How Has the Current Recession Affected Demand for Overseas Travel for Different Consumer Groups, Based on the Income Elasticity of Demand?

Personal consumption expenditure also increased in 1998 compared to 1997. Because the aging population will decrease the labor force growth, this will reduce the economy’s potential to produce. This will increase the cost of labor for the airline industry. Households in the Northeast and West spent more than the Midwest and South in 1995. Because regional spending patterns are partly determined by climate, spending by region is not likely to change in the years ahead. 4. Political/Legal Environment With the deregulation of the airline industry came the advent of hypercompetition and also a decrease in wages for airline industry employees. Censuses show a 10% decline in the relative earning of airline workers after deregulation. Excess government intervention will be the only thing that will inhibit the rapid growth effects of deregulation both domestically and internationally. 5. Global Environment Growth in international travel will be determined on the successful application of Open Ski legislation and other agreements with foreign governments and carriers. On June 16, 1999, the United States and the United Kingdom were on the verge of a break through in their negotiations on an open-skies agreement between the two countries. This would create an open and competitive environment in one of the world’s largest international aviation market. The European Community has been working on its own version of Open Skies deregulation. European regulation is a national

P4) Review factors that have contributed to one declining destination (Cyprus) and one developing (Greece) in the European travel market.

The number of trips taken by Britons overseas has declined by 12.6 million, from 69.4 million to 56.8 million between 2007 and 2011, according to the research by Travelodge. This means that 5.9 million holidays and trips have come out of the market altogether when the number of domestic holidays and trips are factored in. This is shy of the government’s stated ambition for domestic trips to replace the number of missing overseas trips, the report says. However, the analysis shows that ‘staycation’ breaks were up by 5.6% as the recession proved that holidays are an essential rather than a luxury. UK city breaks account for 23% of domestic tourism but seaside towns are in decline by 5%. Total tourism revenue was up 12.6% to £40 billion between 2007-2011 against the general economy up 8%. Employment numbers in tourism have bucked the wider trend, thanks to strong growth in 2011 when 120,000 new jobs were created. The UK’s appeal as a tourist destination endured during the double dip, with overall visitor numbers up by 3.1% to 157.4 million, the report shows. Staycations form the backbone of the tourism economy, with domestic trips and holidays increasing by 5.6% to 126.6 million.

| * Recent international Economic recession * Customers reluctant to travel due to increased gas prices * Decreased leisure spending

During 9/11 it dealt with its most difficult year. The United States had welcomed 60 million international visitors. 4.8 million more visitors than in 2009. The visitors who came to the United States injected more than $134.4 billion in the U.S. alone. Even with a strong recovery, the industry related employment has not recovered. The lack of demand for travel and tourism related goods took a major toll on this industry. In 2010 there was 44% total of overseas arrivals to the United States. The travel and tourism exports increased 12% when put up to 2009. In the international market many of the different places opened up for demand and ended up ranking in higher visitor spending percentages. Employment dropped 1.4% in 2010, 7.8% in 2009. There was nearly 112,000 jobs lost in 2010 due to it reducing its labor force by nearly 11 million.

When looking at the elasticity of demand Southwest is extremely impacted by the elasticity of demand. Items such as externalities, unemployment, inflation, and monetary, fiscal, and federal policies affect the elasticity of demand. The elasticity of demand is based solely on current market conditions, the customer’s purpose for travel, and available substitutes. The airline industry is viewed has being unstable because it is based on current market conditions, and the market is always changing.

Income elasticity measures the responsiveness of consumers to changes in their incomes (McConnell, p 88). Demand for normal goods tends to increase as consumers’ incomes increase and conversely, demand for inferior goods tends to decrease as consumers’ income increases.

Consumer behavior have changed, they are more interested in luxury goods and imported products which confirms the increase in income

Most of Americans are middle classes and have a little wealth which are more likely to do a lot traveling

Tourism data indicates that there will be a shift in international visitor demographics over the next 8 years (Appendix 14). Primary research has not provided sufficient information to draw conclusions about how this change in the origin of international tourists would impact pricing expectations see (Appendix 13) for further recommendations.

Tourism plays a vital role in economic development in most countries around the world. The industry has not only direct economic impact, but also significant indirect and influential impacts. There is agreement among experts that the travel and tourism sector is the fastest growing of global economy. According to the latest UNWTO World Tourism Barometer, international tourism receipts surpass US$ 1 trillion in 2011, growing about 3.8%up from 2010 (WTO, 2012).

It is relatively price-inelastic for business travel. Due to the budget of their business, encouraging them to travel more frequently by offering low prices will not effect to their travel decision. In another way around, increasing prices neither discourage they to hesitate go travelling.

Since the airline industry is a direct product of market conditions, it is greatly affected by all externalities. Many people noticed a decline in travel after the September 11th tragedy occurred due to safety concerns. When there is a huge increase in fares that definitely interferes with the demand for travel; it causes the price of tickets to continue to rise since a clear correlation between supply and demand exists. When the economy is doing well in terms of the employment rate, and when the dollar is strong people have the tendency to travel more (Jerram,1998).

From an environmental perspective, it is apparent that the world is starting to realise that increases in tourism are having a negative impact on the environment. This is due to increases in energy consumption, which in turn heightens the effects of global warming (Neto, 2002). There are many controls that governments are trying to put into place, such as flight rationing (Liverpool Business School, 2009). However, it can be argued that these have not really begun to have a significant effect on tourism, as they are still insufficient to dampen demand. It may become a problem in future years, as the number of controls is likely to increase. Perhaps the largest environmental factor would be natural disasters, like Hurricane Katrina (Cashell, 2005) and the tsunami that hit Asia in December 2004 (Birkland, 2006). These will impact negatively on people’s confidence in visiting places that have been hit severely by such disasters.

The state of the industry since September 11, 2001 is as follows: Airlines have experienced two point one billion in losses and more than one hundred thousand layoffs. Employment domestically has experienced a ten percent drop in demand and employment globally has experienced a thirty percent drop in demand. Hotels have experienced a two billion dollar lost in room revenue and meeting room and convention industry has experienced a one billion dollar loss. As a whole the entire Travel and Tourism industry have experienced an enormous drop in revenues.