Effects of the Global Recession on Tourism

Abstract

In very many countries all over the world, the tourism sector has been regarded as the most important sector in the economy. This is due to the big reason that the tourism industry plays a significant role in economic development. Tourism enables the country to earn foreign exchange. In addition, very many people are employed by the tourism sector; thus, through tourism, poverty is eliminated and the social welfare of the society is greatly improved as well as the infrastructure. On the other hand, the social and economic benefits of tourism have greatly been destabilized by the recent global recession. This has provided the researcher with a big reason to investigate the effects of the recent global recession on tourism.

This paper will therefore be very relevant as it will explore the link between tourism and the recent global economic recession. This will therefore be of great importance to the policymakers and the relevant players to formulate the appropriate ways of countering the shock with an aim of advancing economic growth and development.

The study relied on both primary and secondary data. Both interviews and questionnaires were used for the primary data. For the secondary data, various books and publications were consulted. The publications mainly dwelt on the connection between tourism and financial recession. The research used the qualitative research design to analyze data relating to the effects of the financial crisis on tourism.

The outcome of the study revealed that indeed, the global financial recession impacted heavily on tourism. The study further suggests the possible ways of alleviating the various setbacks in order to ensure efficient economic prosperity for the countries. Some of these methods have not yet been articulately undertaken, thus, the study gives the possible areas that other researchers should touch on in order to come up with more concentrated research.

Introduction

Historical background

Financial crises have occurred in various forms in the recent past in various parts of the world. The financial sector is the basic pillar for development for very many countries in the world in addition to being a unique and organized sector all over the world. It is very unfortunate that this sector was hardly hit by the recent global recession (Dai, 1999, p. 125). The developing countries were so much on the receiving end as they imported the crisis from the developed countries. The crisis started as a result of a major worldwide financial setback, for instance, food prices shot up just like the fuel prices and many countries in the world felt this burden (Dong, 1999, p. 125).

The aftermath of this crisis was that poverty levels went up and the social welfare of the citizens was highly compromised. High poverty levels led to a decrease in demand, thus, financial institutions went under because of their inability to lend. The level of investment declines, hence, the opportunities to trade in terms of import and export also diminished (Sorensen, 2004). The less developed countries were largely affected due to their lack of capacity to save their banks from the harm of being bankrupt. When the financial institutions are bankrupt, the stock market will decline, thereby increasing the interest rates. With high-interest rates, no investment can take place (Southall, 1998). This paper will explore the effects of the global recession on tourism using a case study of Thailand.

The study context

Recent statistics revealed by the World Tourism Barometer point out that since January 2008, the global tourism sector has recorded a slower growth. This is attributed to the fact that the global market has been highly unfavorable (Sugden & Williams, 1978). The continuous rise of oil prices and the imbalances in the balance of trade and balance of payment have all factored in to weaken the tourism sector. As a result, the growth of other related businesses and the confidence of the tourists have been greatly undermined. In addition to this, there has been a reduction of visits by tourists from first world economies (like the US, Canada and Western Europe) to Thailand. This has limited the country from earning from foreign exchange and foreign investment. It is in line with this notion that the researcher saw the need to explore the effects of the recent global recession on tourism in Thailand.

Problem statement

Thailand is one of the leading tourist destinations in South East Asia because it has a diverse nature, rich and diverse culture, and also friendly people. The tourism industry for Thailand has grown over the years in spite of a minor decline in 2009 as a result of various internal and external shocks. International tourism arrivals grew by 2% in the year 2011 as their number reached 17.3 million; in addition, in the same year (2011) Thailand received more than $15.5 million from tourism (Ruan, 2000, p. 15). The income from tourism contributed to more than 14.1% of Thailand’s GDP. Moreover, Thailand’s tourism industry has created more than 3.9 million jobs.

Many elderly tourists are motivated to travel due to the fact that they have retired from their jobs and have much time to commit to traveling around. In addition, they have an accumulation of lifetime income savings and pension, which increases their purchasing power. Elderly tourists always pay attention to some important factors before they make their travel. They have to make sure that the travel destination will guarantee them their security or safety. More so, they also check on the accommodation facilities and other social amenities to make sure that their comfort is guaranteed.

Objectives of the study

Indeed, there are many studies that have been conducted to explore the effects of the recent financial crisis, but actually, there is limited literature with regard to the link between the global recession and tourism. The general objective of this study, therefore, is to explore the impacts of the recent global recession on tourism in Thailand.

Research questions

In line with the general objective of the study, the following research questions were tested:

1. How was the style of tourism before the global economic recession in 2008?
2. How has the global recession affected the tourism industry in Thailand?
3. Which quarters of tourism were highly affected by the global recession?
4. How has the economy of Thailand been affected by the global recession?
5. What are the measures in place to manage the global recession in Thailand?

Significance of the Study

The main objective of the study is to gather and analyze data relating to the effects of the recent global recession on the tourism sector of Thailand. The findings of this study are of great value to policymakers and regulatory authorities. It provides the policymakers with a wide exposure with regard to the assessment of the impacts of the global recession on the tourism sector of Thailand, thus enabling them to adopt the relevant strategies in line with the situation. The findings of this study also add to the body of knowledge of related studies and challenge further researchers to focus on the solutions to the financial crisis.

The flow of the study

The whole research has been covered in five chapters. Each chapter explores various facets of the research. The first chapter covers the introduction, the study objectives and research questions. Chapter two focuses on the theoretical framework of the study. Chapter three explores the various related literature with regard to the effects of the global recession on tourism. Chapter four presents the research methodology while chapter five presents the conclusion and recommendations.

Theoretical Framework

Tourism in relation to economic development

Both local tourism and international tourism contribute greatly to a country’s economic development. For local tourism to succeed, all the players and stakeholders involved should work with a common interest to develop the economy of the country (Tang, 2005). For a long time, the impact of tourism on a country’s economy has been highly underestimated. As a result of this, the amount of theoretical literature with regard to the impacts of global recession on tourism is quite minimal. Theories like the life cycle theory, the dependency theory and the community theory approach were formulated in the mid-1970s (Unger & Chan, 1994).

The dependency theory and the life cycle theory

According to Walsh (1986), the dependency theory is attributed to Neo-Marxism. In the same respect, Wang (2003) outlines that the Life cycle theory came up as a result of the modernization theory. When organizations expand through economies of large scale, the number of tourists increases as a result of the expansion of destination sites. This is beneficial to tourists due to the fact that the visit expenses are reduced. With the growing number of visitors will grow global tourism which in turn will trickle down to the local tourism. These arguments form the basis of the two theories (Wang, 1995). When the costs associated with tourism go up, the local society that relies on tourism is left with little influence to spearhead development. As a result, they gain so little when the number of visitors increases (Wei, 2000).

The two theories have been downplayed by many stakeholders due to the fact that they pay much focus on what is happening internationally rather than what happens locally (Wu & Ma, 2005). There is a need for the local society to work together with small groups of elites that influence the tourism process. This will help in fostering local development and uplifting the social living standards for the people.

The community theory approach

The theory was formulated in 1989 and it insists that the local society should be engaged in the tourism process so as to influence the results (Wu, 2002). This theory is considered to be friendly, unlike the other theories due to the fact that it takes the interests of the local community into account by allowing them to participate in the tourism activities. The local society, therefore, has a chance to control the events leading to various development activities (Wu, Xu & Yeh, 2007). When the local community gets involved, the power structure that is entrenched in the community will change since aspects like gender equality or racial alignment will be paid attention to (Yin & Wang, 2000).

Each individual in the community has a specific need; it is these needs that will determine the level of community involvement that will further translate to development (Crompton & Ankomah, 1993, p. 468). The community theory approach focuses more on the level of capital accumulation that comes as a result of tourism activities.

The regulation theory

The political dimension of the world has greatly changed as a result of recent globalization. This has shaped up the process of economic development (Crompton, 1979). The theory of regulation is more focused on the relationship between production and consumption among the members of the society. For this theory to be stable, there are various social and political rules or procedures that govern the process (Crouch & Jordan, 2004). For this theory to hold there has to be some sense of flexibility both from the inside and outside. From the inside, the local firms should customize their products to fit the needs of the community. From the outside, the firms should be more specialized to satisfy the target markets.

Economies of scale play a critical role in determining the profitability of tourism, but in the current world, the main focus is to concentrate on the segmented markets in order to exploit it. Customization of the tourist products attracts more tourists, thus, increasing the level of profitability for the firms. The competitive advantage of the sector will also be greatly boosted due to the customization of the products (Dann, 1981; Dann, 1996, p. 44).

Literature Review

Summary

The tourism industry is rapidly growing worldwide; this presents many advantages and opportunities to the concerned countries. The annual contribution by the industry is at least $4,000. Moreover, the sector provides massive employment opportunities projected to be 20% (Dann, 2001, p. 238). When the sector grows, there is a positive effect on economic development which further triggers economic growth. In the same respect, any shock in the economic sector will negatively impact the tourism sector (Hsu, 2001; Huang & Tsai, 2003, p. 570).

The recent global recession mainly started from the highly developed countries spreading to the least developed countries. The recession was mainly caused by the major global financial shock. This caused both food prices and fuel prices to go up, thus, affecting the less developed countries which already have high levels of poverty. This lowered the standards of living and increased the rate of interdependence among the people.

The conceptual foundation of the analysis of economic impacts of tourism

The analysis of the economic impacts of tourism is concerned with the approximation of the transformations of the economic activities in a particular region as a result of tourism activities (He & Xu, 2007, p.55; Hunt, 1977; Jamrozy, Backman & Backman 1996). To various scholars in the field of tourism, economic impact analysis deals with the estimation of government revenue, the level of income, the level of employment and the revenue generated from the import of the tourists’ expenditure (Leslie, 2009; Jang, Ha & Silkes, 2009). The direct economic effects of tourism are the transformations that occur in the line industries that are connected to the tourists’ activities; for instance, if a visitor checks him/herself in a hotel and pays $200, the payment is bound to directly increase the volume of sales in the hotel for that day. In this way, a direct sales effect is achieved as a result of the expenditure of the visitors. This payment will enable the hotel to hire more employees and pay them well.

When the hotel makes purchases from suppliers who mainly are from industries that are connected to the activities of the hotel, an indirect economic effect of tourism is achieved, as the purchases made by the hotel will increase the volume of sales to the suppliers and also enable the suppliers to employ more attendants and give then nice remunerations (Shiwen, 2008; Jang & Wu, 2006, p. 306; Javalgi, Thomas & Rao, 1992). For instance, the hotel can buy bed sheets or blankets or foodstuffs from various industries so that they can provide quality services to their customers; the incomes gained or the jobs created from the sales of these products by the linked companies are the indirect economic effects generated from tourism.

Apart from direct and indirect economic effects, there are also induced economic effects. The induced effects are connected to the sales or the earnings received from the direct or indirect spending by the tourists (He & Xu, 2007, p.53; Kinni, 1994; Koh, Jung-Eun & Boger, 2009). The induced economic effect of tourism is in most cases evident from the activities of the hotel employees or employees of catering companies, for instance, when they spend their salaries; they create more sales, jobs and incomes (Guo, 2000, p.208; Koss, 1994). The induced expenditure can be lost partly through savings or through the importation of goods or services; when the losses occur, they are termed as leakages (Shiwen, 2008; Kozak, 2001; Lam & Hsu, 2006, p. 589).

The expenditure by tourists creates extra-economic effects to other sectors of the economy; as a result of this, the level of income and expenditure of the various households increase and a chain of spending and re-spending is initiated; this is referred to as the ‘multiplier effect’ (Leslie, 2009; Lancaster, 1966; LaTour & Peat, 1979). The multiplier effect depicts the ultimate output change in the economy in relation to the original visitor’s expenditure change; in addition, the multiplier effect is important to the assessment of the economic effects of tourism in the economy. When the multiplier effect is so large, it means that the impact of the visitors’ expenditure on the economy is also great (Guo, 2000, p.207).

The multipliers entail the magnitude of all effects; it is more often than not the ratio of the total effects of tourism on the economy to the direct effects of tourism on the economy (Miller & Blair, 1985). For example, suppose the sales multiplier for an accommodation industry is 1.5 in a certain region, any visitor who spends $100 on accommodation will generate a total effect of $150 with regard to sales in that region; this translates to $100 direct sales effect to the accommodation industry and $50 secondary effect to the related industries that are in the region. Hence, the real economic impact of tourism lies in the expenditure of the visitors (He & Xu, 2007, p.53).

Economic impact analysis

In order to support the decisions that are related to tourism, there are various economic analyses are undertaken. These forms of economic analyses are related to each other and on many occasions, they tend to be confused with each other; thus, every kind of economic analysis is recognized by the issues it addresses and the type of model it is based on (Leslie, 2009).

Types of economic impact analysis

This type of analysis focuses on the role of tourism activities in the economic position of a region. It mainly checks out the patterns of expenditure related to tourism activities based in the region so as to point out the changes with regard to sales, incomes and tax remittances that come about as a result of tourism activities (Frechtling, 1994). The important methods that are used in this kind of analysis include a survey involving the expenditure of the visitors, a survey of the government economic statistics, a survey of the region’s economic models, a survey of the input-output models and a survey of the multipliers (Frechtling, 1994).

Fiscal impact analysis

This type of analysis focuses on whether the revenue that the government generates from activities related to tourism, taxes, or other sources will sufficiently finance the government’s expenditure (Burchell & Listokin, 1978). Therefore, fiscal impact analysis points out the various changes with regard to the government’s expenditure in connection to the amount of revenue collected or received from the government’s services (Burchell & Listokin, 1978).

Financial analysis

This type of analysis focuses on whether any extra profit can be realized from the tourism activities; for instance, it analyzes whether the revenue generated from the tourism activities will surpass the total cost used in those activities so as to make a substantial amount of profits. Financial analysis always covers the availability of capital to start up and also the availability of funds to finance the operating cost and other overhead costs. The analysis of finance for a small private enterprise is equivalent to the fiscal analysis of the impacts of tourism in the economy (Burchell & Listokin, 1978).

Demand analysis

This type of analysis focuses on the assessment of changes to the number of tourists visiting a certain area as a result of changes to the prices of tourist activities, changes to promotional activities, changes to the competition, changes to the quantity and quality of the tourism facilities and changes to other determinants of demand (Walsh, 1986). Using the demand analysis, it is possible to make a forecast concerning the qualitative or quantitative aspects of the visiting tourists through estimations. These forecasts are usually made by paying attention to the past and current trends of tourist activities in the region. In addition, these predictions are made through the use of a model that analyzes the various determinants that affect patterns of tourists’ visits and expenditures. These determinants include the size of the population, the levels of income, the nature of competition and the distance between the market and the accommodation area (Johnson & Thomas, 1992).

Cost-benefit analysis

This kind of analysis focuses on the assessment of whether there exist other optional policies that provide the society with the largest package of benefits during a certain period of time (Sudgen & Williams, 1978). Therefore, a cost-benefit analysis plays the role of approximating the competence of the other optional policies by weighing their benefits in terms of cost over a period of time, so as to point out the best policy overall. In order to achieve this, the cost-benefit analysis approach employs a wide array of methods; such methods include the travel cost technique and also the contingent valuation technique (Sudgen & Williams, 1978).

Feasibility study

This kind of analysis evaluates whether the selected project should be embarked on. In other words, it aims to point out whether the selected policy has good chances of succeeding once it is commenced. In many cases, a feasibility study involves carrying out the financial analysis in order to investigate whether there are chances of success. A feasibility study that is conducted by the private sector is equivalent to conducting a cost-benefit analysis in the sector. The main difference between feasibility study and cost-benefit analysis is that in feasibility study the benefits and the cost go to individual people or individual business organizations while in cost-benefit analysis, the benefits and the costs mainly go to the society as a whole (Warnell, 1986).

Environmental impact analysis

This kind of analysis focuses on the assessment of the effects of the projects or policies selected on the environment. The projects or policies can affect the environment in various ways, for instance, cultural changes, physical changes, changes to the ecological system, social changes, etc. (Williams, 1994).

The tourism industry

Tourist destination can be categorized with regard to the sectors they originate from, i.e. transport sector, infrastructure sector, attractions sector, supporting facilities sector and accommodation sector. All these sectors are related in that; tourists are encouraged to visit through attractions, they make their visits through transportation, the supporting facilities (for instance, banks, hotels, shopping centers) ensure that the visitors are well taken care of during their vacation, a proper infrastructure confirms that all the other related sectors are properly working (Leslie, 2009).

The tourism industry is majorly concerned with setting up enterprises or organizations that make it easy for people to travel from their normal environment to a different environment. The business of tourism can be divided into two levels, i.e. level one encompasses enterprises or organizations that cannot survive without the existence of tourism e.g. hotels, travel agencies and airlines. Level two encompasses enterprises or organizations that would still thrive even without tourism existing; however, their existence would be of a diminishing form. Some examples of these enterprises include gift shops, taxis, rental car agencies, etc. (He & Xu, 2007, p.53).

Ecotourism is the most recent style in the tourism industry. It entails traveling that consists of both conservations of the natural environment and maintaining the interests of the people who live in that environment (Frechtling, 1994). There are significant differences between ecotourism and traditional tourism. Ecotourism focuses on measures that guarantee that the visitors do not engage in any activity that endangers the natural environment; in addition, ecotourism encourages sustainable tourism. Thus, any tourism activity that causes harm to the environment or diminishes the local cultures of the people in the environment is not attuned to ecotourism (Guo, 2000, p.203).

Relationship between tourism business and economic development

Global tourism has significant impacts on different economies, suggesting that tourism is a business that has great economic magnitude. Tourism is a great source of income and job opportunities, besides being a significant aspect of the balance of payment for various economies. As a result of this, many governments give special treatment to the tourism sector because of the huge contributions it makes to the economy (Leslie, 2009).

In developing countries, tourism plays various important roles in the economy. Tourism necessitates the utilization and management of the natural resources in the country. In addition, tourism enables developing countries to be in a position to compete internationally as a result of favorable terms of trade. More so, tourism contributes to an improved balance of payment. Tourism also creates job opportunities and raises the level of income of the people. Due to the tourism industry, the developing countries have a balanced growth in their various sectors of the economy (He & Xu, 2007, p.53).

Tourism has the capability to produce from one sector of the economy to the other. It does this by facilitating the flow of income and resources from one sector of the economy to the other; combined with the multiplier effect, increased revenue, expansion of employment opportunities and increase in foreign direct investment and earnings from foreign exchange. All over the world, there is a wide perception that tourism contributes highly to the economic growth of a country; thus, making it play a significant role in the economy of the country. A well-developed tourism sector will boost the public pride of the residents of the country, improve the education system and professionalism, and improve earnings for the country.

Due to the fact that the tourism industry employs several people, it calls for the improvement and expansion of the education sector in order to offer training to the local people and expose them to this field. With regard to this, the levels of professionalism have risen as many more jobs have been created. It is beneficial to conduct an elaborate economic impact analysis of tourism in order to equip the policymakers with the relevant information that will guide them in making reforms (Frechtling, 1994). The revenue that tourism pumps into the economy is mainly got from the expenditure or the spending of the tourists, especially when they source goods and services.

The tourism sector offers a wide variety of job opportunities. These jobs are spread across retail firms, the communication sector, construction companies and manufacturing companies. A large portion of the population is a beneficiary of these jobs. Tourism, therefore, plays a major role in the development of emerging economies as it improves the welfare of many people, hence, raising their standards of living. Tourism is just like any other product for sale that can be imported or exported; the only difference is that it is intangible; therefore, it cannot be manufactured, packaged, or transported to the destined market. In the same way, tourism resembles a product for sale; the customer (tourist) travels to the market (point of sale) and pays for the good or service and eventually receives it. Therefore, tourism is a product that is sold to consumers who majorly come from abroad; hence, it is regarded as the biggest and the widest export product (Guo, 2000, p.207).

Impacts of tourism on economic and business development

For many developing countries, especially the ones in the Caribbean, tourism has been regarded as a very important foreign exchange earner; hence, it is a major source of wealth to these countries. Therefore, for these countries to continue earning from tourism activities, they should ensure that the tourism activities should be friendly to the environment and sustainable (Frechtling, 1994). For other developing countries, tourism is quickly replacing agriculture as the main foreign exchange earner; hence, fostering the diversification of their financial systems. The main motivation for a country to have a well-developed tourism sector is to maximize its foreign exchange earnings in order to maintain an efficient balance of payment. The tourism sector is a sector that grows continuously, thus, it is always viewed as a sector that enables the country to earn much through the foreign exchange for over many years (Leslie, 2009).

International tourism experienced a major shock when the United States was attacked by terrorists on September 11, 2001. This affected international tourism both in the short run and in the long run. When terrorism is not controlled, international tourism is highly affected as the travelers have minimal confidence to travel around and tour the world. The risks involved cannot be measured; hence, it becomes so difficult to quantify the effect of terrorism on tourism (He & Xu, 2007, p.53).

The tourism industry is assisted by a wide range of associated companies or enterprises. They include airline companies, accommodation industries, manufacturing firms, tour firms, travel and tour agencies, financial institutions, and taxi and car rental agencies. Tourism enables these industries to expand and grow, thereby, creating more jobs and increasing income earnings for the people concerned. In addition, tourism facilitates the flow and exchange of wide varieties of cultures all across the world; this has played a great role in the development of the associated industries, businesses, farms or enterprises that assist the tourism industry (Guo, 2000, p.205). The direct revenue or income that is obtained from tourism includes money spent by the visitors on accommodation, meals, traveling, leisure and entertainment, and a visit to game reserves or game parks or beaches. The direct revenue from tourism makes it possible for indirect revenue to be earned.

Various scholars have pointed out that tourism as a quickly expanding and rapidly growing industry, aims at promoting programs that protect the natural environment because this environment serves as a home to the animals and plants that the tourists aim to see. Tourism also aims at addressing the issues that touch on the social factors, economic factors and natural factors that change from time to time. Through tourism, resources are allocated in a balanced manner; thus, enhancing the development of infrastructure and eradication of poverty (Leslie, 2009).

The dynamics of international tourism have rapidly changed over the years since the end of the Second World War. In the year 1999, the tourism industry was estimated to have a value of US$8,000 billion, accounting for 6% of the world’s total economy (World Travel and Tourism Council, 2011). That is to say, from the year 1949 when tourism started to develop, it took only 50 years to match the contribution of mining and agriculture to the world’s total economy (World Travel and Tourism Council, 2011). In the same year (1999), the tourism sector managed to employ at least 200 million people across the entire world (World Travel and Tourism Council, 2011).

The quick growth and expansion of the tourism sector year after year has not failed to be noticed as the most outstanding element of tourism. In the 1950s, the number of international tourists was only 25 million visitors; come the year 2000, this number had rapidly grown to at least 699 million visitors worldwide. This indicates that the annual tourism growth rate has been 7% (World Travel and Tourism Council, 2011). The total revenue received from tourism or tourism-related activities grew by 11% in this period (Guo, 2000, p.201).

Economically, the receipt from international tourism entails the export and import of international tourists’ expenditure. Several countries receive direct revenue from tourism or tourism-related activities. Direct revenue mainly entails the revenue that is received by a country as a result of taxes. Developing countries greatly rely on tax revenue in order to enhance their economic growth and development. There are at least 40 different types of taxes that are enforced on the tourism industry; the most common taxes include accommodation taxes, visa taxes and airport arrival and departure taxes. There are various variables that relate to the direct revenue earned from tourism; the variables include the total number of visitors expected; the number of days that they are expected to stay; and the level of their daily expenditure (He & Xu, 2007, p.53). The government has an option of influencing any of the variables so as to achieve maximum direct revenue from tourism.

The governments need to identify tourism as the top earner of revenue. In order to support this, the various governments should work out policies that aim at expanding both travel and tourism so that the sector should grow exponentially. The country’s business setup needs to offer a very competitive field so as to raise the business standards and improve the quality of the business products. In addition, the various governments need to expand the transport sector, the communication sector and international trade, as these are the sectors that play a great role in the development of the tourism sector. Moreover, the various countries need to work on security measures so as to ensure that the tourists are safe. The tourism sector should also be expanded so as to make it more sustainable and it should aim at protecting and preserving the cultures of the country residents. With these mechanisms in place, the tourism sector is greatly improved and well maintained in order to satisfy all the stakeholders who are concerned (Frechtling, 1994).

Tourism policies and their impacts on the national economy

Tourism is viewed as the fastest growing industry all over the world as it is the main creator of jobs and source of revenue for the governments. Statistics from the World Tourism Organization (WTO) indicate that at least 10% of the total world’s income is generated by tourism, and at least one-tenth of the total world’s population is employed by the tourism sector (World Travel and Tourism Council, 2011). These figures indicate that tourism plays a very important role in terms of safeguarding the economic welfare of the country; hence, the need to set up a proper management authority to check on the welfare and the growth of the tourism sector. In the emerging economies, the great benefits of tourism on the economies is very hard to point out due to the fact that a very large amount of income that is got from tourism is transmitted out of the country since the local enterprises, firms and products are excluded. Therefore, increase in income, employment opportunities, and improvements in the standards of living are negligible.

When the government formulates the tourism policies effectively and plans properly, the tourism sector is greatly boosted; thus, its chances of growing and expanding are majorly boosted. The economic effect of tourism in the economy cannot fail to be recognized as it is exceptional and easy to point out. The balancing of a country’s terms of trade is always regarded as a very positive contribution of tourism to the economy. Apart from impacting the country’s economy, tourism also has social impacts on the local societies. When there is a boom in tourism, the government moves swiftly to welcome and contain the visitors. In addition, sustaining and maintaining the tourism activities require extra money from the government or from the local community who pay tax (He & Xu, 2007, p.53). These extra costs are required to meet the expansion of roads, airports, hotels and other infrastructure that are associated with the tourism sector. Tourism necessitates the development of social infrastructures such as hospitals, schools and colleges, cyber cafes, etc.; these social infrastructures make it possible for the local society to be linked to the tourism activities and participate in one way or the other. As a result of this, several businesses are expanded as many interested investors opt to invest (Guo, 2000, p.201).

The developing strategy of the tourism sector

The macro-development strategy of Thai’s tourism

On the motivation of the conglomeration of tourism enterprises, there are three different voices in the academic world:

Government-led strategy

The reasons to advocate for government-led strategy are based on three points: First, Thai’s tourism development experience over the past 30 years; second, the lessons learned from the developed countries; and third, the nature of tourism industry makes it to revolve in many related sectors (Prahalad & Hamel, 1990, p.24; Ruan 2000, p.57).

Government support for advanced projects

Some scholars have argued that the government should actively encourage the consortia to enter the hotel industry or form groups, but the method should be based on acquisition, equity transferring and improving the existing hotels. In particular, the government should promote the cooperation between consortia and hotels and famous hotel management companies in order to let big financial groups hold shares and pass the management rights to the management company; thus, setting up the giants in the hotel industry (Zou, 1999, p.122).

The market-oriented strategy

Experts in the industry thought that capital is the key to the success of Thai’s tourism conglomeration. That means that capital management should be a mode of operation to form tourism groups. In order to develop tourism groups according to the market-oriented standards, the expansion ought to follow the market laws. First, conglomerate groups should implement an internal management strategy to improve management and enhance the effectiveness of the internal allocation of resources. By expanding markets, companies can develop new products, adjust the organizational structure, improve management, increase productivity and control costs to integrate the internal resources under the capital structure (Wang, 2006, p.202).

Research Methodology

Summary

This chapter presents the systems used by the researcher to collect and evaluate the pertinent data. The strategies used by the researcher were in line with the primary objective of the research which was to investigate the effects of the global recession on tourism. The strategies used by the researcher were very relevant to the study. The study used Thailand as the case study to analyze the effects of the global financial recession.

Qualitative research in relation to quantitative research

The main contrast between qualitative and quantitative methods of collecting data is centered on subjectivity and objectivity. In this case, the qualitative research approach provides a subjective manner of clarifying matters while the quantitative research approach provides an objective manner of clarifying matters. The quantitative research approach is very appropriate when handling a large amount of data. On the other hand, the qualitative research approach is very efficient when it comes to the handling of small data, whereby data is collected through observation and interviews.

In an instance whereby both approaches are used, the worth of the research is elevated and the research can be justified. The qualitative approach eases the data collection process while the quantitative approach eases the analysis of the collected data (Saunders, Lewis & Thornhill 2009).

Data sources

For this study, the researcher relied on both primary and secondary data to obtain the relevant information relating to the main objective of the study. The main sources of secondary data were the related studies to the main topic such as books, journals and newspaper articles. Secondary data is mostly preferred by researchers as they are not much expensive and are easily obtainable. Moreover, secondary data allows for the comparison of the new data gathered by the researcher and the old data that is in existence (Saunders, Lewis & Thornhill 2009).

Questionnaires and interviews were used for primary data. The questionnaires were designed and mailed to the targeted respondents. The interviews were mainly conducted on phone. Mailing the questionnaires to the respondents is considered to be a cheaper way to obtain data; the main limitation is that it restricts the researcher from controlling the respondents (Saunders, Lewis & Thornhill 2009). The researcher was restricted with time, therefore, questionnaires were posted to the targeted respondents and telephone interview was used as a follow-up of the questionnaires.

Study Population

The main targets for data collection were tourism-related organizations and stakeholders. The sites included the ministry of tourism, national parks, museums, beaches, and other relevant tourist attraction sites. The researcher interviewed a top official in the ministry of tourism in Thailand. The targeted information here was the impacts of the tourism sector on the economy of Thailand. Table 4.1 below summarizes the study population

Table 4.1 Study population

Study sample size

Judgmental sampling was used in this study. It is a situation whereby the researcher judges the respondents who can provide the relevant information. Through this method, the researcher managed to get 20 officials from targeted institutions that had the relevant information required. The 20 officials were drawn from the ministry of tourism in Thailand, Khao Yai national park, wildlife parks, mountaineering sites, Thailand Bureau of Statistics, the Central Bank of Thailand and tour operator groups. Besides judgmental sampling, the researcher also applied quota sampling which categorizes the attributes that the researcher requires in the sample.

An instrument for data collection

For primary data, the instruments used were questionnaires and interviews. Questionnaires are a pre-formulated set of questions that require the respondents to record their answers usually within closely defined alternatives (Saunders, Lewis & Thornhill 2009). Questionnaires can be administered to the respondents either by mail or personally by the researcher. Before designing a questionnaire, there are three principles to pay attention to, these principles include principles of wording, principles of measurement and the general setup of the questionnaire.

The principle of wording entails

• The content and purpose of the questions, i.e. the researcher needs to understand the nature of variables to be tapped; if a variable is subjective such as satisfaction where a respondent’s beliefs, perceptions, and attitudes are to be measured, the questions should tap the dimensions and elements of the concepts. In addition, where objective variables such as age and income are tapped, a single direct question would be appropriate (Saunders, Lewis & Thornhill 2009).
• Wording and language, i.e. language of the questionnaire should approximate the level of understanding of respondents. Consequently, the choice of words should depend on the level of education of the respondents (Saunders, Lewis & Thornhill 2009).
• Type and form of a question, i.e. type relate to whether the question will be open-ended or closed whereas form relates to positively and negatively worded questions [1 -5 with 1 being the lowest] versus [1-5 with 1 being the highest] (Saunders, Lewis & Thornhill 2009).
• Sequencing of questions, i.e. the questions should be structured in a way that they start from general questions to specific questions or from easy to difficult questions (Saunders, Lewis & Thornhill 2009).

The principle of measurement encompasses the principles to be followed to ensure that the data collected are appropriate to test the hypotheses. These principles include categorization, which entails the adjustment of negative questions to become positive questions; coding; using scales and scaling techniques; and reliability and validity: reliability indicates how stably and consistently the instrument taps the variable

While validity establishes how well a technique, instrument, or process measures a particular concept (Saunders, Lewis & Thornhill 2009).

Validity and Reliability

Validity refers to whether an instrument actually measures what it is supposed to measure, given the context in which it is applied. Reliability is concerned with the consistency of measures. The level of an instruments’ reliability is dependent on its ability to produce the same results when used repeatedly. To achieve validity and reliability, the data was checked for coding errors and omissions while coding into excel sheets. The database was also verified for accuracy and completeness of all the entries to ensure the reliability of data is achieved.

Validity of the data represents the data integrity and it connotes that the data is accurate and much consistent. Validity has been explained as a descriptive evaluation of the association between actions and interpretations and empirical evidence deduced from the data (Saunders, Lewis & Thornhill 2009). The canyon of validity is applicable to all guises of evaluation (which are both qualitative and quantitative) by coalescing scientific inquiry and rational debates to prove or disprove the outcomes and interpretations emanating from the data collected.

Survey Sample Framework

A sample is a subset of the population, i.e. it comprises some elements chosen from the whole population (Saunders, Lewis & Thornhill 2009). Sampling is the process of selecting a sufficient number of elements from the population. The study of the sample and an understanding of its properties or characteristics would make it possible to generalize such properties to the population elements; that is, characteristics of the population such as population total, the population mean, population standard deviation and population variance [parameters] can be approximated via measures of central tendency, dispersion, and other statistics (Saunders, Lewis & Thornhill 2009).

The main reasons for sampling include: it is impractical to collect data from the entire population; sampling is time-saving, in addition to saving costs and human resources. Collecting data from the entire population may occasion fatigue and increase errors; hence, sampling is widely preferred (Saunders, Lewis & Thornhill 2009).

Questionnaire Administration

Data can be classified into two and they are secondary data and primary data. Primary data refers to the new data (observation, survey, interview, experiment, etc) that the researcher needs to collect for the research while secondary data refers to the existing data that are available in various sources including books, journals, the internet, etc. For primary data collection, the issue is to focus on sampling. As far as the researcher is considered, the sampling technique is significant. For example, the sample size that is determined should not be too small as this will make it difficult to generalize the data. It is to be noted that reliable results can be originated from a larger sample size.

The primary data sources comprise observation and participant observation, questionnaires and interviews, texts and documents, focused groups, case studies, etc. Questionnaires are practical approaches to collecting data. Respondents were also given analog questions that were supplemented by in-depth interviews. The outstanding advantages of using questionnaires are that the data are accurate, anonymous, and they can cover a broad location without any geographical limitation. The disadvantages of using questionnaires are that they could be expensive, impersonal, delay in getting results, and the response rate can be very low.

Limitation of data collection methods

There has been a lot of concerns on additional budgetary expenses for the collection of the data, regardless of whether the gathered data is really genuine or not and whether there may be an explicit conclusion when interpreting and analyzing the data.

In addition, some employees were reluctant to offer some information they deemed confidential and unsafe in the hands of their competitors. This posed a great challenge to the research as the researcher had to take a longer time to find employees who were willing to give out adequate information.

Findings, Data Analysis and Interpretation

Introduction

It is a continuation of the previous chapter whereby the findings of the study are presented, analyzed and interpreted. The main objective of the study was to explore the effects of the global recession on tourism, using a case study of Thailand. The interpretation of the results will be in line with the data collected through questionnaires and interviews from the ministry of tourism in Thailand, Khao Yai national park, wildlife parks, mountaineering sites, Thailand Bureau of Statistics, the Central Bank of Thailand and tour operator groups, and other stakeholders.

Demographic characteristics

Out of all the respondents who were interviewed, the male respondents were 61% while the female respondents were 39%. The age of the respondents varied from 18 years to above 46 years. Table 5.1 below summarizes the demographic characteristics of the respondents.

Table 5.1 Summary of the demographic characteristics

Number of years at work

An analysis of the duration of the employees at the place of work was made and the results revealed that for an employee to be a manager or a leader, he/she has to work in the organization for many years. The organizations provided a favorable working environment to encourage the employees to work for long. This helped to maintain continuity. Table 5.2 shows the detailed summary of the duration of the employees at work.

Table 5.2 Length of the employees at work

Questionnaire response rate

Out of the 20 questionnaires that were issued, 13 respondents gave out their feedback. He represents a response rate of 65%. Out of the respondents, females were 54% while the males were 46%. The age of the tourists varied from 18 years to 45 years. With regard to these findings, it can be deduced that many international tourists visit the country and their number is more than the domestic tourists. Table 5.3 summarizes the response rate.

Table 5.3 Response rate

In the course of data collection, the researcher bumped into some setbacks. For instance, some target respondents were so busy and could only get a very limited time to give out their responses. Similarly, when conducting phone interviews with the government agents, some of the calls were diverted to the secretaries or receptionists who never bothered to pass the message to their bosses.

Background of tourism in Thailand

Thailand is one of the leading tourist destinations in South East Asia because it has a diverse nature, rich and diverse culture, and also friendly people. The tourism industry for Thailand has grown over the years in spite of a minor decline in 2009 as a result of various internal and external shocks. International tourism arrivals grew by 2% in the year 2011 as their number reached 17.3 million; in addition, in the same year (2011) Thailand received more than $15.5 million from tourism (Ruan, 2000, p. 15). The income from tourism contributed to more than 14.1% of Thailand’s GDP. Moreover, Thailand’s tourism industry has created more than 3.9 million jobs (Hall, 2006, p. 15).

Many elderly tourists are motivated to travel due to the fact that they have retired from their jobs and have much time to commit to traveling around. In addition, they have an accumulation of lifetime income savings and pension, which increases their purchasing power. Elderly tourists always pay attention to some important factors before they make their travel. They have to make sure that the travel destination will guarantee them their security or safety. More so, they also check on the accommodation facilities and other social amenities to make sure that their comfort is guaranteed.

Contributions of the tourism sector to Thai’s economy

Tourism has a direct benefit to the economic development in the country’s economy. All the respondents confirmed that tourism creates direct employment for many people in the country and this has helped to improve the standard of living and the level of social welfare. Actually, it is estimated that at least 1.7 million people got jobs in the tourism sector. In the whole world, the number of people employed in the tourism sector is at least 200 million. This number is expected to rise with the expanding tourism sector. In addition, tourism leads to economic development indirectly through the multiplier effect and improvement of the country’s Gross Domestic Products.

The foreign exchange earnings got from tourism have helped the country to improve and expand the infrastructure such as roads, as well as social amenities such as schools or hospitals. Foreign exchange earnings are very important to the GDP of the country and further help to alleviate poverty and social inequality in the country. This is very important for the economic development of the country.

Impacts of the financial institutions on the tourism sector

The existence of donors in an economy helps to improve the economic standards of the country and in the long run, alleviate poverty. The country should invest more in the tourism sector with the funding got from donors. All the respondents confirmed that at one time they had been funded by various donors to fund their operations. The IMF, World Bank and the European Union are the major donors of Thailand. In fact, it is estimated that the funding received from donors to the tourism sector comprises 40% of the total budget allocated to the sector. However, the government should discourage much overreliance on donors as it is not a practical idea.

How the global crisis affected Thai’s economy

The main stronghold of Thai’s economy is the agricultural sector. At the same time, the tourism sector is also considered a strong contributor to Thai’s economy. The results from the Central Bank indicate that the tourism sector has been largely affected by the occurrence of the global recession. The effect has been with regard to the frequency of visits by the tourists, creation of employment opportunities, earnings from foreign exchange, improvement of businesses, and eradication of poverty.

Frequency of visits

Besides the agricultural sector, Thai’s economy earns more from the tourism sector. With regard to the results, there was a rise in the frequency of visits by the tourists between the years 2003 and 2007. After the global recession in the year 2008, the frequency of visits reduced drastically. Many of the respondents agreed that this sharp decline was attributed to the global recession. The majority of the tourists come from America and West Europe. In fact, 75% of the total tourists are international tourists.

Creation of employment opportunities

The results indicate that the rate of unemployment sharply increased after the global recession. The increase in the rate of unemployment has mainly been caused by a decline in the financial sector and the manufacturing sector. The rate of unemployment was projected to increase as a result of the continuous decline of the tourism sector. The empirical results from the wildlife parks indicate that the rate of new staff recruitment has fallen. In addition, there has been a reduction in the working hours for the employees associated with the tourism sector. One of the reasons for the decline in employment is the reduction of foreign direct investment to the country which has limited the sector to employ several people.

Improvement of businesses

For the successful existence of the tourism sector, other social amenities like hotels, hospitals or tour operators have to be stable, and vice versa. When there is a decline in the tourism sector, business activities will be affected. Empirical results indicate that the hotel industry registered low sales during the global recession. Similarly, wildlife parks and mountaineering sites have recorded low tourist turn up during the global recession. It is estimated that the business sector had a decline of 15%.

Earnings from foreign exchange

The empirical results indicate that there was a massive decline in foreign exchange earnings. This means that the process of revenue collection was slowed down by the global recession. The tax level was reduced and the charges received from wildlife parks and mountaineering sites were also reduced. As a result of this, various development projects such as the construction of roads, and other social amenities (like hospitals) stalled. This has limited the government from continuing with the process of poverty eradication and improving social welfare.

Eradication of poverty

The escalating rates of poverty levels have proved to be a major challenge to the country. There are many types of research that have been done with regard to how the tourism sector impacts the economic sector. When the tourism sector declines, the government’s effort to eradicate poverty also goes down. This has a direct effect on the level of social welfare and the rate of poverty reduction.

How the effect of the global crisis on tourism is managed

The recent global recession has lowered the rate of economic growth in many countries and Thailand has not been exempted. It is necessary to look into this issue so as to aid the economic growth. The origin of the global recession was mainly the developed countries. It started in the most developed economies like America and parts of Europe before spreading to the rest of the world. The empirical results show that the country has come up with some measures as a remedy to this shock. One of the remedies is to come up with more parks in order to attract more tourists.

Empirical results from the mountaineering sites show that the tourists are offered incentives with the aim of attracting them. The incentives are in form of reduced prices and improved services. The incentives are followed up with much aggressive marketing. The hotels have offered discounts with the aim of attracting more tourists. Even though this is considered to be a good measure, the hotel institutions might end up getting losses. The government has also invested more in the tourism sector with the aim of rescuing it from the global crisis. The Ministry of Tourism confirmed that there is an additional $250 million allocated as a stimulus package with the aim of expanding the sector. In a summary, some of the measures to rescue tourism include:

• Lowering the visa charges for international tourists in addition to lowering the entrance fee to the tourist attraction sites.
• Coming up with appropriate measures to promote domestic tourism with an aim of expanding the sector.
• Providing incentives and packaged services for international tourists. This is achieved through advanced marketing to the relevant places.
• Taxes should be lowered in order to promote the expansion of the private sector. This will in turn have a positive effect on tourism.

Table 5.4 shows the ANOVA analysis

Table 5.4 ANOVA Analysis results in

Conclusion, Recommendation and Further Research

The previous chapter presented the research findings and data analysis. This chapter draws inferences based on the findings and further proposes the areas for further research in line with the main objective which is to explore the impacts of the global recession on the tourism sector of Thailand.

• The general aim of the study was to investigate the impacts of the global recession on the tourism sector of Thailand. Both primary and secondary data were used in the research. Primary data was obtained through the use of questionnaires and interviews while secondary data was obtained from publications. The total number of questionnaires issued was 20, but only 13 of the respondents gave out their feedback.
• It is very evident from the results that the economic development of a country greatly relies on the tourism sector. The direct benefits of tourism include the creation of mass employment, provision of revenue to the government, alleviation of poverty, provision of foreign exchange, and improvement of social amenities.
• The results have further revealed that the global recession negatively impacted the tourism sector, not only in Thailand but also in the rest of the world. Tourism led to the loss of jobs as the wildlife parks and the mountaineering areas stopped hiring workers. This resulted in reduced earnings from foreign exchange, thus, affecting the GDP of the country. Tourism has played a greater role toward poverty eradication by creating mass employment. The global recession has set back the tourism sector and limited it from playing this role.
• The global recession was the major factor that had a negative impact on the tourism sector of Thailand. Besides it, there are other factors, for instance, the government is not exploiting the available natural resources efficiently in a manner that attracts a large number of tourists. This has limited the country from gaining through foreign exchange earnings. In addition, the existence of man-made wildlife game parks. Another factor is the poor marketing strategies, which has limited the country from attracting many tourists. Corruption has also hindered the sector from picking up. Indeed, literature has proved that the tourism sector faces many threats. The threats should be addressed in an appropriate manner.

Recommendations

The global recession affected many developing countries in the world, Thailand being no exception. This has limited these countries from fighting poverty and improving the standard of living. There are various donors who have come out to invest in the tourism sector of Thailand. Without the help of donors, the tourism sector can really slump. Therefore, it is recommended that donors should come up and invest in the sector in order to rescue it.

Plans and strategies should be put in place so as to support the expansion of both domestic and international tourism. One of the strategies is through engaging in campaigns aimed at promoting the tourist destination sites in the country. They can do this by coming up with incentive packages. This will persuade the tourists to make their visits to the country. Another way of persuading the tourists to visit is by providing them with visa fees discounts and also offering discounts in hotels or tourist resorts. Both the private and public tourism stakeholders should team up together in order to spearhead this process.

On the same line, infrastructure has to be improved so as to sustain the tourism sector. The already existing infrastructure should be managed efficiently, or if possible, be expanded in order to accommodate the expanding tourism sector. The government should also introduce tourism-related courses in learning institutions so as to create awareness with regard to how to efficiently manage the tourism sector. This is very necessary to mitigate unexpected economic shocks. In addition, the country should enact strict fiscal policies, whereby they should maintain an optimum level of foreign reserves which they can trade in the foreign exchange markets.

Study limitations

The researcher was faced with time constraints. This did not allow for elaborate and in-depth data collection. This would have improved the data analysis. In addition, some respondents were not willing to divulge the required information. This also limited the researcher from collecting in-depth information. The information that was got through secondary data was insufficient, as some books and other publications were old dated.

Even though the researcher faced some limitations, the necessary information that was needed for this research was gathered, thus, fulfilling the objectives of the study and answering all the research questions.

Recommended areas for further research

This paper mainly focused on two large segments of the tourism sector, for instance, wildlife parks and mountaineering sites. The tourism sector is a very broad sector, thus, in the future; the researchers should dwell on all the sectors like the museums, beaches, hotels, etc., so as to come up with impartial in-depth information regarding the sector.

In addition, future researchers should also focus more on the impacts of the global recession on the entire economy of the country. Also, a study should be conducted on how to deal with the financial crisis when it occurs.

Summary

This chapter has presented the conclusion and recommendations. They were drawn based on the research objectives and findings. It will be good news if the tourism sector of Thailand implements the recommendations given in this paper. This will really help in absorbing the financial shock. Were it not for the limited amount of limited available to conduct the research, more in-depth data would have been collected to support the study. Despite this fact, the researcher still managed to obtain the relevant and appropriate information that was relevant to the study.

Statement of contribution

In very many countries all over the world, the tourism sector has been regarded as the most important sector in the economy. This is due to the big reason that the tourism industry plays a significant role in economic development. Tourism enables the country to earn foreign exchange. In addition, very many people are employed by the tourism sector; thus, through tourism, poverty is eliminated and the social welfare of the society is greatly improved as well as the infrastructure. On the other hand, the social and economic benefits of tourism have greatly been destabilized by the recent global recession. This has provided the researcher with a big reason to investigate the effects of the recent global recession on tourism.

This paper will therefore be very relevant as it will explore the link between tourism and the recent global economic recession. This will therefore be of great importance to the policymakers and the relevant players to formulate the appropriate ways of countering the shock with an aim of advancing economic growth and development.

The study relied on both primary and secondary data. Both interviews and questionnaires were used for the primary data. For the secondary data, various books and publications were consulted. The publications mainly dwelt on the connection between tourism and financial recession. The research used the qualitative research design to analyze data relating to the effects of the financial crisis on tourism.

The outcome of the study revealed that indeed, the global financial recession impacted heavily on tourism. The study further suggests the possible ways of alleviating the various setbacks in order to ensure efficient economic prosperity for the countries. Some of these methods have not yet been articulately undertaken, thus, the study gives the possible areas that other researchers should touch on in order to come up with more concentrated research.

The global recession affected many developing countries in the world, Thailand being no exception. This has limited these countries from fighting poverty and improving the standard of living. There are various donors who have come out to invest in the tourism sector of Thailand. Without the help of donors, the tourism sector can really slump. Therefore, it is recommended that donors should come up and invest in the sector in order to rescue it.

Plans and strategies should be put in place so as to support the expansion of both domestic and international tourism. One of the strategies is through engaging in campaigns aimed at promoting the tourist destination sites in the country. They can do this by coming up with incentive packages. This will persuade the tourists to make their visits to the country.

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