel and tourism in particular, many marketing managers have been brought in from manufacturing and other service industries to bring their expertise to bear as firms grow faster than the level of expertise available from within their own sector of business. THE MORE DEMANDING CONSUMER FOR TRAVEL AND TOURISM – A GLOBAL DEVELOPMENT More affluent, measured in disposable income per capita, ownership of property and household facilities. Better educated and more interested in continuing education. More healthy and interested in more active pursuits. Older, with a particular shift in the number and attitudes of the more active over-fifties. More leisured in terms of hours of work and holiday entitlement, having regard also to earlier retirement – although many at work are also experiencing greater pressure on available leisure time. More travelled, for work and business as well as for holidays and leisure, increasing numbers with frequent international travel experience. More exposed to the media and information generally. More computer literate with ownership of personal computers (PCs) and access to the Internet growing exponentially. More heterogeneous and individualistic in their demands and expectations. More culturally diverse in terms of ethnic origin as well as in their range of lifestyle choices. It explains the concerns of tourism businesses with staff training and providing ever higher quality standards of furnishings and fittings, in hotels and other forms of accommodation for example, just to keep pace with customers’ rising expectations. Better soundproofing, individually adjustable heating and ventilation, bathroom facilities and size of rooms and lighting are other aspects of product provision influenced by relative affluence, to which marketing managers in the travel and tourism industry have to respond with new and modified products. THE MAIN DETERMINANTS OF DEMAND Fortunately for students and others wishing to understand the nature and potential of demand for travel and tourism, the underlying factors are common to all countries. Economic factors and comparative prices. Demographic, including education. Geographic. Socio-cultural attitudes to tourism. Mobility. Government/regulatory. Media communications. Information and communications technology. ECONOMIC FACTORS AND COMPARATIVE PRICES Wherever travel and tourism markets are studied, the economic variables in the countries or regions in which prospective tourists live are the most important set of factors influencing the volume of demand generated. The influence of economic variables in supporting tourism growth is especially obvious for leisure and holiday travel but developed and growing economies also sustain large numbers of trips away from home for business purposes of all kinds. Using the published statistics of tourist trips and of national economic trends, it is possible to trace the relationship over time between changes in real disposable income (measured in constant prices) and the volume of trips and expenditure away from home. COMPARATIVE PRICES Price, which represents cost to customers in terms of money, time and effort, is relative to their spending power and reflects the economic determinants discussed above. There is convincing evidence in leisure tourism that, in the short run, the price of a firm’s products, or the perceived price of a destination compared with those of competitors, is still the most important single determinant of the volume of demand. The global price of oil, which is especially important in all forms of air transport, adds a third variable to these price complications and it reflects the current US dollar exchange rate. Add to these the influence of economic growth and recession cycles in generating countries, and it is easy to see why the effects of comparative prices is highly complex in practice and impossible to predict with precision. DEMOGRAPHIC FACTORS The term ‘demographic factors’ is used here to identify the main population characteristics that influence demand for travel and tourism. Working much more slowly than rapidly changing economic variations, the main characteristics determining tourism markets are ageing populations, social class and household income, household size and composition, divorce and remarriage, and the experience of further and higher education. In countries with developed economies, one- and two- person house- holds have emerged as the norm over the last two decades, with fewer young children in them and a much greater proportion of women in full- or part-time work. SOCIO-CULTURAL ATTITUDES AFFECTING TOURISM The potential markets for domestic and international tourism clearly include a growing number of people with enough income, leisure time and mobility to generate and sustain significant market growth in the next decade. Attitudes generally are formed of the ideas, fears, aspirations and beliefs that people hold about their lives. Attitudes towards tourism are subsets of a wider view and broad consensus on the desired quality of life and how to achieve it. Another common belief is that holidays are ‘rights’ and necessities for relieving stress rather than luxuries, and that trips abroad for business or pleasure are symbols of economic and social status that serve to indicate an inspirational position in society. PERSONAL MOBILITY FACTORS The personal mobility provided by cars has become a prime determinant of the volume and types of tourism for many tourism businesses over the last two decades, especially for domestic tourism. At the start of the twenty-first century most hotels, nearly all self- catering establishments, most tourist restaurants and the great majority of visitor attractions and entertainments in North America and Europe, are highly dependent on travelers by car for their business. The use of surface public transport has declined as car ownership increased. Coach and bus operators have found many niches to exploit, for international tourists as well as for the more traditional holidays based on coach tours. Such schemes are likely to develop further as traffic congestion grows and government regulations favour public transport. MASS-MEDIA COMMUNICATIONS A major influence over demand for travel and tourism is the massive exposure to colour television and, more recently, the World Wide Web now common to populations in all countries with developed economies. Over the last decade cable-TV, space satellite transmitters and the Web have provided instantaneous international images of places and events, as well as a continuous stream of films identifying places and standards of living. The cumulative impact of thousands of hours of television- watching, even before the full impact of new access to specialist channels and the Internet, has already had a major influence on travel demand. Not least of the influences exerted by the mass communication media is the effect achieved by regular television travel programmes, which review and expose a wide range of tourism products on offer and provide critical evaluations of their quality and value for money. INFORMATION AND COMMUNICATIONS TECHNOLOGY Increasing promotion and distribution of products on the World Wide Web by both private sector businesses and destination marketing organizations, including online sales and the use of the Internet for vital last minute sales. Multimedia information provision in customers’ homes enhancing promotional possibilities. Linked development of interactive digitized television with broadband Internet access, replacing the traditional PC box for many users. Switch to greater use of direct marketing, reducing the traditional role of travel intermediaries such as retail travel agents. Customer database development and its role in marketing information systems. Power to develop bespoke products for targeted customers. Relationship marketing with repeat buyers and other targeted customers/stakeholders. Creation of virtual enterprises in which ICT provides the linkages– especially networks for micro-businesses. Major opportunities both for large corporations to grow larger and small ones to gain access to international markets at low cost. Diagonal marketing to generate new streams of business from existing customers and linkages with other businesses (as defined by Poon, 1993). CHARACTERISTICS ASSOCIATED WITH HIGH AND LOW DEMAND FOR TOURISM Net propensity is the proportion of a population that takes at least one holiday in a twelve-month period. Gross propensity is the total number of holidays taken, expressed as a proportion of a population (proportion taking any holidays multiplied by the average number of holidays taken). Measured annually over a decade or so, it is possible to assess the extent to which a market for travel and tourism is increasing its size due to increased penetration (more of a population taking trips away from home) or because of increased intensity (the same people taking more trips in a year). Both of these are important measures for marketing managers, especially when related to specific market segments, e.g. to measure the holiday propensity of people aged fifty-five or more, or of a particular social class. THE RESPONSE OF MARKETING MANAGERS The role of marketing managers in response to the determinants of travel and tourism can be put simply. First, it is their business to monitor and where necessary to research the opportunities arising from external factors in the business environment that influence movements in the particular markets with which they are concerned. Second, based on this knowledge, it is their business to forecast the direction and speed of change in the determinants and the implications of such forecasts for the travel patterns in their markets, taking action through strategic decisions and through the marketing mix decisions. STRATEGIC MARKETING PLAN Assign NMTD program managers to each sector of tourism (i.e. hotel, restaurant, ski, spa, golf) and have them become active members of industry sector organizations. Develop bimonthly report for print and e-mail distribution to the industry and the market. Disseminate tourism information and research at NMTD program meetings, workshops and through program networks. Provide regular releases to the industry on advertising opportunities, ad campaigns and research. Increase awareness of the NMTD regional program to industry partners and local communities in order to encourage greater participation. Determine feasibility of an on-line application process for the cooperative advertising program. STRATEGIC PLANNING THE END… Thank you !