Globalisation of Tourism: Drivers and Outcomes

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What is Globalisation? The growing interdependence between national economies is

reflected in a trend towards global markets, global production, global competition and global communication.

Globalisation involves the evolving interconnectedness of the world, reflected in the expanded flows of information, technology, capital, goods, services and people.

Globalization includes, and goes beyond, simple internationalization of markets.

a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration and transportation

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Proponents of Globalisation claim positive effects - - - -

• promotes global economic growth, • creates jobs, • makes companies more competitive,• expands consumer choice • lowers product prices. • the basis for disseminating technical knowledge and education• improves global communication and transport, • creates new markets for firms and countries,• generates innovation and enhanced product quality, • fosters democratic ideals and cultural exchange and international understanding

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Critics of Globalisation claim negative effects - - - - generates income inequalities,

destroys local industries, creates greater dependency of developing economies on developed ones, with

adverse effects on small business Local level negative effects include increased prices of consumer goods and services, increased price of land and housing beyond local affordability, increased demands on public services and facilities. Some critics advance stronger claims that the effects of globalisation, through

the operation of TNCs, include displacement of indigenous peoples from lands, human rights abuses, unfair labour and wages, commodification of cultures, environmental degradation

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So - - - who is right?• Generalisations are hazardous• The effects of globalisation differ case by case and by context. • This is particularly true for the two- way link between the tourism industry

and globalisation.

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5 Drivers of Globalisation

•Economic•Technological•Demographic•Social•Political

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Economic Drivers Globalisation drives the integration of national economic systems,

including• greater trade in goods and services, • the creation of trading blocks, with the ability to move goods and

services freely across borders, • substantial, and increasing, volumes of world trade. The centre of gravity of the world economy is shifting from west to

east and north to south. Rapid income growth within emerging economies is creating new

markets and new sources of competition. Newly emerging economies, particularly China and India, are driving this growth in trade.

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Economic Drivers• Easier access to foreign capital and increased FDI provides the

foundation for import substitution and export promotion to generate competitive markets.

• Globalisation induced economic growth is a source of tax revenue for development financing. TNCs can help developing countries to improve their balance of payments with critical financial infrastructure for economic and social development

• more integrated and interrelated world labour market. Does globalisation reduce global economic inequalities? While jobs are created in developing countries, globalisation is

claimed to cause unemployment in industrialized countries as businesses outsource work to developing countries where the cost of labour is low.

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Technology Drivers

• The globalizing economy and technological change inevitably require a more highly skilled labour force.

• Developments in information and communications technology (ICT) and transportation have accelerated the pace of globalisation, lowering operating costs and making it more economically feasible for a firm to locate in different countries.

• technology makes it possible to produce customised services on a large scale at cost competitive prices (mass customisation).

• Technological spillovers are particularly important for developing countries providing opportunities for them to narrow the productivity gap with the developed economies.

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Technology Drivers

• The Internet and related social media has been a vital development across all industries as consumers use it to gather information on destination, products and services.

• Rise of social media. Internet services such as Facebook, Twitter, YouTube and Skype, e cross-cultural communication.

• Technological advances in the transport sector, particularly aviation, enable the continued rise in mobility as people are able to move greater distances, more comfortably and in faster time.

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Demographic Drivers• Major demographic shifts have profound effects on most social institutions.• important drivers involve the related areas of population growth and age

structure change, driven by differential fertility rates and improved health care• A high standard of public health in developed countries has contributed to

increased longevity. With increasing longevity, the growing world population is ageing, especially in rapidly expanding urban areas

• Population is ageing in developed countries but getting younger in developing countries.

• Population growth in the context of globalisation has generated a worldwide trend toward urbanisation. By 2020, more than 60% of global population will live in cities The number of very large cities, megalopolises of more than 10 million people, will increase to about 30 by 2020

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Social Drivers

• Parallel to changes in demography are changes in people’s values and needs, aspirations and expectations.

• As incomes rise in most countries in the world, so people’s values, aspirations, motivations and behaviour do too.

Worldwide, people possess:• an increased sense of deservingness with emphasis on quality.• Individualism• Money rich time poor• Experimental• Hedonistic• Feeling of deservingness• Social and environmental consciousness - - -

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Social Drivers Globalisation has produced a generation that is more international in

its outlook than any before. This is demonstrated in membership of international organisations,

studying abroad, taking part in human rights campaigns and so on. the migration and movement of people – either from rural to urban

environments within countries or migration related between countries is a prominent feature of the globalization process.

provides better opportunities for people all round the world to gain access to jobs.

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Political Drivers

• increasing liberalization of trade and capital markets. • International bodies such as the World Trade Organisation (WTO) and

the International Monetary Fund (IMF) have facilitated globalisation by respectively reducing trade barriers (such as tariffs and subsidies) and the deregulation of world financial markets.

• The Organisation for Economic Cooperation and Development (OECD) and the World Bank support continued liberalisation of trade through their lending and debt relief policies.

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Political Drivers

• ongoing political pressure for higher living standards in developing societies with a growing global middle class creating a cycle of rising aspirations.

• A rapid expansion of the private sector in many emerging market economies,spurs economic growth by generating competitive pressures to use resources more efficiently

• development of generic consumer protection frameworks in many countries providing certainty to all businesses and consumers as to their rights, expectations, responsibilities and obligations across all industries

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These Drivers Affect Tourism Development

• The above highlights only some of the relevant drivers of globalisation • Each of the drivers has tourism relevance and no single driver or trend

will dominate. • Each influences the others and will have varying impacts in tourism

destination different regions, countries, industry sectors and tourist behaviour.

• The drivers are not necessarily mutually reinforcing; in some cases they will work at cross-purposes.

• Taken together they set the context in which the global tourism industry will develop in a context of continued globalisation.

• The trend towards increased globalisation will boost tourism, as people are increasingly ‘international’ and ‘cosmopolitan’ in their outlook.

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Effects of Globalisation on Tourism Supply and Demand

• Economic Growth income inequality, economic dependency consolidation tourism expenditure leakages destruction of local industry,

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Economic Growth• Globalisation is considered to increase the economic prosperity of countries, as

rising trade and investment flows generate additional world GDP. • In particular, strong income growth in developing economies such as BRIC (Brazil,

Russia, India, China) is expected to drive the increase in international tourism worldwide as the ‘new wealthy’ seek new experiences.

• The UNWTO projects tourism to grow at 4.1% annually at least to 2020, fuelled primarily by economic growth internationally.

• By 2030, it is forecast that destinations in today’s emerging economies will account for 57 percent of international tourist arrivals compared to 47 percent in 2011

• As rising income is the most powerful generator of tourism flows to the extent that globalisation generates a dynamic world economy, it also creates the economic basis for continued growth in domestic and international tourism worldwide.

• The circle may be virtuous. 19

The other side - - -

• Critics have argued that globalisation has effects that greatly reduce the economic impacts of tourism growth.

income inequality, economic dependency consolidation tourism expenditure leakages destruction of local industry

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Income inequality

• A particular advantage claimed for globalization is that it fosters the generation of employment, increasing the standard of living of people worldwide, and also alleviating poverty.

• Over time, as nations become wealthier and more efficient, the benefits of trade will ‘trickle down’, reducing poverty levels.

• Even so, a causal relationship between inbound tourism and economic growth may not necessarily lead to higher living standards in developing countries, as these are also dependent on the distribution of income and the quality of services such as health care and education.

• Some studies suggest caution when generalizing the effects of tourism growth on poverty within a country.

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Dependency Most developing economies are highly vulnerable to any economic

disruptions that occur in the developed countries that purchase their products.

Two types of risks from overspecialisation relate to tourism. a dependency on tourism in general as an export market. The global

financial crisis has demonstrated the risks involved in tourism dependency arising from sudden unfavourable changes in demand from world markets

too much reliance on tourism from particular origin markets or too much reliance on a particular tourism product (e.g. hunting, spa tourism, gambling).

Given the discretionary nature of tourism expenditure, the industry is extremely sensitive to crises of every type (economic, environmental, political).

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Dependency

• Both of the above types of risk are compounded by the reality that TNCs are increasingly 'footloose', with ability to move and change at very short notice creating uncertainty for the host destination.

• TNC’s can switch their investments between territories in search of the most favourable regulatory regimes with adverse consequences for the local tourism industry.

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Dependency In many developing countries, local economic activities and

resources are used less for the benefit and development of communities and increasingly for export and the enjoyment of others (i.e., consumers from other areas of the world). This occurs in tourism when the domestic market is neglected.

To avoid overdependence on the international tourism market and related problems, countries can explore tapping the potential of domestic tourism

domestic tourism can effectively absorb the excessive supply resulting from any slumps and seasonality of inbound tourism.

This also helps redistribute the national income, thus reducing interregional gaps in the level of economic development and contributing to social equality.

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Consolidation• For many tourism firms, survival in the global marketplace

requires merging with or taking over companies that deliver different components of the whole product.

• The growth of TNCs, and the rise in the significance of global brands, has been central to the emergence of globalisation in the tourism industry.

• The high concentration in some tourism sectors creates market power and the potential for abuse by large international firms as evidenced by exclusionary agreements, price fixing, market sharing among dominant operators or boycott and refusal to deal with operators in developing countries.

• These anti-competitive agreements and conduct can impose substantial costs particularly on developing economies eliminating many of the benefits of globalisation

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Leakages• Expenditure patterns of international tourists has a higher import

content than the expenditure of domestic tourists.• The resulting higher leakages imply a loss of foreign exchange and a

loss of economic benefits outside of the community back to foreign owners.

• The weaker industrial bases of developing countries implies that most products demanded by tourists cannot be manufactured domestically.

• Weak links between tourism and other sectors in a destination implies a weak ‘multiplier effect’ from tourism expansion

• Leakages also include export of profits by TNCs’ to foreign locations by way of repatriation of profits to their 'home country',

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De-industrialisation Globalisation can also erode an economy's manufacturing base. Local businesses, particularly in developing countries, face much

greater competition due to globalisation. This can put local tourism SMEs at a disadvantage as they do not have

resources to compete at global scale. Local stakeholders may also be pushed out or sell out local prices for commodities and services rise, as do taxes. The crowding out effects of export oriented tourism growth, resulting

in the decline of local (non- tourism) industries, are well recognised.

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Employment Opportunities: Positive

• Globalization can be a catalyst to the creation of jobs that require higher skill sets.

• Globalisation generates greater labour mobility as the internet provides greater opportunities to gain jobs internationally.

• The implications of this for tourism employment include an increased demand for people with language skills, and with the skills to work in different cultural environments.

• Tourism can also be a good employer of women and disadvantaged groups and can upgrade their economic status.

• The jobs created by tourism can act as a very important motivation to reduce emigration from rural areas. Local people can improve their earnings prospects through tourism-related professional training.

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Employment Opportunities: negative

• competition from other sectors is causing a diminishing labour pool of tourism staff of the right quality.

• the jobs created may be low-skilled with the TNC employing expatriate workers for the more senior and skilled roles.

• TNCs can operate as local monopsonies of labour, and push wages lower than the free market equilibrium.

• Local employment can be low level or unskilled, seasonal, low wage, part time with little opportunity for advancement and development of business and organizational skills.

• the tourism-related informal sector may contract as the tourism-related formal sector expands

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Spread of Technical Knowledge

• Access to information technology provides awareness of other countries and their tourism offers.

• The tourism industry globally uses social media platforms such as Facebook, Twitter, YouTube and travel blogs such as TripAdviser, much more intensively, both on the demand and supply side

• These new technologies have facilitated greater information flows between travellers.

• interactive access to product offering via the Internet gives tourists unprecedented control over how they spend their time and money

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Spread of Technical Knowledge

• Travel and tourism companies and organisations increasingly integrate ICT into their sales and marketing activities.

• The Internet allows marketing activity to be undertaken on a more level playing field whereby small businesses can connect directly to consumers and compete for market share on an even footing with larger firms

• New technologies globally also compete with tourism by delivering new forms of entertainment in or near the consumer’s home.

• The new technologies with sophisticated database management systems have transformed travel and tourism into a more flexible, customised, individual-oriented activity responding to individual preferences

• Technology changes thus enable an increasing proportion of tourism organizations to achieve the dual goals of reducing operating costs and increase their ability to add value for their customers.

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Spread of Technical Knowledge

• In the transportation sector, new technology is improving the speed and reducing the real cost of travel.

• However, developing countries do not have a proper infrastructure in place to leverage technological benefits (TTCI)

• Is there ‘too much’ technology?. A consideration for the tourism sector will be whether it can deliver authentic experiences that aren’t crowded by technology.

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New Markets

two main causes of the development of new markets in tourism, both of which are associated with globalisation.

demographic variables new consumer values.

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Demographics: Population Change

• Population growth generates substantial expansion in overseas travel. • Mass tourism is one of the visible manifestations of globalization. • In 2000 the rate of international journeys was 11.5 per 100 people. At this rate

population increase alone would see a 20% rise in international travel. However increases in wealth, particularly in developing countries, are expected to see the rate of journeys grow to 20 per 100.

• Population growth is much higher in developing countries. • The changing distribution of the population implies the importance of Asian

tourists to all markets. • emerging economies expected to experience faster growth in tourist arrivals• By 2030, it is forecast that destinations in today’s emerging economies will

account for 57 percent of international tourist arrivals compared to 47 percent in 2011.

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Demographics: Urbanisation

• The world is experiencing a shift from rural to urban communities. • This trend is a positive development for tourism, since urban dwellers

have a greater propensity to travel than those living in rural areas. • The growing urban congestion in both the industrialised and

developing economies leads to the increasingly felt need to engage in discretionary tourism to escape and/or to indulge.

• As the world’s population grows and becomes increasingly urbanised, tourists will be drawn to nature-based experiences.

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Migration

•Migration levels worldwide have increased substantially due to globalisation.

•Migration and tourism are clearly interlinked. •Both Migration- Led Tourism (MLT) and Tourism- Led Migration (TLM) make important economic and social contributions to countries ranging from cultural exchange to providing labour for tourism related industries.

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Age Re-structuring• Increased life expectancy means larger numbers of older tourists from existing

markets in developed countries.• Increased longevity increases the period over which people are active travellers

and tourists. • Older persons are attractive as tourists because they have the financial means,

and time to devote to travel experiences.• Tourism industry will increasingly have to take account of the needs and

preferences of older travellers by way of product design and marketing. • At the same time, tourists from developing countries will be younger with very

distinctive needs from the older tourists from more traditional source markets. Concurrent to income growth in the developing world youth travel is experiencing rapid growth.

• The challenge for tourism industry is to address both the needs of younger less experienced tourists in developing markets and the needs of experienced tourists in developed markets.

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Changing Social Structures

• Changing social structures associated with globalisation affect tourism flows.

• Household types are diversifying away from the traditional ‘nuclear’ family in developed economies.Family structures are shifting from more ‘horizontal’ with fewer generations to more ‘vertical’ structures with more generations included

• tourism will need to adapt itself to provide a more varied offer.• Marketing and communications will have to address new needs and

wants that result from these emerging family and household structures, with staff trained accordingly.

• Meanwhile, the growth of the singles market suggests strong opportunities for educational and ‘interest-based’ tourism.

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Work Patterns and GenderWork patterns are changing which is also associated with

globalisation. Changing work patterns will allow for more flexibility of travel

plans. The distinction between work and leisure will continue to blur Society is also becoming more feminised, with the traditional

distinction between the roles of men and women becoming more blurred.

Women have increasing influence on all the key consumption decisions, including tourism opportunities and destination choice.

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In Sum: Importance of Demographic Changes

• Demographics will have a dramatic impact upon tourism in the coming decades.

• It will impact upon the types of tourists that will travel, where they originate from, where they travel to, the types of accommodation they require, length of stay, and the activities they engage in while away.

• The changes clearly have implications for business management,

marketing and new product development in tourism

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New Consumer Values: Money-rich, time-poor:

• In developed countries, the growth of ‘money rich-time poor’ people implies a high demand for short time holidays.

• The greater pressure on ‘time’ and rising ‘stress’ levels leads to growing emphasis on the means of ‘escape’ through holidays.

• Greater flexibility in working hours can provide benefits to employees in terms of greater freedom to choose when to go on holiday.

• This balancing between time and money is a critical issue for the tourism industry to offer the right balance of activities and relaxation to maximise the ‘benefit’ of the experience.

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New Consumer Values: Individualism:

• People increasingly tailor holidays to meet their particular requirements.

• As travellers become more experienced, they want customised services, rejecting the impersonal, non-interactive system of ‘mass tourism’.

• Tourists seek the unusual and the authentic experience rather than the shared, off-the-shelf holiday package

• The experiences sought are those ‘authentic’ to the destination and its people, personalised and often involve social interaction and emotional connection.

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New Consumer Values: Participation

• As incomes grow, people shift their discretionary expenditure towards experiences as opposed to products.

• One result of the experience economy and tourism has been a fragmentation of the tourist market into subsets of unique experiences.

• With tourists desirous of involvement as participators not spectators, seeking a variety of optional experiences,

• At the same time, tourists are demanding assurances of safe products and services prior to purchase.

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New Consumer Values: Self-improvement

• individuals are becoming more interested in self-improvement as part of the tourism experience, emphasising health, well-being, education, skill development and cultural appreciation.

• people are increasingly concerned about their health and well-being. Greater value is being placed on de-stressing and selfmedicating

• People are increasingly interested in discovering, experiencing, participating in, learning about and more intimately being included in the everyday life of the destinations they visit.

• As more material needs are satisfied tourists seek newer, richer, deeper, experiences. Tourists, have an increased social and environmental consciousness, seeking ‘authentic’ tourism experiences.

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Seeking Quality

• Standards in hospitality management and hotel sector are now judged by global comparisons, even at the more localised level.

• The tourist marketing battle has shifted from competitive pricing towards service improvement.

• TNCs that have been able to establish and sustain a consistent brand image and control quality typically outperform competitors unable to do so.

• As domestic businesses have to combat foreign competition, they are compelled to raise their standards and customer satisfaction levels in order to survive in the market.

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In Sum: New Consumer Values• The new consumer values have important implications for tourism on both

the demand and supply side. • Rising affluence, greater internationalism, an appetite for risk taking, more

sophisticated marketing, the feeling of greater time pressures, and improved access to technology all contribute to a fragmentation of tastes in both developed and emerging markets.

• Firms must adopt individual strategies for individual markets and customers, in order to become increasingly competitive in the market place.

• This will require more detailed analyses of demographic trends and value shifts, how these are impacting on tourism demand

• Those tourism organisations that ignore this massive demographic and values shifts and their global impact are likely to experience strategic drift and cease operations.

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International Agreements

• Globalization results in easier access across borders, which for the tourism industry implies more foreign tourists as well as increased global competition from international tourist destinations.

• The continued deregulation and liberalisation of air transport and ‘open skies’ policy supports the growth of trade and tourism.

• However, it has been argued that international institutions aid and abet some negative effects of globalisation

• Under GATS, protection to the local tourism industry would be construed as unfair practice and would thus have to be eliminated.

• Regulations such as those found in the TRIMS agreement which restrict a country's rights to require companies to purchase local materials, the "most favoured nations" provisions which make it illegal for countries to reward companies who hire locals or have good environmental practices, and the liberalization of trade in services of GATS which would allow foreign companies to merge or take over local companies.

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International Agreements• Tourism is now being pursued as a serious development strategy for the less

developed world. Under IMF-World Bank prescriptions, tourism is classified as an export strategy.

• The International Monetary Fund (IMF) has included tourism as part of its Structural Adjustment Programmes (SAPs).

• The SAPs, which are preconditions for the approval of financial assistance require the indebted country to: be integrated into the global economy; deregulate and liberalise its economy; shift from an agriculture-based to a manufacturing and service industry-based economy; and liberalise its financial sector.

• All such initiatives reinforce the importance of globalisation to tourism industry development.

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Environmental Effects

• On one view, globalisation has enhanced our understanding of the importance of environmental protection benefitting all tourism stakeholders. Tourism can foster conservation and preservation of natural resources, encouraging community revitalisation and beautification, raising revenues to help maintain quality of natural and heritage attractions

• The rise of the socially conscious and environmentally conscious consumer leads to new patterns of tourist behaviour, as exemplified by the development of alternative tourism, in opposition to mass tourism

• Many global environmental problems involving cross-boundary pollution, e.g. over-fishing in the oceans, climate change, are being solved by discussions and conventions.

• Globalization enhances the ability of countries to work together to overcome natural disasters and global challenges, such as global warming and whaling.

• Another phenomenon that the globalization of ideas brings about is improving environmental awareness and the popularization of the concept of sustainable development

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Environmental Effects• As a counterargument, all countries face intensified environmental

problems as a result of population growth, economic development and rapid urbanisation.

• Trade growth has also accelerated the depletion of non-renewable resources, such as oil. Increased consumption leads to an increase in the production of goods, which in turn puts stress on the environment via its carbon footprint.

• Tourism transport, especially aviation, is a high emitter of greenhouse gases, and contributor to global warming. Human, animal and plant diseases spread more quickly through increased movement of goods and people around the globe.

• The main environmental trends such as climate change, depletion of natural resources and loss of biodiversity, are all associated with globalisation.

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Social Effects: Positive• The globalisation of social networks, whether through multinational companies,

higher education, or international civil society, can be expected to drive further growth of tourism and travel.

• Inter alia, tourism can lead to removal of social or national prejudices, promote mutual understanding between hosts and guests, encourage civic involvement and local pride in a destination, improve the quality of life of locals including the vitality of local communities, and increases availability of recreation facilities and opportunities.

• Globalisation forges cross-cultural contacts, helping to promote cultural understanding and tolerance, as well as the spread of democratic ideals.

• Globalization has helped to create internationally sanctioned agreements which attempt to ensure that people are not discriminated against on the basis of country, caste, creed or sex.

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Social Effects: Negative• On a contrary view, since the cultures of those countries that have more

economic power are likely to be more dominant than others, it is no surprise that global tourism threatens indigenous knowledge, social structures and relationships.

In many developing countries, tourism's effects on indigenous peoples have been profound:

• widescale eviction from their lands, • economic dislocation,• breakdown of traditional values• degradation of cultural sites when historic sites and buildings demolished to

make way for tourist facilities. • commodification of culture Clearly the reality differs case by case.

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Reason for optimism?• On a brighter note, populations are responding to the globalization of

economies, markets, systems and cultures by exploring their own identities • This tension between ‘modernity’ and ‘identity’ is leading to the increasing

questioning by local communities of the form and scale of tourism development and type of destination marketing in those societies.

• Increased community involvement in tourism planning and development results in a growing dispersion of tourism away from mass tourism dominated by TNCs, into diverse niche markets.

• From this perspective, globalisation appears to pull in two ways, both towards the creation of TNCs by the extension of operations through take-overs, the formation of strategic alliances or franchising agreements, and, in terms of consumption, towards more localised or regional ‘branding’ and niche marketing.

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In Sum - - -- - • We cannot generalise too broadly on globalisation’s impacts on tourism and the

subsequent effects on economies, communities and natural environments.• Globalisation has positive and negative effects. • More case studies are required to identify the effects in particular locations.• As the drivers of globalisation show no signs of a slowdown, the challenges

facing tourism are formidable.• Since the same forces that drove mass tourism are sewing the seeds of its

demise, it is very likely that a complete change of paradigm, is required if tourism globally is to develop in a sustainable way

• Some critics argue that the growing incidence of crises, environmental, political and economic, encourages a counter trend to the globalisation process, with possible significant implications for the future of the global travel system.

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In Sum - - - -• All elements of the tourism industry need to be sensitive to the needs of the

‘new tourists’. Communities must ask: What do tourists want? What types of experiences do they value? How can we meet those needs? Do we want to?.

• Perhaps even more important than catering for visitor needs, destination residents should be developing a vision for the type of community they wish to live in, and the role that tourism might play (if at all) in achieving that vision.

• the tourism industry can do more to critically engage with the main international institutions and governments, providing a link from stakeholders who are marginalised and exploited by the processes of globalisation.

• The international tourism industry, through organisations such as the UNWTO, can play an important advocacy role, helping to build the capacity of developing countries to participate more fully and negotiate more effectively in the discussion about trade rules, subsidies, liberalisation and corporate responsibility and regulation.

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Thank YouMerci

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