Tourism
I. Chapter 3 Review and Questions
What Is Tourism?
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Tourism is the world’s largest industry if all its interrelated components
are included. It accounts for 10.2% of world GDP and employs 200
million people, 7.8% of the global workforce.
Object.
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Components of tourism include travel; lodging; conventions, expositions,
meetings, events; restaurants, managed services; and recreation.
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The World Tourism Organization (WTO) is vested by the UN with a
central role in promoting tourism, in order to stimulate economic growth
and job creation, paying particular attention to developing nations.
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Tourism has become one of the world’s most important sources of
employment.
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Intercultural awareness and personal friendships fostered through tourism
are a powerful force for improving international understanding and
contributing to peace among all nations of the world.
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Tourism for Prosperity and Peace
Long-Term Prospects: Tourism 2020 Vision
International arrivals are expected to reach over 1.56 billion by 2020. This
rapid growth presents opportunities and challenges. Tourism is a mature
industry but a young profession.
Definition of Tourism
The WTO definition of tourism is “Tourism comprises the activities of
persons traveling to and staying in places outside their usual
environment for not more than one consecutive year for leisure,
business, and other purposes.
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Tourism represents a high percentage of gross national product for many
developing nations. In many cases, tourism serves to balance trade with
other nations.
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Tourism is frequently characterized according to various sectors and
organizations involved with tourism.
The sector categories are:
Geography, Ownership, Function, Industry, Motive.
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Airlines
U.S. airlines have lost billions of dollars in the past few years, in part
because of their inability to compete effectively with international
carriers. This partly stems from the fact that several international
airlines receive funding from their governments.
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Since 9/11 and the economic downturn, airline revenues have plunged
while costs have risen.
Effective competition will require alliances to be made, such as
USAir’s partnership with the Star Alliance. Such alliances allow
airlines access to others’ feeder markets and are part of the trend
toward worldwide deregulation.
Carriers with lower cost structures, such as Southwest and JetBlue,
have forced the major carriers to retreat, eliminating routes to smaller
cities.
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Another way that airlines have worked to decrease losses is through the
creation of the Hub-and-Spoke System. The Hub-and-Spoke system
enables passengers to travel from one smaller city to another smaller
city via a hub or even two hubs.
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The two main benefits of the Hub-and-Spoke system are:
a) Airlines can serve more cities at lower costs.
b) Airlines can maximize passenger loads from small cities.
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A cruise ship is often referred to as a floating resort. Various types of
entertainment from exercise classes to cabarets to charm classes to
shuffle board tournaments and all night dancing are available; thus,
there is plenty for travelers to do.
Some 215 ships provide mostly ocean-going cruising. The cruise
market has rebounded dramatically since 9/11, with 8.6 million
Americans cruising in 2004.
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Carnival is the most successful cruise line, netting about 20% of all
sales and carrying close to 3 million guests.
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The Hub-and-Spoke System
Cruise Ships
The nationality of the ship’s crew contributes to its ambiance. Reasons that
most cruise ships sail under foreign flags include:
a) U.S. labor costs are too high to compete in world market.
b) U.S. ships are prohibited from operating casino-type gambling.
c) Many foreign shipyards are subsidized by their governments.
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Employment positions for Americans are mainly confined to shore-based
activities such as sales and marketing. On board, Americans sometimes
serve as cruise directors and pursers.
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Segmenting the Cruise Market
Mass Market: Income: $30,000 - $60,000.
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Cost of Cruise: $85 - $175 per day
Middle Market: Income: $60,000 - $80,000.
Cost of Cruise: $175 - $350 per day (750 - 1000 passengers)
Luxury Market: Income: higher than $80,000.
Cost of Cruise: average more than $350 per day (700 passengers)
Tourism Organizations
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Governments are involved in tourism decisions because tourism involves
travel across international boundaries. Governments regulate the entrance
and exit of foreign nationals. Decisions impact national parks, heritage,
preservation, and environmental protection. Tourism in many ways serves
as an “international ambassador.”
Object.
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The World Tourism Organization (WTO) is the only organization that
represents all national and official tourism interests among its allied
members. It is the most widely recognized organization in tourism.
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The International Air Transportation Association (IATA) is a global
organization that regulates almost all international airlines. The purpose of
the IATA is to facilitate the movement of people and goods, regulate
waybills and baggage checks, permit rapid booking and connections, and
maintain fares and rates.
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The International Civil Aviation Organization (ICAO) is made up of more
than 80 governments. It coordinates the development of all aspects of civil
aviation, specifically with regard to the formulation of international
standards and practices.
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The World Bank (WB) lends substantial sums of money for tourism
development. The International Bank Reconstruction and Development
serves a purpose similar to the WB. The United Nations Development
Program (UNDP) assists countries with a variety of development
activities.
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The Organization for Economic Cooperation and Development (OECD) was
established in 1960. Its purpose is to (a) achieve economic growth and
employment in member countries while maintaining financial stability, (b)
contribute to sound economic expansion in member and non-member
countries, and (c) contribute to the expansion of world trade on a
multilateral, no discrimination basis. The OECD studies various aspects of
tourism and makes recommendations to governments through an annual
report entitled “Tourism Policy and International Tourism in OECD Member
Countries.”
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Other organizations with similar interests include the Asian Development
Bank, the Overseas Private Investment Corporation, the Inter-American
Development Bank, and the Agency for International Development.
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International Organizations
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The Pacific Area Travel Association (PATA) unites its 34 member
countries toward the goal of excellence in travel and tourism growth.
Concentrated successful efforts have focused on research, development,
education, and marketing.
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The United States Travel and Tourism Administration (USTTA) is a
government agency responsible for promotion of tourism and for the
development of travel to the U.S. from other countries, expanding the
growth of the U.S. travel industry.
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The Travel Industry of America (TIA) addresses common interests and
concerns of all components of the U.S. travel industry. It focuses on
unifying the goals of the industry, coordinating private sector efforts,
monitoring government policies that affect travel and tourism, and
supporting research and analysis. The TIA was founded in 1941.
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Domestic Organizations
State Offices of Tourism
State Offices of Tourism are created by the state legislative offices and are
responsible for the growth and development of tourism within their states.
They promote recreation and tourism attractions within their states.
City-Level Offices of Tourism
Many cities have established Convention and Visitors Bureaus (CVBs) to
attract and retain visitors. The CVB’s are largely funded by transient
occupancy tax (TOT), which may range from 8% to 18% of hotel room
rates. Additional funding comes from membership dues and promotional
activities.
The Economic Impact of Tourism
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Object.
A study commissioned by the World Travel and Tourism Council predicts that
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total gross output for travel and tourism in 2010 will be $2,571 billion or more
than 10% of the world’s gross national product (GNP). About 31% of
spending takes place in the European Union and 30% in North America.
Nearly every state publishes its tourism economic impact study. For example,
New York $38.5 billion, Florida 51.7 billion, Texas $33 billion, California
over $53 billion, and Hawaii $23 billion (its largest industry).
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The Multiplier Effect
Tourism produces effects beyond travel, hotels, restaurants, and souvenirs.
The money earned by transportation companies, hotels, and shops is used to
purchase more goods, pay wages, etc. This chain reaction continues until the
money is used to purchase something outside of the area, which is called
leakage.
Promoters of Tourism
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Object.
Tour Operators
Nearly 500,000 tours by 1,636 operators are conducted annually in the
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U.S., carrying 21 million passengers. They spend an average of $168 per
passenger per day (one-day and multi-day tours).
Travel Agencies
An agency serves as a middle person who provides travel counseling and
sells on behalf of airlines, cruises, hotels, car rentals, etc. The travel agent
has ready access to schedules, fares, and information about various
destinations.
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The first agencies opened in the 1880s. “Ask Mr. Foster” is identified as
the oldest agency in the U.S. Today, the American Society of Travel
Agents (ASTA) claims 20,000 members in 165 countries. The average
travel agency generates about 3 million dollars a year in sales.
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Agents use computer reservations systems (CRS) to access availability and
make bookings. Main vendors are Sabre, Apollo, Worldspan, System One,
and Galileo. Sabre owns 70% of Travelocity. Galileo is owned by
Cendant, and Worldspan is owned by Delta, Northwest, and American.
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In addition to selling tickets, agents arrange transportation, prepare
itineraries, book accommodations, meals, tours and special events, and
handle and advise on matters such as foreign exchange.
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A corporate travel manager works within a large corporation and is
charged with making travel arrangements for the organization. Interested
agencies are invited to submit bids to the corporate travel manager for
consideration by the corporation.
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Many corporations are using electronic mail (E-mail) to book travel
directly, without the travel agent acting as the middle person.
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Commission Caps
The airlines have imposed a commission cap of $20 on domestic flights
and between 0% and 5% on international ones, forcing agents to become
more specialized or expand their offerings.
Travel Corporations
The largest of these is American Express. AMEX mostly provides
services to business travelers for corporate clients by negotiating with
providers.
Corporate Travel Manager
Travel and Tourism Wholesalers
Travel wholesalers consolidate the services of airlines and other
transportation carriers and ground service suppliers into a tour that is sold
through a sales channel to the public. This practice became common in
the 1960s when airlines had vacant seats. Air travel seats, like hotel
rooms, are perishable.
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The tour wholesale business is comprised primarily of about 100
independent agents. Ten major wholesale companies account for 30% of
the wholesale business.
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The main types of wholesalers are (a) the independent wholesalers, (b) the
airline working in cooperation with the tour wholesalers, and (c) a retail
travel agent who packages tours for his or her clients. In addition, travel
houses and various travel clubs serve as wholesale agents.
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Certified Travel Counselor (CTC)
Travel industry experts formed the Institute of Certified Travel Agents
(ICTA), which offers specialized courses in the travel industry, leading to
designation as CTC on passing examinations and having five years’
experience.
National Offices of Tourism (NOT)
These seek to attract tourists. They provide oversight to hotels, transport
systems, and tours and tour guides as well as publicizing the country.
Destination Management Companies (DMCs)
Destination Management Companies are service organizations that offer
programs and services to meet the needs of their clients. They concentrate
on selling the destination to meeting planners and incentive companies.
Why People Travel
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Object.
Pleasure Travel
Most domestic travel (69%) is for pleasure purposes.
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Reasons for travel include the desire to experience new surroundings and
other cultures, rest and relaxation, visit friends and family, and view or
participate in sporting activities.
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Travel is likely to increase in the coming years due to changes in life style
and population. Longer life spans, flexible working hours, early
retirement, greater ease of travel, tendency to take shorter, more frequent
trips, and increased standard of living are among the reasons stated.
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The appeal of travel correlates with scenic beauty, pleasant attitudes of
locals, good accommodations, cultural interests, and cuisine, among other
factors.
One challenge that is emerging is matching expectations to reality.
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Business Travel
Business travel frequently combines with pleasure. It accounts for 20%
of U.S. travel.
Business travel is declining as a percentage of all travel.
Corporations are increasingly focusing on controlling expenses of
business travelers.
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Social and Cultural Impact of Tourism
Page Object.
Tourism can have both positive and negative impacts on communities. Travel
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has contributed to international understanding. If the number of tourists is
manageable, the host community is respected and the sociocultural norms and
values are respected. Tourism provides opportunity for social interaction.
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However, socio-cultural problems can arise from tourism. Tourism can dilute
the culture of a country by the introduction of “mass cultural norms.” In
many cases, there is little meaningful social interaction between the tourist
and the native culture. Often non-natives hold the senior and management
level positions in the hotel, while lower level positions are open to the native
population.
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Tourism brings new revenue to the area and creates/maintains higher levels of
employment. In developing countries, tourism is a major contributor to the
GNP.
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Ecotourism
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Ecotourism is a term for the growing trend in adventure tourism or
sustainable tourism. For tourists, it is the latest trend. For ecologists,
scientists, and students, it is a lifelong dream. And for the tourism
industry leaders, it is a potentially prosperous business.
Object.
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The International Ecotourism Society defines Ecotourism as
“responsible travel to natural areas that conserves the environment
and improves the well-being of local people.” See text p. 115 for the
list of ecotourism principles.
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Ecotourism projects tend to be small scale and are located in
underdeveloped and developing countries.
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Trends
Continued growth in tourism is anticipated with increased interest in
ecotourism, sustainable tourism, and heritage tourism. Internet
bookings will continue to increase with the advancement of
technology, heightened government awareness of tourism as an
economic and, also, a social/cultural force.
Check Your Knowledge, p. 93
1) Question: In your own words, define the term tourism.
Answers will vary but should include emphasis on tourism being dynamic, evolving, and consumerdriven. Also included in the definition should be the size and scope of the industry.
2) Question: Research: Which city in the United States is the biggest hub city for air travel?
Approximately how many flights does this city have a day?
Answers to this can be researched on the Internet. Focus on international airports such as JFK in New
York, LAX in Los Angeles, and Atlanta, Chicago, Miami, and other major cities.
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3) Question: Explain the significance of the Airline Deregulation Act of 1978.
Answer: The significance and purpose of the Airline Deregulation Act was to allow free-market
operations whereby airlines could decide their own fare structure and rates. The effects were to force
several noncompetitive airlines out of business.
Check Your Knowledge, p. 110
1) Question: What is TOT? What is the TOT in your city of residency?
Answer: TOT stands for transient occupancy tax, which is applied to hotel accommodations and set by
city officials.
2) Question: Brainstorm on the services offered by AMEX.
Answer: American Express (AMEX) is a corporation that has travel services with locations worldwide.
Some of the services include (p. 100):
 Ticket sales
 Travel services
 Tour operators
 Foreign currency exchange
 Corporate travel services
 Internet services based on cheap flights and convenient flights
Check Your Knowledge, p. 118
1) Mini project: Put together what you would consider your perfect vacation. This mini project is selfexplanatory. Answers will vary according to destination. The information should include location, air
travel, ground transportation, attractions, hotel accommodations, weather, expenses, and currency
conversions.
IV. Answers to Chapter 3 Review Questions
1) Tourism can be defined as the business of attracting, transporting, and accommodating guests’ needs.
People are motivated to travel to relax, by the desire to meet new people, to visit relatives, to get to know
new cultures, or the desire for attention, recognition, and entertainment.
2) Tourism is the fastest growing industry and the largest employer in the world. Travel and tourism supports
more than 200 million jobs worldwide. This represents about 7.8% percent of the global workforce
according to the World Travel and Tourism Council (WTTC).
Tourist spending produces a secondary financial impact that ripples in to other businesses. This is known as
the multiplier effect. Tourism is also likely to have a great impact on the economies of developing countries
by bringing new revenues and infrastructure. National Offices of Tourism (NOT) seek to improve the
economy of the country they represent by increasing tourist visitations. The World Tourism Organization
(WTO) represents all national and official tourism interests of its members. International Development
Organizations further tourism development, and the United Nations Development Program (UNDP) assists
countries with a variety of development projects.
3) Various.
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4) Ecotourism prepares participants by educating them about local regions, cultures, animals, and plants to
minimize visitors’ impact on natural environments. Tourism pollution refers to the dilution of culture and
nature by massive tourism.
Tourism can leave both negative and positive impacts on communities. It can be a major contributor to the
economy and enhance sociocultural understanding on one hand, but may also damage the cultural heritage.
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