ECONOMICS OF TOURISM

The organization faces low entry barriers for entering the tourism sector, which is one of the characteristics of fragmented industries. In fragmented sectors, none of the industries or organizations holds a significant share in the market or the ability to influence the overall outcome of the sector. For the fragmented industries, the top-4 firm concentration ratio is less than or equal to 40%. Apart from other indications, this measurement or indication criteria also suits the tourism industry, which supports the given assertion. The fragmented nature of the tourism sector influences both public as well as private services. It not only influences the infrastructure of the economy but also has a considerable impact upon agriculture, transportation, accommodation, landscape, as well as the environment or natural resources. Tourism is of various types, such as international or domestic tourism, cultural and historical, adventurous or recreational tourism.

The various competitive organisations in the tourism sector are in an influential position to affect the entire sector. Like other fragmented sectors, tourism also has low entry costs, resulting in high payoffs for consolidation. The service providers of a vast range of products and services offer very weak competition and thus there is a minimum threat of retaliation  (Nguyen, Esteban, and Onuki, 2019). To disrupt tourism services, it is required to build and utilize a multi-sided model so that demand and resource allocation can be met efficiently. Thus, the tourism sector demonstrates a similar attribute as that of fragmented one. This fragmentation allows tourism sector organisations to develop a business as per market opportunities or the personal instincts for exploring huge opportunities of fragmentation.

Thus, the tourism sector can be considered a fragmented sector or market that is in search of an industry so that better development and improvement policies can be formulated for all the fragments (Luah et al., 2019). The marketing expenses of the tourism industry are also lower because it mainly encompasses local marketing. Thus, tactics such as social media, digital marketing, and word-of-mouth publicity are preferred for promoting services and products among local people instead of favoring the national population. Tourism as solely complete industry does not provide a fixed or regular pattern of services. Instead, its fragmented nature includes servers that provide differentiated services to its diversified customers. It includes innovation opportunities for the company as well as lower competitive threats, demonstrating the fragmenting nature of the tourism industry.

2. Contribution of the economy to tourism

The tourism industry is not only affected by service quality but also by public policies, government regulations, and the responses of local communities, as well as by political and economic stability. A stable economy tends to have a positive impact on tourism and encourage more travelers. Any kind of instability, such as huge growth in the inflation rate or an imbalance in the demand and supply gap, hurts tourism (DENG and LI, 2017). However, this impact can be of different extents on different segments of tourism. For instance, inflation may not affect the number of business travelers, but it will bring a significant decline in the number of tourists who visit the destination for adventure or recreational purposes. The tourism sector is also known to be dependent on one economy.

The development of tourism is also an important agenda of government and national development policies. The sector equally contributes to the national as well as regional economy. However, with economic instability, the local economy is affected greatly and severely. Another critical trend that is observed in the tourism economy is that planning and tourism-related decisions are influenced by economic stability and economic measures such as inflation rate, consumer price index, and employment indicators (As-il, 2015). For instance, if the inflation rate or consumer price index is higher, then tourists may prefer to avoid their visit or to spend the minimum on purchasing local resources. It naturally influences or causes a reduction in the overall contribution provided by the tourist to local vendors, food, or accommodation service providers.

Similarly, business tourism is a significant contributor to the development of the economy. However, when the economy is not stable and suffering from a critical phase, it makes employment and business development projects extremely rare. As a result of this, business-based tourism has completely vanished or is limited to a great extent (Nichols, Ralston, and Holmes, 2017). Thus, the countries that desire to develop their regional places as tourism hotspots are also required to emphasize a stable economy. The stability in the economy encourages people to visit the nations, as it gives them a purpose to explore a stable and highly developed country.

The tourism economy has also been witnessing a vast range of developments and issues. One such issue is environmental sustainability. The huge exploitation of natural resources due to tourism activities has created a scarcity of natural resources thus affecting the demand supply, cost, and import of resources (Getz and Page, 2016). Thus, sustainability has been emerging as the key issue in tourism economics. It has been emphasized by policymakers that economic sustainability cannot be achieved without considering the environment. Tourism is also considered a means for regional development. Thus, local authorities are creating new local tourism destinations so that the regional economy can also be supported. The challenges to control inflation and the interest of local service providers with the increasing international ventures or foreign investment are also critical aspects of retaining a stable economy and encouraging tourism development without letting tourism get affected.

3 text-based questions

A.) Role of projects such as hosting of Olympic games in regeneration

When nations organize international events such as the Olympics, apart from the huge economic growth, it also benefits in terms of regeneration. The organization of such games demands improved infrastructure and resources. Thus countries begin to explore for the resources which can add to it. For instance, the same was observed in Sydney, where a dumping ground was regenerated to result in a modern-day destination that is highly accessible and visited by people (Nguyen, Esteban, and Onuki, 2019). These events also provide quick and more influential strategies for governance so that high-quality urban development and infrastructure policies can be formulated and host destinations can be regenerated. The events also create job opportunities and revenues, which can be used to further maintain the regenerated outlook of the host city.

B.) Negative economic impact of hosting the Olympic games

In addition to the economic benefits, hosting the Olympics also has certain disadvantages. For instance, many service users go for international brands instead of local suppliers during the Olympic games. Thus there is no benefit to the economy, but it leads to excessive resource consumption. For organizing such events, nations also spend huge money on building stadiums or infrastructure, which are used for the short-term only. Thus, these unnecessary expenditures add to the financial budgets, and taxpayers have to pay irrelevant taxes for them. In some circumstances, such as if corruption, negative feedback, or any adverse event occurs during these events, then it gives huge negative publicity to the country. As a result of this, there is a negative impact on the brand value of the nation, which can affect the economy or foreign investments as well.

C.) Opportunity cost of public sector  investment

The vast range of public sector investment in the Olympics can be considered an opportunity cost for improving the infrastructure of local communities. These investments improve urban cities as per international standards of quality. However, if such funds are invested in people with low-income levels or unemployment, then they can be provided with a good quality of life using education facilities, residential and food services, along public health and welfare programs. Another opportunity cost for these investments is the improvement of communities that need government support for their healthy and safe survival in poverty situations.

D.) Industries likely to get benefits

The Olympic games provide great development and growth opportunities to various industries. The first industry is the travel and tourism industry. The organization of such events creates demand for accommodation services, food and beverages, and transportation services. In addition to this, Olympic games also benefit the infrastructure or construction industry because these games also generate the need for building infrastructure, stadiums, and other game requirements (Getz and Page, 2016). The success of these events also motivates people to learn such game skills. For this purpose, tertiary services such as teaching or the health care industry also benefit from this so that individuals can get quality services. In addition to this information and technology industry, the agriculture industry also gets opportunities for earning profits or revenues.

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