Travel and Tourism: the Largest Segment of the Hospitality Industry - Case Study Example

Outline Travel and tourism the largest segment 1. Introduction a. Hospitality sector b. Components of tourism sector 2. Growth of tourism in recent years 3. Significance of the tourism sector 4. Employment within the travel and tourism sector 5. Industry examples a. Palm Beach County b. Vermount travel and tourism industry c. Food and beverage industry d. Recreation industry e. Travel industry f. Shopping Malls g. The case of Dubai 6. Conclusion Thesis statement: Travel & Tourism is the largest segment of the Hospitality Industry and is comprised of many different businesses - for example, businesses offering transportation, lodging, food & beverages, shopping, entertainment, and recreation. Introduction Hospitality sector The hospitality sector is a major sector in the world economy and comprises of four sectors - food and beverage, lodging, recreation, and travel and tourism. The hospitality industry is a multi-billion dollar industry in the US and globally it is a multi-trillion industry employing millions of people directly and indirectly (Steven, 1999). Out of these different sectors, travel and tourism is the world’s largest industry and the largest generator of jobs. Statistics from all over the world show that travel & Tourism is the largest segment of the Hospitality Industry and is comprised of many different businesses - for example, businesses offering transportation, lodging, food & beverages, shopping, entertainment, and recreation. Components of tourism sector There is a certain amount of overlap in the demarcation of the travel and tourism sector and the overall hospitality industry. Tourism while being the largest employers in any country, it is also a viable economic development strategy adopted by many countries. Rural areas and small communities with a declining economic based have found an alternative in tourism. Ohnoutka and Hughes (2002) contend that tourism is a complex industry as it includes a variety of economic sectors - transportation, accommodations, food and beverage services, recreational activities, retail shopping, and entertainment. Community tourism industry therefore sells goods and service to the sector. Hence apart from the hotel and the restaurant industry, most areas or businesses that caters to the tourists or is engaged in the promotion of tourism form a part of the travel and tourism industry. Thus the airlines, tour operators travel agencies, cruise companies and convention planners, lodging, recreation and shopping malls at tourist spots also are a part of the travel and the tourism sector. Growth of tourism in recent years Tourism in the 20th century as the business of attracting visitors and catering to their needs has grown as the world’s largest industry surpassing autos, steel, electronics, and agriculture (Sirgy & Su, 2000). It is undoubtedly a large source of foreign exchange, employment and income. This shows that the economy of a nation depends on the travel and tourism industry and this is further endorsed by the fact that post September 11, the industry lost $1.36 billion in business because of a dramatic drop in bookings for flights, hotel rooms, car rentals and cruise. According to the Travel Industry Wire (2009) tourism represents about 5% of GDP and 6% of jobs in G20 countries. Global tourism services exports amount to about $3 billion per day. For the world’s poorest countries travel and tourism is the main growth and trade driver. In fact because of the large size of the industry, it can play an integral role in the shift towards greener economy. For the developing economies it is the largest services export sector. Tourism has a strong multiplier effect as it fuels business growth, makes sport and entertainment possible and sustains rural destinations. It boosts trade for the world’s poorest countries. It generates jobs, enhances infrastructure and trade and development. Significance of the tourism sector Travel and tourism promotes synergies between the public and private sector, generates profits as well as protects the social, natural and the cultural environment. The travel and tourism sector contributes to the country’s GDP and it is expected to rise from 9.4% (US$5,474 bn) in 2009 to 9.5% (US$10,478 bn) by 2019 (WTTC, 2007). As far as employment is concerned it contributes about 7.6% of the total employment which means 1 in every 13.1 jobs by 2009 and one in every 11.8 jobs by 2019. The real GDP growth from travel and tourism sector has decreased in 2009 from 2008 but in the next ten years it is expected to average 4.0% per annum. International visitors and tourism goods generate about 10.9% of the total exports. All these demonstrate the significant role that the travel and tourism, sector has within the hospitality industry. Employment within the travel and tourism sector Currently the travel industry employs 7.7 million Americans and generates more than US$740 billion in spending annually (Travel Mole, 2009). The industry leaders contend that the Travel Promotion Act would be able to give the industry a boost and attract international visitors which in turn would create hundreds and thousands of jobs. Overseas visitors spend on an average $4000 per person per visit and this would be a great boost to the economy. Even meetings and events within the country come under the travel and tourism sector and generate more than $100 billion in spending. Industry examples An example of Palm Beach County demonstrates that travel and tourism is the indeed the largest segment in the hospitality sector. The total travel and tourism spending in this county in 2004 was $2831.22 million out of the maximum was spent on restaurants, shopping, recreations and transportation (Lehmann, 2005). Shopping and entertainment make up the bulk of the spending by the tourists. A study of the Vermount travel and tourism industry indicates that there are day visitors as well as overnighters. Visitors made 12.8 million trips in 2003 to Vermont for leisure, business and personal business bringing with them needs and desires for goods and services (EPR, 2003). This gave rise to number of small businesses to respond to the demand thereby impacting the overall economy. All these businesses offering goods and services fall under the travel and tourism industry. The total tourist spend in 2003 in Vermont was $1462 million of which shopping and recreation accounted for the largest share of the visitor spending as indicated by the graph below: Source: EPR (2003). This shows that a segment of the travel and tourism sector fetches the largest contribution to the economy. Visitor spending in Dallas in 2006 amounted to $3.27 billion. Here too travelers spent $632 million on lodging, while they spent $780 million at restaurants, $536 million for entertainment, and $1.32 billion on a broad range of goods and services including transportation and shopping (Crusemann, 2006). This again shows that the travel and tourism sector is the largest within the hospitality industry. Food and beverage, air transportation, shopping and recreation make up for the major spend as there are many who are day visitors or spend the night with family and friends. The food and beverage industry or the food service industry, a part of the travel and tourism sector provides 50% of all meals eaten in the US today (Montana, 2008). People eat out very often and thus there are many opportunities for entrepreneurs. Within the food service segment also there are three types of services – commercial, institutional and food service for consumers. Within the commercial segment there are the full-service restaurants like the chain restaurants and there are the quick-service restaurants like the McDonald's. Institutional food services are services that cater to institutions like schools, hospitals, military base, prisons or factories. Food services within the consumer business are the ones that are located within the cinema halls or at airports, theme parks, train stations or museums. Consumers do not visit these places just for food but when they happen to be at these places they avail of this facility. Since the air transportation is the primary mode of travel to different places, these food services are very popular. Recreation is another important segment in the travel and tourism industry as most tourists look out for spots for recreations during their visits. The goal of recreations is to refresh a person’s body and mind. Recreation businesses can be diverse because people have too many options and they seek newer ways to relax. Recreation again includes entertainment, attractions, spectator sports, and participatory events (Montana, 2008). Entertainment includes live theatre or concerts while attractions range from natural scenery, museums, and zoos to heritage sites. Spectator sports include football, baseball or even the Olympics. Hence any travel or transportation to watch the Olympics in another country would fall under the travel and tourism sector. The travel industry is the business of moving people from place to place and hence there are various segments within this industry. Hence it includes all means of transportation such as buses, planes, ships, and trains (Montana, 2008). Within the tourism industry again there are various branches like leisure tourism, in which people seek pleasure. Hence food and recreation too fall under the travel and tourism industry. Under the tourism industry, to provide services various businesses like travel agencies, tour operators, cruise companies, convention planners and visitors bureau function. Shopping malls at the airports form a part of the travel and tourism industry and are very popular shopping sites for tourists. The shopping Mall at Singapore’s Changi airport is the largest shopping mall in Singapore in terms of sales. Visitors do not even have to leave the airport to shop because the shopping mall at the airport offers range of goods from 70 cents for a can of soda to a diamond ring costing over $100,000 (USA Today, 2005). Because of the high potential in retail food and shopping by the tourists, the Civil Aviation Authority of Singapore (CAAS) have dedicated more than 322,000 square feet of space in Changi's two terminals to retail and food and beverage concessions. Other recreational and relaxation services like foot massage are also available at the airport. About 70% of all travelers buy or eat something at Changi. There are about 8 million tourists entering Singapore every year and tourism accounts for about 5% of its GDP. Globally tourism is valued at $733 billion (USD) in terms of international receipts as per the WTO (Manitoba, 2006). It has also been found that leisure accounts for 51% of all international travel. Overall there has been negative growth in the hospitality industry between 1996 and 2006 but there has been growth in the transportation, recreation, spectator sports sector, travel arrangements and tourism related transportation. Tourism related transportation includes air Transportation – Scheduled, Air Transportation – Non Scheduled, Inter Urban & Rural Bus Transportation, Taxi & Limo Service, Charter Bus Industry, Scenic and Sightseeing Transportation. The lodging industry has registered negative growth and so is the case with food services and drinking places. International tourism is one of the most important sectors in the world today as expenditure on tourist goods and services represent some 8% of total world export receipts and 5% of world GDP (Lanza & Pigliaru, n.d.). Dubai was a small and poverty-ridden settlement of about 30000 people about 50 years ago but in the last 15 years it has been transformed into a modern city. This has been possible because like Singapore it combined trade with tourism. It is now a hub of global commerce, an attractive tourist destination and a shopping Mecca – a New York, Miami and Las Vegas – all rolled into one (Bagaeen, 2007). Dubai’s tourism sector accounts for about 30 percent of the UAE’s GDP against the global average of ten percent (Khaleej Times, 2008). Dubai has other attractions like trade shows and exhibitions, festivals and conferences (McEachern, 2006). The Dubai Shopping Festival, an annual event, is a month-long festival and apart from low prices, includes attractions like prizes, cultural events, children's activities, sporting events and spectacular fireworks work. All these form a part of the travel and tourism industry. Conclusion Thus it can be seen that travel and tourism comprise of a range of goods and services that are needed and used by the tourists. These include transportation in different forms, food service in different categories to suit different purposes and budgets, recreation in the form of sports or entertainment, and shopping. All of these today, in any nation, form the bulk of the tourism industry. Food is a very important segment as 50% of the people in the US eat out. Shopping at most airports, account for huge revenues which come from the visitors or from in-transit passengers. There has been decline in the lodging industry but there has been growth in the transportation, food and recreation sectors within the travel and tourism industry. Study of several counties also suggests that the travel and tourism contribution is the highest to their economy and is the highest generator of jobs. Since the travel and tourism industry accounts for growth, is a valuable contributor to most economies round the world, is the largest generator of jobs and the GDP, it can be surmised that this is the largest segment within the hospitality industry. Reference: Crusemann, F. R. (2006). CITY TOURISM IMPACT. Retrieved April 16, 2009, from http://www.dallascityhall.com/convention_center/pdfs/city_tourism_impact2006.pdf EPR. (2003). The Travel and Tourism Industry in Vermont. Retrieved April 16, 2009, from http://www.epreconomics.com/Docs/Exec%20Summ.pdf Hvidt, M. (2007). Public–Private Ties and their Contribution to Development: The Case of Dubai. Middle Eastern Studies, 43 (4), 557–577. Khaleej Times. (2008). Dubai's tourism to account for 30% of UAE GDP. Retrieved April 16, 2009, from http://www.menafn.com/qn_news_story_s.asp?StoryId=1093195279 Lanza, A. & Pigliaru, F. (n.d). On the fast economic growth of small countries specialised in tourism. Retrieved April 16, 2009, from http://www.feem.it/NR/rdonlyres/C2687016-C30E-409D-AD93-5EE3A91528D8/317/7398.pdf Lehmann, J. C. (2005). CITY TOURISM IMPACT. Retrieved April 16, 2009, from http://www.pbcgov.com/touristdevelopment/pdf/PalmBeachCountyCTI.pdf Manitoba. (2006). The Value of Tourism. Retrieved April 16, 2009, from http://ti.travelmanitoba.com/assets/pdf/2006_value_of_tourism.pdf McEachern, A. et al. (2006). Economic and Environmental impacts of tourism on Dubai and Hawaii. Retrieved April 16, 2009, from http://webhost.bridgew.edu/dleuenberger/student/Sustainability-Dubai&Hawaii.pdf Montana. (2008). The Four Segments of the Hospitality and Tourism Industry. Retrieved April 16, 2009, from http://www.montana.edu/hhunts/MAFCS%20WEBSITE%20DEVELOPED%202008/MAFCS%202007%20Student%20Lesson%20Plans/Unit%20Plan-%20adobe%20files/Lesson%202%20Four%20Segments%20Infosheet.pdf Ohnoutka, L. & Hughes, D. W. (2002). Training Needs of Tourism-Based Businesses. Retrieved April 16, 2009, from http://www.joe.org/joe/2002june/rb4.php Sirgy, M. J. & Su, C. (2000). Destination Image, Self-Congruity, and Travel Behavior: Toward an Integrative Model. Journal of Travel Research, 38, 340. Steven, C. (1999). Hospitality: a new look at an established industry. Retrieved April 16, 2009, from http://www.articlearchives.com/travel-hospitality-tourism/lodging/1608005-1.html Travel Industry Wire. (2009). Placing Tourism And Travel In Global Stimulus Packages And The Green Economy. Retrieved April 16, 2009, from http://www.travelindustrywire.com/article37870.html Travel Mole. (2009). Leaders in the travel industry meet with Obama to discuss the journey ahead. Retrieved April 16, 2009, from http://www.travelmole.com/stories/1135184.php?mpnlog=1&m_id=_rs~~Admn USA Today. (2005). Changi Airport is Singapore's premier shopping mall. Retrieved April 16, 2009, from http://www.usatoday.com/travel/destinations/2005-10-13-changi-shopping_x.htm WTTC. (2007). WORLD - KEY FACTS AT A GLANCE. Retrieved April 16, 2009, from http://www.wttc.org/eng/Tourism_Research/Tourism_Economic_Research/ Read More