Intro to tour 1

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Cooper et al: Tourism: Principles and Practice, 3e Pearson Education Limited 2005, © retained by authors
Chapter 1
Managing Tourism Demand

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Learning Outcomes
In this lecture we focus on the basic concepts, definitions
and indicators of tourism demand to provide you with:
• An awareness of how approaches to the management
of demand have changed since 1945;
• A thorough understanding of the concept and
definitions of tourism demand;
• An awareness of the components of tourism demand;
• A grasp of the importance of indicators of demand
such as propensity to travel; and
• A comprehension of the purpose of demand schedules
and an understanding of how to interpret them.

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Milestones in Tourism Demand
Statements
• 1948 Universal Declaration of Human
Rights
• 1980 Manila declaration
• 1994 Osaka Tourism declaration
• 1999 Global Code of Ethics for Tourism

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Contrasting Approaches to Tourism
Consumption
• The public sector: The Global Code of
Ethics for Tourism
• Pressure groups and charities:
Oxfam, Partners in Sustainable Tourism
• The tourism Industry: TUI

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• We can identify a number of official
proclamations(announcements) which
affirm(comfirm) every individual‟s right to
demand tourism.
• As far back as 1948 the United Nations
(UN) stated in its Universal Declaration of
Human Rights that everyone has the right to
rest and leisure including … periodic
holidays with pay.

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• By 1980 the Manila declaration on world
tourism declared the ultimate aim of tourism
to be: the improvement of the quality of life
and the creation of better living conditions
for all peoples (WTO, 1980).
• With this statement we can see the emphasis
changing from the earlier right of everyone to
demand tourism to statements of the quality
of demand and the form of demand and/or
experience.

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• This observation is supported by declarations in the
1990s which state that if individuals demand
tourism, they must take responsibility for the
environment and host societies: tourists share
responsibility for conservation of the environment and
cultural heritage (Osaka Tourism
Declaration, WTO, 1994).
• Yet as we approach and enter the new millennium it is
still true that only a very small percentage of the
world‟s total population engages in international
tourism and although a considerably greater number
participate in domestic travel, tourism remains an
unobtainable luxury for many individuals.

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Definitions of tourism demand
• Definitions of demand vary according to the
subject perspective of the author. For
example, economists consider demand to be
schedule of the amount of any product or
service that people are willing and able to buy
at each specific price in a set possible prices
during a specified period of time.

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Demand Schedules
Figure 1.1 Individual’s demand for product X

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• In contrast psychologists view demand from
the perspective of human motivations and
behaviors.
• Geographers, on the other hand, define
tourist demand as: “the total number of
persons who travel, or wish to travel to use
tourist facilities and services at places away
from their places of work and residence”.
(Mathieson and Wall, 1982).

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• Each approach is useful. The economic approach
introduces the idea of elasticity – which describes the
relationship between demand and price, or other variable.
• The geographer‟s definition implies a wide range of
influences, in addition to price, as determinants of demand
and includes not only those who actually participate in
tourism, but also those who whish to, but for some reason
do not.
• On the other hand, the psychologist scratches(describes)
underneath the skin of the tourist to examine the
interaction of personality, environment and demand for
tourism.

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Concepts of tourism demand
• Effective/Actual Demand
• Suppressed demand
– Potential
– Deferred
• No demand
• Substitution
• Redirection
• New Supply
• The notion that some
individuals may harbor
a demand for tourism
but are unable to
realize that demand
suggests that demand
for tourism consists of
a number of
components that make
up the total demand for
tourism:

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1. Effective or actual demand is the actual
number of participants in tourism or those
who are traveling, i.e. de facto tourists.
This is the component of demand most
commonly and easily measured and the
bulk of tourism statistics refer to effective
demand.

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2. Suppressed demand is made up of that section
of the population who do not travel for some
reason.
• Two elements of suppressed demand can be
distinguished. Firstly, potential demand refers
to those who will travel at some future date if
they experience a change in their circumstances.
• For example, their purchasing power may
increase, or they may receive more paid holiday
entitlement, and they therefore have the potential
to move into the effective demand category.

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Suppressed demand
• Deferred demand is a demand postponed
because of a problem in the supply
environment, such as a lack of capacity in
accommodations or maybe terrorists activity.
• Again this implies that when the supply
conditions are more favorable, those in the
deferred demand category will convert to
effective demand at some future date.

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3. Finally, there will always be those who simply
do not whish to travel, constituting a category
of no demand
• We can also consider other ways in which
demand for tourism may be viewed.
• For example, substitution of demand refers to
the case when demand for one activity (say a
self-catering holiday) is substituted by another
(staying in serviced accommodation).

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A similar concept is redirection of demand where
the geographical location of demand is changed –
say a trip to Spain is redirected to Greece because
of over-booking of accommodation.
Finally the opening of new tourism supply- say a
resort attraction or accommodation- will:
• redirect demand from similar facilities in the
area;
• substitute demand from other facilities; and
• generate new demand.

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• Economists refer to the first two of these as
the displacement effect – in other words
demand from other facilities is displaced to
the new one and no extra demand is
generated.
• This can be a problem in tourism and is an
important consideration when appraising the
worth of new tourism projects.

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Travel Propensity
A useful indicator of effective tourism demand
in a population:
Travel propensity:
• Net travel propensity
• Gross travel propensity
• Travel frequency
• Country Potential Generation Index

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Indicators of tourism demand
Travel propensity
• One of the most useful indicators of
effective demand in any particular
population is travel propensity.
• This measure simply considers the
penetration of tourism trips in a
population.
• There are two forms of travel
propensity:

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Travel propensity
1. Net travel propensity refers to the percentage
of the population that takes at least one tourism
trip in a given period of time. In other words it
is a measure of the penetration of travel among
individuals in the population.
The suppressed and no demand components
will therefore ensure that net travel propensity
never approaches 100 % and a figure of 70 %
or % 80 is likely to be maximum for
developed Western economies.

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2. Gross travel propensity gives the total number of
tourism trips taken as a percentage of the
population. This is a measure of the penetration of
trips not individual travelers.
• Clearly then as second and third holidays increase
in importance so gross travel propensity becomes
% 200 in some Western European countries where
those participating in tourism may take more than
one trips taken as a percentage of the population.

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• In other words, as second and third holidays
increase in importance so gross travel
propensity becomes more relevant.
• Gross travel propensity can exceed 100 %
and often approaches 200 % in some
Western European countries where those
participating in tourism may take more than
one trip away from home per annum

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• Simply dividing gross travel
propensity by net, will give the
travel frequency in other words, the
average number of trips taken by
those participating in tourism during
the period in question (see Box 1.1.)

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Out of population of 10 million inhabitants :
• 3.0 million inhabitants take one trip of one night or more
i.e. 3 x 1 = 3.0 m trips
• 1.5 million inhabitants take two trips of one night ore more
i.e. 1.5 x 2 = 3.0 m trips
• 0.4 million inhabitants take three trips of one night ore more
i.e. 0.4 x 3 = 1.2 m trips
• 0.2 million inhabitants take four trips of one night ore more
i.e. 0.2 x 4 = 0.8 m trips
• 5.1 million inhabitants take at least one trip, while total trips
reach at 8.0 million.

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Net travel propensity=
Number of population taking at least one trip
Total population
x 100 = 5.1
10
x 100 = 51 %
Gross travel propensity =
Number of total trip
Total population
x 100 =
8
10
x 100 = 80 %
Travel frequency = = = 1.57
Gross travel propensity
Net travel propensity
80 %
51 %
Box 1.1: Calculation of travel propensity and travel
frequency

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• A further refinement to the above
calculations is to assess the capability of a
country to generate trips.
• This involves three stages.
• Firstly, the number of trips originating in
the country is divided by the total number
of trips taken in the world.
• This gives an index of the ability of each
country to generate travelers.

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• Secondly, the population of the country is
divided by the total population of the
world, thus ranking each country by
relative importance in relation to world
population.
• By diving the result of the first stage by
the result of the country potential
generation index (CPGI) is produced.

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CPGI =
Where
Ne = number of trips generated by country
Nw = number of trips generated in world
Pe = population of country
Pw = population of world
• An index of 1.0 indicates an average generation
capability.
• Countries with an index greater than unity(1.0) are
generating more tourists than expected by their
population.
• Countries with an index below 1.0 generate fewer trips
than average.
Ne / Nw
Pe / Pw

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Tourism Flows
• Push Factors – factors affecting tourist decisions to take
trips arising from generation area – such as paid
holidays, religion, health etc.
• Pull Factors – some attractions affecting tourism decisions
to evaluate and choice destination – such as
nature, history, monuments, men made atractions..
• The Gravity Model:
– Destination attraction = „pull‟
– Market size = „push‟
– Distance = friction

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• Model takes into account the push and pull
factors that influence tourim demand.
• Model claims that the greater the “mass” of the
generating region and the destination, the greater
will be the tourist flows.
• The model also adds a constraining factor, that of
distance and intervening opportunities.
• The greater the time and cost involved in
reaching a destination from an origin point, the
smaller will be the flow..
The Gravity Model

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