The Economics of Tourism

Mike J. Stabler, Andreas Papatheodorou, M. Thea Sinclair

• Publisher: Routledge
• Year: 2009
• eBook ISBN: 9781135194963
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

This new edition of The Economics of Tourism reflects the tremendous changes that have occurred in the tourism sector in the last twelve years. It recognizes that the nature of tourism demand and supply is being transformed by innovations in information communication technologies, market liberalization and climate change. Paralleling this, there is much greater interest in the study of tourism by both students and researchers in mainstream economics.

The text is now in four parts covering: demand; supply; national, regional and international matters and environmental issues. The concluding chapter appraises the state of the economic research into tourism. The increased interest in tourism has engendered the development of new methods of analysis and the refinement of established ones. Accordingly, the book has been extensively restructured, revised and expanded with two new chapters: chapter six of the first edition is now broken down into two and a new chapter has been added on environmental issues to take account of new developments, critically review the associated literature and consider future trends in tourism economics research. The reader-friendliness of the book has also been enhanced in various ways, such as the extensive chapter cross-referencing to refresh the reader's memory and the inclusion of a detailed list of abbreviations.

The Economics of Tourism will continue to make accessible for the non-specialist, the application and relevance of economics to tourism. Extensively revised and updated, including research and case studies the textbook will be an indispensable resource for both students and researchers.

PART I
Introduction and demand theory in tourism

1
THE SCOPE AND CONTENT OF THE ECONOMICS OF TOURISM

1.1 Introduction

The aim of this book is to demonstrate the extent to which tourism is susceptible to economic analysis and to provide a review and critical evaluation of the tourism literature emanating from a number of disciplines, also to indicate possible directions for future research. The book is not conceived as simply a text aiming to introduce the application of economics to tourism to non-specialist readers. It attempts to go further by demonstrating the subject’s ability to strengthen the theoretical foundations of the more descriptive, diffuse and pragmatic approaches to the analysis of tourism and by showing the potential of economics to explain and predict tourism phenomena and inform government and business operational policy in the sector. By examining tourism, using concepts, principles and methodologies from mainstream and more specialized fields of economic analysis, it also contributes new perspectives on an activity of major and increasing economic importance which until the 1990s was largely neglected in the economics literature. As identified in the preface to this new edition, the book introduces more recent and advanced applications of economic analytical methods of a quantitative nature, so going beyond a simple exposition of principles. It also raises issues of global importance that reflect rapid changes in the economic, ecological, environmental, political and social systems that tourism, an activity of major importance, both has an impact on and is affected by.

An important objective of the book has been to make it as accessible as possible, both to an economic audience and to those to whom economic concepts and methods are less familiar. To this end, theories and analytical approaches have been discussed in a way that avoids, as far as is possible, the excessive use of technical economic terms and the subject’s econometric methods. Given the vast expansion in the economics of tourism in recent years, the topics and references to studies of them covered are necessarily selective. Two factors that determined the selection are, first, the desirability of including the main areas in which economics is relevant to a comprehensive analysis of tourism, and second, the perception of key issues in tourism. The topics covered include demand, supply, market structure, pricing, output, growth and the environment, in a domestic and international context. The emphasis is on examining the role of quantifiable variables (the very essence of economics) in analyzing tourism phenomena, as this is where the contribution of economics to tourism research is likely to be most significant. It is worth repeating the point made in the previous paragraph that the ultimate focus of economic analysis is on its implications for tourism policies. In particular economists consider that the underlying rationale for their investigations of tourism is to indicate the impact, often leading to unintended outcomes, of its operation and actions to support its development and growth.

It should be noted that, to an extent, the analysis of tourism within the book proceeds from the simple to the more complex in the early chapters in that economic concepts are initially used to examine tourism as though it were a non-composite commodity, similar to other goods, purchased by a relatively homogeneous set of consumers and likewise supplied by businesses in an identifiable industrial sector. That in reality this is not the case is discussed below in examining the debate about conceptualization of tourism, both in the wider and economics literature. Further complexities are gradually introduced throughout the book as attention is paid to the different components of tourism, initially in a closed economy and subsequently in an open or international one. Given the increasing concern over both global and local environmental challenges, a significant proportion of the book is devoted to the interrelationship of tourism with natural and humanmade resources, including the use of those that are not traded in markets, necessitating the exploration of methods for estimating their value. Problems associated with the operation of tourism concerning externalities, such as pollution and waste, and inequalities in income and wealth are investigated and the policy instruments, both regulatory and priced-based, that can be applied to mitigate their detrimental effects are analysed. The conclusion of the book evaluates the progress made in the development of the economic analysis of tourism and suggests its explanatory and predictive efficacy. The possible directions required of future research and analysis are indicated.

1.2 The state of analysis of tourism

1.2.1 Background

It is acknowledged that tourism has characteristics that set it apart from other economic activities and therefore pose particular analytical problems. Even as a service sector, it is distinct in that it is usually purchased without inspection, consisting of a range of goods and services which are purchased and/or used, often in sequence, such as reservation agencies, financial services, acquisition of specialized clothing and equipment, transportation, accommodation, food and human-made and natural attractions. Because the last two components are a substantial proportion of total inputs, it is the set of markets giving rise to the non-priced features, referred to above, that create analytical difficulties. It is, thus, the unusual composite nature of tourism, frequently taking place internationally and therefore involving generating and destination countries, which requires specific analysis relating to spatial and temporal factors, very much within the purview of geography, but to which spatial economics, concerned with urban and regional issues, is able to contribute.

This composite nature of the sector and the many-faceted components that constitute what can be referred to as the ‘tourism product’ supplied through many markets have given rise to a long-standing and occasionally acrimonious debate in the wider literature, echoed in economics, on the nature of tourism. Those studying the phenomenon need to agree on this in order that it is certain that research approaches are consistent, the definition of it is unequivocal and its boundaries are clearly delineated. However, before the current position on its conceptualization can be established, it is instructive to examine briefly the complex nature of tourism studies and how it is bedevilled by controversy because of the many approaches that exist.

With very few exceptions, notably Gray (1966), there was little analysis of tourism until the 1970s and even then much research tended to be uncritically descriptive, employing inadequately defined goals and an agreed approach. No attempt is made here to conduct a comprehensive review of the development of studies since the 1970s as this has been carried out elsewhere in the tourism literature (for example, Sheldon, 1990; Eadington and Redman, 1991; Sinclair, 1991a; Van Doren et al., 1994; Wahab and Cooper, 2001; Shaw and Williams, 2002; Lew and Hall, 2004; Hall and Page, 2006), some of which has offered views on its content and scope. There is, however, a measure of agreement with Pearce and Butler (1993) when they state that the many disciplines that have studied tourism bring with them all their conceptual and methodological baggage.

A considerable number of disciplines have made contributions to the subject, the principal ones being anthropology, ecology, economics, environmental studies, ethics, geography, political economy, politics, social psychology and sociology. The main themes which have been studied are the cultural, economic, environmental and social effects of tourism, travel patterns and modes between origins and destinations, tourism’s relationship with economic development, tourists’ motivations and behaviour, forecasting trends and practical aspects of planning, management and marketing. More recently attention has been paid to tourism and sustainability, the balance between economic, environmental and social goals (what is known as the triple bottom line), social intra-generational inequity and the relationship of tourism with poverty in destinations, and responsible tourism that is sensitive to the conservation of natural and fragile environments.

As pointed out by those who have long worked in the wider field of tourism studies, a number of aspects of the subject suffer from a poor or even the absence of a theoretical framework through a lack of appropriate research (Sessa, 1984). However, the lack of a theory of tourism is understandable, given its characteristics, identified above. Similarly, concern has been expressed that much writing on the subject has no firm sense of direction and is methodologically unsophisticated (Pearce and Butler, 1993), which can have detrimental consequences for the operation of the sector and policies concerning its development and growth. Nevertheless, there has been a steady flow of contributions over the last two decades to the debate on the need for a theory, emphasizing the difficulties of deriving one, and a definition of tourism and its conceptualization see, for example, Ritchie et al. (2005). It is the definition of tourism that has become the focus of attention recently because of the perception that it is necessary to define it, in order to establish what the scope and content of tourism activity is, to facilitate the pursuit of sustainable tourism operations and development. The link between sustainability and the need to conceptualize tourism is examined in Chapter 8, therefore it is not considered at this point.

Unlike the study of tourism in other disciplines, the economic study of it is set within an established academic one, possessing a formal structure in educational establishments with vehicles for the dissemination of research in a firm theoretical foundation, with clear principles and well-tested methodologies. Its approach to the study and analysis of the sector is described below. This notwithstanding, the subject has similar concerns as to the exact nature and structure of tourism that has identified conceptualization issues, most notably whether or not it is an industry or a system or merely a collection of markets. Thus, an outline of the current state of the attempts to agree on exactly what tourism consists of and the construction of a theoretical framework is now examined.

1.2.2 The conceptualization of tourism in the wider literature

In the wider academic study of tourism there have been many publications on the reasons why it is necessary to define it as a sector and its concomitant conceptualization. The issues can be encapsulated by outlining what Lew et al. (2004), from a largely geographical perspective, assert is the need to define it, and why, by arguing that it is essential, in an empirical context, to do so to identify the nature of its impacts, especially economic, and the associated policy implications. They consider that the supply and demand sides should be distinguished in what they perceive is a system, rather than an industry. The supply side is deemed to be an aggregation of all the businesses that directly provide goods and services involving distribution, commodification and a lifestyle in an interaction with the demand side, consisting of the leisure, recreational and tourism pursuits of those away from home; Lew et al. (2004) recognized that the relationship between tourists and suppliers gives rise to economic, environmental, political and sociocultural effects. They also acknowledged that the mobility, space and time dimensions of tourism are important determinants of demand, very often underpinning constraints such as cultural and social structures, institutions, occupation, work patterns, wealth, income, gender, age and class. Overall, their conclusions are that, rather than a single disciplinary approach, analysis should include the perspectives of many disciplines, or involve cooperation between them. However, they express concern that an obstacle to this development is that currently there appears to be increased disciplinary specialization within academic journals, notwithstanding the incredible growth in their number.

In the wider literature, the study of tourism is mainly through case studies, emanating from the newer universities and colleges rather than the more prestigious older universities, that concentrate on quite a narrow range of topics that are supported by government departments, non-governmental organizations, tourism bodies and businesses. The social sciences, particularly sociology, predominate in research that focuses on issues such as cultural identities and threats to them, ecotourism, ethnicity, heritage, history, gender roles, post-modernity, poverty, sustainability, tourism development and growth and its impact, especially on natural, human-made and human environments (issues considered from an economic perspective are identified in the next section).

However, the crucial issue of the lack of a theory of tourism, which is perceived as vital for progress to be made in overcoming the shortcomings of research into it, identified earlier in this section on the state of analysis, is that there is an increasing imperative to conceptualize the subject. Related to this is the assertion that the study of tourism should transcend disciplinary boundaries. Most of the key references on the debate have appeared in journal articles. The position is confusing, as there is no clear consensus either on what the disciplinary framework to be adopted should be, or its conceptualization.

Before these two issues are discussed, it is instructive to examine what has been stated about the nature of tourism that, it is argued, should inform the way in which it is analysed and perceived. Parry and Drost (1995), in a relatively early paper on management related to marketing, and Faulkner and Russell (1997) strongly argued for an alternative approach to the study of tourism founded in complexity and chaos theory, which Lorenz (1963) first propounded as a result of his dissatisfaction with the models then used in meteorological forecasting. His observations of uniformity, emerging from what appeared to be ostensibly random occurrences f...

Table of contents

• CONTENTS
• FIGURES AND TABLES
• AUTHOR PROFILES
• PREFACE TO THE FIRST EDITION
• PREFACE TO THE SECOND EDITION
• FOREWORD
• ACKNOWLEDGEMENTS
• ABBREVIATIONS, ACRONYMS AND GLOSSARY OF TERMS
• PART I Introduction and demand theory in tourism
• PART II The economics of tourism supply
• PART III The economics of tourism at a national, regional and international level
• PART IV The economics of environmental issues in tourism and an appraisal of the economic analysis of tourism
• REFERENCES
• INDEX