The process of tourism demand forecasting is as important as the outcome. why might this be so?

Tourism Economics – Individual Project

Subject: The process of tourism demand forecasting is as important as the outcome. Why might this be so?

The Tourism Sector represented a worldwide turnover of 852 billion $ in 2009. For a country like France, this sector represented, in 2009, a receipt of 49,4 billion $. Those numbers show the importance and the weight of the tourism sector in acountry economy. John Naisbitt explained in its books Global Paradox in 1994 that tourism would be one of the three industries that will drive the world economy in the 21st century.
To comprehend at the best the evolution of this sector, several studies are leaded since many years in order to understand the demand and its components and trying to make forecasting.
The aim of this essay is todiscuss about the process of tourism demand forecasting, and if it’s as important as the outcome. To achieve this goal, I will present first what is a demand forecasting and what are its components. Then, I will show why this forecasting is important and how it can be use. Finally, I will explain the difficulties in tourism demand forecasting and the consequences of poor forecasting.

• Forecastingdefinitions, objectives and component

➢ Definitions
Werner Heisenberg explained in its “Uncertainty Principle state” in 1927, that it is impossible to determine both momentum and position of a subatomic particle at the same time, only the probability of each. This Quantum Mechanics principle can be apply in every sector.
Forecasting is fundamentally the process of organizing information abouta phenomenon’s past in order to predict the future. Applied to the tourism sector and following the Heisenberg’s principle, we can define the tourism demand forecasting as a “process designed to reduce the risks of tourism marketing and other management decisions through the use of forecasting” (UNWTO definition).

➢ Objectives
Tourism demand forecasting is a tool, it is use “to predict themost probable level of demand that is likely to occur in the light of known circumstances or, when alternative policies are proposed to show what different levels of demand may be achieved” (Archer, 1987).
Determining the level of demand that may be achieved helps marketers, managers and planners by reducing the risk of decisions regarding the future. It allows them to determine what will be thesupply needed by customers? How many customers will need this supply? Is the destination responding to this demand? And how organized the destinations to provide them this needs.

➢ Component
They are plenty of methods available used to determine what will be the demand (quantitative and qualitative techniques). It depends of the type of data that will be used, of who will ask the study(business managers, public planners…) or the purpose of the study.
The following diagram, extracted from the book of Douglas Frechtling (1996), is presented a quick summary of the different approach used for tourism demand forecasting:

• Importance of demand forecasting and how it be used

➢ The importance of Tourism Demand Forecasting
As I said in the previous part, Tourism DemandForecasting is used to reduce the risk by discerning certain future events. But why it is such important to discern future events or to understand more clearly the environment?
The demand forecasting is especially more useful in the tourism sector than in other sector for five main reasons:

• The tourism product is perishable.
The example that illustrate the most the perishable product in tourism, itsan airplane seat. Indeed, once the airplane has taken off, if the seat is empty it will no longer be sold for this flight. If a hotel has 100 rooms, and during one night only 50 rooms are occupied, so 50 rooms are empty and will no longer be sold for this night. Each time it’s a lost of revenue for the company.

• People are inseparable from the production-consumption process
Tourism products...
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