Tourism Management: Organization, Economics, Planning & Impacts

Posted on Mar 27, 2025 in Business Administration and Innovation Management

National/Regional Organization for Tourism Development

National Tourism Organizations (NTOs)

• Forms and Types
• Mission
• Organizational Structures – Examples: UK, China, Canada

Developed/Developing Country Considerations

• Active Role
• Passive Role
• Other Agencies’ Role in Tourism Development—US Example

International and Development Agencies

• International Development Agencies: World Bank, Regional Development Banks, UNDP, OAS, NGOs
• National Development Agencies: USAID

Defining a Region

• Socio-cultural Features
• Political Boundaries
• Economic Characteristics
• Physical Features

Economic Impact Basics

• GNP(Y) = C + I + G + (X – M)
• Basic vs. Non-Basic Industries
• Direct Economic Impact
• Indirect Economic Impact
• Total Economic Impact

Regional Economics

Multipliers

• Sales vs. Income vs. Employment

Methods to Increase Multiplier Effect

• Increase the size of the Region
• Increase linkages between businesses in the Region
• Emphasize local products
• Use local people as employees

Tourist Types Affecting Economic Impact

• Type of activity
• Length of stay
• Purpose of trip

Extent of Impact is Situational

• Can cause inflation
• Can lead to economic growth without inflation

Economic Impacts of Tourism

How to Define Tourism within the National Economy?

Often described as one of the world’s largest industries. It employs millions of people, has a turnover in billions of dollars, and encourages millions of people to travel.

What is Tourism?

It’s an economic activity aiming to gain economic effects, determining its economic character within the national economy. Activities produce certain types of products or deliver specific services. Research on tourism supply has often focused on individual sectors rather than the structure of the sector as a whole. Tourism is a highly sophisticated integral system within a national economy, consisting of mutually integrated, heterogeneous, and complementary fragments of different economic branches and activities that together form a logical and functional equilibrium.

Why Understand How the System Functions?

To manage tourism effectively. The tourism product is not single; it’s a diverse range of interacting products and services. Although the ‘sector’ is fragmented, collaboration at the destination level across various enterprises is necessary for product delivery. Tourism is also fragmented with many provider types and no single representative voice. It’s highly diverse (MNCs vs. SMEs; IT to service provision; accommodation to air transport; public and private). Investment can be risky due to unstable demand, and the sector can be slow to accept change, requiring constant innovation and adaptation.

Dependence Upon Tourism

• International tourism activity (volume statistics): Easier to measure than domestic tourism activity (due to customs/immigration procedures).
• Expenditure statistics: Two major problems exist when making international comparisons of tourism expenditure and receipts:
  1. Data are generally expressed in current prices (ignoring inflation effects).
  2. Data are often standardized in US dollars; movements in the dollar exchange rate appear as changes in the local value of tourist receipts and expenditure.
• Economic dependence: Measured as tourism receipts as a percentage of total export earnings. Problems in international comparisons include data in current prices, standardization in US$, inflation not accounted for, and exchange rate movements. This relates to the trade deficit.

Tourism as an Invisible Export

An invisible export is an “export on the spot” from the host country’s perspective. Positive aspects: International tourists travel to destinations, pay for products and services on the spot (often in cash). Selling prices of utility goods can be up to four times higher than prices for ‘real exports’.

The Economic Consequences of Tourism

Tourism contributes economically to enterprises, destinations, communities, regions, and countries. Economic effects are generated through tourist expenditure. Money and jobs circulate around the destination economy and ‘multiply’ to create further income and jobs (multiplier effect).

Tourism Satellite Accounts (TSA)

TSA must be built around an input-output model based on national accounts data. It’s one approach to determining tourism’s economic significance. It’s a set of accounts approved and adopted by the UNWTO used to determine the size or significance of tourism within an economy. TSAs perform a different role from economic impact models that estimate net economic benefits. The input-output model uses a demand-oriented approach.

Generation of Economic Impacts by Tourist Spending

Tourism expenditure acts as an injection of demand into the host community. This expenditure ‘multiplies’ as it circulates, creating the multiplier effect. The multiplier is a numerical coefficient indicating how much destination income will increase due to an injection of tourist spending.

• International tourism expenditure: Non-nationals spend income earned outside the national economy.
• Domestic tourism expenditure: Involves spending within the national economy.

A full assessment of economic impacts must also consider:

• Leakages of expenditure out of the local economy
• Indirect and induced effects
• Displacement and opportunity costs

Tourist expenditure has a “cascading” effect through the host economy.

The Measurement of Economic Impact

1. Direct Effects: The value of tourist expenditure minus the value of imports needed to supply those front-line goods and services.
2. Indirect Effects: Generation of economic activity from subsequent rounds of expenditure by businesses supplying the front-line firms.
3. Induced Effects: During direct and indirect rounds, income (wages, salaries, profit, rent, interest) is generated for local residents. This additional income is partly re-spent locally, generating further economic activity.

Only when all three levels are estimated is the full positive economic impact assessed.

The Multiplier Concept

Based on the recognition that sales from one firm require purchases from others within the local economy. Multiplier models determine the economic impact of changes in tourist spending on income, employment, government revenue, and foreign exchange. Firms depend on other firms. Any change in tourist expenditure changes the economy’s production, household income, employment, foreign exchange flows, etc. The ‘tourism multiplier’ relates the change in a key economic variable (income, employment, revenue) to the change in tourist expenditure.

Types of Multipliers

• Transactions or Sales Multiplier: Measures additional business revenue created by increased tourist expenditure (volume and value of sales).
• Output Multiplier: Measures additional output generated by tourist expenditure (focuses on production levels, not sales volume/value).
• Income Multiplier: Measures additional income (wages, salaries, rent, interest, profits) generated by tourist expenditure (measured as national or disposable income).
• Employment Multiplier: Measures total employment generated by an additional unit of tourist expenditure OR the ratio of total employment generated to direct employment alone.
• Government Revenue Multiplier: Measures the impact on government revenue (all sources) associated with increased tourist expenditure (gross or net terms).

All multipliers are closely related.

Negative Economic Impacts

• Seasonality
• Migration of labor from rural to urban areas
• Transfer of labor from other industries to tourism
• Import of labor (leading to repatriated income)
• Displacement effect (tourism development at the expense of another industry; opportunity costs)
• Seasonal appreciation (currency)
• Seasonal inflation

Policy Implications of Multiplier Analysis

Detailed multiplier models are suitable for:

• Analyzing national or regional effects of public/private sector investment in tourism projects.
• Simulating the economic impact (sector by sector) of proposed tourism developments to determine future factor requirements (e.g., labor needs).
• Examining the relative magnitudes of impacts from different tourism types and comparing tourism with other economic sectors.
• Identifying the optimal tourism mix.

Tourism Destination and Planning

Introduction

• For many consumers (especially leisure tourists), the destination is the principal motivating factor behind decisions and expectations.
• A key barrier in defining destinations is the nature of boundaries (administrative, political, geographical) which may not align with consumer perceptions.
• Supply-side definition: A destination is a well-defined geographical area understood by visitors as unique, with a political/legislative framework for tourism marketing and planning.
• Demand-side definition: Destinations are places people travel to and stay for a while to experience certain features or characteristics.

Destination Types

• Coastal destinations: E.g., seaside resorts, evolving since the mid-18th century (advocacy of spas and sea bathing).
• Urban destinations: Major cities have been cultural attractions since ancient times (e.g., Venice, popular during the Grand Tour).
• Rural destinations: Range from ordinary countryside to national parks, wilderness areas, mountains, and lakes.

Key Features of a Tourism Destination

• Logical geographical unit recognized by visitors
• Contains significant visitor attractions
• Access (or potential for access)
• Internal transport network
• Tourist infrastructure and superstructure present (or can be developed)
• Administratively possible to plan and manage

Destination Competitiveness

• Refers to a destination’s ability to compete effectively and profitably.
• Successful management balances economic/business skills with sensitive environmental management.
• Comparative advantage: A destination’s ability to manage its natural and man-made resources effectively long-term.
• To remain competitive, destinations must be aware of both demand and supply factors.

Advantages of Collaboration Within and Among Destinations

• Reduction in risk through strength in numbers and interconnectedness.
• Efficient and effective exchange of resources for mutual benefit.
• Generation of increased visitor flows and positive economic impacts.
• Potential to counter the threat of channel intermediary powers.
• In peripheral locations, collaboration can broaden the destination domain.
• Ability to counter industry standardization through innovative collaborative marketing.
• Potential to develop destination-wide reservation systems and customer dialogues through technology (facilitating relationship building and CRM).

Constraints and Drawbacks to Collaboration

• General mistrust/suspicion among partners due to inappropriate governance structures.
• Inability of various sectors to work together (political, economic, inter-personal reasons).
• Stakeholders failing to recognize the value of collaboration.
• Frequent disinterest from ‘honey-pot’ attractions due to their individual success.
• Competition between municipal authorities within a recognized destination, leading to inertia.

Destination Management Organizations (DMOs)

DMOs emphasize leadership in destination development using teamwork. Promotion is no longer the sole purpose. This modified role presents challenges but offers broader opportunities for competitiveness.

DMOs Must:

• Be clearly identifiable as responsible for coordinating the tourism system.
• Command support from all important sectors and major actors.
• Be capable of influencing decisions of public agencies and private firms affecting the tourism experience.
• Possess tools to stimulate required supply development aligned with overall policy.
• Be sufficiently independent and flexible to develop and implement innovative strategies quickly.

Generic DMO Strategies for Success:

• Enhance the long-term prosperity of local people.
• Delight visitors by maximizing satisfaction.
• Maximize profitability of local enterprises and multiplier effects.
• Optimize tourism impact by balancing economic benefits with socio-cultural/environmental assets.

Critical Factors for DMO Governance Success:

• Significant private sector control over spending.
• Understanding the need to incorporate public sector objectives (balancing marketing and product development).
• A dedicated revenue stream not subject to annual government control.
• A broad, integrated mandate covering functions critical to industry development (marketing, education, research, infrastructure).

Sustainable Development: Can it be Measured?

Exploitation vs. Sustainability

• Exploitation: Using something for profit (often seen as a negative value concept).
• Sustainable: Use now while preserving for future generations (positive value concept).

Sustainable Development Movement

• 1980s World Commission on Environment and Development—Our Common Future.
• Numerous case studies extolling virtues of sustainable development.
• Often little tie to development literature (exception: Sharpley, 2000).

Types of Development Theory

• Modernization: Emphasis on growth.
• Dependency: Emphasis on relationships between nations.
• Neo-Classical Counter Revolution: Less state intervention, free trade.
• Alternative Development: Bottom-up approach with social and environmental concerns foremost.

Necessary Elements to Measure Sustainable Development

• Economic factors
• Environmental factors
• Socio-cultural factors
• Consideration of Quantifiable vs. Non-Quantifiable aspects; Standard of Living.

Forms of Measuring Sustainability

• Super Strong: No net loss for any individual variable measured.
• Strong: No net loss overall in the socio-cultural, economic, or environmental component.
• Weak: Gain in the overall production function (allowing substitution between capitals).

Issues in Implementing Measurement

• Weak vs. Strong form of integration (Policymakers often prefer Weak, but this may not be truly sustainable).
• Selection of inputs for inclusion and analysis.
• Weighting and measurement of inputs.
• Application of the ‘no net loss’ provision.
• Tourism is often ignored in broader sustainability measurement frameworks.

Issues for Tourism Sustainability

• Sustainability at the Unit Level:
  • Eco-lodges
  • Best practices
  • Self-regulation
  • Preferred government regulation
• Sustainability at the Macro-Level:
  • What form of development matters?
  • Role of regulatory policy

Conclusions on Sustainable Development Measurement

• Sustainable tourism development requires more than just intuition.
• Scientific models have advanced to allow for the measurement of development impacts.

Environmental and Socio-Cultural Impacts of Tourism

Environmental Impacts of Tourism

Causes of Environmental Impacts

• Rapid population growth
• Industrial growth
• Lack of public awareness
• Urbanization

Tragedy of the Commons

• Resources treated as a ‘free good’.
• Overuse to acquire additional personal benefit.
• Ignorance or disregard of cumulative impacts.
• Impacts may be slow to appear.
• Tendency to ‘get out before the environment crashes’ (e.g., keyhole access).
• Tourists are often only present for a short time, potentially reducing perceived responsibility.

Factors Affecting Environmental Impacts

• Intensity of site use
• Resiliency of the ecosystem
• Time perspective of the developer
• Transformational character of development

Types of Ecosystems Affected

• Islands
• Coastlines
• High elevations
• Deserts
• Polar regions
• Rainforests
• Built environment

Transformational Character of Development

• Architectural pollution
• Ribbon development and sprawl
• Infrastructure overload (often ‘all or nothing’)
• People congestion

Limits of Acceptable Change (LAC) Process

1. Identify issues and concerns.
2. Define and describe opportunities.
3. Select indicators of resource and social change.
4. Inventory existing conditions.
5. Specify standards for resource and social conditions.
6. Identify development options.
7. Identify actions needed for each option.
8. Evaluate and select a preferred option.
9. Implement and monitor.

Socio-Cultural Impacts of Tourism

Tripartite Cultural Relationship in Tourism

• Tourists
• Residual (Host community elements not directly involved)
• Transitional companies (Businesses serving tourists)
• Hosts (Directly interacting community members)

Types of Socio-cultural Impacts

• Demonstration effect (locals adopting tourist behaviors/consumption)
• Marginal Man concept (individuals caught between cultures)
• Culture Shock (for hosts and/or tourists)
• Cultural Commodification (culture treated as a product for sale)
• Relocation and Displacement of residents
• Dependency on tourism
• Increase in Crime and Prostitution
• Increased Drug use
• Change in Social Order/Structure

Indicators of Socio-Cultural Change

• Language changes (e.g., more slang, adoption of foreign words)
• Changes in Religious values
• Shift away from Traditional occupations

Intermediaries in Tourism

Headlines & Perceptions

“The high street travel agency ‘will be DEAD within five years’ due to new technology”

“A relic of the past”

“A dying sector”

“Sunset for the package holiday”

“The disappearance of traditional intermediaries”

Yet, innovation started in 1841 (Thomas Cook). Major companies like TUI Group serve millions and focus on business transformation.

Diminishing Role of Intermediaries?

Tourism intermediaries are accustomed to challenging market conditions; someone is always trying to eliminate them.

What Drives Innovation in Tourism?

• Tourists themselves
• Technology changes
• Tourism enterprises
• Competition
• Distribution – critical to profitability and competitiveness.

Every technological improvement adds complexity. Companies evolve (e.g., Google from search, Booking.com from hotels, TripAdvisor from reviews, Accor from hotels).

The Nature of Intermediation

Travel and tourism intermediaries improve distribution channels by bringing buyers and sellers together. Distribution provides access to the product and facilitates purchase.

Main Representatives of Intermediaries

• Travel agencies
• Tour operators

Tremendous changes have occurred in how tourism services are booked, sold, and paid for.

The Origin of Organized Travel

• Thomas Cook: The first group tourism travel organizer.
• July 5, 1841: The first inclusive tour with a pre-established program.

The Role of Travel & Tourism Intermediaries

To link service providers with service users. Differentiation through personalization and emotional intelligence remains a key value proposition potentially irreplaceable by technology.

What is Tourism Distribution?

• An integral part of the marketing mix.
• A system.
• The tourism channel of distribution represents “an operating structure, system or linkage of various combinations of organizations through which a provider of travel products describes, sells, or confirms travel arrangements to the buyer” (Goldner, et al., 2000).
• Tourism distribution has a complex structure.

Definition of “Tour Operator”

An economic entity that unites services from different providers to create and organize inclusive tours in its own name and on its own account, for yet unknown buyers, continuously realizing its main source of income.

Tourism Distribution System

Main Differences: Tour Operators vs. Travel Agencies

• Tour Operator: Creates packages, takes financial risk (buys components in bulk), sells wholesale or direct. Principal.
• Travel Agency: Sells packages/components created by others, usually works on commission, less financial risk. Agent.

Traditional vs. Contemporary Function of Travel Agencies

• Traditional: Provide information, mediate between customers and providers, facilitate reservations (often favoring higher commissions, minimum value added).
• Contemporary: Re-invented roles. More complex job adjusted to distribution changes. Consumer-centric focus. Offer professional advice/expertise, distill product info, provide competitive info, make recommendations, add value-added benefits, assist in emergencies. Specialization and niche development, moving from generalist to differentiated business models.

How Can You Travel Abroad and Learn Nothing?

A critical view: TAKE A PACKAGE TOUR (!?!). Has this perception changed? Package holidays have evolved significantly from the standardized products of the 1970s-1990s to potentially customized, tailor-made experiences today, driven by innovation.

What is a Package Holiday?

Defined by the EU Package Travel Directive as “the pre-arranged combination of not fewer than two of the following when sold or offered for sale at an inclusive price and when the service covers a period of more than twenty-four hours or includes overnight accommodation:

1. transport
2. accommodation,
3. other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package.”

To Which Phase Can We Link the Business of Tour Operators?

The phase of modern tourism (post-1950). Developing countries became aware of tourism potential; developed countries became aware of these regions’ attractiveness. New economic entities (tour operators) sensed profit opportunities.

Relationship of Tour Operator and Travel Agent Towards Clients

• Tour Operator: Often indirect relationship (via travel agent), focused on product creation and fulfillment.
• Travel Agent: Direct relationship, focused on advice, sales, and customer service.

Is it Easy to “Manufacture” Package Holidays?

Tour operators combine various components (transport, accommodation, activities) and sell a single product at an inclusive price, directly or indirectly. HOWEVER, the business is very complex, highly demand-driven, and very risky.

Where are the Main Risks?

• Projection of tourism demand
• Capacity planning
• Pricing

Better demand forecasting leads to better capacity planning and pricing. Forecasting is risky due to numerous factors causing sudden changes (economic movements, safety/security risks).

Why is Forecasting Tourism Demand Difficult?

High dependency on economic conditions in generating/receiving markets and various safety/security risks. Tour operators must finalize package prices often 12+ months before operation. Tour operating is typically a very low net-profit business.

How Does the Tour Operator Work?

The Business Philosophy

1. Principle of economies of scale: Contracting large numbers of facilities allows for…
2. Creation of numerous products at reasonable prices, which enables…
3. Mass sale of these products.

Risk Level Depends Greatly on Contracts Signed

• Hotel contracts:
  • Allotment: Agreement to hold rooms until a cut-off date.
  • Firm contract (guarantee): Commitment to pay for rooms regardless of sale.
• Airline contracts:
  • With charter airlines (often involving commitment).
  • With scheduled airlines (buying seats).
  • Back-to-back charter: A series of continuous flights throughout a season (‘chain of charter flights’).

Pricing an Inclusive Tour

Selling price depends mostly on transport and accommodation types (direct costs). Tour operators connect contracted beds to contracted flight seats; total availability is featured as a package.

Why is Promotion the Most Delicate Feature?

If promotion fails to convince customers, the package holiday remains unsold. Intense competition makes promotion’s role increasingly significant.

European Tourism Concerns: Multinational or Multibusiness?

Large European tourism companies often own and operate multiple separate businesses domestically and abroad. They are not just multinational but also multibusiness companies.

Leading Leisure Concerns in Europe (Examples implied, not listed)

Refers to large integrated groups like TUI, etc.

The Future

• More integrated tourism concerns face more complex and riskier operations.
• SMEs can survive competitive pressure by:
  • Offering high-quality products.
  • Engaging in niche marketing.
  • Using size as an advantage (flexibility, innovation).