Chương 1

1. What is the difference between GDP and GNP?

- Gross domestic product (GDP) is the value of the goods and services produced by a nation in a given period.
- Gross national product (GNP) is GDP plus income accruing to domestic residents from investments abroad less income accruing to foreign
residents from investments in the domestic economy.
** GDP + Net property income from abroad = GNP - Capital consumption = Net national income or net national product **
** GDP = Consumption + Investment + Exports – Imports **

GDP GNP

Definition Gross domestic product/product, made by people living and Gross Domestic Product/Product, made by the people
working in the country's territory. of a country, regardless of the region of the world.

The nature of the Calculates only the total product produced within that country's Calculates products in all regions of the world, as long
two indicators territory, regardless of the country's citizens. as they are made by citizens of that country.

Calculation formula GDP = C + I + G + (X – M) GNP = C + I + G + (X - M) + NR

What do GNP and GDP again reflects the amount of goods produced by a country GNP shows the level of consumption of
GDP reflect? in its territory, thereby calculating the average income of goods/services by the people of a country regardless
people in the country. of where they are located

Applicability More commonly used, used by countries to calculate average Usually applied in banking and finance to calculate
income the total output of final goods/services of countries.
2. If the balance of payments always balances why do we hear about deficits and surpluses?
The sum of the three balance of payments accounts must always be zero, because every transaction in international trade has a double aspect.
Just as accounting transactions are recorded by matching debit and credit entries, so too are international trade and financing transactions
recorded by means of matching plus and minus transactions.
If a UK exporter sells goods to a foreign buyer:
 The value of the export is a plus in the current account of the balance of payments
 The payment for the export results in a reduction in the deposits held by foreigners in UK banks (a minus in the assets and liabilities
section)
When we use the phrases 'deficit' or 'surplus on the balance of payments' what we actually mean is a deficit or surplus on the current account.
If there is a surplus (+) on the current account we would expect this to be matched by a similar negative amount on the assets and liabilities
section. This will take the form of:
 Additional claims on non-residents (for example, overseas loans)
 Decreased liabilities to non-residents (paying off our loans abroad)
This will involve not only banks and other firms but it may also involve the government too, since it is responsible for the 'reserves'. If there is
a deficit (-) on the current account the result will be a similar positive amount on the assets and liabilities section. This will consist of inward
investment and/or increased overseas indebtedness, representing how the deficit has been 'financed'. This means that banks and other firms will
owe more money abroad and the government may also be borrowing from abroad
The Balance of Payments (BOP) is an accounting record of all monetary transactions between a country and the rest of the world. It includes
all payments and revenues that flow between countries and is split into two accounts: the current account and the capital account.
A current account deficit occurs when a country imports more than it exports, while a current account surplus is the opposite. This can cause a
country to accumulate debt, while a surplus allows countries to invest in other countries. A current account deficit or surplus doesn't
necessarily mean that the balance of payments is unbalanced. It only indicates the magnitude of import and export activity between countries
and doesn't account for other transactions like tourism, banking, or investments.
3. What is the opportunity cost?
Opportunity cost is the cost of an item measured in terms of the alternatives forgone.

The **opportunity cost** is the cost of something that you forego when you choose to do something else instead. It is the potential benefit that
is lost when a choice is made to do one thing over another. It is the difference between what you could have done and what you actually did.
Chương 2
1. Discuss how each of the following might affect the demand for hotel accommodation at a destination:
a. A rise in income in the origin country.
b. A rise in the cost of transport fuel worldwide.
c. A successful marketing promotion by the destination country.
- An increase in income in the origin country may cause an increase in demand for hotel accommodation in that area. It could be due to people
having the ability to travel more often or to stay in hotel rooms with more luxurious amenities. Additionally, the rising income may increase
the number of people choosing to stay in hotels instead of staying with friends or family. That being said, there are also factors such as
proximity to attractions that can affect the demand for hotel accommodation regardless of income levels.
A rise in income in the origin country would likely result in an increase in demand for hotel accommodation at a destination, as people would
have more disposable income to spend on traveling. It could lead to an increase in the demand for hotel accommodation at the destination, as
people may have more disposable income to spend on leisure activities.
- An increase in the cost of transport fuel worldwide will lead to an increase in the cost of traveling, thus decreasing the demand for hotel
accommodation. This is because people may be less likely to travel due to the higher costs associated with the increased fuel costs.
Additionally, businesses may also be more reluctant to spend on corporate travel, thus decreasing the overall demand for hotel
accommodations.
Fuel cost increases will also likely have a negative impact on airline ticket prices. As fuel prices rise, airlines will be forced to pass the
additional costs on to travellers, resulting in higher ticket prices. This could lead to a decrease in the number of people who are willing to fly
due to the increased cost of air travel. This decrease in demand for air travel could then also lead to a decrease in demand for hotels in areas
where there are no nearby airports. It would likely result in decreased demand for hotel accommodation at a destination, as people would have
less disposable income to spend on traveling. Moreover, it could lead to a decrease in the demand for hotel accommodation, as people may be
less likely to take long trips due to the added expense.
- A successful marketing promotion by a destination country could lead to an increase in demand for hotel accommodation. This could be
done by providing promotional discounts and offers, or by setting up campaigns to better publicise the destination and its attractions. This
could lead to more people wanting to visit the destination, and thus needing a place to stay. Ultimately, this could lead to an increase in
demand for hotel accommodation. A successful marketing promotion by the destination country could potentially lead to an increase in
demand for hotel accommodation at a destination, as people may be more likely to consider the destination for their travels, it could lead to an
increase in the demand for hotel accommodation, as more people may be aware of the destination and may choose to visit

2. List substitute and complementary products that might affect the demand for domestic air travel.
Substitute products for domestic air travel include other forms of transportation such as train travel, bus travel, car travel, and alternate forms
of air travel such as corporate jet or helicopter services,...
Complementary products to domestic air travel include parking and ground transportation services, tour packages, booking services, and third-
party travel insurance providers,...

3. Using examples, explain why, overtime, some tourism products that were once considered normal goods may come to be seen as inferior
goods.
The demand for inferior goods decreases as income increases or the economy improves. When this happens, consumers will be more willing to
spend on more costly substitutes. Some of the reasons behind this shift may include quality or a change to a consumer's socio-economic status.
Inferior goods can be defined as goods with a decrease in demand when consumers' income increases. This means that as the consumer's
income increases, they will opt for other goods with higher quality, or substitutes that provide more satisfaction. Inferior goods, which are the
opposite of normal goods, are anything a consumer would demand less of if they had a higher level of real income. They may also be
associated with those who typically fall into a lower socio-economic class. Conversely, the demand for inferior goods increases when incomes
fall or the economy contracts. When this happens, inferior goods become a more affordable substitute for more expensive goods..
For tourism products, this could include something like a beach holiday, which could be substituted with a more luxurious experience like a
cruise. As consumer incomes increase and the consumer's preferences change, it could lead them to switch from a beach holiday to a cruise,
which would mean that the beach holiday is considered as an inferior good.
As time passes, the perception of certain tourism products may change. For example, a five-star hotel may have been considered a normal good
at one point, but as its price increases, it may become seen as an inferior good due to the availability of more affordable options. Similarly, a
popular beach destination may become less desirable as more and more tourists flock to it, making it crowded and less enjoyable. When this
happens, tourists may look for a more affordable and less crowded alternative. This can make the once popular beach destination seem inferior
in comparison.

5. Explain the difference between the short-run and the long-run.

- short run: The short run is the timeframe in which at least one factor of production is fixed. For example, as the popularity of a restaurant
grows, in the short run it might meet any extra demand for its services through hiring more labor (variable factor), given that the amount of
capital equipment, for example, seating capacity or the size of the kitchen, cannot be altered quickly (fixed factors).
- long run: The long run is the timeframe in which all factors of production are variable and the restaurant can expand or move to larger
premises. Similarly, the theme park may add more attractions and the cruise line can lease/purchase more ships.

6. Draw a simple supply chain for the hotel accommodation industry.

A simple supply chain for the hotel accommodation industry looks something like this:

The main actors in the chain are the customer, the hotel, and the suppliers.
The customer initiates the process by asking the hotel for a reservation. The hotel then contacts its suppliers to order the necessary supplies and
services needed to provide the customer with accommodation. The suppliers then provide the hotel with the necessary supplies and services.
Finally, the hotel provides the customer with the accommodations they requested.
7. Using tourism examples, distinguish between economies of scale and economies of scope.
Economies of Scale Economies of Scope

Definition

Economies of scale is a concept of Economics that suggests that when a Economies of scope is an economic concept that suggests
company reaches a point where the production cost is decreasing due to bulk that production of various products can lead to reduction in
production cost

Cost reduction

Reduces the cost of one product Reduces the cost by production of a variety of products

Deals with

Production of goods in bulk Production of a variety of products within the same task

Reduction occurs due to

Bulk production of any product Reduction occurs due to a variety of goods produced during
the production process.

Approach

Old Approach Relatively new approach

Resource Utilisation

More resources are utilised Less resources are utilised

+ Economies of scale refer to the cost advantages that a business can obtain due to expansion. It means that the cost per unit decreases due to
the increased level of output. This is usually achieved through mass production and increasing the size of an organization. For example, in
tourism, if a hotel chain develops a large and successful brand, they will be able to purchase items in bulk which can lead to increased
efficiency and cost savings.
Economies of scale refer to when economies of production increase as size increases. This can be seen in tourism when a hotel can lower
production costs and increase profits through increasing the size of its facility or the number of guests. On the other hand, economies of scope
refer to when a company can benefit from diversifying its operations in order to reduce costs and increase profits. It can also be applied to
operations that require large investments of money, such as building factories or purchasing expensive equipment. In this case, a company can
benefit from spreading the cost of the investment across many different products or services, thus reducing the cost per unit. Economies of
scope, on the other hand, can be used to increase profit margins by diversifying into new markets or new product lines that have potential for a
higher margin.
+ Economies of scope refer to cost savings achieved by producing a variety of goods or services. This is the ability to produce multiple
products on the same production line and can help to reduce costs by making use of shared resources and expertise. Economies of Scope refer
to the cost advantages that a business can gain by deploying the same resources and assets to produce multiple goods and services, and then
offering them in a bundle. It is the cost advantage derived from the ability of a business to produce multiple products or services using the
same resources, which can lead to efficiencies in production. For example, in tourism, a hotel chain can offer customers a variety of services
including restaurant, spa, and fitness services, which can reduce costs associated with hiring staff and buying supplies for each service
separately or Examples of economies of scope within the tourism industry can include offering a packaged holiday that includes airfare, hotel
accommodations, car rental, and activity tickets, or a hotel that also offers a restaurant and spa services.

8. The majority of tourism firms are too small to have much control over their supply chains and as such should not worry about it. Discuss

Many tourism firms are small, and have limited control over their supply chains. This means that they are unable to make large-scale changes
to the way that their business is run, which can be a challenging situation for them. However, there are still measures that can be taken to
ensure that the supply chain is as efficient and ethical as possible. Tourism firms are small businesses that can't exercise a great degree of
control over their supply chains as compared to large firms. As such, they should focus on other issues that can help improve their operations,
such as customer service, product quality, and marketing. Supply chain management may be too challenging for small tourism firms and may
not be the most efficient use of their resources. That depends on the type of business. For larger chains, it may be important to have a certain
amount of influence over the chain in order to stay competitive. On the other hand, for smaller businesses, the main goal may be to focus on
providing customers with exceptional service that helps them stand out from their competition. There is no one-size-fits-all answer when it
comes to influencing a business chain.

For example, companies can strive to increase transparency within their supply chains, by understanding where their materials come from and
assessing the operational practices of their suppliers. Doing this allows companies to form ethical partnerships and build relationships with
their suppliers that are mutually beneficial. Companies can also implement strategies, such as eco-friendly packaging or reducing waste, that
can help reduce their carbon footprint while also adhering to ethical standards within their supply chains.
Ultimately, while small companies may not have the resources or ability to make large-scale changes to their supply chains, there are still
measures that can be taken to ensure that their practices are ethical and sustainable.

Chương 3

1. Imagine a tourist spends $100 at a hotel. Outline a scenario of what might happen to the money to demonstrate the multiplier
effect.
The money spent by the tourist at the hotel is an example of the multiplier effect in action. The hotel owner takes the $100 and spends it on
various goods and services, such as purchasing new furniture, hiring a cleaning service, or paying staff wages. This spending then multiplies
and benefits other businesses, such as the furniture store, the cleaning service, or the employees’ local stores. This in turn can create a chain
reaction and cause a further economic ripple effect. For example, the furniture store could use the money to upgrade their stock, the cleaning
service could hire additional staff and the employees could purchase new items from the local stores. This entire chain reaction would result in
an increase in economic activity, ultimately benefiting the entire economy.

2. Briefly describe the different types of multiplier.

There are five types of multiplier.
First, the income multiplier is the number of times an individual the amount of tourist expenditure should be multiplied to identify the total
effect on the visited place’s economy.
The second and third types are the sales or transaction multiplier which measures changes in business turnover created by tourism
expenditures; and the output multiplier. The latter is similar to the sales multiplier but includes changes in inventory or stock levels in addition
to sales.
The final two types are the employment multiplier which measures changes in economic activity caused by increases or decreases in tourism
employment, and the government revenue multiplier. The latter measures the effect on government revenue of changes in tourism expenditure

3. Outline some of the factors that affect the multiplier.

Some of the factors that affect the multiplier are the size of the local economy, the propensity of tourists and residents to buy imported goods
or services, as well as the propensity of residents to save rather than spend (where saving reflects money kept out of circulation, ie, not
reinvested)
The multiplier is the number that is used to multiply the estimated business profits in order to determine the actual profits of the business.
Some of the factors that can affect the multiplier include the size of the business, the type of products and services offered, the location of the
business, the level of competition within the industry, the amount of capital invested in the business, and the overall economic climate.
The multiplier is affected by a number of factors, including:
- The level of capacity utilization in the economy
- The level of business investment
- The level of savings and investment in the economy
- The availability and cost of credit
- The level of government spending and taxation
- The level of inflation
- The level of global economic activity
- The level of interest rates

4. Which is more likely to have a higher income multiplier: a small local restaurant or a large city-center hotel?
A large city-center hotel is more likely to have a higher income multiplier as it typically enjoys more customers and visitors due to its prime
location and larger size. Furthermore, its higher costs for labor, equipment, and materials mean it can charge higher prices, allowing it to make
more profits than smaller businesses.
It really depends on the location of the restaurant and hotel, as well as the management and services they provide. Generally speaking, a large
city center hotel is more likely to have a higher income multiplier than a small local restaurant, however, there are many factors to consider.
If you are looking for a reliable source of income for your restaurant or hotel, there are a few key aspects that you may want to consider.
Firstly, your pricing strategy should be tailored to your target market and their needs. You may also want to make sure that you offer
competitive promotions or packages to entice customers. Secondly, you should take advantage of any local or national marketing campaigns or
advertising channels that are available to you.
The success of your business will also be dependent on the quality of your service, so it's important to make sure that your staff has the
necessary experience and skills to properly serve your customers. Additionally, providing a unique experience like a themed restaurant, or a
special event can help to draw new customers. Finally, you may want to keep up with the latest trends to ensure that your business is at the
forefront of innovation.

Chương 4
1. Do leakages reduce or add to the positive effect of the multiplier? Give examples of tourism leakages.
- Leakages reduce the positive effect of the multiplier and include:
1. Payment for goods and services produced outside and imported into the tourist area. Importing
goods means another economy is benefitting from spending e.g., bananas in the UK.
2. Travel costs to airlines and ships.
3. Foreign workers sending money home.
4. Payment to foreign owners of hotels, restaurants and other amenities. Investment from
multinational corporations (MNCs) means that some money earned by that organization will leave
the local economy eg, headquarters in a different destination.
5. Indirect and direct taxation where the tax proceeds are not re-spent in the tourist area.
6. Money saved (in banks etc.) out of income received by workers in the tourist area.
7. Foreign debt in developing the infrastructure for tourism.

3. What is meant by an over-dependence on the tourism industry?

An over-dependence on the industry makes governments and commercial operators vulnerable to reductions in demand caused by internal and
external factors, such as changes in consumer tastes and fashions, political upheavals, natural disasters such as tropical storms, economic
recession and fluctuations in exchange rates. If tourism suffers in a country, the whole economy suffers – a huge negative impact.
A further aspect of over-dependence is that people may be attracted to employment in tourism-related work and leave their traditional primary
industries, particularly in developing countries. This has the effect of loss of labour in those traditional industries, causing labour supply
problems.

4. Explain why growing tourist numbers may lead to increasing import requirements.
Growing tourist numbers may lead to increasing import requirements as more and more goods are needed to meet the demands of the tourists.
This includes food, clothing and other items that may not be available locally, so they need to be imported. Additionally, tourism often leads to
greater foreign investment in the local economy, which may further result in higher import requirements.
The demands by some tourists for their home comforts while on overseas holidays, especially for food and drinks from their home country, can
impose extra costs on host countries by requiring them to import these items for resale to the visitors. This is especially so with small island
economies which often do not produce locally what the tourists want – not just the food and drink brands that the visitors prefer, but also
luxury purchases such as jewellery, cameras, and photographic equipment etc, as tourists require access to goods and services that may not be
available locally. As tourist numbers increase, the demand for imports increases, resulting in a greater need for imported goods and services to
meet the needs of the tourist population. This can lead to an increase in import prices and an increase in the number of imported goods and
services. Additionally, as the demand for imported goods and services increases, the cost of obtaining them may also increase, resulting in
higher import costs.

5. Explain how seasonality affects tourism demand.

There are two main types of seasonality that affect tourism demand. Natural seasonality is the result of regular variation in climatic conditions
in the natural world, such as the four seasons, and corresponding changes in temperature, rain, sunshine and hours of daylight. The demand for
skiing holidays is limited to the months when there is ample snowfall. Climbing Mount Fuji in Japan is only possible during a six week period
in the summer. Institutional seasonality in tourism is caused by human decisions and relates to what were often traditional regular variations in
the patterns of human activity and inactivity. For families with children of school age the demand for summer holidays will be in late July and
August. The demand for tourism is also affected by the specific dates of festivals in certain countries eg, Naadam festival in Mongolia is
always in the second week of July
Seasonality affects tourism demand by certain times of the year being more popular than others. For example, summer is usually a peak season
in many locations, while winter is usually a slower season. Different kinds of tourism activities also have different levels of seasonality. For
example, skiing tends to be much more popular in the winter months than in other months.

Chương 6

1. Discuss in small groups what are the positive benefits and negative impacts of globalization.
The positive benefits of globalization include increased access to markets, improved product and service quality, increased ability to specialize
and compete, and the ability to share knowledge and resources quickly across the world. The negative impacts of globalization include
increased competition, cultural homogenization, environmental challenges, and wage inequality.
In terms of economic benefits, globalization can help increase international trade, improve economic efficiency, and reduce poverty in
developing countries. It can also help stimulate consumer demand, increase investment opportunities, and create jobs. However, there are
downsides to globalization as well, such as increased reliance on foreign markets, foreign investment, and competition which can both reduce
the number and quality of jobs available. Additionally, large corporations can become powerful and control markets, resulting in a
concentration of wealth.

2. List types of tourism related businesses that fall into the definition of a multinational enterprise, give examples where you can.
A multinational enterprise is a business that operates in multiple countries. Examples of tourism-related multinational enterprises can include
large hotel chains such as Marriott, cruise lines such as Carnival or Royal Caribbean, airlines such as United or Delta, and vacation rental
companies such as Airbnb or HomeAway. Other types of tourism related businesses can include tour operators, theme parks, and travel
agencies.
Types of tourism related businesses that fall into
the definition of a multinational enterprise include:
- Airlines: for example, Emirates
- Hotel chains: for example, Marriott
- Cruise lines: for example, Royal Caribbean
- Travel agencies: for example, Thomas Cook
- Tour operators: for example, TUI Group
- Tourism boards: for example, Singapore Tourism Board
- Destination marketing organizations: for example, VisitBritain
- Theme parks: for example, Disneyland.

3. What are the objectives of tourism policies set by governments?

Governments’ roles include looking after investment in quality and skills, marketing and branding, managing environmental sustainability for
green growth, product development and innovation, strategy industry planning for tourism, reducing barriers to tourism development and
evaluation and capacity building.
The objectives of tourism policies set by governments are typically to:
1. Stimulate economic growth through increased tourism spending.
2. Foster employment in the tourism industry.
3. Enhance the visibility of a country’s cultural heritage.
4. Promote sustainable tourism.
5. Improve the quality of life within local communities.
6. Support existing tourism businesses and attract new investors.
7. Increase the number of direct and indirect jobs in the tourism sector.
8. Encourage regional economic development.
5. List the disadvantages for tourism organisations to operate in a free market.

A free market is defined as a market economy based on supply and demand with little or no government control. A completely free market is
an idealised form of a market economy where buyers and sellers are allowed to transact freely, for example buy, sell and trade based on a
mutual agreement on price without state intervention in the form of taxes, subsidies or regulation. In simple terms, a free market is a summary
term for an array of exchanges that take place in society.
A free market is defined as a market economy based on supply and demand with little or no government control

1. Price competition: When tourism organisations operate in a free market, they compete for the same customers and face increased
competition in terms of prices. This could lead to lower profit margins for tourism organisations.
2. Difficulty in predicting market conditions: A free market is dynamic and constantly changing, making it difficult for tourism organisations
to accurately predict demand and market conditions.
3. Unsustainability: Tourism organisations often face a dilemma of short-term profits versus long-term sustainability. In a free market, there is
a tendency for tourism organisations to opt for short-term profits, which can lead to unsustainable practices such as over-exploitation of natural
resources or exploitation of vulnerable communities.

1. **Competition:** Tourism organizations operating in a free market environment must compete with other similar organizations for
customers, which could potentially lead to lower profits.

2. **Unregulated Quality:** In a free market, quality control is not necessarily regulated, leading to varying degrees of quality among products
and services, which could lead to customer dissatisfaction and reputational damage for the organization.

3. **Price Fluctuations:** Tourism organizations operating in a free market are subject to fluctuations in price due to the demand and supply
of goods and services. This could potentially lead to losses for the organization if the prices drop drastically.

4. **Limited Resources:** With limited resources, it can be difficult for tourism organizations operating in a free market to access the
necessary resources to remain competitive. This could lead to them having to compromise on quality or price.