Lesson 1: Nature of Tourism

Specific Objectives:

At the end of the lesson, you are expected to:

1. Identify the three general sector of the tourism industry.

2. Name the different services the tourism industry offer to market.
3. What is PESTLE Analysis and its importance in the operation of the tourism industry?

Let’s Learn

An Overview of the macro-environment of the Tourism Industry (PESTLE Analysis)

The PESTLE Analysis is a framework used to scan the organization’s external macro
environment. The letters stand for Political, Economic, Socio-Cultural, Technological and
Environmental. Some approaches will add in extra factors, such as International, or remove some
to reduce it to PEST. However, these are all merely variations on a theme. The important
principle is identifying the key factors from the wider, uncontrollable external environment that
might affect the organization.

https://blog.essaycorp.com/pestle-analysis-for-construction-industry/pestle-analysis-feature-image/

PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S
for Social, T for Technological, L for Legal and E for Environmental. It gives a bird’s eye view
of the whole environment from many different angles that one wants to check and keep a track of
while contemplating on a certain idea/plan.

Political factors refer to the stability of the political environment and the attitudes of political
parties or movements. This may manifest in government influence on tax policies, or
government involvement in trading agreements. Political factors are inevitably entwined with
Legal factors such as national employment laws, international trade regulations and restrictions,
monopolies and mergers’ rules, and consumer protection. These factors determine the extent to
which a government may influence the economy or a certain industry. For example, a
government may impose a new tax or duty due to which entire revenue generating structures of
organizations might change. 

The difference between Political and Legal factors is that Political refers to attitudes and
approaches, whereas Legal factors are those which have become law and regulations. Legal
needs to be complied with whereas Political may represent influences, restrictions or
opportunities, but they are not mandatory.

Economic factors are factors are determinants of an economy’s performance that directly

impacts a company and have resonating long term effects. For example, a rise in the inflation
rate of any economy would affect the way companies’ price their products and services. Adding
to that, it would affect the purchasing power of a consumer and change demand/supply models
for that economy. These may also vary from one country to another.

Socio-cultural factors represent the culture of the society that an organization operates within.
They may include demographics, age distribution, population growth rates, level of education,
distribution of wealth and social classes, living conditions and lifestyle.A factor that also
scrutinizes the social environment of the market, and gauge determinants like cultural trends,
demographics, population analytics etc. An example for this can be buying trends for Western
countries like the US where there is high demand during the Holiday season.

Technological factors refer to the rate of new

inventions and development, changes in
information and mobile technology, changes in
internet and e-commerce or even mobile
commerce, and government spending on research.
There is often a tendency to focus Technological
developments on digital and internet-related areas,
but it should also include materials development
and new methods of manufacture, distribution and
logistics.
https://pestleanalysis.com/technological-factors-affecting-business/

These factors pertain to innovations in technology that may affect the operations of the industry
and the market favorably or unfavorably. This refers to automation, research and development
and the amount of technological awareness that a market possesses.

Legal factors have both external and internal sides. There are certain laws that affect the
business environment in a certain country while there are certain policies that companies
maintain for themselves. Legal analysis takes into account both of these angles and then charts
out the strategies in light of these legislations. For example, consumer laws, safety standards,
labor laws etc.
 Environmental impacts are factors that
include all those that influence or are
determined by the surrounding
environment. This aspect of the PESTLE is
crucial for certain industries particularly for
example tourism, farming, agriculture etc.
Factors of a business environmental
analysis include but are not limited to
climate, weather, geographical location,
global changes in climate, environmental
offsets etc.
https://www.pinterest.ph/pin/184999497180525069/

A newer force which is gaining in importance is ethics. These can be defined by the set of moral
principles and values that govern the actions and decisions of an individual or group. Ethics and
morals serve as guidelines on how to act rightly and justly when individuals are faced with moral
dilemmas.
This force could include corporate social responsibility, fair trade, affiliation between
corporations and charities. A particular problem may exist with how ethical factors relates to
legal forces as they may be at different stages in development. Something may be ethical but not
protected by law, whereas other activities may not be ethical, but are legal.

A PESTLE analysis should feed into a SWOT Analysis as it helps to determine the threats and
opportunities represented by macro-environment forces that the organization usually cannot
control.
On an international basis, it is best to perform the analysis on a country-by-country basis because
factors can differ greatly between countries (or even regions).

How to write a PESTLE analysis from scratch: The following are some frequently asked
questions that one needs to ask while conducting this analysis, which give them an idea of what
things to keep in mind. They are:

 What is the political situation of the country and how can it affect the industry?
 What are the prevalent economic factors?
 How much importance does culture has in the market and what are its determinants?
 What technological innovations are likely to pop up and affect the market structure?
 Are there any current legislations that regulate the industry or can there be any change in the
legislations for the industry?
 What are the environmental concerns for the industry?

All the aspects of this technique are crucial for any industry a business might be in. More than
just understanding the market, this framework represents one of the vertebras of the backbone of
strategic management that not only defines what a company should do, but also accounts for an
organization’s goals and the strategies stringed to them.
It may be so, that the importance of each of the factors may be different to different kinds of
industries, but it is imperative to any strategy a company wants to develop that they conduct
the PESTLE analysis as it forms a much more comprehensive version of the SWOT analysis.

Watch these link below:

SWOT Analysis and PESTLE Analysis in Apple business.

https://www.youtube.com/watch?v=VF6mFGlcXk4

Macro-Environment Trends in Hospitality & Tourism

https://study.com/academy/lesson/macro-environment-trends-in-hospitality-tourism.html

In the tourism industry, the macro-environment refers to the external forces that are largely
uncontrollable that affect the operation, survival, and growth of the tourism industry. These
forces are interrelated and change in one will affect the other forces. The tourism macro-
environment refers to: environment or nature, technology, politics and laws, society and culture
and economy.

In the Environmental factor, as we all know nature is one of the foundations of tourism. The
natural sceneries being sold in tourism is highly uncontrollable and the success of destination
depends on the ability to take advantage of the natural assets, to anticipate and respond to
nature’s wrath example of these are:

 Climate change – this is the most talked about environment issue nowadays. A lot of
tourist destinations will be deeply affected by the changes brought about by global
warming (rise in temperature) and the rise in water levels.
 SARS, CORONA virus and other health issues - public health issues deeply affect
tourism especially because tourism involves a lot of mobility.
 Environmental degradation is the worsening state of the environment has been
drawing the attention of concerned organizations and citizens. This heightened
environmental consciousness has contributed to the rise of alternative forms of
tourism such as ecotourism and geo-tourism.
 Natural disasters – several natural catastrophes have severely affected tourism in the
recent past especially in the Asian region. Disasters, though, sometimes present
opportunities. The rise in disaster tourism for example where tourists travel for relief
operations. Some devastation brought about by these disasters has become tourists
attractions like the lahar brought about by Mt. Pinatubo eruption.
 Transport pollution – this is perhaps the biggest environmental factor influencing the
tourism industry is the pollution created by transportation mediums such as buses,
trains, and — more so than others — airplanes. As these modes of transport are used
more often, their impact on the planet increases. All three result in the creation of
large amounts of pollutants (such as carbon dioxide) which contribute to global
warming and other environmental phenomena.
 Tourist negligence - In addition to pollution on a global level, tourism can cause
pollution on a local level. In some cases, tourists may be less respectful of a
destination than of their hometown, causing them to litter and/or contaminate.
 Whether it’s discarding of bottles in the countryside or using regular shampoo in
lakes, this is an unfortunate side effect of the tourism industry.

Technology – technology has been a

major driving force in the development
of mass tourism. These are some modern
technologies that brought too many
changes in the industry:

 Electricity – without
electricity there wouldn’t be
modern conveniences that are
very important for tourists
and travelers.
 Computer and the internet –
computerization has
revolutionized the buying and
selling of tourism products.
Internet marketing, online
booking, computer
reservation systems and the
like have all changed the way people travel.
https://www.openaccessgovernment.org/technology-trends-hospitality/57445/

 Transportation – the development of transportation caused the development in mass

tourism. Many new developments in transportation have also created newer types of
tourism such as space tourism.
 Better transport - One of the biggest technological factors influencing the tourism
industry is the development of transport. Not only do travelers have more
transportation options than ever before — especially with the advent of airplanes —
but they are cheaper (and faster!) than ever before. Buses, trains, and planes are also
more comfortable than previously, and feature new amenities such as Wi-Fi
connectivity or charging ports.

Politics and Laws – tourism development is

influenced by political and legal factors.

 War and Peace – wars have the

effect the suspending travel. In
times of war, tourists are afraid
to travel around while in times
of peace many travelers roam
around.
http://jackchild123.blogspot.com/2012/05/political-factors-polictians-in-uk-make.html

 Terrorism – terrorism is one of the most serious obstacles to travel and tourism. The
more perceived threats could prevent a place from becoming a successful destination.
 Political and economic integration – encourages greater travel. Regional blocs and
organizations have made it easier for people to travel around.
 Open borders - Thanks to many governments’ decisions to open up borders to
foreigners, it’s easier than ever to travel to new countries. While some countries are
still difficult to access (often for political reasons), the vast majority of destinations
can now be visited by tourists from all around the world. In many cases a visa of
some sort is necessary; however, the process of applying for a visa has been
expedited in many countries, in part thanks to the use of technology.
 Government stability - Political stability is a major factor in the success of tourist
destinations. Travelers are naturally curious to visit all corners of the world, and they
can only really be swayed by the threat of danger. Most popular tourist destinations
are considered safe. However, there are a number of culturally-rich destinations that
would be popular tourist spots if not for political instability. Examples include Syria,
Iraq, and recently Hong Kong.
 Tax incentives - Political factor impacting the tourism industry across the world is
that of tax incentives. In many countries, tourists are able to claim a tax refund on
products purchased during their trip upon departure. It’s rarely the case that these tax
incentives are the only reason for a tourist to visit, but there is no doubt that they are
an “incentive” for all tourists.

Economy – there is a positive relationship

between state of the economy and tourism
demand. The more the economy develops, the
higher the demand for outbound tourism gets.

https://www.ukinbound.org/resources/sharing-economy-final-report-all-party-parliamentary-group-
for-tourism-leisure-and-hospitality/

 Exchange rates and tourism – there is a positive relationship between the value of
local currency and outbound travel. An appreciation of the local currency will
encourage foreign travel and depreciation will discourage it.
 Globalized economy – because of globalizations, many companies around the world
are bringing their brands to oversee countries. Because of this, many people work in
 countries other than their own and their families benefit from this fact encouraging
more travel and tourism.
 Rising disposable incomes - Across the world, incomes are rising. As the world
economy grows, individuals are able to earn more and more. With living expenses
growing nowhere near as quickly, many of the world’s citizens have more money to
spend than ever before. This has led to an increase in the use of electronic goods
(which are increasingly accessible also thanks to lower product costs), but also results
in more individuals being able to travel. This is clearly a positive factor for the
tourism industry.
 Sharing economy - sharing economy is the name given to the business trend whereby
individuals exchange goods and services directly with one another using facilitating
services such as Uber and Airbnb. As you may have noticed from those two
examples, the rise of the sharing economy is changing the way we travel. With
services like Uber offering a reliable way for tourists to catch rides around the world,
and Airbnb offering a cheaper alternative to traditional travel accommodation (mainly
hotels and hostels), the sharing economy is making travel more accessible, but hurting
some of the industry’s corporate providers.

Society and Culture – modern society has

been subjected to accelerating social and
demographic transformations which have led
to the creation of new forms of tourism.

 Longer lives – advances in

medicine and nutrition have led
to increased longevity. Longer
lives mean bigger opportunities
for travel and tourism.

https://www.thepatriot.co.zw/old_posts/community-based-tourism-
key/

 Smaller family size – smaller family size makes it easier to travel due to decreased
cost and a smaller number of people to look to in a vacation make it easier to spend
more time for leisure.
  Women power – women make up half of the world’s population and the progress in
women’s rights and economic status has been contributory to the expansion of
tourism.
 Lifestyle changes – more and more people are becoming health and appearance
conscious. Many people now travel to explore new things and experiences.
 Impact of various generations on tourism – travel companies have focused on the
younger generation that has basically redefined how travel is made. The younger
generation also has made it possible for new types of tourism to prosper.
 Social pressures - There’s no doubt about it: travel is fashionable. With the rise of
social media, individuals now have a constant, online presence, and they want to use
that to impress. The social popularity of travel is causing individuals to travel when
they might have otherwise stayed home. Of course, this movement is a positive one
for the tourism industry, but may not see sustainable growth if society moves away
from the use of social media.
 Racial acceptance - Another positive socio-cultural factor for the tourism industry is
that of racial acceptance. Individuals from around the world are increasingly
accepting of those of other races and religions. This makes travelling a much more
comfortable experience, since tourists don’t need to worry about being profiled or
targeted as a result of their skin color, faith, or whatever other personal traits they
may have.

Nature of Tourism as an Industry

It can be said that the tourism is one of the emerging industries around the world. The following
framework discusses the value chain and relationships among tourism sectors that contribute to
the economy.

GOVERNMENT

TOUR OPERATORS

Tourism
Travel Agency Transportation Accommodation Food & Beverage
Attractions

The value chain provides a typical flow of the tourism business.

Tour Operators creates packages for a target market and travel agencies retail the package to
prospective tourists.

The Transportation Sector provides the tourists’ transport to their destination. It comprise
airlines, surface traveled transportation and sea vessels.

The Accommodation Sector, can be a tourism attraction on its own, is in charge of the lodging of
the tourists. Classified as six to seven-star hotels, the curiosity of prospective international
travelers is triggered.

The Food and Beverage establishments offer thematic, as well as local and foreign, gastronomy
or culinary tourism that entices individuals to try their cuisines.

In terms of the Tourism Attractions, countries have been focusing in developing the tourism and
attractions as an avenue to develop potential local tourism destinations, together with private
sector, to create successfully implemented community-based tourism projects that could generate
local employment, marginalized sectors, geared towards the conservation of the environment and
preservation of culture.

The Different Sector of the Tourism Industry

Have you ever stayed at a hotel, flown on a plane, or eaten at a restaurant? If so, you have
experienced the hospitality industry. The hospitality industry is a broad group of businesses that
provide services to customers. It's focused on the satisfaction of customers and providing
specific experiences for them. The hospitality industry is unique because it relies so heavily on
discretionary income and free time. Think about your last vacation. You didn't necessarily need
to go on the trip, but you did because you had both the free time and the extra money. In this
lesson, we'll look at different areas of the hospitality industry, its strong focus on customers, and
as well as levels of service it provides.
The hospitality industry can be divided into three general sectors: accommodation, food and
drink, and travel and tourism.

1: Accommodation
This hospitality sector deals with providing places for
people to stay. These range from basic lodgings
intended for stays of one or two nights, such as a motel
or youth hostel. These might offer facilities such as
shared dormitories or small private rooms containing
minimal furnishings. On the other end of the scale are
establishments such as luxury hotels and resorts offering
higher-end facilities, as well as serviced apartments
which may be used for longer-term accommodation.
https://www.freepngimg.com/png/33331-hotel-picture
Bed and Breakfasts
The bed and breakfast or B&B is a fixture of the budget accommodation sector. As the name
suggests, guests at a bed and breakfast receive lodgings in a shared or private room and at least
one catered meal per day.

Hotels
Hotels are a little higher up the scale than bed-and-breakfast accommodation. Rooms may be
basic, with access to a shared bathroom; luxury hotels offer large suites. Some hotels offer
extensive facilities and services, such as spas or gymnasia.

Motels
Motels focus on short-term lodgings, often aimed at those taking long journeys who need a place
to break their trip for a night or two. Facilities tend to be basic and practical, although there
are higher-end chains and “theme” motels have their fans.

Hostels
Popular with younger guests and other budget travelers, hostels offer basic comforts in a
convivial atmosphere. Lodgings may include private rooms but often focus on large
shared dormitories furnished with multiple bunk beds. Hostels often emphasize the social
element with group activities.

Resorts
Resorts range from the humble campground and caravan park to luxurious hotel complexes
catering to guests’ every need. The difference between a hotel and a resort is the greater
availability of external facilities such as recreation areas, private beaches, parks and so on.

Serviced apartments
A serviced apartment gives guests the comforts of home without having to worry about cleaning
and caretaking. It is a full-sized apartment intended for longer stays but administered like a hotel
room, with laundry, room service etc. provided for the guest.

Time sharing
In a timeshare arrangement you pay for the exclusive use of a particular apartment or other
lodging but only for part of the year. Time sharing can be an economical solution for those
who wish to stay at the same place every year.

2: Food and drink

The food and drink sector of the hospitality
industry includes places serving fast food at modest
prices to sophisticated restaurants. Pubs, wine and
cocktail bars are also part of this sector.
Entertainment establishments are often involved in
providing food and drink. In some cases (such as in
the case of a nightclub) food or drink is a major part of the entertainment on offer, while in
others (for example in the case of a cinema) food and drink are additions.

https://christiepitspub.com/

Restaurants
Restaurants are among the most obvious examples of the sector. They serve food of varying
quality, with a focus on dining rather than providing snacks. Some restaurants may also
serve alcoholic beverages, particularly wine their primary focus is food.

Catering
Catering involves the provision of food and drink at a premises other than a restaurant or other
eateries. This might be the client’s home, workplace or another venue such as a meeting hall or
conference center. Catering ranges from simple sandwiches to banquets.

Bars & Cafés

Bars focus primarily on providing drinks in a social setting. They may also offer light meals and
entertainment such as televised sports or live music or comedy. Cafés provide light meals and
hot or cold beverages, typically but not always non-alcoholic.

Nightclubs
Nightclubs focus more heavily on entertainment and social engagement than bars or cafés.
Music is typically provided by a DJ but live acts may also perform and there may be other
entertainments as well. Nightclubs typically serve minimal or no food, focusing on drinks.

Tea and coffee shops

Tea and coffee shops focus on providing hot beverages, often in a quiet and refined setting.
They tend to attract a more mature customer base. As well as tea, coffee and other drinks,
tea and coffee shops may offer snacks such as pastries.

3. Travel and Tourism

The travel and tourism sector of the
hospitality industry includes businesses
that arrange transport and activities for
travelers. This includes everyone from tour
operators dealing largely with those who
travel for leisure, to airlines and vehicle
rental specialists who serve both leisure
and business clients. In previous eras, these
would have been primarily bricks-and-
mortar firms; however, in the digital age,
more travel is arranged online and new
business models have evolved in response
to this.
https://www.asianhospitality.com/wttc-travel-tourism-created-7-million-jobs-globally-2017/
Travel agents
Travel agents arrange transport and accommodation for travelers. They are specialist consultants
who work with individual clients to tailor a suitable package, which may include lodgings,
activities such as tours, and travel arrangements such as plane tickets.

Tour operators
Tour operators specialize in arranging tours for their clients. This includes liaising with venue
operators, tour guides and other key organizations and individuals. Tour operators are not usually
involved directly with giving tours — this is the job of a tour guide.

Online travel agencies (OTA’s)

Playing an increasingly large role in the travel and tourism sector, OTA’s perform many of the
services offered by a traditional travel agency via a web-based platform. Their lower overheads
and greater agility allow them to offer competitive prices for their clients.

Cruises
Cruises combine both transport and accommodation. The purpose of a cruise is to provide a
luxury hotel experience while afloat, combined with travel to exotic and interesting destinations.
Cruises offer activities both onboard and on land, such as games and musical productions.

Car rental
Car and vehicle rental is an important hospitality sector both for leisure and business. Vehicles
range from chauffeur-driven luxury limousines to budget self-drive options. Rentals may be
required for as little as an hour or two or for extended periods of weeks or months.

Airlines
An airline is a company that provides air transport services for travelling passengers and freight.

Casinos
Casinos can be exciting destinations, offering games of chance and other entertainments. Casinos
may offer automated slot machines and video games; they may also include more
traditional gaming experiences such as card games or roulette. Many also offer food and
accommodation.

Recreational Park means a plot of land used for formal and informal recreational activities.
Recreational park includes, but is not limited to, playgrounds, playfields, and athletic courts (i.e.,
basketball, baseball, roller hockey, volleyball, and dog run).