Economics of tourism

enterprises Lectures & Exercises

contact: j.drazkiewicz@vistula.edu.pl;
dr Jacek Drążkiewicz jacek@wycieczkiznami.pl;
Jacek Drążkiewicz – has been involved in tourism
industry since 2001
Target groups of clients:
1) Incentive tours (60-65 % of our sales revenues),
2) Sightseeing tours (sightseeing + sunbathing) (20-25 % of our sales revenues)
3) Thematic routes (thematic trips) for school children, pilgrimages etc.). (10-15 % of our
sales revenues)
KOMFORT
PLUS
KOMFORT
WILLA
The purpose and tasks of
the subject
The basic goals of the subject

Subject’s objective:

 As a result of mastering the subject, the student will be able to: use the knowledge of
effective acquisition, collection and use of financial, material and intangible resources
in the practice of managing a tourist enterprise, principles and methods of rational
and effective management in the basic units of the tourism economy, describing the
phenomena governing the process of producing services tourism in various types of
competition, at what cost to produce tourist goods and services, set maximum profit,
how to measure and properly assess the effectiveness of the tourist business
Podstawowe założenia pracy doktorskiej

TEZA:
„Dochody gmin wiejskich w Polsce z tytułu turystyki zależą od
dominującego modelu rozwoju turystyki na danym terenie.”

PODSTAWOWE ELEMENTY MODELU:

Subjects
 dominujący rodzajofturystyki
lectures and
w gminie,
 rodzaj bazy noclegowej,
exercises
 charakter polityki władz gminnych wobec rozwoju turystyki i
maksymalizacji dochodów budżetowych z tego tytułu.
Subject’s Lecture Exercise
no.

1 Intoduction to the subject -Factors influencing the choice of

-Factors influencing development of tourism enterprises business form.
-Tourist product, motivations as the basic criterion of segmentation. -The role of enterprises in the tourist
-Economics and detailed economics. value chain.
-The concept of economics of tourism enterprises -Contemporary tourist products,
discussion.
-The concept of enterprise and entrepreneurship. Typology of business entities.
Legal and organizational forms of activity: private enterprise, limited liability
company, joint-stock company.
-The reasons for including businesses in tourism enterprises - typical tourist
enterprises.
2 The tourism company’s environment. Analysis of "Porter's 5 forces" on the
-Microenvironment’s concept. The concept of competition. Porter's example:
competitive forces model. Factors influencing the increase of competition in the -hotel with conference facilities, located
tourism sector. Threat of entering new competitors. Barriers to entry in the in the Land of Great Lakes,
tourist sectors. Buyers' bargaining power. The bargaining power of suppliers. - travel agency specializing in holiday
Threat of substitute products or services in tourism. packages in the Mediterranean
-Macroenvironment’s contept.Institutional and legal environment. Tourist Basin ... etc.
policy (in the country and in the European Union). Tourism regulations (Tourism
Services Act). Other legal provisions directly affecting the tourist market.
Institutions responsible for tourism. Economic environment - factors. Social and
demographic environment. Environmental environment. Technological
environment.
Subject’s Lecture Exercise
no.
3 Economic cooperation of tourism enterprises - Case study: TUI Group.
-Forms of economic cooperation of enterprises: cooperative and
concentration cooperation. - Case study: airline alliances.
-Inclusion of integration. General reasons for integration among tourism
enterprises. Horizontal and vertical integration.
-Operative forms of cooperation: non-contractual, contractual,
cooperative.
Concentration co-operation: a multi-enterprise enterprise, a corporation, a
holding company, a conglomerate.
4 Economic models of typical tourism enterprises: - Divivers in business models
- The needs of intermediary and organizing services - premises. between leisure tourism agencies
Distribution channels of basic tourist services. Economic reasons for and business support agencies
choosing the distribution model by producers. The concept of travel (incentive tourism)
agency and tourist agency. Types of agency services. Economic models
of tourist agencies. General features of the economic model of a tourist - International hotel systems
agency.
- Economic models of activity in the field of hotel services.
The concept of hotel services. Types of hotel services.
Groups, chains and hotel chains. The concept of the brand. General
features of the hotel group's economic model.
Subject’s Lecture Exercise
no.
5 The economics of the tourism company's finances - The balance sheet for the
-Objective and subject of finance economics. Tasks of the finances of the company's hotel and the travel agency.
finances. - Discussing the individual
-The capital of the enterprise. Valuation methods of the enterprise and its assets. components of the income
Shaping the financial result of a tourism enterprise. statement. Analysis of the
Profit and loss account (results) of the enterprise. Cost typology (including tourism company's costs.
depreciation), -Tax differentiation by type of
- Business balance. Assets and liabilities of the enterprise. Sources of financing the business
company's operations.
- Cash flow statement.
Typology of tourist taxes (direct and indirect taxes in tourism, rates, methods of
counting).
6 Economics of marketing activities - Criteria for price
- The importance of marketing activities for the economics of a tourism enterprise. differentiation in tourism.
- Economic aspects of marketing research and segmentation. The position of products - Forms of promotion of a
on the market and profitability. Impact of pricing strategies on the economics of the travel agency and a hotel
enterprise. Price flexibility and the flexibility of advertising in the enterprise. Marketing enterprise.
goals determining the price setting process. Formulas (methods) of price calculation.
Strategic and tactical prices. Differentiation of prices in tourism. Economic aspects of
distribution in tourism. Economic benefits of using internet systems in tourism.
Changes in models of distribution of tourist services. Economic aspects of promotion -
setting promotion budget.
7 -Summary Test  - Summary Colloquium
Podstawowe założenia pracy doktorskiej

TEZA:
„Dochody gmin wiejskich w Polsce z tytułu turystyki zależą od
dominującego modelu rozwoju turystyki na danym terenie.”

PODSTAWOWE ELEMENTY MODELU:

Literature
 dominujący rodzaj turystyki w gminie,
 rodzaj bazy noclegowej,
 charakter polityki władz gminnych wobec rozwoju turystyki i
maksymalizacji dochodów budżetowych z tego tytułu.
Podstawowe założenia pracy doktorskiej

TEZA:
„Dochody gmin wiejskich w Polsce z tytułu turystyki zależą od
dominującego modelu rozwoju turystyki na danym terenie.”

PODSTAWOWE ELEMENTY MODELU:

 dominujący rodzaj turystyki w gminie,
1) Introduction to the subject
 rodzaj bazy noclegowej,
"economics of tourism
 charakter polityki enterprise"
władz gminnych wobec rozwoju turystyki i
maksymalizacji dochodów budżetowych z tego tytułu.
The concept and scope of economics

– Referring to the Ancient Greek word oikos

etymology of the word
"economy", we can say
that it is a science of
management.
meant a household and the nomos
of law, principles.
Modern economics not only
determines the laws and principles
of managing a household, but also
an enterprise or a state.

Economics is the science of the most efficient allocation of

limited resources between unlimited needs in order to
obtain the maximum satisfaction of society.
(acc to. Lionel Robbins)
Mixed Economy
 What and how much? (what
should be produced and in what
quantities, i.e. how much and what
goods and services should be
produced and when to produce)
 How ? (by whom, from what
resources and by what technical
method goods and services are to
be manufactured)
 For whom? (who is to use
goods and services produced in a
given country and benefit from
The economics of the tourism enterprise explores
the economic dependencies between the factors
needed to produce tourism products in tourism
enterprises.

The economics of the tourism enterprise is a

detailed science in relation to economics!
WHAT to produce?
Tourist product - the concept and definitions:
In the narrow sense, a tourist product means what buyers use during a tourist trip, eg
transport, accommodation or boarding.

In a wider context, a tourist product is a composition of what tourists do and tourism

assets, facilities and services that they use for this purpose.
 
Economic features of the tourist product:
1) It is consumed at the place of
manufacture, is perishiable;
2) It usually has a complex character -
it consists of many partial services
and components (tourist assets), etc
, can not be provided by a single
enterprice.;
3) It can not be stored or manufactured
for stock;
4) At the time of purchase, the buyer
can not get acquainted with the
product;
5) There is a seasonal nature of
demand for a tourist product
EXPERIENCE ECONOMY – CONTEMPORARY TOURISM –
TOURIST PRODUCT.

According to Pine & Gilmore, we are living in times of a new,

advanced economy, based primarily on services, and which should
provide consumers with strong emotional experience.
Economic activity may then be compared to theatre, as the
product itself includes experience, emotion, sensation, thrill, moodand
atmosphere.
Tourism in the 21st c. is moving further and further away from the
former model, referred to as 3xS (sun, sea, sand), which means
passivity on a beach. The ‘new tourism’ is rather 3xE, where E stands
for education, entertainment and excitement.
HOW to produce?

what production costs, what revenues, what profits ...

FOR WHOM to produce?

customer groups, market segmentation, demand

• Tourist product and travel motivations as the basis for the
differentiation of tourism enterprises.
EXERCISE 1

• CAN YOU THINK IT OVER?

SUBJECT: A global challenge for tourism and the activities of tourism

enterprises - the COVID-19 pandemic.
Prepare analysis: Identify changes and necessary adjustments to the new
market situation.
•
Watch movie:
https://www.youtube.com/watch?v=ka4dScUyCfI&feature=emb_logo
Podstawowe założenia pracy doktorskiej

TEZA:
„Dochody gmin wiejskich w Polsce z tytułu turystyki zależą od
dominującego modelu rozwoju turystyki na danym terenie.”

PODSTAWOWE ELEMENTY MODELU:

2) The tourism company's
 dominujący rodzaj turystyki w gminie,
 rodzaj bazy noclegowej,
environment
 charakter polityki władz gminnych wobec rozwoju turystyki i
maksymalizacji dochodów budżetowych z tego tytułu.
External and internal conditions
• External conditions are characterized by the fact
that travel agencies / hotels can not directly
change them but the way they use them or
adjust their activity to their impact can affect a
number of important areas of tourism
businesses.

• Internal conditions are under direct control by

tourism enterprces who can shape and direct
their development.
THE ENVIRONMENT OF ENTERPRISES
Macroeconomic environment
„PESTLE” analysis:

Institutional and legal environment

Demographic environment.
Economic environment - factors.
Socio-cultural environment.
Environmental environment.
Technological environment.

Microeconomic environment.

Porter's competitive forces model:

Factors influencing the increase of competition in the sector,
Barriers to entry in the sector.
Buyers' bargaining power.
The bargaining power of suppliers.
Threat of substitute products or services in tourism.
Political Factors:
• Political factors:
• Government stability/instability
• Corruption level
• Tax policies
• Freedom of press
• Government regulation and deregulation
• Political action committees
• Government involvement in trade unions and agreements
• Competition regulation
• Voter participation rates
• Amount of government protests
• Defense expenditures
• Level of government subsidies
• Bilateral relationships
• Trade control
• Lobbying activities
Economic Factors:
• Economic factors are determinants of a certain economy’s performance. Factors include
economic growth, exchange rates, inflation rates, interest rates, disposable income of consumers
and unemployment rates. These factors may have a direct or indirect long term impact on a
company, since it affects the purchasing power of consumers and could possibly change
demand/supply models in the economy. Consequently it also affects the way companies price
their products and services.

• Economic factors
• Growth rate
• Interest rate
• Inflation rate
• Exchange rate
• Availability of credit
• Level of disposible income
• Propensity of people to spend
• Unemployment trend
• Stock market trends
Social Factors:
• Population size and growth rate
• Birth rates
• Death rates
• Number of mariages
• Number of divorces
• Immigration and emigration rates
• Life expectancy rates
• Age distribution
• Wealth distribution
• Social classes
• Per capita income
• Family size and structure
• Lifestyles
• Health consciousness
• Attitude towards work
• Buying habits
• Ethical concerns
• Cultural norms and values
• Sex roles and distribution
• Religion and beliefs
• Racial equality
• Use of birth control
• Education level
• Crime levels
• Attitudes towards retirement
• Attitudes towards leisure time
• Attitudes towards product quality
• Attitudes towards customer service
• Attitudes towards foreign people
• Demographic change and particularly the rising number of
older groups within the population
The rising number of aging societies
The growth in the number of pensioners (retirees) could affect the tourist
market in 3 ways
1) seasonal trips to Europe will lose their importance as this part of
population is not limited to holidays;
2) the prices will be more flexible as pensioners can adapt to the trip
duration;
3) increased importance of tourist trips at the expense of business ones
(because most Europeans older than 60 are no longer employed full-
time).
demographic change
The growing importance of single travelers
1) leads to more cross-border and overseas trips by the population
aged between 16 and 35.

• Since younger people have busy work schedule, and they

are under pressure due to strong competition in the labour
market, they have less free time, therefore short holiday trips
with organized offseason events are appealing to that market
segment.
Responding to the growth in tourism from emerging markets

• The impact can already be seen in patterns of overseas travel into the
United States. In 2014, more than half of all overseas travelers
(excluding Canada and Mexico) to the US come from emerging
markets – versus in 2000 only a third of overseas travelers coming into
the US came from emerging countries.
• Within the next decade the number of households making at least
US$100,000 annually will increase by 30 million, with one out of three of
these households located in emerging markets. And just as affluence in
these markets continues to rapidly grow, so does their spending on travel.
• Since 2012 Chinese tourists (have overtaken their American and German
counterparts) are the highest spenders when vacationing and sightseeing
overseas. In 1998 only 8 milion Chinese took trips abroad; in 2012 it was
about 100 milion.
How are tourist destinations responding to the
visitors from emerging markets?
Organizations such as state tourism departments, hoteliers and
tour guides are exploring ways to reach consumers from emerging
markets
1) from promoting their brand to foreign tour operators (tourist fair);
2) training their staff in language and cultural skills;
3) adaptation of food in hotels and restaurants to the eating habits of
tourists coming, providing home comforts such as rice porridge on its
breakfast menu and familiar teas in the rooms

In the UK, Harrods has installed special China Union pay terminals
and trained staff the right way to handle credit card (reverently, and with
both hands outstretched).
Countries in the world by population (2016)
Technological Factors:
• Technology incentives
• Automation
• R&D activity
• Technological change
• Access to new technology
• Level of innovation
• Technological awareness
• Internet infrastructure
• Communication infrastructure
• Life cycle of technology
Global achivments
Airbus A380 - a two-level, four-engine airliner manufactured by the
company Airbus. Thanks to the upper deck extends over the entire length of
the fuselage A380-800 is 555 people when broken down into three classes
or even 853 when configuring the entire machine to the standard economy
class, ahead in terms of the surface of the second on the list of Boeing 747-
400 (Jumbo Jet ) 50%.
Global achivments
• The train called "maglev" carries tourists to the airport in Shanghai at a
speed of 431 km / h.
Environmental Factors:
• Weather
• Climate
• Environmental policies
• Climate change
• Pressures from NGO’s
• Natural disasters
• Air and water pollution
• Recycling standards
• Attitudes towards green products
• Support for renewable energy
Legal Factors:
• Discrimination laws
• Antitrust laws
• Employment laws
• Consumer protection laws
• Copyright and patent laws
• Health and safety laws
• Education laws
• Consumer protection laws
• Data protection laws
Exercise 2
• Macroeconomic environment of tourism enterprises. PESTLE analysis
helps an organisation, by presenting a comprehensive analysis of the
external factors which might have impact on organization’s business
strategy. Prepare PESTLE analysis for middle size tour operator
organizing incentive tours. Please focus especially on the analysis of
economic factors (Growth rate, Interest rate, Inflation rate, Exchange
rate, Availability of credit, Level of disposible income, Propensity of people
to spend, Unemployment rate and trend) and give examples of their
impact on the tourism enterprise. Also briefly identify the most
important political, social, technical, environmental and legal factors.