03 Tourism demand trends

Tourism concepts: 

Tourism concepts Dr. Nimit Chowdhary Professor Indian Institute of Tourism and Travel Management Tourism demand trends

Changing face of travel consumer: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 2 Changing face of travel consumer More affluent , measured in disposable income per capita, ownership of property and household facilities. Better educated and more interested in continuing education. More healthy and interested in more active pursuits. Older , with a particular shift in the number and attitudes of the more active over-fifties.

Changing face of travel consumer: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 3 Changing face of travel consumer More leisured in terms of hours of work and holiday entitlement, having regard also to early retirement. More traveled , for work and business as well as for holidays and leisure, increasing numbers with frequent international travel experience. More exposed to the media and information generally

Changing face of travel consumer: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 4 Changing face of travel consumer More computer literate with ownership of personal computers (PCs) and access to internet growing exponentially. More heterogeneous and individualistic in their demands and expectations. More culturally diverse in terms of ethnic origin as well as their range of lifestyle choices.

Determinants of tourism demand: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 5 Determinants of tourism demand Economic factors and comparative prices Demographic, including education Geographic Socio-cultural attitudes to tourism Mobility Government/ regulatory Media communications Information and communication technology

Economic factors: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 6 Economic factors 30 major countries of origin accounted for over 90% of world traveling spending Top 10 alone account for 2/3 rd of spending and nights. These are countries with highest per capita income. Developed and growing economies also sustain business travel and trips (more than 50%)

Economic factors: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 7 Economic factors Relationship between changes in real disposable incomes and volume of trips and expenditure away from home. Increase in real incomes since 1990s has led to increase in expenditure on travel and tourism (income elasticity) . China and India are fast emerging as tourism markets and suppliers owing to rapid economic growth

Economic factors: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 8 Economic factors Comparative prices are a major determinant of volume of demand. Price is cost to customers in terms of money, time and effort. Spending will depend upon comparative price and disposable income of tourist. East Asia, China and BRIC are therefore increasingly attracting more tourists.

Demographic factors: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 9 Demographic factors Developed world- one- and two- person household, late marriages, with fewer children Divorce, single parent, Small households means more households Affluent old age people (26% Europeans are over 50 years of age) Developing world- greater women involvement, two-income households, more disposable incomes

Demographic factors: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 10 Demographic factors Rise in life expectancy Greater proportion of older population New demand for leisure and travel Health care and nursing Quality of life Structural shifts in communities Development of new towns and cities Education- higher the education, more the amount of travel

Geographic factors: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 11 Geographic factors Climatic and scenic attractions Willingness and affordability to demand destination of choice. Urban areas generate more tourism compared to rural areas- for multiple reasons Geographical pockets of heritage, culture and arts offer tourism products Eco-tourism, and ecological constructs as tourism products

Social factors: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 12 Social factors Increased no. of women in work force Working women and resulting two-income households Quality of life International mobility leads to more sophisticated consumer tastes Greater complexity of life Increased competition in life

Changing attitudes: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 13 Changing attitudes Attitudes towards tourism are a subset of wider view on the desired quality of life and how to achieve it. Examples of attitudes in America and Europe Therapeutic value in lying on the beech and sun holidays are ‘rights’ and necessities for relieving stress rather than luxuries

Changing attitudes: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 14 Changing attitudes Examples of attitudes in America and Europe Longer holiday entitlement in twentieth century has lead to consumers taking several holidays in a year Scandinavia & N. Europe- people having a second home That holiday products should be environmentally sustainable

Personal mobility factor: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 15 Personal mobility factor Superior roads and infrastructure More people having cars and four wheelers Most hotels, nearly all self-catering establishments, restaurants, and great majority of visitor attractions and entertainment in America and Europe are dependent on travelers by car Congestion has increased and governments are favoring public transport

Government/ regulatory framework: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 16 Government/ regulatory framework All governments impose laws and regulations to safeguard health and safety of their populations and to control the use of land and buildings; most impose penalties for non-compliance

Government/ regulatory framework: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 17 Government/ regulatory framework Governments intervene: To ensure fair competition between supplier- check monopolistic tendencies To ensure that customers have choices and rights against suppliers To influence such market patterns as governments control- timing of holiday To ensure that proposed projects do not damage the environment

Government/ regulatory framework: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 18 Government/ regulatory framework Politico-legal changes: Governments creating infrastructure for services (led by EU) Internationalization Governments consciously (rather aggressively) promoting tourism

Government/ regulatory framework: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 19 Government/ regulatory framework Transport regulation Air transport What routes can be flown Which Airline can fly, number of flights, slots available at airports, the capacity of seats on routes, prices that can be charged Bi-lateral agreements between countries Asian highway project Train and rail link with Pakistan Rights to sell ‘duty free’ items

Government/ regulatory framework: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 20 Government/ regulatory framework Tour operations and hotels Regulatory framework Licensing of tour operators and hotels Licensing for bar Example of Bhutan Taxation Control and grading of hotels

Government/ regulatory framework: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 21 Government/ regulatory framework Regulation for the environment CRS

Information and communication technology: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 22 Information and communication technology Increasing promotion and distribution of products on www. Multimedia information provision in customers’ homes enhancing promotional possibilities Switch to direct marketing, reducing the traditional role of travel intermediaries Customer database development and its role in marketing information systems

Information and communication technology: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 23 Information and communication technology Power to develop customized products for consumers Relationship marketing with repeat buyers and other targeted customers/ stakeholders Creation of virtual enterprises- “ Make my trip ”, networks of micro-businesses Major opportunities for access to international markets at low costs

Travel propensity: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 24 Travel propensity Low propensity characteristics High propensity characteristics Low income per household High income per household Single parent household Two parents (employed) household Rural-community dweller Large-city dweller Educated to minimum age Degree or other higher education level

Travel propensity: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 25 Travel propensity Low propensity characteristics High propensity characteristics Older people (80+) Young people and ‘empty nesters’ No access to private transport Two or more cars in the household Three or less weeks’ paid holiday Six or more weeks’ paid holiday No access to internet Access at work and at home

Trendz… Tourism control intelligence: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 26 Trendz… Tourism control intelligence The cruise industry will experience explosive growth. An older, better-educated population in Europe and North America will increasingly seek ecotourism and cultural travel products. "Slow cities" and "slow food" trends will expand from Italy to much of Europe. London, New York, Sydney and Dubai will be the leading tourism poles through the end of the decade.

Trendz…Tourism control intelligence: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 27 Trendz… Tourism control intelligence Non-residents will pay significantly higher entry fees to tourist attractions than those paid by locals (Venice, Petra, Bath, etc.). Tourism Satellite Accounting will be adopted by several developing countries but ignored by the U.S., China, Japan, Russia and most Western European countries. Prayer rooms and compasses will be installed on most passenger aircraft serving the Islamic world.

Trendz…Tourism control intelligence: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 28 Trendz… Tourism control intelligence Antarctica will become an ecotourism tourism destination complete with hotels, restaurants and full-service tours. Shopping, from mega-malls to folk craft centers, will increasingly become a critical feature for tourism destinations. Rides on private spacecraft will become a recreational outing for the wealthy. Mega-resorts (Las Vegas, Orlando, Sun City, etc.) will do what no one thought possible: get bigger.

Trendz… Tourism control intelligence: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 29 Trendz… Tourism control intelligence Cruise ships will sell condominiums, becoming ocean-going resorts. In spite of organized international efforts to fight them, sex and drug focused tourism will flourish. Airlines, travel agents and tour operators will ally themselves with financial institutions to offer consumer travel loans. Western tourists will shun countries with immense tourism potential but "rogue" leaders (Zimbabwe, Libya, Iran, North Korea, etc.).

Trendz… Tourism control intelligence: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 30 Trendz… Tourism control intelligence MGM Mirage will beat out rivals Hilton, Harrah`s and Bally`s to become the undisputed leader of the casino industry. National economies in Cuba, Egypt, Spain and Thailand will become dangerously dependent on tourism. `Rave` tourists will travel further abroad in search of the perfect party (BringItOn! Travel, Like Hiptrips, Experienceibiza, etc.).

Trendz…Tourism control intelligence: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 31 Trendz… Tourism control intelligence Enormous infrastructure projects will significantly expand automobile accessible tourism options (Channel Tunnel car lane, Bahrain-Qatar causeway, etc.). China will be the first country to receive 100 million international arrivals in a 12-month period, sometime around 2018 - France will follow within 2-3 years.

Trendz… Tourism control intelligence Product and service trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 32 Trendz… Tourism control intelligence Product and service trends Hotel rooms, increasingly equipped as offices with full-size desks, computers and advanced communications technologies, will minimize the need for business centers. Expansion of Europe`s high-speed train network will eliminate short haul flights. Hotel meeting and dining areas will be designed less formally in an attempt to attract the casual business traveler. Small super-luxury boutique inns will take market share from Four Seasons, Ritz Carlton and Fairmont.

Trendz… Tourism control intelligence Product and service trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 33 Trendz… Tourism control intelligence Product and service trends Hub airports will install capsule-cocoon hotels in terminal facilities. Hotel and restaurant facilities will be designed for an aging population with lower rise steps, more handrails and wider doors. Travel guidebooks will become highly specialized and more frequently consulted - primarily on the web. The distinction between business and leisure hotels will erode as business clients seek fitness and entertainment activities and vacation guests demand advanced telecommunications IT.

Trendz… Tourism control intelligence Product and service trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 34 Trendz… Tourism control intelligence Product and service trends "100% Satisfaction Guaranteed" will replace "Let the Buyer Beware". Growth in demand for home food delivery will outpace all other food service segments. An aging population and growing infatuation with healthful living will bring a wave of European holistic spas and `health-tels` to North America and Asia. A new wave of budget conference & exhibition hotels will be built to meet the convention needs of cost conscious companies.

Trendz… Tourism control intelligence Product and service trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 35 Trendz… Tourism control intelligence Product and service trends European and Japanese new-build hotels will be obliged to design larger guest rooms closer to North American standards. Restaurant groups will operate F&B outlets wherever people gather (Laundromat bars, espresso counters at service stations, etc.). Center-city urban resorts will challenge sun, sand & sea vacation villages in the leisure market.

Trendz… Tourism control intelligence Product and service trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 36 Trendz… Tourism control intelligence Product and service trends Credit card check-in/check-out, F&B vending machines, self-cleaning bathrooms and self-serve laundries will eliminate most human contact in budget hotels. Luxury resorts that once shunned children will welcome them with a expanded array of activities and tailored dining options.

Trendz… Tourism control intelligence Investment and finance trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 37 Trendz… Tourism control intelligence Investment and finance trends Hotel real estate assets will be increasingly concentrated in the portfolios of fewer investors, particularly private equity funds. Intense competition for hotel operating contracts will push management fees as low as 1% of gross, 5% of IBFC and $4 per reservation. Airlines will continue to rack up significant losses as they struggle to deal with high fuel costs, new security requirements, an onslaught of no-frills carriers and brutal competition from `open skies` agreements.

Trendz… Tourism control intelligence Investment and finance trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 38 Trendz… Tourism control intelligence Investment and finance trends Following the big American sell off of the 1980s and 1990s, hotel companies will be repatriated to the U.S. (Westin, Ramada, Renaissance, etc.). Airline alliances of the 20th century will evolve into acquisitions as weaker players struggle to survive (Air France-KLM, American-TWA, etc.). By the end of the decade, a score of management companies will control the world inventory of branded hotel rooms.

Trendz… Tourism control intelligence Investment and finance trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 39 Trendz… Tourism control intelligence Investment and finance trends Hotel feasibility studies will become an unprofitable commodity for hospitality consulting firms. Hotel operating companies will sell their remaining equity in real estate to free up capital for expansion of management contracts. Per room hotel acquisitions in Europe will reach stratospheric new records (i.e. Savoy Group).

Trendz… Tourism control intelligence Investment and finance trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 40 Trendz… Tourism control intelligence Investment and finance trends Franchising will experience explosive growth as hotel companies strategically reposition to get out of the hotel business and into the business of hotels (i.e. Radisson, Choice, Cendant, Holiday Inn, etc.). Fewer new-build hotels in Europe and North America, more existing property renovations.

Trendz… Tourism control intelligence Human resources trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 41 Trendz… Tourism control intelligence Human resources trends Critical shortages of skilled staff will encourage hospitality corporations to develop or outsource proprietary training centers. The introduction of new technologies in the upscale tourism industry will not replace the human element in service delivery - to the contrary, it will gain importance. Unionized hotel and restaurant workforces will trade scheduling and task flexibility for job security and quality-of-life benefits.

Trendz… Tourism control intelligence Human resources trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 42 Trendz… Tourism control intelligence Human resources trends Tourism and hotel management schools will move out of the classroom and out of the library, onto the web and into the field. Powerful unions, a shorter workweek and reluctance to taper social benefits will maintain Europe's standing as the world's most expensive tourism destination. Middle Eastern countries enforcing employment quotas for nationals will experience reduced productivity and higher labor costs. Airline employees will accept significant wage and benefit cuts to prevent their employers from going bankrupt.

Trendz… Tourism control intelligence Marketing trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 43 Trendz… Tourism control intelligence Marketing trends The Internet will become the dominant distribution channel for all travel and tourism products eliminating most intermediaries. Understanding customers as people - their likes, dislikes, habits, interests and hobbies - will become critical to establishing competitive advantage in hospitality marketing. Customer retention will replace customer acquisition as travel agencies` strategic objective. Homogenization of airline services will render them commodities while lodging products will continue to focus on differentiation.

Trendz… Tourism control intelligence Marketing trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 44 Trendz… Tourism control intelligence Marketing trends Data warehousing and data mining will provide one-to-one and relationship-marketing opportunities never imagined. Print media advertising will move onto the Web. Increasingly value-conscious customers will demand more and better product information. Consumers will increasingly expect to negotiate hotel and airline rates. Cross-sector strategic alliances between food service, lodging, travel and entertainment companies will prove to be effective marketing formats.

Trendz… Tourism control intelligence Marketing trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 45 Trendz… Tourism control intelligence Marketing trends Better understanding of psychographic consumer behavior will lead to more precise identification of customer segments and sub-segments. Hotel revenue management systems will become more sophisticated and be relocated from the reservations department to sales & marketing. Revenue management tactics will be applied to pricing in restaurants, amusement parks, golf courses, tour buses, cinemas, convention centers and sports stadiums.

Trendz… Tourism control intelligence Marketing trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 46 Trendz… Tourism control intelligence Marketing trends As marketers increasingly distinguish between loyalty and satisfaction, frequent use programs will become more elaborate. Hotel companies` PMS standardization will result in the transfer of database and data warehousing responsibilities to CRS for greater operational and marketing efficiency. Market share and product profitability will be replaced by customer share and customer profitability as measures of marketing effectiveness in the hotel industry.

Trendz… Tourism control intelligence Safety and security trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 47 Trendz… Tourism control intelligence Safety and security trends Consumers will systematically consult travel health sites before checking ticket or room availability. Security concerns in the Holy Land encourage religious tourists to make pilgrimages to sites in Ethiopia, Cuba, Greece, Italy and Morocco. Crime and terrorism will render some traditional tourist destinations unsellable. Customer credit cards will replace coded key cards in most hotels.

Trendz… Tourism control intelligence Safety and security trends: 

November 9, 2011 (C) Prof. Nimit Chowdhary @IITTM 48 Trendz… Tourism control intelligence Safety and security trends Guest room safes will be enlarged to accommodate standard laptop computers. International hotel companies will refuse management contracts and franchises for hotels without in-room sprinkler systems. Terrorism fears will keep Israel, Indonesia, Iraq and India off the mainstream tourist circuit for the foreseeable future. Advanced encryption technology will make on-line payment genuinely secure. To improve energy and water conservation, hotels will install usage meters and levy charges for consumption.