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LO3: Understand the effects of supply and
demand on the travel and tourism sector:
3.1 Explain factors affecting tourism
demand
3.2 Explain how supply has changed to meet
the effects of demand.
UNIT 1: THE TRAVEL AND TOURISM SECTOR

Task three
• Understand the effects of supply and demand on the
travel and tourism sector:
• 3.1 Explain factors affecting tourism demand
• 3.2 Explain how supply has changed to meet the
effects of demand
• EXPLAIN: Show clearly knowledge and
understanding of a topic

Factors influencing demand for tourism
Factors influencing changes in demand
• “Clearly everyone who has travelled since 9-11 is well aware that travel
is not the same as it once was. Following on the heels of September 11,
travel and tourism has had to face issues of food safety, health crises,
natural disasters, and the rapid rise in petroleum prices resulting in
major price increases for both land and air transportation” (Peter
Tarlow, 2008)
• Do you agree with this statement? Why?

In your groups discuss the following:
• What is ‘demand?
• What is ‘supply?
• Agree your ideas with the whole class 

Demand.
• How much or quantity of a product or service is desired by buyers.
• The quantity demanded is the amount of a certain price
• The relationship between price and quantity or the demand
relationship.
• How much the market can offer
• Producers are willing to supply

The supply demand.
• The correlation between price and how much of goods or service is
supplied to the market is known as the supply relationship.
• Price is a reflection of supply and demand.
• The law of demand = as the price of goods or servvices increase the
quantity demanded will fall.
• Do you agree?

• It is great importance to evaluate destination attractiveness from
a supply side or a demand side perspective.
• The supply perspective is based on the number and quality of
available products and services at a destination.
• The demand perspective depends upon the perceptions and
interests of travellers in the area.
Supply and demand

• Demand refers to the quantity of a product or service desired by
the consumers
• Price is considered according to what consumers are willing to pay
• The relationship between price and quantity is known as the
demand principle. Supply represents how much the market can
offer
• The quantity supplied refers to the amount of products and
services producers are willing to supply when receiving a
product/service.
• PRICE = the reflection of supply and demand.
Supply & Demand

• The total number of persons who travel and use tourist facilities
and services at places away from their PLACES OF WORK OR
HOME. (cooper et.el 1993.)
• Development of tourism is shaped by the demand of a destination
and the opportunities available.
• A quality product must be delivered based on sustainable
principles required for tourism development.
• When supply is limited prices go up.
• In response more products and services in a destination.
Definition of demand of tourism

• The supply perspective determines the overall attractiveness of
the area by performing an accurate inventory of existing tourism
resources. For example, in analysing tourism resources using a
regional perspective, Smith (1987) considered accommodations,
recreation establishments, and cultural and natural attractions.
• Can you think in pairs of factors that may impact supply?
supply

• Evaluation of tourist supply was based upon the six following
dimensions:
• Seasonality, which is the length of stay for each attraction;
• Accessibility, the physical access that connects tourists to the
destination and its resources;
• Admission, which implies that many tourist attractions cannot be visited
without permission or admission tickets;
• Importance, according to historical, technical, or professional value of a
destination;
• Fragility, which depends on how much tourism a given destination is
able to sustain without deteriorating its unique features;
• Popularity, made by reputation and a generalised good image of the
site.
Supply dependent on:

• Can you think in pairs the positive benefits of supply?
McIntosh, Goeldner, and Ritchie (1995) and Inskeep (1994) contend
that the understanding and accurate evaluation of destination can
result in substantial economic and socio-cultural benefits.
supply

Positive Impacts of Supply
• Positive impacts of tourism
• Conservation. Tourism has supplied the economic incentive to set
up national parks and conservation areas which protect wildlife.
• Employment. Tourism has generated jobs, improving the living
standards for local communities.
• Infrastructure. Roads, airports and other facilities have been built.
• Investment. Profits from tourism have been invested in education
and other programmes for local communities.
• Economic. Revenue created goes back into the economy through a
regeneration programme.
• Can you think of an example from one of the above?

Negative impacts of demand
• Environmental damage. Erosion and depletion of natural resources.
Roads and tracks for example in the Serengeti: safari jeeps can
erode grass cover, damaging plants and animals and disturbing
local habitats. The removal of trees and other vegetation for the
construction of roads can lead to soil erosion.
• Inequality. Often the profits of tourism are reaped by wealthy
landowners or the hotel and travel companies.
• Loss of traditional cultures. Culture can be lost over time or
through translation. The Masai's way of life and traditional farming
methods have been taken away through new reforms of the setting
up of the Serengeti National Park.
• Water cycle damage. Diverting water for tourists can exploit local
water reserves, leaving local people, plants and animals short of
water. Tourist hotels sometimes dump waste into rivers.
• Cost to host community, infrastructure and living costs.

Negative impacts.
• Leakage
• Enclave Tourism
• Infrastructure costs
• Increase in prices
• Economic dependency
• Seasonality.

Positive impacts
• Foreign exchange earnings
• Contributions to government revenues
• Employment generation
• Infrastructure investment
• Contribution to local economies.

The Hula• The traditional kind of Hula that was being performed before Western
civilization influence was called the Kahiko, and was developed by the
Polynesian people that first inhabited Hawaii as a tribute to the
goddesses.
• 1820, the Hula was labeled as the “heathen dance”.
• Throughout the years, the Hula has seen drastic changes the height of
tourism in Hawaii as it rose to becoming one of the most sought after
vacation spots, Hula is done today largely for entertainment reasons
and thought to be authentic to the Hawaiians. Also considered
sensuality and provocative.
• The old style is still used as a form of tribute to the goddesses, and is
kept as a well kept secret of Hawaiian culture. The Hula is the most
popular feature of Hawaiian culture, and with good reason. The nature
of the dance, chants and the music perfectly capture the Hawaiian
beliefs and practices that respect their gods, and are in touch with
their surroundings, their spirits, and with the higher beings that guide
them and protect them in their everyday lives.

How do we measure Supply and Demand?
• In your groups think of the various methods to measure S and D?

• The demand measures for determining the power of a region or
destination include:
• - number of visitor arrivals or number of participants;
• - tourism expenditures or receipts;
• - length of stay or tourist nights spent at the destination site;
• - travel propensity indexes (measuring an individual's propensity
to buy the brand) and tourist preferences.
How do we measure S&D?

• It is the role of leaders/marketing managers to understand and seek to
influence consumer demand in response to the dynamics of continuous
changes in the business travel and tourism environment in which they
operate. Managers should decide how best their organisations should
respond.
• There are two groups of factors which affect demand in tourism:
The ones which cannot be forecast – products/services cannot be adapted
in a short period of time
Those ones which in most cases can be forecast – there is time to adapt
services/products to meet new needs and expectations.
Can you give any examples?
1-Political and economic circumstances, climate, natural and artificial
disasters
2-culturla, social and technological changes

Videos Bali and Tourism.
• http://www.sbs.com.au/news/article/2014/07/29/it-s-going-kill-my-
business-are-tourist-demands-threatening-balis-future

Factors can be also seen as external and internal:
• External – Technological, political, cultural and social – (the ‘determinants’
of demand)
• Internal - Motivation within individuals; needs, wants and desires that
influence tourism choices; a buyer behavior model.
• Do you think both types of factors equally influence changes in demand?
Why?

The more demanding consumer of T&T – a global development
The Factors are common to all countries.
The set of external demand determinants affects individual operators such
as:
• Hotels
• TOs
• Airlines
• Attractions
• Research activity: carry out individual or group research to find out the
evidence of how supply has changed to meet the effects of demand.
Present to the class ( either in a power point format or a poster).
You can choose any of the sector mentioned above.

Activity.
• Consider the factors that have changed consumer behaviour,
working in two groups as assigned?

In all development countries, reflecting economic growth over the last half-
century and more competitive business climate T&T businesses are
responsible for meeting the current demand changes in order to satisfy more
demanded customers.
Over the last two decades consumers have become (on average):
• More affluent, measured in disposable income per capita
• Better educated and more interested in continuing education
• More healthy overall with many interested in active life
• Older, as life expectancy rises, with particular shift in the number and
attitude of the more active over 50s.
• More leisured in terms of working hours and holiday entitlement
• More travelled, for work and business as well as for holidays including
international travel
• More exposed to the media and information generally
• More computer literate with access to the Internet still growing
• More individualistic in their demand and expectations
• More culturally diverse I terms of ethic origin and cultural background
• Exposure to social media

Supply also affect demand - Demand and supply interact!
We can identify ten determinates of demand:

Current Trends.
In your groups consider what are the tourism trends?

Current Trends.
• Global Growth: BRIC growth markets
• American Market: demand could outpace supply as a growing and
popular destination
• Europe growing destination
• Middle East more Gulf destinations
• Asia remains a top destination
• China: largest source of outbound tourism (larger than Gremany
and USA)
• The New Tourism Law implemented in October cause a shift for
independent travel.

Current Trends
• Brazil: 12 per cent increase in outbound trips, expenditure has
soared to 50 per cent 2010 to a further 30 pe cent in 2011.
• Millennials (1980 to 2000) interest in urban and resort destinations
as Leisure travel with friends or family. Use of social media to share
travel experiences and photos.
• Elder Travellers more affluent and travelling more and longer stays.
Feeling safe and secure of value in destination choice.
• Affluence more of a disposable income and luxury markets
dominant growth areas, China, Us Japan and Europe.
• Social Status key for Social Media users
• LGBT: growth markets travelling to supported countries welcoming
countries include: Sweden, France, Spain, Belgium and UK.
• Multi Generation: seniors living longer holiday for convenience and
value, markets support the new trend.

Current Trends
• Active Adventures: Nature, culture and physical.
• Technology: Online access bookings, internet access on hotel sites,
mobile apps replace concierge.
• Bleisure: business travellers extend their trips, second homes for
the more affluent travellers.
• Shopping Tourism: 10 major shopping malls in the Middle East by
2014. Bric travel to shop. Shift in more independent and boutique
shops.
• Creative Tourism: art, heritage or reside in an area of culture to
develop new skills/experience.
• Whole Living: well being and luxury market, focus on food,
wellness and culture.

Current Trends
• Culinary Tourism: cultured and affluent activities around food.
• Athletic events or spectator sports: mega events can shape
tourism.
• PANKS: Professional Aunts, No kids.

Disposable income (handout)
• Overseas Travel
• By 2011 people aged 65 and over were spending £1.3 billion more on
foreign travel than they had been in 1999, while people aged 16–34
were spending £922 million less.
• Only people aged 55-64 and 65+ accounted for a higher proportion
of Britain’s total spending on overseas travel in 2011 than they had
done in 1999. For all other age groups, the proportion of travel
spending either shrank or remained flat.
• Young people suffered a significant decline in spending power
compared to older generations between 1999 and 2011: the whole
of the overall increase in spending was accounted for by higher
spending amongst people aged 45–54, 55–64 and 65+. People in all
of the age groups below 45 actually spent less on travel, in real
terms, in 2011 than they had done in 1999.
• Spending Power Across the Generations December 2012

Disposable income.
• older people have become wealthier, the spending power of the
under-30s seems to have declined, a trend which can be traced back
to the many problems facing that generation, including high
unemployment following the recession, wage freezes for those
who are in work, high housing costs, and the costs of having to pay
off university tuition fees.

Demographics.
• A report published UNWTO/European Travel Commission (ETC) on
‘Demographic Change and Tourism’. The report sets out the main
demographic trends worldwide and in major current and emerging
source markets and describes how destinations and the private
sector can make the most of these in terms of product
development and marketing.

Demographics
• Major demographic trends at the global level –
• rising populations
• increased life expectancy
• migration
• changing family structures
• All of which present fresh challenges for the tourism sector.
Demographic change will impact upon the types of tourists that will
travel, where they originate from, where they travel to, the types of
accommodation they require and the activities they engage in while
away.
• Many organisations incorporate this is their marketing plans.

Technology
• Mobile technology has changed the way people plan, research and
book their travel arrangements which is creating a new way for
travel agents to capture customers. A recent study conducted by
Nelson shows that almost half of mobile travel searches carried out
in the UK end up in a booking or reservation with almost 1 in 3 doing
so through their mobile devices.
• Many Apps help customers find travel options and book via a
mobile device, but there are also specific apps for travel agents
such as allowing travel agents to retrieve and change any bookings
whilst out and about. This ensures they are able to maintain an
excellent customer service, by offering round the clock care.

Technology.
• Mobile technology can also open doors for repeat business. Travel
companies can now send tailored promotions directly to a
customer's mobile, increasing the chances the message will be read
and helping drive demand during quiet periods. By tailoring
promotions, travel agencies are able to interact in a more personal
way with customers and send more relevant promotions.
• Do you have any example to share? Discuss in your groups.

LO3: Understand the effects of supply and demand on the travel and tourism sector:
3.1 Explain factors affecting tourism demand
3.2 Explain how supply has changed to meet the effects of demand.
• What are we studying today/tomorrow?
• We are to answer the following questions:
1. Why is it difficult to come up with a universally agreed
definition of tourism demand?
2. What are the components of tourism demand?
3. What are the factors influencing changes in tourism demand?
4. How supply has changed to meet the effects of demand?
(considering services, product type and their quality, and
sustainability)
5. What are tourism current trends?
Can you take it further? Thinking point
Given the increasing stress on the individual needs of the tourist, is it
still possible to segment markets today? How can providers offer an
unlimited supply of alternative opportunities?

Key terms: 
discuss in your groups and agree as a whole class - 10-15 minutes
• Demand/Supply
• Suppressed demand
• Potential tourism demand
• Social-psychological determinants
• Tourism Trends
• Governments polices
• Globalisation
• Economic determinants
• Responsible tourism
• Sustainable tourism

1. Why is it difficult to come up with a universally agreed
definition of tourism demand? It is difficult to understand
because it is a complex term and there are many factors which
are influencing….

1. Why do we need to understand what ‘demand’ is and the key factors
of demand?
2. Be able to forecasting future demand in order to meet customers’
needs with a range of products/services by private sector and
policies/funding by public one.
• Lifestyle (income and employment)
• Paid holiday entitlement
• Education and mobility
• Race and gender
• Life-cycle (age)
Issues:
• Travel and Tourism industry involves ‘unexpected’ changes; agree?
why?
• Demand can be seen as a global or individual process; why?
Individual
factors

2. Why is it difficult to come up with a universally agreed definition
of tourism demand?

The components of tourism demand – group activity
• Read your hand-outs and explain two components of tourism
demand to your classmates
• Discuss as a whole group
• Case study – ‘Domestic age and tourism Demand’
Answer two questions in writing
Homework:
• Read your hand-outs and summarise individual
factors/determinants of tourism demand (to be discussed in the
morning class tomorrow)

27/02/2013
• Recap – why do we need to understand what ‘demand’ is?
• List factors affecting tourism demand, why?
• What does FLC stand fro and how this can be used by T&T
organisations?

27/02/2013
Individual
factors
Macro factors (a
broader scale of
demand)

Transformation of the Service Economy
Government
Policies
Business
Trends
Social
Changes
Advances in
IT
Globalization
Innovation in service products & delivery systems, stimulated by better technology
Customers have more choices and exercise more power
Success hinges on:
 Understanding customers and competitors
 Creation of value for customers and firm
 New markets and product categories
 Increase in demand for services
 More intense competition

Pair research/presentation to the class
1. Taking a country or region of your choice, look at the patterns
of demand for tourism and explain them in respect of social,
technological, economic and political factors.
2. Identify the main factors/determinants for tourism an assess
their relative importance.

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