Chapter Two



Tourism

I. Chapter 3 Review and Questions

What Is Tourism? Page Object.

|Tourism is the world’s largest industry if all its interrelated components are included. It accounts for |82 |1 |

|10.2% of world GDP and employs 200 million people, 7.8% of the global workforce. | | |

|Components of tourism include travel; lodging; conventions, expositions, meetings, events; restaurants, |82 |1 |

|managed services; and recreation. | | |

|The World Tourism Organization (WTO) is vested by the UN with a central role in promoting tourism, in order to|82-83 |1 |

|stimulate economic growth and job creation, paying particular attention to developing nations. | | |

|Tourism for Prosperity and Peace | | |

|Tourism has become one of the world’s most important sources of employment. |83 |3 |

|Intercultural awareness and personal friendships fostered through tourism are a powerful force for improving |83 |6 |

|international understanding and contributing to peace among all nations of the world. | | |

|Long-Term Prospects: Tourism 2020 Vision | | |

|International arrivals are expected to reach over 1.56 billion by 2020. This rapid growth presents |84 |1 |

|opportunities and challenges. Tourism is a mature industry but a young profession. | | |

|Definition of Tourism | | |

|The WTO definition of tourism is “Tourism comprises the activities of persons traveling to and staying in |84 |1 |

|places outside their usual environment for not more than one consecutive year for leisure, business, and | | |

|other purposes. | | |

|Tourism represents a high percentage of gross national product for many developing nations. In many cases,|84 |1, 3 |

|tourism serves to balance trade with other nations. | | |

|Tourism is frequently characterized according to various sectors and organizations involved with tourism.|85 |1, 5, 6 |

| | | |

|The sector categories are: | | |

|Geography, Ownership, Function, Industry, Motive. | | |

|Airlines | | |

|U.S. airlines have lost billions of dollars in the past few years, in part because of their inability to |85 |3, 5 |

|compete effectively with international carriers. This partly stems from the fact that several | | |

|international airlines receive funding from their governments. | | |

|Since 9/11 and the economic downturn, airline revenues have plunged while costs have risen. |85 |3, 5 |

|Effective competition will require alliances to be made, such as USAir’s partnership with the Star |85 |3, 5 |

|Alliance. Such alliances allow airlines access to others’ feeder markets and are part of the trend | | |

|toward worldwide deregulation. | | |

|Carriers with lower cost structures, such as Southwest and JetBlue, have forced the major carriers to |86 |3, 5 |

|retreat, eliminating routes to smaller cities. | | |

|The Hub-and-Spoke System | | |

|Another way that airlines have worked to decrease losses is through the creation of the Hub-and-Spoke |86 |2, 3 |

|System. The Hub-and-Spoke system enables passengers to travel from one smaller city to another smaller | | |

|city via a hub or even two hubs. | | |

|The two main benefits of the Hub-and-Spoke system are: |86 |3, 5 |

|a) Airlines can serve more cities at lower costs. | | |

|b) Airlines can maximize passenger loads from small cities. | | |

|Cruise Ships | | |

|A cruise ship is often referred to as a floating resort. Various types of entertainment from exercise |87 |3, 5 |

|classes to cabarets to charm classes to shuffle board tournaments and all night dancing are available; | | |

|thus, there is plenty for travelers to do. | | |

|Some 215 ships provide mostly ocean-going cruising. The cruise market has rebounded dramatically since |88 |3, 5 |

|9/11, with 8.6 million Americans cruising in 2004. | | |

|Carnival is the most successful cruise line, netting about 20% of all sales and carrying close to 3 |88 |3, 5 |

|million guests. | | |

|The nationality of the ship’s crew contributes to its ambiance. Reasons that most cruise ships sail under |91 |3, 6 |

|foreign flags include: | | |

|a) U.S. labor costs are too high to compete in world market. | | |

|b) U.S. ships are prohibited from operating casino-type gambling. | | |

|c) Many foreign shipyards are subsidized by their governments. | | |

|Employment positions for Americans are mainly confined to shore-based activities such as sales and marketing. |91 |3, 6 |

|On board, Americans sometimes serve as cruise directors and pursers. | | |

|Segmenting the Cruise Market | | |

|Mass Market: Income: $30,000 - $60,000. |92 |3, 6 |

|Cost of Cruise: $85 - $175 per day | | |

|Middle Market: Income: $60,000 - $80,000. | | |

|Cost of Cruise: $175 - $350 per day (750 - 1000 passengers) | | |

|Luxury Market: Income: higher than $80,000. | | |

|Cost of Cruise: average more than $350 per day (700 passengers) | | |

Tourism Organizations Page Object.

|Governments are involved in tourism decisions because tourism involves travel across international boundaries.|93 |2, 3, 4, 6 |

|Governments regulate the entrance and exit of foreign nationals. Decisions impact national parks, heritage, | | |

|preservation, and environmental protection. Tourism in many ways serves as an “international ambassador.” | | |

|International Organizations | | |

|The World Tourism Organization (WTO) is the only organization that represents all national and official |93 |2 |

|tourism interests among its allied members. It is the most widely recognized organization in tourism. | | |

|The International Air Transportation Association (IATA) is a global organization that regulates almost all |93 |2 |

|international airlines. The purpose of the IATA is to facilitate the movement of people and goods, regulate | | |

|waybills and baggage checks, permit rapid booking and connections, and maintain fares and rates. | | |

|The International Civil Aviation Organization (ICAO) is made up of more than 80 governments. It coordinates |93 |2 |

|the development of all aspects of civil aviation, specifically with regard to the formulation of international| | |

|standards and practices. | | |

|The World Bank (WB) lends substantial sums of money for tourism development. The International Bank |93 |2 |

|Reconstruction and Development serves a purpose similar to the WB. The United Nations Development Program | | |

|(UNDP) assists countries with a variety of development activities. | | |

|The Organization for Economic Cooperation and Development (OECD) was established in 1960. Its purpose is to |94 |2 |

|(a) achieve economic growth and employment in member countries while maintaining financial stability, (b) | | |

|contribute to sound economic expansion in member and non-member countries, and (c) contribute to the expansion| | |

|of world trade on a multilateral, no discrimination basis. The OECD studies various aspects of tourism and | | |

|makes recommendations to governments through an annual report entitled “Tourism Policy and International | | |

|Tourism in OECD Member Countries.” | | |

|Other organizations with similar interests include the Asian Development Bank, the Overseas Private Investment|94 |2 |

|Corporation, the Inter-American Development Bank, and the Agency for International Development. | | |

|The Pacific Area Travel Association (PATA) unites its 34 member countries toward the goal of excellence in |94 |2 |

|travel and tourism growth. Concentrated successful efforts have focused on research, development, education, | | |

|and marketing. | | |

|Domestic Organizations | | |

|The United States Travel and Tourism Administration (USTTA) is a government agency responsible for promotion |94 |2 |

|of tourism and for the development of travel to the U.S. from other countries, expanding the growth of the | | |

|U.S. travel industry. | | |

|The Travel Industry of America (TIA) addresses common interests and concerns of all components of the U.S. |94 |2 |

|travel industry. It focuses on unifying the goals of the industry, coordinating private sector efforts, | | |

|monitoring government policies that affect travel and tourism, and supporting research and analysis. The TIA | | |

|was founded in 1941. | | |

|State Offices of Tourism | | |

|State Offices of Tourism are created by the state legislative offices and are responsible for the growth and |94-95 |2 |

|development of tourism within their states. They promote recreation and tourism attractions within their | | |

|states. | | |

|City-Level Offices of Tourism | | |

|Many cities have established Convention and Visitors Bureaus (CVBs) to attract and retain visitors. The CVB’s|95 |2 |

|are largely funded by transient occupancy tax (TOT), which may range from 8% to 18% of hotel room rates. | | |

|Additional funding comes from membership dues and promotional activities. | | |

The Economic Impact of Tourism Page Object.

|A study commissioned by the World Travel and Tourism Council predicts that total gross output for travel and tourism|95 |3 |

|in 2010 will be $2,571 billion or more than 10% of the world’s gross national product (GNP). About 31% of spending | | |

|takes place in the European Union and 30% in North America. | | |

|Nearly every state publishes its tourism economic impact study. For example, New York $38.5 billion, Florida 51.7 |96 |3 |

|billion, Texas $33 billion, California over $53 billion, and Hawaii $23 billion (its largest industry). | | |

|The Multiplier Effect | | |

|Tourism produces effects beyond travel, hotels, restaurants, and souvenirs. The money earned by transportation |97 |3 |

|companies, hotels, and shops is used to purchase more goods, pay wages, etc. This chain reaction continues until | | |

|the money is used to purchase something outside of the area, which is called leakage. | | |

Promoters of Tourism Page Object.

|Tour Operators | | |

|Nearly 500,000 tours by 1,636 operators are conducted annually in the U.S., carrying 21 million passengers. |98 |3 |

|They spend an average of $168 per passenger per day (one-day and multi-day tours). | | |

|Travel Agencies | | |

|An agency serves as a middle person who provides travel counseling and sells on behalf of airlines, cruises, |98 |4 |

|hotels, car rentals, etc. The travel agent has ready access to schedules, fares, and information about | | |

|various destinations. | | |

|The first agencies opened in the 1880s. “Ask Mr. Foster” is identified as the oldest agency in the U.S. |98 |3, 4 |

|Today, the American Society of Travel Agents (ASTA) claims 20,000 members in 165 countries. The average | | |

|travel agency generates about 3 million dollars a year in sales. | | |

| | | |

|Agents use computer reservations systems (CRS) to access availability and make bookings. Main vendors are |98 |4 |

|Sabre, Apollo, Worldspan, System One, and Galileo. Sabre owns 70% of Travelocity. Galileo is owned by | | |

|Cendant, and Worldspan is owned by Delta, Northwest, and American. | | |

|In addition to selling tickets, agents arrange transportation, prepare itineraries, book accommodations, |98 |3, 4 |

|meals, tours and special events, and handle and advise on matters such as foreign exchange. | | |

|Commission Caps | | |

|The airlines have imposed a commission cap of $20 on domestic flights and between 0% and 5% on international |99 |3, 4 |

|ones, forcing agents to become more specialized or expand their offerings. | | |

|Travel Corporations | | |

|The largest of these is American Express. AMEX mostly provides services to business travelers for corporate |100 |4 |

|clients by negotiating with providers. | | |

|Corporate Travel Manager | | |

|A corporate travel manager works within a large corporation and is charged with making travel arrangements for|101 |4 |

|the organization. Interested agencies are invited to submit bids to the corporate travel manager for | | |

|consideration by the corporation. | | |

|Many corporations are using electronic mail (E-mail) to book travel directly, without the travel agent acting |101 |4 |

|as the middle person. | | |

|Travel and Tourism Wholesalers | | |

|Travel wholesalers consolidate the services of airlines and other transportation carriers and ground service |101 |4 |

|suppliers into a tour that is sold through a sales channel to the public. This practice became common in the | | |

|1960s when airlines had vacant seats. Air travel seats, like hotel rooms, are perishable. | | |

|The tour wholesale business is comprised primarily of about 100 independent agents. Ten major wholesale |101 |4 |

|companies account for 30% of the wholesale business. | | |

|The main types of wholesalers are (a) the independent wholesalers, (b) the airline working in cooperation with|101 |4 |

|the tour wholesalers, and (c) a retail travel agent who packages tours for his or her clients. In addition, | | |

|travel houses and various travel clubs serve as wholesale agents. | | |

|Certified Travel Counselor (CTC) | | |

|Travel industry experts formed the Institute of Certified Travel Agents (ICTA), which offers specialized |101-102 |4 |

|courses in the travel industry, leading to designation as CTC on passing examinations and having five years’ | | |

|experience. | | |

|National Offices of Tourism (NOT) | | |

|These seek to attract tourists. They provide oversight to hotels, transport systems, and tours and tour |102-103 |4 |

|guides as well as publicizing the country. | | |

|Destination Management Companies (DMCs) | | |

|Destination Management Companies are service organizations that offer programs and services to meet the needs |103 |4 |

|of their clients. They concentrate on selling the destination to meeting planners and incentive companies. | | |

Why People Travel Page Object.

| | | |

|Pleasure Travel | | |

|Most domestic travel (69%) is for pleasure purposes. |104 |5 |

|Reasons for travel include the desire to experience new surroundings and other cultures, rest and |105 |5 |

|relaxation, visit friends and family, and view or participate in sporting activities. | | |

|Travel is likely to increase in the coming years due to changes in life style and population. Longer life |105 |3, 5 |

|spans, flexible working hours, early retirement, greater ease of travel, tendency to take shorter, more | | |

|frequent trips, and increased standard of living are among the reasons stated. | | |

|The appeal of travel correlates with scenic beauty, pleasant attitudes of locals, good accommodations, |105-106 |5 |

|cultural interests, and cuisine, among other factors. | | |

|One challenge that is emerging is matching expectations to reality. |106 |5 |

|Business Travel | | |

|Business travel frequently combines with pleasure. It accounts for 20% of U.S. travel. |107 |5 |

|Business travel is declining as a percentage of all travel. |107 |3 |

|Corporations are increasingly focusing on controlling expenses of business travelers. |107 |3 |

Social and Cultural Impact of Tourism Page Object.

|Tourism can have both positive and negative impacts on communities. Travel has contributed to international |111 |6 |

|understanding. If the number of tourists is manageable, the host community is respected and the sociocultural | | |

|norms and values are respected. Tourism provides opportunity for social interaction. | | |

|However, socio-cultural problems can arise from tourism. Tourism can dilute the culture of a country by the |111-112 |6 |

|introduction of “mass cultural norms.” In many cases, there is little meaningful social interaction between the | | |

|tourist and the native culture. Often non-natives hold the senior and management level positions in the hotel, | | |

|while lower level positions are open to the native population. | | |

|Tourism brings new revenue to the area and creates/maintains higher levels of employment. In developing |112 |3, 6 |

|countries, tourism is a major contributor to the GNP. | | |

Ecotourism Page Object.

|Ecotourism is a term for the growing trend in adventure tourism or sustainable tourism. For tourists, |115 |7 |

|it is the latest trend. For ecologists, scientists, and students, it is a lifelong dream. And for the | | |

|tourism industry leaders, it is a potentially prosperous business. | | |

|The International Ecotourism Society defines Ecotourism as “responsible travel to natural areas that |115 |7 |

|conserves the environment and improves the well-being of local people.” See text p. 115 for the list | | |

|of ecotourism principles. | | |

|Ecotourism projects tend to be small scale and are located in underdeveloped and developing countries. |116 |7 |

|Trends | | |

|Continued growth in tourism is anticipated with increased interest in ecotourism, sustainable tourism, |107 |5 |

|and heritage tourism. Internet bookings will continue to increase with the advancement of technology, | | |

|heightened government awareness of tourism as an economic and, also, a social/cultural force. | | |

Check Your Knowledge, p. 93

1) Question: In your own words, define the term tourism.

Answers will vary but should include emphasis on tourism being dynamic, evolving, and consumer-driven. Also included in the definition should be the size and scope of the industry.

2) Question: Research: Which city in the United States is the biggest hub city for air travel? Approximately how many flights does this city have a day?

Answers to this can be researched on the Internet. Focus on international airports such as JFK in New York, LAX in Los Angeles, and Atlanta, Chicago, Miami, and other major cities.

3) Question: Explain the significance of the Airline Deregulation Act of 1978.

Answer: The significance and purpose of the Airline Deregulation Act was to allow free-market operations whereby airlines could decide their own fare structure and rates. The effects were to force several noncompetitive airlines out of business.

Check Your Knowledge, p. 110

1) Question: What is TOT? What is the TOT in your city of residency?

Answer: TOT stands for transient occupancy tax, which is applied to hotel accommodations and set by city officials.

2) Question: Brainstorm on the services offered by AMEX.

Answer: American Express (AMEX) is a corporation that has travel services with locations worldwide. Some of the services include (p. 100):

• Ticket sales

• Travel services

• Tour operators

• Foreign currency exchange

• Corporate travel services

• Internet services based on cheap flights and convenient flights

Check Your Knowledge, p. 118

1) Mini project: Put together what you would consider your perfect vacation. This mini project is self-explanatory. Answers will vary according to destination. The information should include location, air travel, ground transportation, attractions, hotel accommodations, weather, expenses, and currency conversions.

IV. Answers to Chapter 3 Review Questions

1) Tourism can be defined as the business of attracting, transporting, and accommodating guests’ needs. People are motivated to travel to relax, by the desire to meet new people, to visit relatives, to get to know new cultures, or the desire for attention, recognition, and entertainment.

2) Tourism is the fastest growing industry and the largest employer in the world. Travel and tourism supports more than 200 million jobs worldwide. This represents about 7.8% percent of the global workforce according to the World Travel and Tourism Council (WTTC).

Tourist spending produces a secondary financial impact that ripples in to other businesses. This is known as the multiplier effect. Tourism is also likely to have a great impact on the economies of developing countries by bringing new revenues and infrastructure. National Offices of Tourism (NOT) seek to improve the economy of the country they represent by increasing tourist visitations. The World Tourism Organization (WTO) represents all national and official tourism interests of its members. International Development Organizations further tourism development, and the United Nations Development Program (UNDP) assists countries with a variety of development projects.

3) Various.

4) Ecotourism prepares participants by educating them about local regions, cultures, animals, and plants to minimize visitors’ impact on natural environments. Tourism pollution refers to the dilution of culture and nature by massive tourism.

Tourism can leave both negative and positive impacts on communities. It can be a major contributor to the economy and enhance sociocultural understanding on one hand, but may also damage the cultural heritage.

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