There are various determinants of demand in the travel industry, including prices, consumer confidence, and exchange rates.
Annually, the travel industry generates trillions of euros, converting into one of the largest contributors to the global economy. According to a recent study conducted by the World Travel and Tourism Council, the industry accounts for 10.4% of the world GDP and creates 313 million jobs – which is approximately 9.9% of the global employment. However, travel industry is extremely turbulent, with numerous factors affecting consumer behavior. For instance, politics, fashion, and expectations can significantly influence customers’ buying habits. As a result, prices will fluctuate, demand will oscillate, and economies shift. Here, we explore how demand influences growth in travel and tourism.
Broadly speaking, demand in a desire of consumers and clients for a particular commodity or service. Therefore, the travel sector defines demand as the number of consumers who travel and use tourism facilities in a given timescale. Furthermore, travel is defined as any destination away from a customer’s place of residence or employment. Therefore, tourism industry encompasses both domestic and international tourism, as well as leisure and business travel. As tourism is such a changeable sector, several factors affect consumer behavior across these segments.
Influencing the dynamics of demand in tourism
The determinants of demand in the travel industry are dynamic and ever-changing. To illustrate, demand is affected by disposable income, costs, competition, distribution of wealth, supply competition, advertising, vacation entitlements, exchange rates, government regulations, and tax policy. It is apparent that a multitude of factors influence consumer behavior, many of which are outside of the industry’s control. For example, a local tourist authority often can do very little to influence the cost of airlines taxes. However, companies and local authorities are not completely powerless. Hence, local players can lobby for more direct flights from key origins.
Furthermore, authorities should seek the ways to promote ease of transit. The European Union proves the success of such policies, where passport-free travel, efficient immigration systems, and hassle-free customs have encouraged international tourism within the bloc. In addition, EU membership signals safety, modernity, and accountability to potential visitors. This is illustrated particularly well by the Eastern European nations, whose tourism industries have boomed since they were granted membership.
Why time is money in the travel industry
In addition to accessibility, vacation allowances affect how consumers choose to travel. For instance, consumers with more free time are likely to travel to exotic destinations for longer periods. Equally, those with smaller vacation allowances are likely to choose destinations closer to home for a shorter space of time. Furthermore, season is one of the major determinants of demand. Generally, climate, holidays, and school vacations will significantly affect consumer behavior. Depending on other variables, consumers are generally willing to pay a higher price for vacation packages and products during these periods.
Negotiating the determinants of demand in travel
In summary, the determinants of demand in travel are among the most complex of any industry. In the face of the significant and unalterable effects of seasonality, geopolitics, and global economics, suppliers encounter particularly challenging obstacles. Although it is clear that marketing and lobbying can shift consumers behavior, these key challenges continue to present hurdles. In response, the industry needs to ensure its operations and marketing efforts are agile and customer-centric.