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Tourism Components and Supply

CHAPTER

Learning Objectives

Know the four major supply components any tourist area must possess.

Understand the characteristics of services vs goods

Be able to use the mathematical formula to calculate number of guest rooms needed for estimated future demand.

Develop ability to perform a task analysis to match supply components with anticipated demand.

Discover methods of adjusting supply components in accordance with fluctuating demand levels.

Components of Tourism Supply

NATURAL RESOURCES AND ENVIRONMENT

BUILT ENVIRONMENT

OPERATING SECTORS OF THE TOURISM INDUSTRY

Travel Trade

Sector

Catalyst, Planning, Development, and Promotion Organizations

Accommodation

Sector

Events Sector

Transportation

Sector

Adventure & Outdoor

Recreation Sector

Food Services

Sector

Attractions Sector

Entertainment

Sector

Tourism

Services

PEOPLE

CLIMATE

PHSYIOGRAPHY

INFORMATION

SUPERSTRUCTURE

INFRASTRUCTURE

CULTURE

Industry -- Residents -- Visitors

TECHNOLOGY

GOVERNANCE

SPIRIT OF HOSPITALITY

Tourism Supply Components

Can be classified into four main categories:

Natural resources

Built environment

Operating sectors

Spirit of hospitality & cultural resources

Tourism Supply Components

Natural Environment

Built Environment

Natural Environment

Built Environment

Operating Sectors

Natural Environment

Built Environment

Operating Sectors

Spirit of Hospitality

Cultural Resources

Natural resources & environment

The natural resources available for the use and enjoyment of visitors. The following factors impact this supply component:

Location-Closer to major cities = higher the demand

Availability of: golf, riding, fishing, hunting, snow skiing, mushroom hunting, sailing, sun bathing, nature study, foodies, photography

Seasonable variation of temperature and demand for recreational use of such areas

Labor/management; Intensity of use; Quality of resource maintenance

Natural resources & environment

Built environment

The environment created by humans available for the use and enjoyment of visitors. The following factors impact this supply component:

Infrastructure – basic physical and organizational structures for the operation of a tourism (& resident) destination.

Infrastructure facilitates the production of goods and services, and also the distribution of finished products to markets, as well as basic social services such as schools and hospitals;

Electrical, water supply, communication systems, roads, bridges, airport size (e.g., Nevis)

Built environment

Infrastructure

Built environment

The environment created by humans available for the use and enjoyment of visitors. The following factors impact this supply component:

Superstructure - primarily of accommodation facilities, food services, transportation facilities, and major attractions that many view as the “tourism industry.”

Hotel or lodging (architecturally distinctive for area)

Operating Sector

The products and services that deliver the tourism experience. The following are examples of the different types:

Accommodations – sufficient quantity/quality to meet demand and needs of tourists

Supply of Accommodations

Luxury – highest 15% ADR

Upscale – next highest 15% ADR

Mid-Price – next 30% ADR

Economy – next 20% ADR

Budget – lowest 20% ADR

Types: Condos, time share, hotel, hostel

Operating Sector- Luxury Rental home Tahoe

Operating Sector

The products and services that deliver the tourism experience. The following are examples of the different types:

Transportation – Adequate and economical transportation to and within a destination.

Air and airport facilities

Ship and boat – ocean cruise ships, river cruises passenger freighters, ferryboats, chartered yachts, boats and canoes.

Rail

Taxis – to and from transportation hubs and within the destination.

Spirit of Hospitality and cultural resources

The tourist should feel welcome during their stay in a destination and enjoy heir stay:

What is “hospitality”?

Activities Tourists Enjoy

Entertainment, recreation and other activities

Music, dance, drama, poetry, ceremonies, festivals, sows, meetings, tours, museum and art galleries (Louvre), golf, sports etc.

3 S’s (Sun, Sand & Sex)

What is “Hospitality”? Defined

Is there a difference between “hospitable behavior or hospitableness” and “hospitality”?

Hospitable behavior may be displayed in many different circumstances, for many different reasons, none of which have anything to do with providing hospitality.

Brotherton (1999) Defines Hospitality as “A contemporaneous (simultaneous) human exchange, which is voluntarily entered into, and esigned to enhance the mutual wellbeing of the parties concerned through the provision of accommodation and food or drink” (p. 168)

This definition transforms issues of form, motives, scale, and context and focuses attention on the essential elements of the hospitality concept.

What is “Hospitality”? Four attributes

Hospitality is a relationship between individuals, who take the roles of host and guest.

The host provides generously for the well-being, comfort and entertainment of the guest.

This typically includes offering food, drink, sleeping accommodation and/or entertainment.

The relationship may be commercial or private (social).

Commercial relationship, the guest’s only obligation is to pay and to behave reasonably. The guest holds the power to go elsewhere for service if the hospitality provided is not satisfactory. Private or social hospitality assumes an equality of power, and the guest has a social obligation to contribute to the relationship by being good company, and to reciprocate to the host in some way.

Successful hospitality includes having knowledge of

what would invoke great pleasure in the guest, and

delivering it flawlessly and generously,

the concern for security for both the guest’s person and property.

Hospitality is a process which involves:

Arrival - greeting and making the guest feel welcome,

Providing comfort and the fulfillment of the guest’s wishes, and

Departure which includes thanking and invitation to return.

At each step of the process, these courtesies, or social rituals are enacted and define the status of the guest and the nature of the guest/host relationship.

What is “Hospitality”?

The inclusion, and purposive ordering, of the product parameters (accommodation, food, drink) serves to differentiate hospitality from “hospitable behavior.” Thus, for hospitality to

exist something more than hospitable behavior must be evident.

hospitable behavior

Brotherton (1999)

Characteristics of Services Versus Goods

Intangibility, perishability, heterogeneity and inseparability of production and consumption*

1 – Intangibility

The attributes of services that cannot be grasped by any of the five senses

Product (possessed) vs. Services (experienced)

Aspects of a service that are difficult to grasp prior to purchase

Can you test a hotel room or meal prior to purchase?

Can consumer experiences be exactly repeated?

*Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1985). Conceptual Model of Service Quality and Its Implications for Future Research. Journal of Marketing, 49, 41-50.

Services Versus Goods Tangibility Intangibility Spectrum

Tangible

Dominant

Intangible

Dominant

Salt

Soft Drinks

Detergents

Automobiles

Cosmetics

Advertising

Agencies

Airlines

Investment

Management

Consulting

Teaching

Fast-food

Outlets

Fast-food

Outlets



Services Versus Goods

1 – Intangibility Cont.

Purchase is based on consumer expectations. How are these expectations formed?

What one has received at a similar facility/property

Through traditional marketing communication methods (advertising, PR, promotional events)

Word of mouth through friends, relatives, and gratuitous referrals

Research shows that happy = 14 WOM; bad = many more

Set through previous purchases of service

Services Versus Goods

2 - Perishability

If not sold by a particular time, the opportunity to sell it again is gone forever

Complicated by fixed capacity

Hotels cannot create more rooms with higher demand

Quality of service changes with demand. Employees may be swamped during busy times and standing around during off-peak times.

Unique to the hospitality industry is…

The challenge to “manage” demand and capacity

i.e., discount during slow times, increase $ during high demand times

Services Versus Goods

3 – Heterogeneity

Products (i.e. Coke) are considered “homogeneous”

Service - dissimilar or diverse elements

Delivery of services is inconsistent due to employee variance and varying needs of customers

“Moment of truth” when the service product meets service delivery and consistency is key

Ex) “MoT” - anytime an employee has contact with a customer (Mears Transportation example)

Services Versus Goods

4 - Inseparability –

Simultaneous production and consumption

Services are consumed at the same time they are purchased

Production and consumption occur at the same time

The buyer must be present to experience (consume) the service provided (produced) by the seller (the “Moment of Truth”)

In the hospitality industry –the entire product (service and goods) is consumed on premise with the seller (producer) on hand.

Think of all of the points of contact (MoT) that occur during a hotel stay! How many times can impressions (good/bad) be made?

Thus management is marketing in the hospitality industry because of inseparability

Always the possibility of a new experience with each purchase

The tourist enjoys a variety of activities

R = T x P x L

S x N

T = number of tourists

P = percentage staying in hotels

L = average length of stay

N = total # of guest nights/# of guests

S = number of days per year in business

R = room demand per nights/#

O = hotel occupancy used for estimating; divide number of rooms needed at 100% occupancy by estimated occupancy

Example

T = 1,560,000 visitors

P = 98%

L = 9 days

N = 1.69

O = 70 %

S = 365 days

R = 1,560,000 x .98 x 9

365 x 1.69

R = 22,306 (rooms needed at 100% occupancy); at 70 % occupancy need

R = 22,306/.70 = 31,866 rooms

Formula to Calculate Number of Hotel Rooms RequireD

R = T x P x L

S x N

T = number of tourists

P = percentage staying in hotels

L = average length of stay

N = total # of guest nights/# of guests

S = number of days per year in business

R = room demand per nights/#

O = hotel occupancy used for estimating; divide number of rooms needed at 100% occupancy by estimated occupancy

Example

T = 16,500,000 visitors (bay area)

P = 60.7%

L = 3.5 days

N = 3.5/2 = 1.75

O = 75 %

S = 365 days

R = 16,500,000 x .607 x 3.5

365 x 1.75

R = 54,879 (rooms needed at 100% occupancy); at 75 % occupancy need

R = 54,879/.75 = 73,172 rooms

SF only = 33,642 (as of 9/2012)

* (Running at 75% Occ requires more rooms in order to accommodate tourist)

Formula to Calculate Number of Hotel Rooms RequireD in San rancisco

Task Analysis

Task analysis is the procedure used in matching supply with demand. The following steps are usually employed:

Identification of present demand

A quantitative and qualitative inventory of existing supply

Adequacy of present supply with present demand

Examination of present markets and socioeconomic trends

Forecast of tourism demand

Matching supply with anticipated demand

Demand

Overcrowding and

loss potential business

Low occupancies

Months

Supply

Seasonality can be reduced through either price differentials or multiple use

Fluctuating Demand Levels and Supply (Seasonality)

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