Week Three Workshop Questions – 3203THS Tourism and Hospitality Economic Analysis

Student Name: Xia YANG Student number: s5078560

Workshop Questions (please attempt these before coming to class)

1. What five factors can cause a shift in demand for goods and services? Give an example of
each in the leisure, tourism and hospitality sector. Please use different examples than those
used in the lecture

The factors that can cause a shift in demand for goods and services are: disposable income, price of
other goods, perceptions about comparative quality/value, fashions and tastes and consumer
confidence in the economy.

The demand of goods/services can depend on the income of people. The increases of income of
people increasing results in increase in demand as people can afford more. The greater income
means greater power of buying. For example, if people’s income increases, they will consider about
luxury hotel instead of budgeted hotel.

The demand of goods/services is also impacted by the prices of other related goods. When the price
of other related goods changes, the whole demand curve would change its positions. Therefore, the
price of the substitutes of a good fall, the demand of that goods would fall as well. for example: in
the restaurant, if the prices of wine decreases, people would likely to choose wine rather than beer
as beer and wine are similar beverage. The demand of beer falls.

The perceptions about comparative quality/value is also another factor that affect demand. This
means that the quality or value of particular products are better, the demand of this product will be
stronger. For example, people are more willing to choose the one that are more clean, comfortable
and easily accessed when they need to choose one from two hotels.

Fashions and tastes of consumers is an important factor which determines the demand for a good or
service. The consumer’s tastes and preferences are greater, its demand would likely to be large and
its demand curve will therefore reach at a higher level. On the contrary, consumer’s fashions and
tastes are no longer favourable to the certain goods or services, the demand for them decreases. For
example, people are pursuing the concept of friendly environment, therefore the demand of eco-
friendly are increasing.

Lastly, consumer confidence is another important factor that can shift demand curve. This is about
that consumer has confidence on the current and the near future economy as well as their financial
status, they would likely to spend more. For example, if a person sees his/her salary will rise as the
macroeconomic is developing, he/she would choose to go to travel and spend money in the trip.

2. What four factors can cause a shift in supply of goods and services? Give an example of each
in the leisure, tourism and hospitality sector.

The factor can cause a shift in supply of goods and services are prices of other goods/services that
the firms could be producing using the resources, changing costs of production, technology and
government taxes and subsidies.
The first factor is the prices of other products that firm could be producing using the resources.
When the prices of other products are lower, the supply will be higher. For example, lobster is used
in a seafood dish. when the price of lobster goes down, then the hotel will purchase and stock more
of lobster to sell more lobster in their restaurant which increase the supply of lobster. (freight vs
passenger planes)

The increasing cost of goods have impact on the organisation’s willingness to supply. For example,
when the labour costs increase, the restaurant would reduce the amount of worker, however, the
quality of service would decrease as there is a shortage of staffs.

When there is a new technology is launched, the availability of new product is improved, such as the
theme park applied VR technology in order to deliver more real experiences to their customers.
Additionally, the cost of products will decrease due to new technology. For example, the new
technology allows tourists to book their hotel, transportation or tour guide through their phones. It
creates a more efficient way for providing services in terms of increasing supply. (more fuel efficient
planes)

The changes in government policies can affect the cost of production and supply curve through taxes
and subsidies. The government imposes a tax on alcoholic beverages that collects 5 million from
producers. Taxes are considered as costs of production. Higher cost decrease quantity of this
product as it is more expensive to produce alcoholic beverage. While subsidies are the opposite of
tax as it reduces the additional cost of production, and increase supply. (passenger movement
charge)

3. Read the article “Hotels take profit hit despite surge in tourism, thanks to supply boost” and
summarise it in your own words. (2-3 sentences would be fine)

The surge in tourism boosts the supply of hotel, however the revenue per available room still
decreases as growing new hotel room exceed the additional room sold. Therefore, those new hotels
tend to lower their room rate to attract consumers in a short period. However, it is a opportunity for
leading luxury hotels that are newly opened to lift their rates by offering qualified services instead of
competing with others by lowering rates. It is just a short-term blip in profitability and improvements
are expected in 2019.

Reflection

Please identify any concepts you would like further explanation of in next week’s lecture.

I would like to learn more about how demand and supply affect the price of actual products or
services, especially in tourism and hospitality industry.