The Economic Environment

Earlier discussion with respect to the broader global environment pointed to aspects of the economy both at a national and global scale which impact indirectly on the attraction sector. Such things as increasing globalisation; the emergence of hitherto non existent consumer markets; and the entrance of countries such as China into the domain of free market economies all clearly have some impact on the demand for tourism. (Wahab and Cooper, 2001)

This section is, however, devoted to an examination of the more direct economic factors that impact on the operation of small to medium sized attractions specifically at a micro-level. Traditionally, this has centered on the way economic conditions or variables shape consumer behaviour [both as it relates to discretionary spending in general to specific product choice in particular].

Song and Wong (2008, p.57) allude to a large body of literature on tourism demand analysis that examines “the factors that influence tourism demand and the elasticities of tourism demand with respect to those influencing factors”. The utility of this research, they declare is “that it provides useful insights to the understanding of tourist decision making processes and gives relevant policy suggestions for both public and private sectors engaged in tourism development and marketing” (p.57)

Although as Uysall (1998) argues “income and price related factors are likely to play a major role in determining demand for tourism, as embedded in economic theory, the number of potential demand determinants in the tourism literature is almost unlimited”. Notwithstanding, as Song and Wong (2003, p.58) observe, although intention to visit a destination [or attraction] is influenced by a number of social, cultural and geographical factors [elements of suppy], “realised demand is largely determined by economic factors”.

Although there appears to be some minor disagreements in the literature as to the most valid determinants, income levels, the actual and relative price of the destination product; and transportation costs, appear to be generally accepted measures (Lim 1997:1999). Uysall (1998) suggests that these are in turn influenced by wider economic forces including the prevailing business environment, overall economic growth and stability; the absence or otherwise of economic recession; and regulatory restrictions of a specifically economic nature. The realisation that shifts in the

economic environment are difficult to predict with any degrees of certainty, places attractions, which rely on sustained demand for their existence, in a potentially vulnerable position.

Much can be achieved, however, by simple market ‘intelligence’ in keeping abreast of external economic trends and events and postulating their likely impact. To some extent such a process can be augmented by internal trend analysis which may identify new or growing markets. Whilst far from an exact science, estimates of ‘cause and effect’ can sometimes be a useful way of conceptualising marketing strategies either in defence of existing markets, or in pursuit of new opportunities.

Although this invites a detailed examination of economic theory this is not considered to be within the scope of this study. Rather, a general discussion on the probable and possible impacts of various economic variables identified earlier is considered appropriate.

Income as a determinant

Uysall (1998, p.88) argues that “income is the variable most commonly used to explain and determine tourism demand”, a view that appears to be shared by Ryan (2003, p.27) in keeping with “conventional micro-economic theory”. The broad acceptance of income as the primary explanatory variable can be best demonstrated by the results of a survey of tourism demand modelling conducted by Lim (2006). Reporting on an analytical review of 124 empirical studies on the major factors influencing tourism demand, “income in the origin country [was] the most frequently used explanatory variable” (p.57). Ryan (2003), however, declares “that the relationship between tourism expenditure and gross personal income is indirect [and that] the links between ‘discretionary’ income and tourism spending are more pertinent” (p.31). The issue is complicated by the realisation that the availability of disposable and thereby discretionary income will not necessarily translate into tourism demand or, more particularly individual attraction choice. Competitive destinations and consumer goods generally vie for the same pool of available funds.

What becomes clear from this brief review is that upward income trends, although a reasonable predicator of increased tourist motivation and demand do not offer

income] may be simply too complex for most small to medium sized enterprise to grasp.

Despite this complexity, however, the realisation that general economic conditions in current or potential source markets, possibly measured by such things as GDP (Lim 1997) as proxies of real income, provides operators of attractions with at least some indication of market potential. Further, the fact that as Lim (1997) observes there is an inevitable lag between economic shifts in the origin country, and variations in demand, market intelligence by whatever means becomes a vital direction. Earlier discussion with respect to the importance of forging relationships with government is again emphasised. As repositories of such data a range of government departments and instrumentalities can place such information at the disposal of even the smallest attraction. Although this information begs tactical responses such as pricing or promotional strategies, it also raises the bigger issue of continuously prospecting for new markets as a means of buffering against such changes. Such a proposition is central to theories of organisational adaption (Miles and Snow 1984) which posit greater success for organisations that find and exploit new market opportunities.

Pricing as a determinant

A number of authors (Uysall 1998; Ryan; 2003; Song and Wong 2008) agree that price is the next most important determinant of demand. In considering price it becomes important, however, to make a distinction between price as an element of the marketing mix of individual companies, and the relative price of competing products or destinations. Perhaps a better way of conceptualising price may thus be a matter of considering the competitive environment within which individual destinations or attractions operate.

Although essentially a construct of urban and economic geography, theories of spatial interaction applied to tourism suggest that complimentarity between demand and supply, which is the essence of tourism flows, is tempered by intervening opportunity or “the existence of alternative sources of supply usually at a lower cost” Kelly and Nankervis (2001, p.20), plus what is termed ‘distance decay’ or “the decline in the number of interactions [visits] as the distance between locations increases” (p.23).

A number of authors (Ryan 2003: Uysall 1998) see price, consisting of two components, including the cost of travel which, it might be argued, is directly related to

distance, and the ‘cost of living’ at the destination which includes such elements as accommodation and activities. In observing the nature of the tourism product, Seaton and Bennett (1996, p.24) contend that “tourism is often a combinatory product which requires the deliberate or non-deliberate collaboration of several different parties”. In essence this would suggest that small attraction operators have limited control over the end price of the visit.

If nothing else this implies that greater degrees of collaboration and networking would be conducive to the development of a competitive destination product. Bramwell and Sharman (1999) suggest that such collaboration “adds value by building on the store of knowledge insights and capabilities” (p.393). They acknowledge, however, that attempts at collaboration “give rise to difficult challenges” (p.393). Although these authors do not explicitly refer to pricing it is held that any collaborative arrangement would involve at least some agreement on pricing policy.

Nor, as might be implied, should such networks be confined to providers of the constituent parts of the destination product. A growing body of literature (Buhalis 2000; Dredge 2004) points to the importance of public sector involvement with others (see for example Jamal and Getz 1995) calling for greater community involvement in the process.

With the price of the destination product seen as critical to competitiveness (Dwyer, Forsyth, and Rao 2000; Forsyth and Dwyer 2009), reaching consensus and an air of cooperation rather than engaging in parochialism seems a vital step. Pointing to the work of Healey (1997), Bramwell and Sharman (1999, p.392) list, amongst the principal benefits of collaboration, “avoidance of] the cost of resolving adversarial conflicts in the long term”.

Although destination pricing is merely one part of this collaborative process it is arguably amongst the most important. Murphy, Pritchard and Smith (2000) suggest that “perceived trip value will positively affect traveller intentions to return”. With repeat visitation a critical element of successful destinations such an observation is of particular note. This has particular relevance to the focus of this research given that attractions are a discrete but important component of destination appeal. The extent to which they are able to forge positive relationships with other stakeholders, engage in