Macro-Environment Forces and Thai Tourism Industry

Transcription

1 Macro-Environment Forces and Thai Tourism Industry ก ก ก ก ก Atthawet Prougestaporn* ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก ก กก ก ก ก ก ก ก ก ก ก ก ก ก Abstract The purpose of this article is to present the driving macro-environment forces that will impact the tourism industry in Thailand. Tourism has become one largest and fastest growing industry in the global economy. It is an important sector in Thailand generating the foreign exchange earnings, increasing employment rate, national income, saving, investment * ก ก ก ก ก

2 4 ก as well as enhancing economic growth. The perishable nature of the tourism industry requires a need for accurate forecasts of future business. Understanding the driving forces including the globalization, advancement in informational technology, climate change, change in preferences and tastes, and the value of time order to measure the impact is essential for making a better managerial decision in strategic management process to encourage the positive effects. ก ก Keywords Driving forces, Tourism Industry Background The world today is more economically interconnected and interdependent than any other time in the human history which has led to the globalization of capital, goods as well as services. The change in the international trade paradigm which is becoming closely interlinks causes that no country can solely concentrate on domestic market and trade on its own. The realities of this modern world make all businesses and industries to be more concerned about international trade both in goods and services. Tourism, one of the international trades in services, has become an important share in global market. Lee, Var and Blaine (1996) stated that tourism carried not only sociocultural and political significance but also provides enormous economic benefits. In this century, tourism has emerged as one largest and fastest growing industry in the global economy (Eadington and Redman: 1991 cited in Lee et.al., 1996). Frechtling (2001) stated that tourism and travel contribute more than 10 percent of the world income both directly and indirectly, the most comprehensive measure of the total value of the goods and services the world s economy produce. 35

3 4 ก Tourism exports have become an important sector in many countries including Thailand as a growing source on foreign exchange earnings. This has arisen through the rapid expansion of international tourism which is mainly attributed to the high growth rate of income in those countries. Besides generating the foreign exchange earnings, international tourism also contributes many benefits by increasing employment rate, national income, saving, investment as well as generating economic growth. For Thailand, the government has perceived the potential contribution of tourism to the economy as witnessed by the inclusion of tourism promotion in every economic and social development plan starting from the forth plan in Since then, tourism in Thailand has played a vital role in the social, cultural, and economic development. It is impossible to stockpile unoccupied airline seats and unused hotel rooms. The perishable nature of the tourism industry means there is a need for accurate forecasts of future business, both short- and long-term (Athiyaman & Robertson: 1992 cited in Law, 2000: 331). In addition, the world tourism today is changing dynamically. Understanding the driving forces will give the better opportunities for countries like Thailand to be ready for these challenges. Understanding the driving forces and measuring the impact must be taken to encourage the positive effects and reduce the negative ones. Under these circumstances, then, it is worth examining the development of Thai Tourism, the current challenges on the world and Thai Tourism; and introducing the importance of forecasting on Thai tourism demand. Thai Tourism: Past and Present Originally, the tourism industry in Thailand truly took off when US soldiers started to arrive in the 1960s for Rest and Recuperation or called R&R during the Vietnam War period (Kyoto University research, 1990). In the meantime, international mass tourism sharply increased during the same period due to the rising standard of living (more people 36

4 4 ก acquiring more free time) and due to improvements in technology making it possible to travel further, faster, cheaper, and in greater numbers. The numbers of tourists have grown from 336,000 foreign visitors and 54,000 R&R soldiers in 1967 to over 14 million international guests visiting Thailand in The average duration of their stay in 2007 was 9.19 days. The industry generated an estimated 547,782 million baht and contributed to an estimated 8.7% of Gross Domestic Product (GDP) (Tourism Authority of Thailand, 2008). Although, the volume of tourists who came to Thailand might not be able to compare with the 30 to 70 million people travelling to France, Italy, or Spain in every year, compared to other high-volume tourist destinations around the world, the growth and development of the tourism industry in Thailand was impressive (Pfotenhauer, 1994). While Egypt received approximately 8.2 million tourists and India received only 3.5 million tourists in 2004, Thailand has accommodated at least 10 million tourists per year since Thailand is one of the highest figures for Southeast Asia. According to the Tourism Authority of Thailand (2008), 55% of the tourists in 2007 came from the Asia Pacific region, Japanese and Malaysians forming the two biggest groups. The largest groups of Western tourists came from Britain, Germany, Scandinavia and the United States (Tourism Authority of Thailand, 2008). In the meantime, the number of tourists arriving from the Middle East and Russia is on the rise (Tourism Authority of Thailand, 2008). Generally, around 55% of Thailand's tourists were returned visitors, and the peak period is during the Christmas and New Year holidays when Western tourists are away from the cold conditions (Tourism Authority of Thailand, 2007). Police tourist (2007), Asian tourists primarily visited Thailand for Bangkok and the historical, natural and cultural sites in its vicinity, while Western tourists not only visited Bangkok and surroundings but many also traveled down to the southern beaches and islands. 37

5 4 ก The North is the main region for trekking and adventure travel with its diverse ethnic minority groups and forested mountains (Police tourists, 2007). In general, Thailand has been famous for its impressive historical sites, its rich and vibrant cultures, its beautiful beaches, its scenic countryside, and its genuinely friendly people. According to UNWTO (2007), in 2006, Thailand was the 18th most visited country in the World Tourism rankings with 13.9 million visitors, while France comparable to Thailand in size and population led the list with over 79 million foreign tourists. Thailand has offered a great variety of attractions. These include diving sites, sandy beaches, hundreds of tropical islands, varied night-life, archaeological sites, museums, hill tribes, exceptional flora and bird life, palaces and World Heritage sites. Many tourists followed courses during their stay in Thailand, and the popular courses were Thai cooking, Buddhism and traditional Thai massage (Tourism Authority of Thailand, 2008). Furthermore, the income accrued from tourism contributes substantially to the Thai economy. The government therefore has perceived the potential contribution of tourism to the economy as witnessed by the inclusion of tourism promotion in every economic and social development plan. Tourism in Thailand has played a vital role in the social, cultural, and economic development. However, according to Pfotenhauer (1994), the tourism industry came to the fore when Thailand was changing from a resource-based to a labor-based economy. The adjustment was well suited for tourism development. This was coupled with the fact that the training and material input for tourist services were not as complex or extensive as those required for other kinds of industries, and the high standard of service offered in Thai hotels and restaurants has remained consistently impressive (Pfotenhauer, 1994). In addition, Thai hotels were known for their reasonable prices, top quality service including pleasant, friendly and gentle character of Thai staffs. Besides, good managerial 38

6 4 ก skills have assisted in the maintenance of high quality service in nearly every realm of operation (Pfotenhauer, 1994). Nonetheless, tourism industry is gradually challenged from several external factors. Tourism Authority of Thailand (2008) stated that Thailand has been receiving increased competition since Laos, Cambodia and Vietnam opened up to international tourism in the 1980s and 90s. Destinations like Angkor Wat, Luang Prabang and Halong Bay gradually contested Thailand's former monopoly in the Indochina region. However to counter this, Thailand has actively targeted niche markets such as golf holidays, or holidays combined with medical treatment. Though there were especially aimed at Japan and South Korea, China and Taiwan will be the next target. (Tourism Authority of Thailand, 2008). Normally, the development of the tourism industry in Thailand and the comparative advantages which have been created through it were mostly a result of private sector investment and efforts (Pfotenhauer, 1994). The public sector meanwhile has not been active enough in upgrading infrastructure such as roads, telecommunications and water facilities in order to keep abreast with the industry's growth and to assure the industry's long-term stability. Moreover, in certain areas, water allocation, waste disposal and the safety standards of public facilities were inadequate even for the local population (Pfotenhauer, 1994). Heavy traffic congestion in Bangkok has also been undoubtedly seen as a drawback by people contemplating a visit to Thailand, like inadequate waste and rubbish disposal in Bangkok, Chiang Mai, and other big cities might be seen as problematic by visitors to Thailand (Pfotenhauer, 1994). Thailand then was also rated as one of the most polluted and unsanitary nations. Thailand has been surrounded by competitors looking to grab a piece of the regional and global tourism pie. Vietnam, Laos and Cambodia all experience double-digit 39

7 4 ก growth in arrivals. It is strongly believed that people who have been to Asia two or three times were looking for something different, due to the playing field has been crowded and consumers wanted choices and new experiences. Moreover, according to Dusit International Chief Executive and former chairman of the Thai Hotels Association (THA), Chanin Donavanik pointed out that Thailand has been promoted in the Middle East for the past 10 years. However, since year 2007, there were nine new countries that exhibited at Arabian Travel Mart for the first time, such countries as China, Taiwan, and Macau were all competing with Thailand (Bangkok post, 2007). Challenges of Thai Tourism During the past 40 years, the Thai tourism industry has been flourished even as it struggled to handle with many difficult challenges. In the years ahead, there will also be many challenges that the Thai tourism industry will encounter. The global population will continue to grow and change. The industry is also particularly responsive to cyclical economic change, consumer instability, and the globalization. Besides, international competition is more intense due to the liberalized markets, the lower of transaction costs of new technology, and the mobility of transportation. Additionally, the ecological stability appears to be increasingly unstable. Numerously, particularly chaotic changes are currently taking place in the immediate and wider context of tourism industry. Understanding the tourism context will become more complex. This section will point out some of the most important forces that will shape the environmental of Thai tourism in which it is very important for both public and private sectors in order to formulate and implement the strategies that are suitable to the challenges. 40

8 4 ก The challenge of globalization Although tourism product is tied to the local conditions, the tourism industry cannot avoid being affected by globalization. Tourism product and the destination are becoming interchangeable. The mobilization of transportation, distribution channel as well as reservation systems are increasingly a decisive factor in success. Competition begins to shift from primarily a regional or national focus to an international or global focus. The internet and the adoption of internet technology applications also represent a driving force of historical and revolution proportions. Travelers now can buy their airline seats and hotel rooms on the internet. Information appliances that combine a computer, duplication and telephone with automatic language translation function, and a large flat screen will allow travelers to travel without any difficulty. Moreover, the development of international trade liberalization and the facilitation of free trade under WTO, GATT, and AFTA combined with the advancement in an innovation of information technology create the competitive pressures to the industry. Globalization can be precipitated by the blossoming of tourism demand in many regions and by the actions of government officials in many countries to reduce trade barriers or open up once-closed markets to foreign competitors. Therefore, while technology and globalization knit the world into one marketplace, the competition in tourism industry among countries will grow rapidly. The technology and the internet make it possible for small countries throughout the world to compete for market share. The globalization force can create either competitive advantages or competitive disadvantages to Thai tourism industry. The challenge of economic development Since the economy is so important to how society function, it is nearly always listed as a major forces in every analyzing the challenges including the tourism industry. On the global scale, world economies are increasingly interlinked. Since after the Second World 41

9 4 ก War II, the development of world economies has continually grown up. Most developed and developing countries have enjoyed the rising in standard of living, increasing in productivity, as well as increasing in the real per capita. Silverstein, Fiske, & Butman: 2005 cited in Yeoman: 2008 stated that the desire for holidays has been grown up which are driven by consumer prosperity and affordability. Prosperity has resulted from higher standard of living and productivity while the affordability has arisen from falling in prices and advancement in technology. Global travel will continue to grow at a fast pace. The widespread of prosperity throughout the world will increase the number of people in middle class in both developed and developing countries. The higher standard of living will significantly have a positive impact to the Thai tourism industry. The challenge of the climate change As rain forests disappear and evidence of global warming builds, it is becoming even more difficult to ignore human impact on nature and its impact on human. At this point, the question is not whether how to change industries and life styles to accommodate the environment, but how radically people must change, how quickly people must act, and how much it will cost. The consequences of the climate changed are essential for tourism industry. Higher sea levels, increasingly capricious weather with a greater likelihood towards natural disasters are caused by the climate changed. As a result, more holidaymakers are becoming more environment conscious. The concern for the environment will continue to spread. New regulations will be imposed in order to control the radon gas, the quality of air, the effect of building materials, and asbestos. Nevertheless, the climate change will cause the ecotourism to be one of the fastest growing areas of the tourism industry. The increasing dominance of high technology also promotes this trend. Sea, rain forests, wilderness areas, and other unpolluted regions provide 42

10 4 ก a unique and chance for the consumers to stay away from the city life. Recycling, air quality, waste disposal, kitchen safety and other aspects of the workplace environment will be increasingly regulated and will require greater management attention and investment which finally will lead to the higher cost and price of tourism product. Although, social concerns about environmental problem have forced industries to incorporate expenditures for preserving environment into their cost structures, shifting social concerns, attitudes, and lifestyles alter the pattern of competition, usually favoring those players that response quickly and creatively. Therefore, Thai tourism industry can turn this challenge to be an opportunity if we act promptly. The challenge of changing in value and lifestyle The process of changing in values and lifestyle is turbulent due to the advancement in technology. Telecommunication brings news from around the world. It can cause the system of share basic values that makes for social cohesion to virtually disappear. Advancement in technology and better telecommunication system can erode the value and lifestyles of previous generation. Cultural identity seems to be increasingly reduced to leisure behavior. The demographic change with the increasing in retiring population, particularly in economically developed countries, is expected to create impact on the demand for lifestyle pursuits and leisure. However, Yeoman (2008) stated that the consumer behaviors are now more diversify and individualism in term of interest, tastes, and demands. It is important to point out that the tourism product development is required more innovation especially in offering tailored experiences to meet changing attitudes and beliefs. When tourism consumer tastes and preferences start to diverge, the Thai tourism suppliers can win a loyal following with tourism product offerings that have their own identity and stand apart from those of competitors. 43

11 4 ก The challenge of time pressure Time becomes the world s most precious commodity. For many consumer groups, there is a sensitive sense of time pressure. The meaning of holidays to individuals whose daily life are full of routine, stress and obligation are very important. People tend to have less time for leisure trip. All potentially decisions, such as destination, will be taken out of their hands. Travelers, instead, choose their holiday through reading list or through travel agents. Yeoman (2008) pointed out that shorter breaks are replacing the established long break in which travelers want holidays that offer them the most benefit in a short time. With the challenge of time pressure, the high quality of tourism product will be more desirable. Travelers especially want and can afford the small satisfactions of buying what they perceive to be the best. Small and affordable luxuries, such as hotel restaurant meals, are probably substituted for the absent of leisure. Hence, multiple and shorter vacations will replace the tradition vacation continually. Demand for weekend holidays will grow rapidly, especially in the easily accessible destinations. In conclusion, all of these challenges will have the influence on the tourism competitive environment which will finally have the impact on the demand for the Thai tourism industry. It is essential to both public and private sectors to capture the challenges and use them in the competitive ways in order to increase the tourism industry profitability. However, Thai tourism has to aware that these forces change the world tourism competitive conditions and put pressure to Thai tourism industry as there will be more competitors. Forecasting Thai Tourism Demand The challenges of world tourism will have an impact on Thai tourism demand and cause the competition to be more intense. The tourism industries need to reduce the risk of decisions which also reduce the chances that a decision will fail to achieve the desirable objectives. One important way to reduce this risk is by understanding and discerning certain 44

12 4 ก challenges, future events, and environments clearly. Thai tourism industry needs to pay more attention in measuring the challenges in order to be able to forecast the tourism demand accurately. Understanding the challenges and be able to measuring their impacts accurately are important to the tourism industry for the following reasons: 1. The tourism product is perishable. 2. People are inseparable from the production-consumption process. 3. Tourism demand is extremely sensitive to natural and human-made disasters. 4. Tourism supply requires large and long time leading investment in plant, equipment and infrastructure. Hence, accurate forecasting of tourism demand is necessary for countries like Thailand in effectively planning, formulating and implementing policies by both public and private sectors. Frecthing (2001) stated that as far as government agencies are concerned, accurate forecasts of tourism flows can facilitate their policy projections in various areas, such as price regulation, environment quality control, and provision of sufficient infrastructure. As for tourism businesses aiming to maximize profits, accurate forecasts can avoid the financial costs of excess capacity or the opportunity costs of unfilled demand. Without a meaningful and accurate estimation of tourism demand, the public and private sectors will not be able to allocate scarce resources efficiently (Lee, Var and Blaine, 1996). Nevertheless, Thailand seems not pay much attention to the analyzing and forecasting Tourism demand as it should be (Song, Witt, and Wong, 2003). Thailand is one of the countries famous in tourism and is strongly believed that tourism play an important role in Thai economy and also related business, employment, national standard and government policies. There is a significant need of insightful and accurate information understanding and estimated based on appropriate methods on Tourism demand which is important for decision makers both public and private sectors in Thailand. 45

13 4 ก In order for the government to make effective decisions on range of important policy issue, for example economic development, strategic planning, balance of payments, employment, and the marketing program for national tourism offices, it should have an appreciation of factor influencing the international tourism demand. Conclusion Tourism, as a major force of global trade, plays an important role in the economy and also related business, employment, national standard and government s policies. It is an important source of foreign exchange earnings, one of the biggest exporting products in many countries including Thailand. It also creates employment and helps income distribution. However, there are many challenges the world tourism are facing including the globalization, advancement in informational technology, climate change, change in preferences and tastes, and the value of time. With these dynamic changing in the world economy and sociology as well as consumer tastes and preferences, it is very important for both public and private sectors in Thailand to understand and be able to measure the impact of forces in order to maintain its competitive advantages. Therefore, the accurate measuring and forecasting the challenges is needed for making a better managerial decision in strategic management process. 46

14 4 ก References Athiyaman, A., and Robertson, R. W. Time Series Forecasting Techniques: Short-term Planning in Tourism. International Journal of Contemporary Hospitality Management, 4(4), Cited in Law, R. (2000). Back-propagation Learning in Improving the Accuracy of Neural Network-based Tourism Demand Forecasting. Tourism Management, 21 (1992) : Bangkok Post Thailand Tourism Review (Online) Available : Frechtling, D.C. Forecasting Tourism Demand: Methods and Strategies. Oxford: Butterworth-Heinemann, Kyoto University Research. Tourism in Asia (Online) Available : u.ac.jp/ dspace/bitstream/2433/56779/ 1/KJ pdf Lee, C.-K, Var T., & Blaine T.W. Determinant of inbound tourist expenditures. Annual of Tourism Research.23,3 (1996) : Pfotenhauer, L. M. Thailand's Tourism Industry-What Do We Gain and Lose. TDRI Quarterly Review.9,3 (1994) (Online) Available : Police Tourist. Tourism Industry in Thailand. (Online) Available : Song, H., Witt, S.F., & Wong, K. F. Modeling and Forecasting the Demand for Thai Tourism. Tourism Economics, 9,4 (2002) : Tourism Authority of Thailand. Tourism in Thailand (Online) Available : 47

15 4 ก UNTWO. World Tourism. UNTWO World Tourism Barometer.5, 2 (2007) (Online) Available : Yeoman, I. Tomorrow s Tourists: Scenarios & trends. Oxford: Butterworth- Heinemann, Atthawet Prougestaporn Bachelor of Business Administration in Accounting - Assumption University, Thailand Master of Science in Applied Economics - Saint Cloud State University, USA Research Interest Tourism Economics, Applied Economics. He is Currently a Deputy Vice Rector for Students Affairs and Development Office, Dusit Thani College. 48