Analysis of European Tourism Industry
Analysis of European Tourism Industry
Introduction
As is the case with most countries with tourist attracting features, tourism is one of the major sectors of the European economy. More than 5% of the EU GDP is generated by tourism industry (Costa and Panyik, 2014). Wide variety products comprise the tourism and involve a variety of different stakeholders, both private and public (Mintel, 2013). Tourism industry is in the process of being transformed into information-based industry. Thus, there is a critical role to the ICTs (information and communication technologies) in EU tourism. In addition, European tourism industry may be considered as dynamic and currently, there is a rapid acceleration of this sector (European Commission, 2012).
In European countries, the industry of tourism currently in the process of consolidation, where the number of the participants is decreasing because of both acquisitions and mergers (Budeanu, 2005). The primary aim of this paper is to analyze the environment of the industry in the opportunities and threats arising from changes in the industry. We will also examine the competitive environment of the industry.
For accessing the external environment of the European tourism industry, the PESTEL analysis would be applied since it is an effective tool for ensuring appropriate handling of the crucial aspects (Bowhill, 330-335). This analysis provides the participants of the market with an option of remaining alert in terms of the characteristics of external environment that have a potential of affecting their ultimate operations and business strategies (Dransfield, 444-446). The tourism industry for European operators may be represented in the following manner:
Political
Some changes were made in immigration laws making entrance into an EU country difficult. Many EU countries are willing to join the limits and can have the potential of affecting the political environment in a significant manner.
Additional emphasis should be placed on the Schengen, which is the 90-day tourist visa for the countries of Schengen Area. There is a border-free visa agreement between the courtiers of Schengen area, which allows the residents of these countries to move throughout the Schengen Area without need for a passport. The Ireland and UK residents are allowed a limitless entry. However, such freedom is not provided to all travelers since the residents many other countries need to apply for a Schengen entry beforehand (Nomadic, 1).
Economics
The industry of tourism is adversely affected by recent recession. Many major airline companies rely on the low profit margins and both small and big participants of the market are impacted by global recessions. As recessions end, only the bigger players would have an option of exploiting the opportunities and even gaining expansion and prosperity. Recessions also affect the exchange rates causing fluctuations in consumer spending on tourism.
It is essential to refer to the fact that Euro is a strong currency in the global markets and allows its easy conversion. In addition, the European parliament has asked the airlines to impose taxes on the aviation fuel for further supporting of the trading scheme of EU carbon emissions. Both these measures adversely affect tourists from non-European countries such that they cut down their tourism spending.
Socio-cultural
The standard of living among population in the European countries is improving alongside with the life expectancy rates. This trend represents that older people have an option of travelling more and having a good time. It is estimated that the share of aging population, which is expected to travel in Europe, would soon reach 60% (ECORUS, 29).
The patterns of travelling are also changing with the diverse range of options desired by travelling consumers; the consumers are expecting a wide option of choices because they are willing to travel to different places and make their travelling plans by themselves.
It is also estimated that the quantity of short holidays in EU would increase by about 47% and European tourists would modify their behaviors, as they prefer travelling abroad rather than to the places within domestic country (ECORUS, 31).
Technological
While taking in consideration the rapid popularization of the technological advances, the tour operators’ work has become obsolete. Most people use Internet for making online reservations and availing the services of online travel agencies. Significant share of the tour operators are using both online and traditional platforms for reaching customers and this trend has assisted them in decreasing the cost of these operators.
ICTs standards have become an essential element for the business entities, which are tending for taking advantages from modern technologies of e-Tourism by fostering technological interoperability. Even while taking into consideration the fact that currently, there is a set of the conflicting approaches, the costs may be very high, and a significant quantity of the existing solutions certainly lack the flexibility. Interoperable standardized systems are essential because of the strong trend among the travelers and tourists towards getting immediate response for their changing needs or wishes. Their device indifference high level, which, in turn, becomes more and more evident with increased popularity of using the wireless and mobile devices for accessing the Internet and booking travels, searching information, or composing personalized packages.
Environmental
While taking into account the fact that people have become too much concerned about environment, the plan for a third runway has been scrapped by the UK government at Heathrow because of the pollution issues. Additional emphasis should be put on the fact that the green tax was imposed by the government for carbon emissions effect' offsetting. Some health factors like Swine flu and SARS have influenced the destination choice of travelers.
Legal
For keeping the strict control on the tour operators, governments impose regulations and rules. The EU competition policy keeps an eye on the companies for ensuring that they do not collude together in giving unfavorable packages to the clients.
Opportunities
- In terms of opportunities, the EU tourism industry have the availability of EU funds for infrastructural and tourism development. There are increases in the demand for tourism in certain Mediterranean countries. Other opportunities include the entry of the international hotel chains, cross-border collaboration between Romania and Greece in the area of tourism, entering the EU by the countries of West Balkans, increasing welfare of CEE countries, increased quality, and social status of tourism education in Bulgaria.
- Threats
- The industry does have many threats to its survival and renewed growth. The threats include intense competition between Mediterranean and countries Balkan, continuing Global economic crisis, Strict Shengen visa restrictions for Ukraine, Serbia, Macedonia, Russia and the Belarus and the negative natural population growth Bulgaria (Costa and Panyik, 1).
- Key driver of change
- For the EU tourism, the key drivers of change in the near term appear to be the falling Euro. As Euro declines further, EU becomes very attractive destination for travelers from around the globe because their dollars or yen go much farther in Europe than elsewhere.
- Analysis of the competitive environment for the Tourism Industry using Porter’s Five Forces Model
In the scope of the analysis of the European tourism industry from the perspective of Porter’s Five Forces Model, the following aspects are important for the survival and success of the tourism industry. The analysis and discussion would focus on 1) threat of entry, 2) bargaining power of buyers, 3) the extent of rivalry between competitors 4) bargaining power of suppliers and 5) the threat of substitutes (Hill and Gareth, 43-45; Ahlstrom and Bruton, 130-131).
Threat of entry
There are limited options for the new entrants to join the tourism industry in an easy manner since it is a high cost business requiring huge amount of capital as initial investment. The companies, which currently operate in the market of tourism services, have strong brand loyalty. Customers will not shift their attention to any new entrants in an easy manner.
The extent of rivalry between competitors
While conducting an analysis of the European tourism industry, it is essential to refer to the fact that within this market, there is not much intense competition since this sector is represented by the limited number of big players. The competition, if any, is posed by the big players to the SMEs, as they are getting involved and trying to move into this market. Even while taking in consideration the fact that there are still different indirect competitors in the industry, the positions of top players in EU are still occupied by TUI Travel PLC and Thomas Cook.
The bargaining power of suppliers
In the tourism industry of the EU, the suppliers’ bargaining power is adversely affected by relationships in the distribution channel of tourism (Buhalis, 2000). The conflicts between hotel and tour operators in the Mediterranean resorts are one example. Mediterranean hotel operators increasingly find the power of tour operators from Northern European countries very challenging. To remain competitive, the tour operators reduce the profit margins of their suppliers at destinations (Buhalis, 2000).
The bargaining power of buyers
The bargaining power of buyers, in particular that of the European tour operators marketing “packaged” mass tourism, is considerable, increasing and adversely affecting small and medium sized tourism accommodation enterprises, particularly in the Mediterranean basin (Bastakis et al., 2004). In addition, the small and medium sized tourism accommodation enterprises have to deal with online booking companies acting as buyers on behalf of customers. As a result, the problems faced by small, and medium sized owners or managers are mounting when dealing with large tour operators and online companies (Bastakis et al., 2004).
The threat of substitutes
The preferences, needs, and requirements of customers sharply define the nature of a substitute and the threats thereof. For example, customers who cherish travel and leisure activities would never opt-out of travelling option, however expensive. For customers looking for substitutes, the set of available alternatives include domestic trips to town, in-home activities, watching TV, playing video games and many others. However, such activities do not have the potential of complete replacement of the travelling option, particularly in the EU tourism with global reach (Vanhove, 2006). In other words, the threat of substitutes is low.
Industry attractiveness
- EU tourism is expected remain very attractive to consumers given its grandeur constructions and attractions. People always prefer to visit places with ancient history, modern amenities, and a friendly atmosphere.
Conclusion
- Small and medium enterprises (SMEs), operating in the area of tourism in Europe face a strong competition. That is why, it is essential for such business entities to differentiate their products from the large players of the industry (TUI Travel PLC and Thomas Cook) by putting their focuses on the niches and offering the products with a specific value to their customers. In this context, the crucial role belongs to the fruitful nd effective collaboration between tourism operators. The key role may belong to the ICTs in the process building reliable and trustworthy relationships among the partners in their business and providing them with dynamic and flexible tools for managing the highly dynamic challenges within the market. Despite the ICTs relevance of for the tourism industry in Europe, there is still a low adoption level, mainly because to the European tourism enterprises characteristics and their limited size.
- References
Ahlstrom, D. and Bruton, G. (2009) International Management: Strategy and Culture in the Emerging World. Cengage Learning.
Bastakis, C., Buhalis, D. and Butler, R. (2004) The perception of small and medium sized tourism accommodation providers on the impacts of the tour operators’ power in Eastern Mediterranean. Tourism Management, 25, 151-170.
Bowhill, B. (2008) Business Planning and Control: Integrating Accounting, Strategy, and People. John Wiley & Sons.
Budeanu, A. (2005) Impacts and responsibilities for sustainable tourism: a tour operator’s perspective. Journal of cleaner production, 13, 89-97.
Buhalis, D. (2000) Relationships in the distribution channel of tourism: Conflicts between hoteliers and tour operators in the Mediterranean region. International Journal of Hospitality & Tourism Administration, 1, 113-139.
Costa, C. and Panyik, E. (2014) European Tourism Planning and Organisation Systems: The EU Member States. Channel View Publications.
Dransfield, R. (2004) Business for Foundation Degrees and Higher Awards. Heinemann.
ECORUS. (2009) Study on the Competitiveness of the EU tourism industry. [Online]. Available at: http://ec.europa.eu/enterprise/sectors/tourism/files/studies/competitiveness/study_on_tourism_competitiveness_2009_en.pdf [Accessed: 07 November 2014].
European Commission. (2012) The European Tourism Market, its structure and the role of ICTs. [Online]. Available at: < http://www.iby.it/turismo/papers/TOURISMlink_MktReport_V2.pdf >[Accessed: 07 November 2014].
Hill, C. and Gareth, J. (2009) Strategic Management Theory: An Integrated Approach. Cengage Learning.
MINTEL. (2013) European Leisure Travel Industry - September 2013 [Online]. Available at: http://store.mintel.com/european-leisure-travel-industry-september-2013 > [Accessed: 07 November 2014].
Nomadic, M. (2012) How to (Legally) Stay in Europe for More Than 90 Days.[Online]. Available at: http://www.nomadicmatt.com/travel-blogs/how-to-legally-stay-in-europe-for-more-than-90-days/ [Accessed: 07 November 2014].
Richards, G. (2001) Cultural Attractions and European Tourism. CABI.
Vanhove, N. (2006) A comparative analysis of competition models for tourism destinations. Progress in tourism marketing, 101-114.
