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Employment levels and Inflation

There are many factors which lead people to be more or less wealthy over a period of time, which affects the amount of money they have to spend on the products of tourism organisations.  From the last section you should understand that, if disposable income falls, then people and families might take a holiday in the UK rather than go abroad.  The same is true with unemployment levels.  If more people are unemployed in the country, it is less likely that there will be a demand for expensive holidays and some sectors of the tourism industry might suffer.

Inflation is basically a rise in prices of goods and services.  Inflation means an increase in the cost of living as the price of goods and services rise.  This impacts on disposable income because that means your money won’t buy as much today as it did a few months ago.  In most countries inflation is usually about 1% or 2% per year.  E.g. an item that cost £100 last year might cost £102 this year.  If inflation increases to 5% or more people tend to be more reluctant to spend out on large costs such as holidays.

However, it has to be remembered that it is possible to enjoy some products of the tourism industry without spending a great deal of money.  A day on the beach or a walk and picnic in a national park can cost little more than the cost of fuel for the journey.  Off-peak rail travel can also make travelling to cities fairly cheap and most cities have museums and galleries which are free to enter.

Families can take a shorter holiday if they feel that money is a bit tight or even go for days out.  Another possibility is to take a cheaper type of holiday, such as camping or using Airbnb. 

Tourism organisations are affected by employment levels and inflation, in much the same way as they are with disposable income and tax rates.  Generally, when employment levels and disposable income is high, tourism organisations do good business.  But when unemployment levels increase and/or inflation rises, some tourism organisations might do less business.