Demand and Supply Factors in the Tourism Industry
The demand and supply in the tourism industry are affected by a wide variety of factors, including political, economic, social, technological, legal, and environmental. For instance, the post-9/11 legislation influenced the immigration policies in many countries, making it harder for the tourists to enter, whereas the development of aircraft technologies made long air journeys safer, thus promoting tourism to faraway destinations. However, the three most important factors that affected the growth of tourism are political, economic, and sociodemographic.
The first shift in the demand and supply patterns of the international tourism industry can be attributed to the end of the Second World War when the average annual growth of international tourism rose to 7 percent. Wars generally affect the demand and supply of tourism negatively due to the widespread fears of the people, as well as the economic changes provoked by military expenditures. For instance, in the 1990s, the Gulf War impaired the demand and supply of international travel. Another significant political change occurred in 2001 after the 9/11 terror attacks. The incident, as well as the war on terror started by the U.S. government, both affected the people’s willingness to travel abroad, especially from the United States. Shifts in the country’s political system due to revolutions, major reforms, or government changes can impair both supply and demand for tourism to that country. For example, if government reforms affect the tourism industry providers in a negative way, the supply of hotels in the country will decrease, thus causing a change in the country’s ability to attract tourists. The unstable political situation, manifested in protests or military opposition, on the other hand, will decrease the people’s desire to travel to the country, which will affect the overall demand for tourism.
Economic factors play a significant role in shaping tourism supply and demand patterns, as they affect the country, local businesses, and citizens. For instance, a recession causes the tourism and hospitality industries to lose profits, provoking them to raise fees, which leads to a decrease in demand as the customers may no longer be able to afford travel and stay. Loss of jobs due to the country’s threatening economic position usually leads to people prioritizing necessary spending, such as bills, food, and education, over unnecessary ones, such as tourism, leading to people’s unwillingness to spend money on travel. Such a decrease in demand can affect the supply, as the businesses’ profits decrease dramatically and some hotels or travel companies become bankrupt. Economic development of countries, on the other hand, may boost the supply and demand for both domestic and international tourism: as the case study states, the majority of tourism‐generating countries are those in the high mass‐consumption stage of economic development.
Sociodemographic factors affect the demand and supply in tourism by changing the patterns of tourist behaviors. For instance, in countries with a large share of older populations, there will be a higher demand for trips to nearby countries, as older adults may be less willing to travel far away due to health concerns. Younger populations, on the other hand, generate more demand for active travel. The average income of the citizens also affects their travel choices, as people with higher incomes are more likely to travel to luxury hotels and destinations, whereas people with moderate incomes may opt for cheaper options instead.