Midterm Paper Example: Tourism and Travel Industry

Introduction

Tourism and travel industry is a significant economic activity and a major contributor to the economy. The industry involves traveling for pleasure or business purposes, and it is highly interconnected with other sectors such as food and beverage, hotels and transport industries. This makes tourism a key revenue contributor in an economy while at the same time offering employment to many people in both permanent and seasonal employment terms. Economic indicators play a significant role in tourism decision making by both the consumers and the service providers in different tourism establishments. This research paper will assess how current economic indicators can be used to make forecasts on the future of the tourism industry and how tourism establishments should respond to the current economic situation. The paper will adapt Thomas Cook Travel Company as the organization in question because of its direct involvement in selling experience packages to travelers.

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Economic Indicators

Gross Domestic Product

A gross domestic product is an economic indicator that can be used to measure the United States economy performance by assessing the total value of all goods produced within the borders of a country within a specific period usually in quarterly or annual terms. The growth or decline of the GDP has a significant impact on the economy by influencing salaries, wages, and consumer behavior. According to the Bureau of Economic Analysis (BEA), the United States GDP increased in the fourth quarter at the rate of 2.6% in 2018 which is a decline from the 3.4% rate in the third quarter (BEA. 2019). The increase in real GDP in the fourth quarter is a sign of growth in consumption, exports, federal government spending, and private inventory investment. However, a deceleration in the growth of the GDP is witnessed in the fourth quarter as compared to the third quarter which is an indication of a slowdown in private inventory investment, federal government spending, and also the state and local government spending. Overall there was an increase in real GDP in 2018 by 2.9% compared to 2.2% in 2017 (BEA. 2019).

Personal Income and Wages

Personal income and wages can be used as economic indicators because they determine the available money for expenditure within the economy. In the last quarter of 2018, the personal income increased to $225.1 billion from $190.6 billion in the third quarter (BEA. 2019). The disposable personal income also increased by 5.7% in the fourth quarter from $218.7 billion from $160.9 billion in the third quarter (BEA. 2019). The growth in personal income in 2018 is due to the growth in income and personal dividend income while the compensation for employees declined. Personal savings in the fourth quarter increased by 6.7% to $1.06 trillion from 6.4% or %996.0 billion in the third quarter (BEA. 2019).

Analysis and Impact on Tourism Industry

The growth in real GDP in the last quarter of 2018 is a good indication of the health of the economy which increases investor confidence by firms and business travels which will expand tourism activities. The growth in the real GDP in the last quarter is an indication of the rise in personal incomes and wages which will increase the people consumer power and ability to afford tourism products. An increase in personal income to $225.1 billion from $190.6 billion indicates significant growth in the overall consumer power in the American economy which is in favor for the tourism industry which functions exceptionally well when the incomes are high.

Implications for the Tourism Industry

The growth of the real GDP and personal incomes which are key economic indicators is a good sign for the tourism industry in the first quarter of 2019 which will experience significant growth in service demand as most people tend to travel when the personal incomes are high. All factors remaining constant, the tourism and travel industry will experience significant growth of consumers in the first quarter of 2019 as investors tend to increase their investment and the government its expenditure when there is real GDP growth. Hotels, travel companies, and restaurants can enhance their service capacity in anticipation of increased demand as more people will be traveling for leisure and business amidst growth in the personal incomes and the real gross domestic product.

References

BEA. (2019). Gross Domestic Product, Fourth Quarter and Annual 2018 (Initial Estimate). February 28, 2019. Retrieved from https://www.bea.gov/news/2019/initial-gross-domestic-product-4th-quarter-and-annual-2018