Forecasting Tourism Demand

Methods and Strategies

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1. Introduction

Some say that travel and tourism is the world's largest industry and generator of quality jobs' (World Travel and Tourism Council, 1995: 1). They estimate that travel and tourism directly and indirectly contributes nearly 11 per cent of the gross world product, the most comprehensive measure of the total value of the goods and services the world's economies produce.

The World Travel and Tourism Council estimated that in 1999, gross world product both directly and indirectly related to travel and tourism would total about $3.3 trillion, supporting 187 million jobs and generating $729 billion in taxes. This activity is buttressed by more than $8 trillion invested in world plant, equipment and infrastructure related to travel and tourism.

While these estimates may be controversial, there is no doubt that tourism activities, encompassing travel away from home for business or pleasure, comprise a substantial part of lifestyles of the world's residents, or that a very large industry has grown up to serve these travelers.

Futurist John Naisbitt (1994), in his bestselling book Global Paradox, subscribes to the concept that tourism will be one of the three industries that will drive the world economy into the twenty-first century. He is also author of the idea that small and medium-sized organizations are growing in importance in the expanding global economy. The managers of these organizations have the agility to act quickly and efficiently to take advantage of trend changes, emerging markets and new business opportunities.

In 1998 Microsoft Chairman and Chief Executive Officer, Bill Gates, agreed that tourism would be one of the three leading 'socio-economic service businesses' of the new century. He noted that the Internet would be an increasingly powerful vehicle for travel information, marketing and sales'
(Maurer, 2000).

These two continuing realities - the continuing expansion of one of the world's most ubiquitous activities and industries, and the advantages of being small and nimble - mean businesses and governments place increasing stress on understanding the shapes of global, national and local tourism futures.

What this book is about

This book is designed to provide the basic and practical understanding of demand forecasting that tourism managers, marketers, planners and researchers will need to thrive in the decade ahead. It can be viewed as an introduction to the range of forecasting methods available to anyone who must forecast future demand for a tourism product. It is also designed to instruct the executive who must evaluate proposals to develop a tourism demand forecasting system, or produce demand forecasts, or assess an operating forecasting system and its forecasts for their usefulness in strategic management.

There is no distinct set of tourism forecasting methods. Rather, quantitative and qualitative techniques developed to forecast variables of interest to business managers and public planners have been used to forecast phenomena for those interested in tourism.

This book is an introduction to a complex issue and no substitute for the myriad books, reports and articles available on tourism forecasting. Many of these appear as suggestions in For Further Information at the end of the chapters and in the Bibliography. This book is intended to provide a
foundation for understanding the various methods available.

This book is also designed to suggest the most appropriate strategies for approaching a given tourism-forecasting task. Each of the various methods has its own strengths and weaknesses. Some are best when you have plenty of data to work with and you well understand the factors affecting tourism demand. Others are superior when little is known about the past, or the future we are interested in is distant. Some forecasting methods take little time and knowledge, while others require a detailed understanding of their intricacies.

Some have been widely employed in tourism, providing a wealth of experience we can build upon, while others have not been used for our subjects.

In short, the book was written to encourage readers to try their hands at forecasting some aspect of tourism demand, and to inform their efforts to help ensure success whatever their objectives.

It is often remarked that demand forecasting has become a very complex process, basically opaque to managers and other users. The following observation is typical, if more eloquent than most:

Forecasting often becomes an end in itself, rather than an integral part of the strategic management process, because of the complexity of the methodologies used and the consequent need for specialist analysts to be involved. The analysts, however, have become isolated and detached, and forecasting has become a black box as far as most users are concerned . . . Effective integration of tourism demand forecasting with management decision making implies the establishment of a meaningful dialogue between technicians and users (Faulkner and Valerio, 1995:30).

This text is designed to help lift the veil of obscurity from the forecasting process for those who need sound guidance to the shape of the future. We hope it will lead to such a 'meaningful dialogue', as well as better forecasting and better integration of these forecasts in tourism marketing, planning, development, policy-making and research.

The scope of Tourism

While there are many definitions of 'tourism' in use today, the World Tourism Organization (V/TO), the affiliate of the United Nations (UN) serving as a global forum for tourism policy and issues, is working to standardize tourism terminology and classifications throughout the world. Such standardization will permit comparisons across studies, encourage the accumulation of knowledge about tourism activities and assist those beginning to study tourism in defining their terms. These standards have also been adopted by the United Nations Statistical Commission.

In the spirit of encouraging uniformity in tourism data collection and improving world knowledge about tourism behavior and consequences, the following WTO definitions are observed in this book. (The sources of these and further details about them can be found in the WTO publications listed at the end of this chapter.)

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