Unit Two: Business of Tourism

Dear learners! This chapter is concerned on the over view of the global pattern and variation of
particularly international tourism, the physical development of tourism and the pre-requisites for
the growth of tourism.

Learning objectives

After successfully complete this chapter, you are able to

• Explain the development of the tourism sector

• Identify and explain the prerequisites for the development of tourism

• Describe factors that shape the physical development of tourism

2.1 Over view of the global Tourism pattern

The substantial growth of the tourism activity clearly marks tourism as one of the most
remarkable economic and social phenomena. The number of international arrivals demonstrates a
growth from a mere 25 million international arrivals in 1950 to an estimated 806 million in 2005,
corresponding to an average annual growth rate of 6.5%. In 2006 the international tourism
receipts totaled 733 billion US$ per year or 2 billion US$ a day. Tourism represents around 35%
of the world‘s exports of services and over 70% in Least Developed Countries.

As the largest business sector in the world economy, the Travel & Tourism industry is
responsible for over 230 million jobs (8.7 percent of total employment) and over 10% of the
gross domestic product worldwide. According to the World Travel and Tourism Council
(WTTC) (2007), in 2006, Travel & Tourism (consumption, investment, government spending
and exports) is expected to grow by 4.6% and to the total of US$6.5 trillion. If tourism were a
country, it would have the 2nd largest economy, surpassed only by U.S. In over 150 countries
(four out of five), tourism is one of five top export earners. In 60 countries, tourism is the
number one export. According to the latest annual research of World travel and tourism council
(2009), Travel & Tourism employed over 225 million people around the world and generated
9.6% of global GDP in 2008.
Some points about Global Growth of Tourism:

1950: 25 million tourist arrivals

1990‘s: Tourism grew globally at 7% per year.

2004: 760 million tourism arrivals corresponded to a 10% global growth

2005: The number of international tourist arrivals recorded worldwide grew by 5.5% and
exceeded 800 million for the first time ever.

Moreover in 2020, global tourism is forecasted to reach 1.56 billion international arrivals.

Tourism has particular importance for developing Countries:

•It is a principle ―export‖ (foreign exchange earner) for 83% of developing countries, and the
leading export for 1/3 of poorest countries.

•For the world‘s 40 poorest countries, tourism is the second most important source of foreign
exchange, after oil.

•Over last decade, tourism has been ―the only large sector of international trade in services where
poor countries have consistently posted a surplus.‖

•International tourism in developing countries is increasing by 9.5% a year compared to 4.6%

worldwide.

•Tourism "appears to be one of the few economic sectors able to guide a number of developing
countries to higher levels of prosperity and for some to leave behind their least-developed
country status."

2.2 The spatial pattern of the international tourism

International travel and tourism has had a remarkable record of consistent growth, expanding
faster than the world‘s GDP in the last five decades but it is important to appreciate that since the
factors that have promoted the growth of international tourism vary in their effect through time
and across space they produced quite uneven patterns of growth and development.
Table 2:1 the pattern of tourism development by regions Up to 2000-2005 Market share

The pattern 2001 2002 2003 2004 2005 Market Average

of tourism share Growth
development 2005 rate
by regions
200

World 681 680 700 690 763 100 3.6

Europe 384.1 383.8 394 396.6 416.4 54.9 3.0

Asia 114.99 120.7 131.1 119.3 152.5 19.3 7.0

America 128.2 122.1 116.6 113.1 133.1 16.5 1.0

Middle east 25.2 25 29.2 30 38.4 4.8 9.0

Africa 28.2 28.9 29.5 30.8 36.7 4.5 5.5

2005(%)Average Growth rate 2000-2005

Source: Kenya ministry of tourism and wild life statistical analysis of tourism trends central
planning unit, 2006

Historically (and indeed at present), international tourism has been dominated by Western
Europe, both as a receiving and as a generating region. This preeminence reflects a number of
factors including:

 An established tradition in domestic tourism that converts quite readily into

international travel;
 A mature and developed pattern of tourism infrastructure, including transportation
links, extensive provision of tourist accommodation and Organizational
frameworks such as travel companies;
 A wealth of tourist attractions including diverse coastal environments, major mountain
zones as well as sites of historic and cultural heritage;

A sizeable industrial population that is both relatively affluent and mobile and thus an
active market for international travel;

A range of climatic zones that favor both summer and winter tourism.

The extent to which Europe dominates the international tourism market is indicated in the above
table 2:1. Although the share of Europe in international tourism is decreasing from time to time
still the tourism market is dominated by the region. The following figure can also clearly depict
the fact.

The figure to share of 2005 international tourist arrival by region

Source: Republic of Kenya, ministry of tourism and wild life statistical analysis of tourism
trends central planning unit, 2006

2.3 Prerequisites for the development of tourism

The development of tourism in any given location requires that several key elements come
together to produce the right conditions. These may be summarized under the following
headings.

2.3.1 Resources and attractions display

Tourism is a resource industry, dependent for its basic appeal upon nature‘s endowment and
society‘s heritage. The natural appeal of a locality may rest upon one (or more) of its physical
attributes: the climate, landforms, landscapes, flora or fauna; whilst socio-cultural heritage may
draw tourists seeking to enjoy centers of learning or entertainment, to visit places of interest or
historic significance or to view buildings or ruins of buildings. Socio-cultural attractions may
also extend to the perusal of artifacts or works of art; the experience of customs, rituals or
performing arts; enjoyment of foreign cuisine; or festivals and spectacles.
In addition to the natural and social endowments of an area, the industry will typically seek to
develop the resource and attractions base to tourism through the construction of specific, often
artificial, tourist attractions.

2.3.2 Infrastructure

Tourism is far more dependent on infrastructure than are most economic activities. Furthermore,
unlike other activities, the absence of any one infrastructure service can seriously harm the
marketability of the tourism product. Access to the country and specifically to the destination,
are as important to the client as the availability of water and power at the destination. If sewage
and solid waste management systems are not adequate, ultimately the quality and resource base
of the asset will be damaged. Increasingly, telecommunications are vital to the marketing,
promotion and sale of the tourist accommodation and to meet the demands for entertainment or
the business needs of visitors. The specific requirements for tourism include the formulation of
standards and norms for water quality and waste disposal, especially in coastal and other fragile
natural resource areas, the provision of trunk infrastructure and of network infrastructure for site
development, particularly in previously underdeveloped regions or rural communities.

Tourism, by definition, is centered upon travel and on staying away from home, hence the
provision of both transportation and accommodation will be integral elements within
development programs. Transportational developments need to take account of the needs for
external linkages (ports, airports, international rail terminals, etc.) to allow tourists to gain access
to their destinations, as well as provision that allows for circulation within the destination area
(local roads, vehicle hire services, etc.).

Accommodation developments may reflect particular market segments at which the destination
is being targeted (for example, luxury hotels for discerning international travelers), but otherwise
must cater for the diversity of tourism demands by providing not just serviced accommodation in
the form of hotels, but also cheaper or more flexible forms of accommodation: in apartment
blocks, villa developments, time shares or caravan and camping sites. The expectations of quality
that many tourists carry with them also have implications for provision of public utilities; water
supply, sanitation and electricity are essential underpinnings to most forms of modern tourist
development.

? What is the importance of tourism for developing countries?

2.4 Marketing and promotion/advertizing of tourism

Marketing and promotion are often overlooked when countries establish a tourism sector, yet
without it demand may never be generated for the product in sufficient quantity for it to be
viable. Empirical evidence suggests that marketing of a country internationally should be a joint
public-private sector activity. Some experts believe that because the industry is fragmented and
each unit is involved in selling its own perspective, the activity should be led by the public sector
particularly in a new or fledgling destination. The rationale is that only the government can
reflect the country‘s tourism policies and image in the messages to be delivered to tourists. By
controlling marketing a Government can prevent the ―wrong‖ messages being sent externally,
such messages generally relate to cultural, social inclusion and ethical issues.

The public-private sector effort will promote the country as a whole and specific regions or
destinations within the country. Individually, hotels, groups of hotels, or destinations that include
several non-affiliated hotels and tourist service providers, will promote their own
accommodation and services. Smallerhotels have the most difficulty in absorbing advertising
costs and can often be assisted by national and regional hotel associations with joint promotion
and marketing, combined with a joint computerized reservation system.

The promotion of tourism in foreign markets targets the general public through advertising
campaigns and travel agents and tour operators by a variety of means. Many countries hire public
relations firms, specialized in tourism marketing, to handle their advertising campaigns in major
destination markets. Most companies develop a special logo, music and or message for their
countries that can become instantly recognizable. An advertising campaign targets a mix of
media for the general public: television, radio where it is

important, the Internet, where many countries now have their own websites, the travel sections in
newspapers, travel magazines, travel books and even documentaries, and brochures.
Tour, airline and travel agency operators also consume these same mixed media messages as the
general public, but they are specifically targeted also. The travel industry trade press is a prime
target for country promotion. The tour operators and travel agencies are targeted through paid
familiarization trips to the destination, bonus trips for successful marketing of the country, paid
conferences in selected regions, and ultimately incentive commission structures. Simultaneously
with the marketing and promotion by the country and individual resorts or hotels within that
country, tour operators are also advertising their package holidays through the same print and
visual media, directly to tourists and through travel agents and increasingly the Internet.

2.5 Investment and labor

For tourism area to develop there is a need for sources of capital investment, labor and
appropriate structures for marketing and promoting the destination to be established. Whilst
some of the basic attractions to tourists (especially the natural phenomena) may in a sense be
‗free‘, infrastructural development and the formation of artificial attractions require investment,
and the operation of the industry at the destination requires pools of labor with appropriate
training and experience. In most developmental contexts, such needs are met by combinations of
private and public investment, with governments typically playing a greater role in the promoting
of destinations, in infrastructural improvements involving transport and public utilities, and, in
some cases in employment training. In contrast, private finance is more prominent in the
development of tourist accommodation and attractions. However, the balance between public
and private finance (and between indigenous and foreign investment) will vary considerably
from place to place, depending upon local economic and political conditions.

2.6 Contrasting forms of tourism development

Although the prerequisites that shape tourism development may be defined without too much
difficulty, different processes of development can and do occur, and these will be associated with
contrasting spatial patterns and forms. The spatial forms that result from this interplay are
conceived as falling broadly into four categories: enclaves, resorts, zones and regions. We can
exemplify how these different elements interact to produce varying forms of tourism
development by examining the three most common development ‗outcomes‘: tourist enclaves,
resorts and zones.
Tourist enclaves: Enclaves represent the most highly concentrated form of tourism development
and reflect most clearly the influence of:

• The constraints posed by limitations in infrastructure within a locality;

• Investment patterns in which there are relatively few entrepreneurs developing provision for
tourists and where funding is likely to be external in origin;

• A market which is focused upon a particular segment—usually elite groups—and where the
tourist activity is often concentrated upon a particular resource—usually beach resorts.

Enclave developments, in their purest form, are entirely enclosed and self-contained areas, not
just as physical entities, but as social and economic entities too. They will display several
features:

Physical separation (and isolation) from existing communities and developments;

A minimizing of economic and other structural linkages between the enclave and the resident
community;

A dependence upon foreign tourists which is reflected in pricing structures that reinforce the
exclusivity of the enclave;

Pronounced lifestyle contrasts between the enclave and its surroundings.

Enclave developments are often a reflection of immaturity (or a pioneering stage) within a local
tourism industry that has yet to evolve to the point where it can support a wider base of
provision. However, in modern tourism, enclaves are most commonly found in developing
nations, although this is not exclusively the case. The recent development in temperate parts of
Europe (e.g. Britain, Belgium and the Netherlands) of high-quality indoor holiday villages with
integral and comprehensive facilities set in artificially regulated ‗exotic‘ environments marks a
reworking of the enclave idea that is very much the product of a developed rather than a
developing economy.

For tourism in emerging nations, enclave developments offer several distinct advantages.
First, the concentration of investment into small numbers of contained projects represents a
pragmatic response to the problems of how to begin to provide the high-quality facilities that
modern travelers expect and how to form and reinforce a distinct and marketable product.

Second, the tendency for enclaves to be partially or often entirely financed and owned by
offshore companies is seen as a means of attracting inward investment to the developing
economy and creating service employment for local people. Third, and less obvious, is the fact
that enclaves may be favored by local governments that are anxious to contain or limit
potentially adverse social, cultural or political effects emanating from contact between visitors
and host populations.

However, set against these potential benefits are several serious weaknesses, including increased
economic dependence on foreign corporate institutions and investors; high levels of ‗leakage‘
from the economy—especially in the form of profit paid to foreign owners or investors; limited
levels of dependence upon local supplies of goods and services; and, sometimes, a seasonality in
the employment of labor.

? State the prerequisites of tourism development?

Resorts: The most familiar form of tourism development is the resort. Resorts may occur in a
number of contexts. The seaside resort is the most commonplace, but resorts may also develop
around inland health spas (E.g. Harrogate, England), in mountain regions (e.g. France) and even
in deserts (e.g. Palm Springs, California, and Las Vegas, development of international-standard
accommodation with integral bars, restaurants and shops retailing drinks, tobacco and souvenirs.

Resort developments are perhaps most strongly influenced by the nature of the resources that
form the basis of their attraction, and therefore a concentrated form of development tends to
occur, centered around key resources; but at a detailed level, resorts will also illustrate the effect
of accessibility and availability of land, levels of planning and control, sources of investment and
varying levels of integration.

Tourism zones: In mature tourism destinations, the scale and extent of development will often
proceed to the point at which extended zones of tourism emerge. These typically will be formed
by combinations of resorts, enclaves and other types of development (for example, villa
complexes, holiday villages, caravan sites, attractions, golf courses, etc.) to provide a landscape
that is infused with tourism. In contrast to the other forms discussed above, however, the
emphasis in zonal development is upon dispersal rather than concentration, although there may
still be concentrations of activity within the zone.

The precise form that such zones may take is variable, reflecting key factors of topography,
access, availability of land for development, and planning and investment conditions. However,
one of the most characteristic patterns of zonal development is a linear growth along accessible
and attractive coastlines. In some instances the topography encourages such growth by creating
only narrow coastal strips that are suitable for development, but the attraction of the seashore
also tends to encourage linear forms, irrespective of physical constraints. This tendency may then
be further reinforced by, for example, construction of coastal roads that link the different
elements together. In conditions where local planning control is poor, development will tend to
be spontaneous and produce anarchic patterns in which negative impacts will often be
pronounced.

2.7 Factors shaping the physical development of tourism

It is suggested that such contrasting spatial forms of tourism development (the ‗development
outcomes‘) may be viewed as a product of interplay between ‗factors of influence‘. Five primary
factors are proposed: physical constraints; the nature of tourist resources and attractions;
planning and investment conditions; levels of integration; the nature of the tourism market. Each
of the primary factors is themselves made up of more specific influences that may be briefly
elaborated.

1. Physical constraints: there are sets of physical constraints that will have a direct bearing upon
forms of development. Topography, for example, can influence the availability of suitable sites
for construction, levels of access and the ease with which key utilities (water, power, sewage
disposal, etc.) may be installed or extended from existing settlements and their infrastructure.
‗Difficult‘ environments include rugged coastlines or mountain zones, both of which tend to
fragment and disperse development in a way that is generally untrue of (say) a flat, open
coastline which enjoys ease of access.
2. Nature of tourist resources and attractions:-development patterns will reflect characteristics of
the resources and attractions around which tourism is based, and affect especially the extent to
which tourism becomes dispersed or concentrated. In particular unique or place-specific
attractions, whether natural or non-natural, tend to focus development around the site(s) in
question, whereas more ubiquitous or spatially extensive resources (for example, an accessible
coastline or good-quality rural landscapes) may have a dispersing effect. Thus, rural tourism—in
which sightseeing is an important pastime—is often characterized by a diffuse pattern of
development at a multiplicity of relatively small-scale sites, with activity frequently being
absorbed within existing facilities through farm tourism or second homes (where these are
conversions of existing properties).

[Link] and investment conditions:- Although, historically, many forms of tourism

development were spontaneous and only loosely controlled, the value of tourism as a tool for
regional and national development has tended to mean that the modern industry is far more
closely regulated. Local planning and investment conditions will therefore be a third primary
influence upon forms of development, and, as it is also argued, important factors include political
attitudes towards tourism and the levels of political control (including the extent to which
effective land planning procedures are in place); the extent to which investment is local or
external to the region; and the levels of corporate interest in tourism and the associated patterns
of ownership.

4. Levels of integration:-Planning and investment conditions are closely allied with a fourth key
factor, the level and nature of integration. Discussions of ‗integration‘ of tourism development
tend to use the term in two senses. First, concerns have focused upon the extent to which tourism
development is integrated in a spatial sense with existing, non-tourist forms of development—in
other words, is tourism inter-mixed with other functions and land uses, or is it spatially
segregated? Secondly, integration may refer to whether or not a development is integrated in a
structural sense. A structurally integrated development will bring together all the key elements—
accommodation, transportation, retailing, entertainment and utilities—within a single,
comprehensive development. This form contrasts with what are sometimes termed ‗catalytic‘
patterns of development in which a small number of lead projects, which are often externally
financed and controlled, stimulate subsequent rounds of indigenous development as local
entrepreneurs are drawn into an expanding tourism industry.

5. The nature of the tourism market: Finally, it is suggested that patterns of development will be
influenced by the nature of the tourism market. They will vary according to whether
development is targeted at a domestic or an international clientele, but more significant
distinctions will normally exist between elite and mass forms of tourism, whilst levels of cultural
similarity/dissimilarity between host and visitor may also be reflected in the manner in which
development is organized.

Mention factors of physical tourism development?

2.8 Factors affecting the futurity of the tourism industry

According to the WTO, the futurity of tourism industry is determined by two factors: the
exogenous factors and market forces of demand

1. Exogenous Factors includes: Demographic and Social Trends; Political Developments; and
Transport Developments

2. Market forces of Demand includes: The ‗New‘ Tourist; Technology, Globalization and
Concentration; and Human Resource and Training

2.8.1 Exogenous Factors

Demographic and Social Trends

They mold tourism demand in a certain way. Demographic Trend like aging population in the
major tourist generating countries is liable to play a significant role in influencing tourism
demand. Demographics are thoroughly mixed up with the social trends like late marriages,
couples with children in the later part of the life cycle and/or increasing number of single and
childless couples. The growth of mass migration from developing countries to advanced nations
has implication on tourism Convergence of lifestyle worldwide.

Political Developments
Several political developments like the dominance of market economy, opening of the borders
symbolized by the bulldozing of the Berlin Wall, easing of travel restrictions, harmonization of
taxes, deregulation of transport, measures ensuring free movement of goods, persons and
services all have their own impact on international tourism

Transport Developments

Since tourism is decisively subject to transport technology, tourism respond immediately for any
type of change in the transport sectors. Energy cost might reduce the international tourism to
regional and short journey tourism that can use surface transport. Global warming – as caused by
transportation can have impact on fauna and flora of destination, on coastal areas – which are
critical tourism resources

2.8.2 Market forces of Demand

The New Tourists

Who can be characterized as worldly –wise, sophisticated and demanding – are emerging as a
result of seasoning and maturation of the tourism market. Emerged from experiences – being
habitual travelers, being linguistically and technologically skilled, and being able to cope with
multi-cultural, hard and difficult environment- results the development of new multi-faceted
demand for tourism by these tourists who now expect not only new, innovative experiences but
also worthwhile activities to occupy their amusement besides satisfying cultural scholastic and
sporting interest. This emergence of new demand for tourism shapes the industry in a certain
way.

Technology, Globalization and Concentration

Technology development results horizontal integration among intermediaries and vertical

integration. Global Scale tourism business – operators can expand their activities to more
countries either by establishing their own branches or by forging links or acquiring local firms.
The monopolization of tourism industry by multinational tour operators makes specific areas to
be tourism market while it marginalizes the other parts of the world in a number of ways.
Tourism serves as an agent of globalization and at the same time the phenomenon of
globalization can affect the tourism business since which results uniformity in different aspects
of human way of life.

Human Resource and Training

Tourism is high-touch, high –tech, high involvement industry where it is the people who make
the difference. Hence, the quality of human resource in tourism that acquiesces enterprises to
build-up competitive advantage and gives forth added value with their services. The success and
sustainability of the tourism business depend on the skill, qualities and knowledge that the
managers and workers have. A high quality tourism workforce can be brought in just by high
standard s of tourism education and training involvement. Since tourism education encourages
analytical thinking and understanding of conceptual issues, the training needs to give emphasis to
that.

List the most important factors of the futurity of the tourism industry?

2.8.3 The Role of Government and Other Stakeholders in Tourism Development

 Five major stakeholders in tourism development

 NGO
 Tourists
 Small& medium enterprises
 Tour operator and advertising agencies
 Government
Discuss the role of government and other stakeholder directly or indirectly in tourism
development?