Travel Reference
In-Depth Information
Lack of Knowledge
Many activities are limited because little is known about particular situations. Businesspeople are used
to living with a certain amount of uncertainty, but there are inevitable limits to the amount they are
willing to countenance. Ignorance in
uences governmental operations as well.
Limits on Supportive Resources
There are always limits to the amount of money, managerial talent, workers, construction materials,
social capital, and so on. And these, in turn, limit chances to provide psychological enjoyment, take
advantage of pro
t-making opportunities, or develop local attractions. Many times these individual
constraints interact, creating compound constraints on given activities.
Optimizing the Experience
Maximization of the tourist experience is subject to a number of constraints and is manifested in the
demand function. Demand for tourist experience is peculiar in the sense that the product being
purchased is not easy to identify directly and is frequently purchased sight unseen.
The tourist is particularly constrained by time and budget. To optimize the experience, it
is necessary to determine the combination of destinations preferred and then the possibilities
within the money and time constraints. This explains some of the popularity of package
tours, where both time and cost can be known in advance. There are some exceptions. Retired
persons and young people often have time but limited resources. A few people have neither
constraint.
Optimizing Returns to Businesses
Because goods and services provided to tourists are really inputs to the process of producing the
experience, demand for them is derived from demand for tourism as a whole. Some goods and services
are complementary, and their demand is interrelated in a positive fashion. Others are substitutes and
are characterized by limited area competition.
Packaged tours have the characteristic of putting all parts and services together, so they become
complementary. Competition occurs among tours. Tour operators can maximize pro
ts by selling
tours of different value and costs, in order to cater to as many people as possible along the demand
curve. The number of people to be accommodated can be determined from the marginal cost of the
tour and the marginal revenue to be derived from a given price level.
Goods and services sold to tourists are subject to severe peaking in demand. That is, the heaviest
tourist season is usually limited. During that period, demand is intense and must be met with facilities
that are excess in the off-season. This means that investment necessary to provide the excess capacity
must be paid for from revenues received during the peak period. During off-peak periods, only variable
cost is of interest, but because demand is low, some capacity will not be utilized.
As owners of the facilities,
firms are concerned with providing adequate long-run capacity and with
choosing those investments that will give optimum returns. In the tourist industry, a number of
interrelationships must be considered. Sometimes low bene
t-cost investments are made so that
higher-yielding investments can succeed. Consequently, it is not always true that investors choose the
highest-yielding opportunities.
Generally, it is considered the long-run goal of the
firm to remove constraints on operations. But
tourism has a number of constraints to expansion. These include demand for the tourist experience
and environmental constraints.
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