Running Head: ADVANTAGES OF FORECASTING THE DEMAND FOR TOURISM

Advantages of forecasting the demand for tourism

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Introduction

Tourism demand forecasts are of great economic value both for the public and private sector.

Any information concerning the future evolution of tourism flows is of great importance to

hoteliers, tour operators and other industries concerned with tourism or transportation, in order to

adjust their policy and corporate finance. In the last few decades, numerous researchers have

studied international tourism demand and a wide range of the available forecasting techniques

have been tested. Major focus has been given to econometric studies that involve the use of least

squares regression to estimate the quantitative relationship between tourism demand and its

determinants. However, econometric models usually fail to outperform simple time series

extrapolative models. This article introduces a new approach to tourism demand forecasting via

incorporating technical analysis techniques. The proposed model is evaluated versus a range of

classic univariate time series methods in terms of forecasting and directional accuracy [1].

[Despite efforts by social scientist undertaken since the mid-20th century (Kates, 1971; White,

1942; White, 1973; Quarantelli, 1988), the risk assessment seen from perspective of disaster risk

has only been treated fairly recently. Its systematic conception and analysis was practically

assumed by experts and specialists in the natural sciences with studies regarding geodynamics,

hydro-meteorological and technological phenomena such as earthquakes, volcanic eruptions,

mudslides, flooding and industrial accidents. In other words, emphasis was centered on the

knowledge of hazards due to the existing investigative and academic biases and the efforts of

those who first reflected on these issues (Cutter, 1994). It is important to point out here that the

emphasis still remains, particularly in the highly developed countries, where due to their
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technological development people try to find greater detail the generating phenomena of the

threats. This was an evident trend during the first years of the `International Decade of Natural

Disaster Reduction declared by the United Nations (UN) General Assembly.]

The tourism industries, and those interested in their success in contributing to the social and

economic welfare of a citizenry, need to reduce the risk of decisions, and that is, reduce the

chances that a decision will fail to achieve desired objectives. One important way to reduce this

risk is by discerning certain future events or environments more clearly. One of the most

important events is the demand for a tourism product, be it good, a service or a bundle of

services such as vacation or what a destination offers.

All industries are interested in such risk reduction. However, this need may be more acute in the

tourism industries than for other industries with other products, for the following reasons [2]:

The tourism product is perishable. Once an airliner has taken off, or a theme park has

closed for the day or morning dawns over a hotel, unsold seats, admissions or sleeping

rooms vanish, along with the revenue opportunity associated with them. This puts a

premium on shaping demand in the short run and anticipating it in the long run, to avoid

both unsold `inventory on the one hand and unfulfilled demand on the other.

People are inseparable from the production-consumption process. To a large extent, the

production of the tourism product takes place at the same time as its consumption. And

much of this production-consumption process involves people interacting as suppliers

and consumers, such as hotel staff, waiters and waitresses, flight attendants and

entertainers. This puts a premium on having enough of the right supply personnel

available when and where visitors need them.

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Customer satisfaction depends on complementary services: While an hotelier directly

controls what happens to guests in her or his hotel, the visitors experience depends on

satisfaction with a host of goods and services that make up the visit. A hotels future

demand, therefore, depends on the volume of airline flights and other transport access to

its area, the quality of airport services, the friendliness of taxi drivers, the quality and cost

of entertainment and the availability of recreational opportunities, to name just a few of

these elements. Forecasting can help ensure these complementary services are available

when and where future visitors need them, which will rebound to the benefit of the hotel

or other individual tourism facility.

Leisure tourism demand is extremely sensitive to natural and human-made disasters.

Much holiday and vacation travel is stimulated by the desire to seek refuge from the

stress of the everyday environment. Moreover, today there are countless alternatives for

spending leisure time pleasantly for residents of most developed nations. As a result,

crises such as war, terrorist attacks, disease outbreaks, crime and extreme weather

conditions can easily dissuade leisure travellers from visiting a destination suffering from

one of these, or from travelling at all. The ability to forecast such events and their

projected impact in tourism demand can help minimize the adverse effects of

catastrophes on the tourism-related sales, income, employment and tax revenue of a

place.

Tourism supply requires large, long lead-time investments in plant, equipment and

infrastructure. A new hotel may take three to five years from concept to opening. A new

airport or ski resort may take a decade or so for all planning, approvals and construction.

A new airplane may take five years to may take five years to produce from an airlines
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initial order to final delivery. Future demand must be anticipated correctly if suppliers are

to avoid the financial costs of excess capacity or the opportunity costs of unfilled

demand[3]

Accuracy of monitoring plays an important role in early warning, not only in a technical sense. It

also helps to prevent false alarms and therefore helps to build up trust in the warnings.

Monitoring has to adapt continuously to the changing hazard landscape, especially in light of

climate and environmental change. Examples such as the evacuation of 40,000 people in the

Popocatepetl region, Mexico, in December 2000 just hours before a major eruption are

noteworthy examples of successful early warning from which a lot can be learnt[4].

At the Symposium of the EWC III Third International Conference on Early Warning [5], it was

strongly felt that warning systems must be people-centered: they have to support and empower

people in protecting themselves. In order to go the last mile, an integrated approach to early

warning has to be based on the needs, priorities, capacities, and cultures of those at risk. People

at risk must be partners in the system, not controlled by it[6].

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References

[1] A technical analysis approach to tourism demand forecasting C. Petropoulosa, K.

Nikolopoulosb,*, A. Patelisa and V. Assimakopoulosc

[2] Advantages of Tourism demand forecasting/Forecasting Tourism demand: Methods and

Strategies By Douglas Frechtling;

[3] Advantages of Tourism demand forecasting/Forecasting Tourism demand: Methods and

Strategies By Douglas Frechtling; page 5

[4] Excerpt: Summary of the Scientific and Technical Symposium, Multi-hazard Approaches

Session; 17 (EWC III Third International Conference on Early Warning, 27-29 March 26

March, Bonn Germany)

[5] www.unisdr-earlywarning.org

[6] Excerpt: Summary of the Scientific and Technical Symposium, (EWC III Third International

Conference on Early Warning, 27-29 March 26 March, Bonn Germany)