Travel, Tourism and Hospitality Industries Assignment

This is a solution of  Travel, Tourism and Hospitality Industries Assignment in which we discuss  Travel and  Tourism.

 Introduction to the Research

Research Title

The research topic that will be discussed for this particular study is as following:

Impact of Travel, Tourism and Hospitality Industry on the Asian Economy

Research Rationale

Over the period of last few decades, for any country the travel, tourism and hospitality industries have grown in its importance for the overall development of the economies of the nations. Though traditionally this industries or the combination of the same has not been given much of an importance for the development and sustenance of economic well being for any region, with due course of time, the industry practitioners and subject matter experts have been able to identify that the economic importance of these for the local area as well as the country as a whole is has been underappreciated generally. They have been also able to understand that the impacts of these industries extend beyond the core transportation as well as hospitality sectors. However in view of the fact that the tourism is the leading industry in the service sector at the global level as well as a major provider of jobs and a significant generator of foreign exchange at the national level. One of the biggest as well as fastest growing industries in the current world economy is tourism. During the decade starting from the year 1996 and ending in the year 2006, global arrivals of tourists increased at an average CAGR of approximately 4.0%. 1996 there were 575 million international tourists and in 2006 there were 846 million tourists. International tourist arrivals grew by over 4%Travel, Tourism and Hospitality Industries in 2011 to 980 million, with tourists‟ receipts exceeding US$919 billion. However the rate of growth lessened to some extent during the global financial crisis starting from the year 2007-2008. During this period the Asian countries also grew in its tourism attraction. During the aforementioned decade, the Asian region grew at an increasing rate of 6.7% per annum and was second only to the Middle East in outperforming the rest of the world. The international market share for the tourism and hospitality industry for Asia increased to 19.8% in the year 2006 from 15.7% in the year 1996. Post the global recession the Asia started the decade of 2011 with strong momentum in terms of the economy (World Bank, 2012). This also led to continued growth for the region in terms of the sectors under discussion. Tourism has become one of the most imperative industries for the Asia Pacific countries as well as the economies for the same. At present for various Asian countries the major source of earning foreign exchange is the tourism and this enhances the impact of the same on these economies (World Bank, 2012). Hence in this paper the discussion which will be looked into will be done with the intention of exploring these factors. The rationale for the research will be develop understanding on the subject of the various ways in which the tourism and hospitality industry can lead to expansion and improvement of the economies of a region through the example of Asia as a region. However in view of the fact Asia is larger region which is not very homogeneous in terms of the tourism as well as the development levels of the countries within the region, it will be necessary to decide on a specific country on the basis of which this study will be carried out. The specific nation which will be looked into through this study is Nepal. This country has been chosen for the reason that this country and its economics are highly dependent on the tourism industry as there is no other significant industry for the country. Nepal, lies along the southern slopes of the Himalayan mountain ranges. It is a landlocked country located between India to the east, south, and west and the Tibet Autonomous Region of China to the north. The Kingdom of Nepal was formed in 1768 by the unification of Nepal. Founded by King Prithvi Narayan Shah, a Gorkhali monarch, it existed for 240 years until the abolition of the Nepalese monarchy in 2008. The area for the country is 147,181 square kilometres and the population is 26,494,504. Nepal is 93rd largest country in the world and 41st most populous country. The country has its capital in Kathmandu, one of the major cities of the country.

 Significance of the Research

This research will be significant in view of the fact there is currently a dearth of literature and researches which look into the economic impact of the tourism industry especially for the Asian countries. Also in view of the fact this paper will be discussing these factors from more or a qualitative point of view rather than a pure quantitative perspective, this may lead to answer to various widely discussed questions related to the understanding the economic value-added and impact of the tourism sector. This research can be helpful for the policy makers for the aforementioned industries as this will provide them with a direction regarding the effect of development of tourism for the overall improvement of the economy as well as the factors those are needed to be looked into for the growth of tourism and hospitality sector. These services sectors have been traditionally considered to be less effective in terms of economic development. This research will try to change this perspective to a significant degree.

 Introduction to the Research Topic

The 2 most important difficulties those are faced by the policy makers of the tourism and hospitality industries, researchers as well as statisticians are as following:

  • To identify the best way for presenting a reasonable, collectively acceptable as well as theoretically strong definition of the tourism and hospitality sector for the clearly defined boundaries of the industries; and
  • The methods for precisely measuring the economic value-added and impact of the tourism sector.

These difficulties have been pronounced for the sector in view of the fact the group of industries which are being discussed in this paper are not present as a distinct entity in the traditional national accounts or national statistical system. Thus, data on the range of economic activities directly attributable to tourism may be found in the statistical infrastructure, but they are disjointed, and widely dispersed among other economic sectors. Consequently, the value added of the tourism sector has been consistently underestimated in traditional national income accounting. Recognizing that, with a few country specific exceptions, one of the biggest limitations in the regional tourism sector is the absence of a reliable, thorough and internationally uniform statistical database from which one could measure the full economic impact of tourism. It is often the positive economic impacts that persuade governments, companies and individuals to get involved with development of tourism destination (Gunn, 1972; Kumar & Hussain, 2014a). Hotels, caravan parks, guesthouses or tourist attractions that provides income for stakeholders and create jobs for local community. According to Stynes (1997) and Jago (2012) the travel and tourism sector has the ability to provide a variety of positive economic impacts and the most important of them are;

  • Enhanced foreign currency earnings and domestic income and;
  • Enhanced employments
  • Economic multiplier effect
  • Developed infrastructures

Revenue generated by tourism development is often vital to the economic well-being of an area and is boosted by an important concept known as the multiplier effect. Research has shown that the amount spent by visitors to an area is re-circulated in the local economy. Tourism’s ability to create jobs is one of the main reasons why governments encourage its development. Direct employment in tourism occurs in areas such as hotels, transport operators, travel agencies, tourist attractions, tour guides, government departments and tour operators (Lieper, 1979). Tourism also creates indirect employment in industries not directly associated with the sector, for example in construction, banking, design and transport companies. Mathieson and Wall (1982) and Kumar and Hussain (2014a) reports that beside generating revenue and creating jobs, tourism development also contributes to infrastructure improvements in destination areas, e.g. road and rail improvements, airport developments, improvements in telecommunications and utilities such as water and power supply. In this way, local people can benefit from improved facilities that are provided for tourists.

 Research Objectives

It will be necessary for the researcher to develop a set of objectives which will act as the very important guiding parameters for the research. The research objectives also help the researcher in preparation of the research methodology that will be used for the purpose of this specific research. This also provides the researcher with a sense of purpose with which the research needs to be concluded. Following are the research objectives which have been developed for this study:

  1. To understand the nature and underlying factors of the travel and tourism industry
  2. To identify as well as discuss the overall importance of the travel and tourism industry that can be helpful for the economy of the destinations in terms of destination chosen for the research

Chapter 2: Literature Review

Introduction to Literature Review

This section of the report will be dealing with the secondary research that will be carried out for this research. The secondary research for the study will be carried out through a literature review process. In this process of literature review, the researcher will be aiming at gathering as well as critically assessing the various information and data which have been given by the previous researchers on the same or similar topic of this research. This will be done for the purpose of developing a theoretical understanding for the study which will help the researcher on answering the specific research questions which have been developed for this study. The themes which will be looked into through this literature review are as following:

  1. The definition as well as underlying aspects of the global travel, tourism and hospitality Industry
  2. The overall importance of the travel, tourism and hospitality industry in terms of the economy of Nepal

The definition as well as underlying aspects of the global travel, tourism and hospitality Industry

The travel and tourism industry can be defined as the collection of companies which are in the business of providing various solutions related to the travel, stay, commute etc. for the travellers. This industry or the combination of related industries primarily caters to the various requirements of the travellers through the provision of the intangible services.  There are various sub industries which are integral parts of the overall tourism and hospitality sector. These parts also are benefited through the development of the global tourism and typically include the hospitality services which provide the accommodations such as hotels and resorts; transportation services like taxicabs, airlines, cruise ships etc. and entertainment venues, such as amusement parks, casinos, shopping malls, music venues, and theatres. A combination of all of these lead to the overall service provision for the tourists as far as the global travel, tourism and hospitality Industry is concerned.

Despite the core service remaining same, the global travel, tourism and hospitality Industry has undergone a lot of changes in the last few decades and there are several aspects which have helped this sector in its journey towards all of these significant changes. In this section, a brief description of few of these aspects will be given which have been mentioned by various previous researchers as well as industry practitioners. These factors are (Gautam, 2006; Mathieson and Wall, 1982; Kumar and Hussain 2014a):

  1. Economic impact of tourism and leakage from the same: Various actions which have been taken by the policy makers in various countries with the purpose of increasing the positive impacts of the tourism on the economy through reserving earnings for the destinations has led to the improvement of the offerings for the tourism sector.
  2. Globalization: There are various factors which have been impacted by globalization. These include consumer protection regulations, environmental challenges, policies related to the aviation, changes in the global currencies including the introduction of euro etc. A combination of all of these factors combined has led to serious impact on the global travel and tourism industry.
  3. Some other factors which have been able to influence the global scene of the travel and tourism sector include enhanced liberalization of border control formalities, easier access to visas for various countries, as well as increasing investment opportunities in the tourism sector.
  4. Taxation: Also for the purpose of enticing more and more travellers to a specific region the governments of those areas have decided on significant tax breaks for the companies in the travel and tourism industry. This has also helped in shaping the opportunities for the nTravel, Tourism and Hospitality Industriesew age travel and tourism.
  5. Social issues: There are multiple social issues for the travel destinations in which the aspects of the overall welfare of the destinations’ local people and other social aspects of the destinations as well as the preservation of the nature and natural elements of the same. All of these factors have led to development of new offerings including responsible tourism, eco-tourism, sustainable tourism etc.
  6. Improved human resources: Due to the better respectability and recognition for the tourism industry more and more well-qualified people are being attracted by this industry which has led to the enhanced service offering by the companies in this industry (Malhado, 2014).
  7. Technology: Technology has been one of the most important factors for the significant improvement for the tourism and hospitality industry. Especially due to the advancement of the information technology over the period of past couple of decades, the information dissemination process for the companies in this industry has become significantly more efficient and effective, which has helped to attract the new base of consumers. A spokesperson of the European Airline has confirmed that currently almost all the frequent travellers of the airlines are using new age mobile telephones, personal computers with the intention of surfing Internet for multiple hours a day. As a result of this entities in this industry have been trying to implement the new age distribution strategies which are aided through the use of information and communication technology. The development and expansion of the same also has changed the way the internal activities of the industry is carried out and especially for the supply chain management functions as well as marketing and distribution strategies.
  8. One of the negative factors which have led to serious concerns within this industry and for the end users of the same is related to the global instances of crime and terrorist activities in addition to the political issues which can lead to regional unrest in the preferred destinations.

The 2 most important difficulties those are faced by the policy makers of the tourism and hospitality industries, researchers as well as statisticians are as following:

  • To identify the best way for presenting a reasonable, collectively acceptable as well as theoretically strong definition of the tourism and hospitality sector for the clearly defined boundaries of the industries; and
  • The methods for precisely measuring the economic value-added and impact of the tourism sector.

The overall importance of the travel, tourism and hospitality industry in terms of the economy of destinations

Revenue that is produced by the generated by the travel, tourism and hospitality industry in terms of the economy of destinations is often very important to the economic development as well as sustenance of the same. One of the main reasons for this development lies in the important concept of multiplier effect. It has been shown by various researches is that the amount which is spent by the incoming tourists for the destination is re-circulated within the economy of the destination. Hence this factor couples with the capability of the tourism industry for creation of jobs can be cited of the main reasons why governments encourage its development. Direct employment happens for the tourism sector for the various areas including the transport operators, hotels, tourist attractions, travel agencies, government departments, tour guides and tour operators (Lieper, 1979). Tourism has also been able to create indirect employments for the industries which may or may not be directly linked to the sector of the tourism. An example for this can be given as the infrastructure sector which is often developed as a cause or the result of the enhanced tourism. Other such industries include banking, design and transport companies. Mathieson and Wall (1982) and Kumar and Hussain (2014a) reports that beside generating revenue and creating jobs, tourism development also contributes to infrastructure improvements in destination areas, e.g. road and rail improvements, airport developments, improvements in telecommunications and utilities such as water and power supply. In this way, local people can benefit from improved facilities that are provided for tourists.

It is often the positive economic impacts that persuade governments, companies and individuals to get involved with development of tourism destination (Gunn, 1972; Kumar & Hussain, 2014a). Hotels, caravan parks, guesthouses or tourist attractions that provides income for stakeholders and create jobs for local community. According to Stynes (1997) and Jago (2012) the travel and tourism sector has the ability to provide a variety of positive economic impacts and the most important of them are;

  • Enhanced foreign currency earnings and domestic income and;
  • Enhanced employments
  • Economic multiplier effect
  • Developed infrastructures

However, apart from the above mentioned financial impacts there are few environmental aspects which lead to some national expenditure for the ethic has become very important for the continued sustenance of the companies in this industry, including airlines, hotel chains as well as tour operators. Hence they are reacting to these issues with positive approach to ensure the long term feasibility of the industry.

  • Airlines and aviation: The international impacts of the alliances between the bigger airlines have begun to become noticeable for the travel and tourism industry.
  • Various alliances between the private and public sectors which has driven the industry significantly. The tourism has also linked with various industries including textiles, agriculture, retailing and even arts/culture.

In terms of Nepal, following are some of the key factors related to the economic impact of tourism for this country.

Direct contribution to GDP: The direct contribution by this sector to the GDP of the country in the year 2014 was Nepalese Rupee 83.7 Billion which translates into 4.3% of total GDP. This figure was expected to increase by 5.4% in the year 2015. This figure is also expected to grow by 4.4% per year for the period of year 2015 to 2025 which will mean that in the year 2025 the contribution of the tourism sector to the entire GDP of the country will be Nepalese Rupee 135.7 Billion which is 4.8% of total GDP.

Total contribution to GDP:  The total contribution of this sector to the country’s GDP was Nepalese Rupee 171.6 Billion in the year 2014 which was 8.9% of GDP. This figure is expected to increase by 5.8% in the year 2015, and further increase by 4.5% per year for the period of 2015 to 2015 and rise to Nepalese Rupee 281.5 Billion in the year 2025 which will be roughly 10.0% of the GDP.

Direct contribution to employment: In the year 2014 this sector directly led to 3.5% of total employments in the country which was as much as 487,500 jobs.

Total contribution to employment: In the year 2014, the gross support of this sector to the total employment of Nepal is 7.5% of the total employment. This number includes the jobs which have been supported indirectly by this septic industry and translates into as much as 1,059,000 jobs.

Following is the graphical representation of the same:

Source: WorldBank Data

Following is the changes in the key metrics for the tourism industry of Nepal (World Bank, 2015).

YearInternational tourism, number of arrivals% ChangeInternational tourism, receipts     (current US$)% Change
20063,84,0001570,00,000
20075,27,00037%2340,00,00049%
20085,00,000-5%3530,00,00051%
20095,10,0002%4390,00,00024%
20106,03,00018%3780,00,000-14%
20117,36,00022%4150,00,00010%
20128,03,0009%3790,00,000-9%
20137,98,000-1%4600,00,00021%
20147,90,000-1%5020,00,0009%

 

References

  1. Leiper, N. (1979). The Framework of Tourism. Annals of Tourism Research, 6(4), 390-407. DOI: 10.1016/0160-7383(79)90003-3.
  2. World Bank data, (2016) Accessed from World Bank website
  3. J. and Hussain, K. (2014a). Evaluating Tourism’s Economic Effects: Comparison of Different Approaches. Procedia – Social and Behavioral Sciences, 144, 360-365. DOI: 10.1016/j.sbspro.2014.07.305.

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