AC 2.1 - The UK business environment

From your work on this unit so far, you will realise that tourism organisations have to operate within a business environment over which they have little or no control.  Tourism organisations must react to decisions by government and economic conditions which are constantly changing.  During the last 20 years or so there has been a massive social change in the UK and continuous developments in technology.  More recently, for some families, wages are not keeping up with inflation and disposable income has decreased.

At the same time, freak events of nature, such as flooding, or terrorist activity might impact on tourism businesses at any time.

Some of the major effects on tourism organisations caused by the external business environment include:

• Financial impacts
• Visitor/customer numbers
• Sales
• Employees

Financial Impacts

If private sector tourism businesses do not make a profit they will go out of business. This happens to many tourism businesses each year. Travel agents, small attractions, hotels and guesthouses are amongst the most likely organisations to go out of business. This happens because costs increase and/or income falls so the organisation is unable to meet its bills.  Often, as income falls the organisation does not make enough money to invest in the business and make improvements. This often leads to a decrease in the number of customers.  

Activity 1

Read the newspaper article below and answer the questions.

A seaside hotel in Plymouth told its guests over breakfast that they would have to leave as it was closing down. The Beeches Hotel on the Plymouth Hoe told its guests in the hotel to vacate the premises by 11am while others on their way to Plymouth had their bookings cancelled, the local paper reports.  One guest from the US arrived to bolted doors. He said he had not been told of the closure when he spoke to hotel staff the day before.

Speaking to the local newspaper, he said: "This morning as I was driving down from London, Expedia called to say there was no accommodation for me. They have sent me an email with some alternative options but have been offered a refund if I don't like any of them.

"We wanted the sea view here. You can stay at places on the Barbican but you do not get the same view of the water."

It's not the first time guests have been thrown out of a hotel at such short notice. Last year, a Scottish hotel closed without informing its guests who were still inside. The Glen Fyne Hotel, near Inverness, closed while a Danish couple and a woman from Dundee were still staying there.

The owner was reportedly taken ill and left. A cleaner then arrived to cook breakfast and tend to the guests but she told them that the hotel was closing permanently there and then.  The guest from Dundee said: "I got up... and there was nobody in the hotel at all, and the owners’ cars that had been parked outside were not there."  

Visitor/customer numbers

It is often the case that tourism businesses stop trading at short notice.  In the recent past, airlines have stopped operating during a weekend, leaving thousands of passengers stranded abroad.  Industry bodies such as ABTA then have the responsibility of making sure that people stranded abroad get a flight home.   

One of the best examples of how the tourism industry has changed in recent years is the growth in air travel within the UK and Europe.  This has been brought about by technological changes which have made it easier to book flights online and the growth of ‘budget’ airlines such as Ryanair and easyJet.  These, and other airlines, have provided cheap flights by cutting costs and charging customers for ‘extras’ such as taking luggage on board and choosing a seat.  The growth in customer numbers flying with easyJet, shown below, indicates how rapidly these airlines have grown. 

Activity 2

Draw a graph to show the rapid increase in the number of easyJet passengers.

Activity 3

3+ Hour Day Visits Summary

• 3+ hour day visits in Great Britain for the three months to August 2017 decreased by -1% compared to the same period in 2016 to 811 million visits.
• The value of these visits decreased by -1% for the three months against the same period last year to £24.1 billion.
• Year to date, volume is down by -4% to 2 billion 3+ hour visits and value decreased by -1% to £57.3 billion.
• In England, volume declined by -3% in the three months to August 2017 to 671 million. Similarly, the value of these visits decreased, by -4%, to £19.2 billion.
• Year to date the volume of day visits in England decreased relative to the same period in 2016 by -5%, to 1.7 billion and the value decreased by -4% to £46.1 billion.

Study the information in the slide and answer the questions below.

From the information above it would appear that in 2017 there were less day visits lasting 3 hours or more than there were in 2016.  Is this good news or bad?

Sales

It may be the case that a change in disposable income or some other reason why people have less money to spend may not only affect visitor or customer numbers but may also affect sales. 

For large organisations such as theme parks an important source of income is ‘secondary spend’.  This is the amount of money spent by visitors while they are in the theme park.  This would include spending on refreshments and souvenirs. If people were feeling a bit hard up they could still afford the visit to the theme park, but reduce their spending by having less refreshments or not buying any souvenirs.

Activity 5

For each of the tourism activities shown below, suggest how people could still enjoy the activity but spend less money.

• Staying in a hotel
• Going on a flight
• Going on holiday

Employees

Obviously, changing economic conditions and disposable incomes have an impact on the people working for tourism organisations.