Tourism Management in the UK: Issues, Impact and Recommendation - Essay Example

Tourism management: Issues, impact and recommendation The paper presents a brief summary of changing trends in the tourism sector with respect to the United Kingdom and its hotel industry. Hotel industry was selected as a subsector of tourism because the sector largely intersects a number of economic sectors such as hotel, transportation, food facilities and entertainment. The global tourism sector witnessed a sea change since the recession and is continuously adjusting to accommodate the growing trends. The paper present a clear overview of macro and micro factors of the industry and discusses their impact on the hotel industry. Based on the issues recognised thereof, recommendations have been provided in the paper so that the industry can adjust with the changes and increase their revenue. Table of Contents Introduction 4 Changing face of tourism industry worldwide 4 Macroeconomic factors affecting tourism demand in the UK 6 Micro environmental factors of hotel industry in the UK 7 Impact of changing tourism demand on hotel industry 9 Recommendations 10 Conclusion 11 Reference list 12 Introduction In recent years, tourism was witnessed to experience tremendous growth. The growth is so large that the industry is expected to assume position of the fastest growing as well as largest industry worldwide by all measures. Tourism sector experienced strong domestic as well as international growth primarily because it delivers a myriad of several advantages to travellers, tourists and their hosts (Bosselman, Peterson and McCarthy, 1999). Another reason that was determined to be strongly responsible for growth of tourism across the globe is its inherent quality of transecting numerous sectors, interests and business levels within one activity in a comprehensive manner. The economic sectors that enjoy benefits of tourism are hotel industry, transport department, tourist board and operators and government organisations (Cater, 1995). Tourism has gained increasing attention from private and public bodies chiefly because of its contribution as a source of attracting foreign exchange, employment generation, increasing tax revenue and profit generation (Mathieson and Wall, 1982). Despite the economic benefits, tourism is not free from criticisms. Tourism has been blamed by several organisations for environment pollution, excessive resource consumption and adverse impact on a nation’s cultural and social environment (Bosselman, Peterson and McCarthy, 1999). The paper, however, is more focussed on impact of macro and micro environmental factors on growth of tourism. The growth pace of tourism is slowing down because of a number of issues. The face of tourism is also changing as numerous relevant trends are evolving consistently (Cooper, et al., 2008). As tourism has been referred as a commercialised form of hospitality by Cohen (1984), hotel industry is an important dimension of the industry. In this paper, tourism in the United Kingdom has been focussed upon with special attention towards accommodation (hotel industry) subsector. Changing face of tourism industry worldwide Tourism industry has undergone several changes since its inception. In the 19th century, leisure travelling was meant only for the elite but with development of cost effective transport measures such as railway, waterways and airways, travelling and holiday destinations have grown simultaneously. From leisure to economic activities, tourism development has resulted in classification of the same in two categories, namely, old tourism and new tourism (Cecilia, Elisabeta and Magdalena, 2011). The major paradigm shift in tourism practices has primarily lead to the explained classification. The new tourism can be considered as a product of increasing communication and information technology development and changes in tourism demand. It was determined that the new generation tourists are relatively more experienced, flexible, independent, educated, quality conscious and environment friendly than the preceding generation tourists. The satisfaction standard of present-day tourists is tremendously high and increasing demand of customised products has resulted in increase in competition in the industry (Cecilia, Elisabeta and Magdalena, 2011). The profound changes in the tourism sector has been classified as (a) new consumers (b) new production techniques (c) new technologies and (d) prevailing circumstances. Among these four factors, prevailing circumstances can be considered as the macro environmental factor while the others can be ascertained as micro environmental factors (Poon, 1993). The key factors that were determined to have a prominent impact on tourism are economic recession, exchange rate fluctuation, increasing demand of e-tourism, socio-demographic tensions in certain parts and natural and manmade disasters (Cooper, et al., 2008). Tourism is not limited to industrialised countries or the developed economies. Instead, rapid growth of tourism in developing nations can be witnessed as well. Estimates suggest that in 30 years (1970-2000), the tourist arrival in these countries has increased from 20percent to about 42 percent; however, major share of world tourism continues to prevail in nations such as the US, the UK, Germany, France, Japan and Spain. In 2001, the first five countries attracted more than 40% of total tourists worldwide (Royal Geographical Society, n.d.). Moving forward with UK, it was determined that the industry is one of the successful industries in the country post recession. Although the economy is severely affected by recession and economic slowdown, inbound tourism contributed significantly towards national revenue and economic recovery (Tourism Alliance, 2014). The UK tourism industry has strong potential considering its contribution to the national economy and its role in generation of employment even during recession. Yet, the country has its own woes as it was established that the outbreak of foot and mouth disease in 2001, 9/11 terrorism act and gulf war affected the tourism significantly. Additionally, the country is facing stiff competition from Eastern European, Middle Eastern and Asian countries in terms of tourism growth and promotion (Royal Geographical Society, n.d.). Since tourism is significantly responsible for attracting consumers in a country, it is also responsible for creating business for hotel industry. The hotel industry in the UK faced a tough time due to decline in inbound tourism (Hospitalitynet, 2013). In the following sections, macro and micro aspects of tourism and hotel industry is discussed elaborately. Macroeconomic factors affecting tourism demand in the UK From political to environmental features, every macroeconomic factor has significant influence on the tourism sector of the country. The prominent factors are exchange rate fluctuation, recession, political scenarios such as growth of the EU in size, taxation and environmental crises. Each of these factors is discussed briefly in this segment. Exchange rate fluctuation: Consumer’s economic position is an important determinant regarding their holiday destination. The consumer economic condition affects tourism with respect to volatility in exchange rate. Exchange rate volatility generally does not affect domestic tourism but it has significant influence on international tourism. Frequent fluctuation in exchange rate influence buying capabilities of visitors as most consumers of new tourism era are price sensitive (Cooper, et al., 2008). Webber (2001) determined that tourism demand is affected by exchange rate volatility in short run in the US and the UK but in the long run the effect is inelastic in nature. The author also determined that consumers when travelling to countries such as the US and the UK tend to compare prices with respect to the same in Asia and other European countries. Recession: As the recession hit the UK economy, the tourism industry witnessed a decline of 7 percent during the period. Between 2008 and 2009, the Gross Value Added (GVA) output declined by £5 billion. Not only that, the decline was witnessed in the employment sector as well as major number of full-time jobs were downsized between 2008 and 2011 (Office of National Statistics, 2012). The recession affected inbound as well as outbound tourism demand. Consumers were observed to spend their disposable income relatively more cautiously. Domestic tourism spending was also affected during and after recession. The revenue was positive but the net earnings declined and fluctuated significantly (Webber, Buccellato and White, 2010). Growth of EU: Hall, Smith and Marciszewska (2006) highlighted that enlargement of the European Union by means of inclusion of more and more member countries have global consequences on the tourism sector. The enlargement not only affects European countries but also the world in terms of tourism. EU enlargement result in continuous change in various trade policies. The enlargement generally results in growth of tourism in various member countries resulting to possibility of increased competition in the UK. The authors further highlighted that so far EU has not defined tourism as a definite policy area but its other policies will affect the tourism because these are primarily related to resource mobility, environment, trade development and negotiations. Since free mobility of human resource is encouraged in the EU, it is expected to influence leisure tourism positively. Taxation: Taxation and travel related cost in the UK can be considered as one of the deterrents in the tourism demand. Among all the EU countries, UK is one of the only four countries that levies full rate of value added tax on tourism accommodation. It was also determined that the average rate of VAT is 10.7% while that in the UK is comparatively high. Additionally, the UK is the only country that charges VAT on restaurant meals and amusement as well. The air passenger duty in the country is also high and may act as a reason for foreigners to visit the country less. The duty has amplified by 360 percent between 2007 and 2014. Introduction of biometric visa and increased cost of visa has resulted in decline in tourism demand in the UK from visitors of countries such as India, China and Russia (Tourism Alliance, 2014). Environment: Tourism and environment share a relatively complicated relationship where each of the factors has direct as well as indirect impact on the other. Consistent rise in tourism has resulted in significant environmental damage in the form of biodiversity loss, ozone layer depletion and climatic change. Conversely, tourism demand is declining due to natural disasters and severe climatic changes. Flood, volcano, earthquake and outbreak of diseases have significant impact on consumer’s perception. For instance, more that 75 percent hotels in Wales, Scotland and England witnessed decline in business during outbreak of foot and mouth disease in 2001. Unexpected climatic changes also exhibit similar impact (United Nations Environment Programme, 2014). Micro environmental factors of hotel industry in the UK Accommodation is an essential factor with respect to Tourism. It was determined that large number of tourist at least stayed for one night in different cities and countryside in the UK. In domestic tourism, consumers tend to stay for at least 3 nights on average while international tourists stay for at least 7 nights (Tourism Alliance, 2014). There are several factors in the micro environment of hotel industry which are significantly related to the tourism sector. Changing consumer preference, increasing emphasis on ecotourism, quality of service and price sensitiveness significantly affects hotel industry. It was established by a number of authors in their research that consumer preference is increasingly getting influenced by the world economic crisis. Consumers are not only reducing cost regarding hospitality services such as travelling and hotel services but also in products, they purchase. The financial crisis has resulted in increase in product and brand switching. Consumers are satisfying their requirements by means of low priced brands. With respect to accommodation while travelling, consumers are inclining more towards budget hotels instead of luxury and deluxe hotels. Additionally, consumers were observed to be relatively more interested in short trips and avoided staying overnight at hotels and motels (Tourism Alliance, 2014; Gretzel, et al., 2006). The hotel industry is also affected by the food habits of consumers as they are switching from hotel restaurants to local food. Consumers are not limiting themselves to traditional activities that they previously pursued on tours but they are trying new adventures with the help of local communities so that they can save extra costs. Considering the high level of taxation in the UK on amusement, consumers are exploring greater alternative choices (Bojanic, 1996). However, it was determined by Marketline (2014) that the market condition of hotel industry will improve by 2018. The hotel industry comprises services related to hotels, motels and other accommodation services such as food services, telecommunication and entertainment. The hotel industry revenue declined significantly in 2011 but Olympic in 2012 boosted the sector considerably. The hotel growth declined by 0.9% between 2009 and 2011 and average growth of the UK industry was determined to be only 5.2% between 2009 and 2013. The revenue of hotel industry is heavily dependent on leisure segment instead of business segment; as a result, value addition in revenue is only possible when tourists vacation in the UK and stay in hotels in greater number. The UK hotel industry is primarily dominated by large international brands such as Intercontinental, Whitbread, Hilton and Wyndham (Marketline, 2014). From the perspective of geographical segmentation, it was determined that in the Europe, the UK comprises only 9.4 percent of the total hotel industry while countries such as France and Germany are relatively ahead in this regard (Marketline, 2014). Beside price sensitiveness, consumers are increasingly being influenced by telecommunication development. Presently, consumers have the liberty to compare hotels in terms of their services and prices and select the better choice. Advent of internet has made it possible for consumers to communicate directly with other consumers through social networking and have feedback about products and services. Online recommendations were also determined to have an impact on purchasing behaviour of consumers (Chiang and Jang, 2007). Ecotourism is another microeconomic factor that is noticeably influencing the hotel industry and its practices. Modern consumers are relatively more knowledgeable and prefer their acts to be sustainable. Preference towards sustainability is forcing hotels to modify their business activities as more and more consumers prefer buying services of green hotels over others (Cecilia, Elisabeta and Magdalena, 2011). Impact of changing tourism demand on hotel industry The hotel industry in the UK and rest of Europe is maturing and as a result, becoming increasingly competitive. With relative profit fluctuation and whimsical attitude of consumers, a certain degree of uncertainty can be expected to permeate in the sector. Price sensitiveness among consumers is also affecting offerings of hotel, as a result of which most hotels are diversifying their portfolio that include budget as well as luxury hotels. In the premium market as well buyers are highly demanding and price sensitive and it was determined that price can be conveniently linked with quality perception of buyers (Marketline, 2014). Tourists and travellers are ultimate consumer of hotel services and economic slowdown tends to improve bargaining power of consumers. It was also determined that increasing consumer interaction online has contributed towards strengthening of buyer’s purchasing behaviour. Since UK has majority of leisure consumers, therefore during economic slowdown they may resist luxury offerings. Hotel industry to a great extent depends on real estate owners and developers and the recession affected real estate sector most. Consequently, the possible implication can be high rental changes and other service costs. Hence it can be determined that the hotel industry is expected to face pressure from suppliers’ end as well as from buyers’ end (Marketline, 2014). Presently, the hotel industry is facing serious challenges as a result of evolving trends in the tourism industry. The industry may experience difficulty in finding consumers with respect to its offerings due to cost factor. In this regard, small motel with more than average services are enjoying great benefit as they deliver basic services in relatively low cost. The economic downturn has made tourism strictly seasonal and thereby affected hotel business fairly. It was determined that product substitution has become an order among consumers and they are seeking relatively inexpensive choices such as camping facilities and recreational vehicles (Marketline, 2014). The budget hotels are facing stiff competition from multi-brand hotels as well as from motels and other low cost accommodation. Considering the existing situation, it can only be suggested that the competition is going to increase only. Sensing the growing competition, large hotel operators are diversifying their services in entertainment sectors as well such as casino, spa, gym and value added services such as free breakfast, parking facilities and free passes. In this regard, it is noteworthy that considering high exit cost, hoteliers need to innovate more to stay competitive (Marketline, 2014). Recommendations Stiff competition and price consciousness among consumers are two major challenges that hotels in the UK are presently facing. Product diversification and cost leadership can be considered as necessary recommendations which the firms can achieve by means of vertical and horizontal integration. Loyalty rewards and purchase benefits can be considered by hoteliers to promote their hotels and attract greater number of consumers. Product innovation is essential for combating market competition. Hotels can develop services that directly offer consumers travelling opportunities such as site seeing. Modern tourists are aware of environmental sustainability and exhibit preference towards greener products and services. Hence, hotels can renovate their offerings and align the same with green practices (Inkson and Minnaert, 2012; Marketline, 2014). Another area that hotels can focus upon is wider exposure by means of internet and social networking. The concept of e-tourism is relatively new and attractive to consumers as it saves them from the physical hassle. Tourism is often undertaken by individuals for cultural and social experience beyond their own community. If hotels are successful in delivering such experiences, it can be expected to boost their sale. The hotels can enter in business contract with online tourism service providers, who help consumers with low-cost travel packages. Since exposure has become very essential for survivals, strong marketing campaigns by hoteliers and tourism industry of the UK should be undertaken (Kandampully and Suhartanto, 2000). Conclusion Tourism is one of the most vibrant and dynamic business sectors and is continuously growing worldwide. It is probably the only sector that remained barely affected by the recession and economic slowdown. However, sectors that are associated with tourism were considerably affected by recession and its consequences. In this paper, tourism in the UK and accommodation (hotel industry) has been discussed elaborately in the light of changes in macro and micro environmental factors. The macro environmental factors that were evaluated include exchange rate, recession, EU expansion, taxation and environment while the micro environment factors focussed primarily on consumer preference, service quality, technological development and growing competition. Considering the vulnerabilities with respect to the overall environment of tourism and hotel industry, the paper produces certain recommendations which are expected to help the sector resume growth. Reference list Bojanic, D. C., 1996. 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