Demand and Supply in Tourism - Managing Demand

1. Prof. Cheryl Venan Dias
PPP – Module 3 – Session 1

2. Objectives
After completing this module you will be able to:
 Identify the significance of an analytical approach to
tourism demand
 Identify how the approaches to the management of
demand has changed since 1945
 Define the term tourism demand
 List the components of tourism demand
 List the indicators of demand
 Interpret the purpose of demand schedules

3. Introduction
This session focuses on the key approaches to tourism
demand management. The volume of tourist grows and
they can now reach the remotest regions of the world.
UN’s Universal Declaration of Human Rights
encourages every one to travel as a ‘right’, In the present
day the travellers are also urged to travel ‘responsibly’.
There are large sections of people who want to travel but
are unable to do so due to barriers in travel. It is your
responsibility to identify these barriers and implement
strategies to remove them.

4. Analytical Approach
Uysal (1988) provides three compelling reasons for
analysing tourism demand.
1. It is essential underpinning for policy and
forecasting.
2. It provides critical information to allow the
balancing of provision of supply and demand at
destinations.
3. It allows the tourism industry to better understand
consumer behaviour and the tourism marketplace.

5. Changes in Tourism Demand
Policy makers, for example the United Nations (UN) after the
second world war in its Universal Declaration of Human
Rights stated that: ‘every one has the right to rest and leisure
including.. Periodic holidays with pay’(1948)
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)
Change in trend is the change from ‘right’ to ‘quality of
demand’

6. Changes in Tourism Demand
Current thought by WTO 1994, states that ‘Tourist share
responsibility for conservation of the environment and
cultural heritage’’
It has now become essential to manage tourist behaviour
through code of ethics, visitor guidelines, and education
about responsible tourist behaviour at host destinations.
The tourism industry has been called to take further
responsibility by reducing the carbon footprint.

7. Definition of Tourism Demand
Scholars of various subjects and disciplines have defined tourism
differently.
Economist consider demand to be the schedule of the amount of any
product or service that people are willing and able to buy at each specific
price in a set of possible prices during a specified period of time.
Psychologist view demand from the perspective of motivation and
behaviour.
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

8. Definitions and Approaches
The economic approach introduces the idea of elasticity – which
describes the relationship between demand and price, or other
variables.
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 wish to but due to some reason do not.
The psychologist delves deeper into the tourist to examine the
interaction of personality, environment and demand for tourism.

9. Components of Tourism Demand
There are three basic components that make up the total demand for tourism:
Effective or actual demand:
Refers to de facto tourist who are travelling and bulk of tourism statistics depends on this number.
Suppressed demand:
Potential demand- These people may travel subject to the change in circumstances
Examples: Increase in purchasing power, savings, more paid holiday
Deferred demand-demand postponed due to a problem in supply environment (deficit)
Examples: Lack of capacity in accommodation, weather condition, natural disaster example
2004 Boxing Day Tsunami. When supply conditions are more favourable these may convert
into effective demand in future.
No demand:
These are cause by people who simply do not wish to travel, they spend their income on goods other than
tourism.

10. Other Influences on Demand
Redirect demand from similar facility in the area:
Example: Geographical location of demand is changed, a
trip to Spain is redirected to Greece because of over-
booking of accommodation.
Substitute demand from other facilities:
Example: Self catering holiday to a fully serviced
accommodation.
Generate new demand:
Opening of new tourism supply – resort, attraction or
accommodation.

11. Demand Schedule
In economic terms, a demand schedule refers to the
quantities of a product that an individual wishes to
purchase at different prices at a given point in time.
The relationship between price and quantity of product
demanded is inverse.
The higher the price of the product the lower the
demand; the lower the price of the product the greater
the demand.

12. Graph
Expression in responsiveness of
quantity to price change is known
as elasticity of demand:
Formula:
ei=%Change in quantity / %
change in price
It is a absolute positive value and
can be expressed as 1.0, 2.0 etc and
not -.1, -.2 for goods that have their
own-price elasticity greater than 1
are called elastic and are luxury
goods.
When it is less than 1 it is termed
as a necessity.

13. SEA based questions:
Five Mark Questions:
1. State and substantiate your reasons on why its important to analyse tourism
demand?
2. Critically evaluate the changes to thoughts on tourism demand starting from
the year 1948
3. Make a list of the reasons why an individual may be in the ‘no tourism
demand’ category.
4. Draft a press release urging conference delegates to ensure that their travel to
your conference is carbon neutral.
5. List the reasons why an individual may fall into the ‘potential tourism
demand’ category.
6. Identify 10 reasons why demand for international tourism has grown since
1945.
7. Review the concepts of demand substitution and demand redirection and
provide two examples each.

14. SEA based questions
10 Mark Questions:
1. How might the market and individual curves for tourism
differ form other commodities, such as say food?
2. Critique the concept of ‘responsible tourism
consumption’
3. ‘The UNWTO’s Global Code of Ethics for Tourism is
impossible to police’ Discuss the statement.
4. Why is it difficult to come up with a universally agreed
definition of tourism demand?
5. Identify and discuss the key barriers to tourism demand
that an individual might experience.