(Mt) – The Crisis Management in Tourism and Hospitality Research Paper

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Library of Congress Cataloging-in-Publication Data Application submitted British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN 13: 978-0-7506-7834-6 ISBN 10: 0-75-067834-8 For information on all Butterworth–Heinemann publications visit our Web site at www.books.elsevier.com Printed in the United States of America 06 07 08 09 10 11 10 9 8 7 6 5 Working together to grow libraries in developing countries www.elsevier.com | www.bookaid.org | www.sabre.org 4 3 2 1 1 Introduction Learning Objectives By the end of the chapter, the reader should be able to 䊏 䊏 䊏 䊏 䊏 Recognize the different causes of tourism crises. Identify the characteristics of tourism crises and their various types. Appreciate the consequences of tourism crises. Understand the special features of the tourism industry which make it vulnerable to crisis. Explain the key components of crisis management plans and underlying principles. Introduction The opening of the twenty-first century was marked by a wave of terrorist attacks, outbreaks of disease and devastating natural phenomena. Many of these incidents had local, regional and global repercussions and prompted tourism crises at corporate, industry and destination levels. Although some events were unprecedented, crisis and disaster have acquired greater prominence in recent years and the modern world appears to be one of heightened uncertainty and insecurity. Tourism cannot isolate itself from these forces and developments in the external environment have the capacity to precipitate tourism crises, as do industry and organizational circumstances. Some notable examples of tourism crises in the last decade are listed in Table 1.1, and this pattern seems set to continue in the years ahead. A growing awareness of the threat of tourism crises and their potential to inflict harm is reflected in the number of academic publications devoted to the topic, including special editions of journals, many of which are referred to in the course of this book. More manuals and handbooks for practitioners are available and industry associations, official agencies and government bodies have been involved in their 1 Tourism Crises: Causes, Consequences and Management Table 1.1: Selected tourism crises 1995–2005 Year Event 1995 Earthquake in the Japanese city of Kobe killed over 5,500 and disrupted transport services throughout the prefecture. Indian Airlines plane hijacked on a flight from Nepal; 178 passengers released after eight days. Asian financial crisis and falling currency values depressed demand for intra-regional travel and investment in tourism. Terrorist attack on tourists visiting an historic site at Luxor in Egypt killed 58. Abduction of 16 tourists on an organized tour in Yemen, four of whom were killed. Industrial action by Cathay Pacific pilots over a labor dispute led to flight cancellations affecting thousands of passengers. Crash of a Concord plane chartered by a German tour operator at Paris killed 113. Foot and mouth outbreak in the UK restricted access to the countryside and damaged destination images. Terrorist bombings at nightclubs on the Indonesian island of Bali killed 191 and injured 300. Severe Acute Respiratory Syndrome (SARS) virus epidemic in Asia and Canada impacted on tourist movements and air travel. Indian Ocean tsunami in which over 200,000 estimated to have died, including 2,000 tourists in Thailand. Suicide bombings at an Amman hotel in Jordan killed 57 and injured 120. 1996 1997 1997 1998 1999 2000 2001 2002 2003 2004 2005 Sources: Assorted news reports. production. It is also an increasingly popular conference theme for both business and academic communities, with a strong emphasis on understanding crises and being prepared to meet them. These themes are central to this book, which deals with causes of crises, their dynamics, consequences and approaches to management. This first chapter provides an introduction to tourism crises and tourism crisis management. It discusses the features of such crises, their origins and evolution and recommended responses within the context of the wider literature on crisis management. Distinguishing characteristics of the tourism industry, comprising public and private actors, are outlined and shown to heighten its vulnerability to crisis, which assumes a variety of forms and is provoked by assorted catalysts. The overview stresses the significance of planning and management and sets the scene for the remainder of the book, which explores a multiplicity of tourism crises and the manner of their resolution. Individual chapters cover tourism crises related to economic, political, sociocultural, environmental and technological issues with additional separate chapters dedicated to questions of terrorism, health and commercial crises. The final chapter reviews the principal themes which emerge from the accounts and examines the lessons to be learned, highlighting examples of best practice and considering the 2 Introduction challenges of implementation in an era of rapid change when the future is unknown and unpredictable. It is hoped that the book will afford new insights into the important topic of managing tourism crises, which cannot be ignored by anyone with an interest in tourism. Tourism Crises, Causes and Consequences There is no universally accepted definition of what constitutes a crisis and different writers present their own interpretations. These do, however, frequently correspond and it appears that “three elements must be present: a triggering event causing significant change or having the potential to cause significant change; the perceived inability to cope with this change; and a threat to the existence of the foundation of the organization” (Keown-McMullan, 1997, p. 4). A distinction can be drawn between disasters which owe their origins to factors such as extreme weather, yet impinge on industrial activity, and crises which are products of institutional stresses (Faulkner, 2001). The latter are more amenable to control, but the two have qualities in common and are connected when catastrophes outside an organization provoke a crisis within it. Emergency is another term sometimes employed interchangeably with crisis, but it refers to a less serious and therefore more easily managed event or threat. An associated concept is that of risk pertaining to latent, rather than actual, individual or sets of conditions which can become crises if realized and of sufficient gravity. Risk assessment is a key stage in planning for crisis, involving the anticipation of what might go wrong and identification of the reasons for divergences from expectations (van Waldbeek, 2005). Every crisis is unique, yet characteristics generally cited include unexpectedness, urgency and danger (Hermann, 1972). They are precipitated by catalysts powerful enough to undermine structures and modes of operation, with repercussions for the profitability of commercial ventures which might even be destroyed (Shrivastava and Mitroff, 1987). Lives and company and individual reputations may be put in jeopardy, thereby eroding staff morale. Participants are taken by surprise and have little time to make difficult decisions in an atmosphere of tension and instability. Crises also reach a crucial point when change, for the better or worse, is unavoidable and the experience may prove beneficial for people and organizations (Prideaux et al., 2003). Tourism crises usually share these attributes, although certain crisis situations can be predicted and lack immediacy such as those facing destinations suffering from rising sea levels due to global warming. They are also not restricted to the corporate arena and the phrase can be extended to describe circumstances in which tourists and members of the tourism industry individually or collectively, including destinations, are faced with change, which is potentially destructive for every, or certain, parties (a concept definition which is repeated at the end of the chapter). Generalizations may, however, be misleading and tourism crises display a remarkable range and variety, which it is the intention of this book to convey. 3 Tourism Crises: Causes, Consequences and Management Existing typologies of corporate crises as a whole are founded on root causes (Shrivastava and Mitroff, 1987), time (Booth, 1993), gravity (Brecher, 1978) and facets of business operation (Meyers, 1986). Specific tourism crises can be classed in these ways and domain of origin or cause is a relatively straightforward method which permits comprehensive analysis. It represents the rationale for this book’s organization and a conceptual framework is presented in Figure 1.1. Causes of many tourism crises can be traced to developments in the economic, political, socio-cultural and environmental domains, which affect demand and supply in generating and destination countries. Economic downturn and recession, fluctuating exchange rates, loss of market confidence and withdrawal of investment funds can all engender a tourism crisis. Political events such as war, military coups, deteriorating international relations, the imposition of sanctions and terrorism will have a similar outcome. Civil unrest and growing crime and violence may act as triggers and natural disasters of earthquakes, typhoons, volcanic eruptions and flooding will almost inevitably do so. Deterioration in public hygiene and infectious disease also lead to tourism crises. Crises generated within the industry too can be analyzed under the headings of economic, socio-cultural and environmental when tourism has adverse impacts in these fields. Technological is a fifth domain in which crises are initiated when technology in an assortment of manifestations fails to perform as expected and crises of competition and industrial relations are born of corporate affairs, the sixth domain. Human error is often a compounding factor, or even a principal cause, in these and all forms of tourism crises. Table 1.2 contains a list of threats of crisis by domain and whether they are external or internal to the tourism industry. There may be overlap across the domains and the demarcation between internal and external worlds is also not always clearly discernible. A crisis beyond the industry could be a rigorous test of management competence and the financial health of an organization, with corporate and industrial commercial crises ensuing if these are found to be deficient. Figure 1.1: Domains of Tourism Crises ECONOMIC (Chapter 2) POLITICAL (Chapters 3 and 4) COMMERCIAL (Chapter 9) SOCIO-CULTURAL (Chapter 5) ENVIRONMENTAL (Chapters 6 and 7) TECHNOLOGICAL (Chapter 8) 4 TOURISM CRISES Introduction Table 1.2: External and internal threats of crisis Domain External Internal Economic Recession Currency fluctuations Taxation Government policy International relations Instability Terrorism Unrest Crime Natural phenomena Natural disasters Pollution Health scares Computer systems failure Mechanical failure Design faults Fire Regulations Government intervention Rising costs Falling revenues Unprofitability Political Socio-cultural Environmental Technological Commercial Staffi ng Cultural conflicts Overdevelopment Environmental degradation Transport accidents Competition Labor disputes Management decisions Human error The cause and source of a crisis will help to decide its consequences and severity can be assessed on a scale from major to minor, measured by items such as number of people implicated and costs incurred. Duration is a dimension of magnitude which embraces a short to long-term continuum, from a temporary computer systems collapse to a slowly mutating crisis linked to environmental degradation. Some crises have been likened to cobras when they erupt without warning and pythons if they reveal themselves more stealthily (Seymour and Moore, 2000). Spatial and industrial scope is another facet to take into account. The zone of crisis may be local, national, regional and international with regard to geographical area and corporate, industrial (domestic and overseas) and government (local, national and international) with regard to decision makers. An isolated case of food poisoning at a restaurant principally concerns the manager and staff and, if managed well, will be quickly forgotten with limited financial damage. In comparison, the tourism industry and governments worldwide must respond to a pandemic of a deadly disease which could resonate for many months and have serious balance of payments implications. This range in crisis scope and, by implication, gravity is depicted in Figure 1.2. Crises are thus rooted in a multiplicity of intrinsic and extrinsic causes originating in various domains. They occupy a spectrum, from short-lived situations confined to 5 Tourism Crises: Causes, Consequences and Management LOCAL MANAGERS AND STAFFF CORPORATIONS AND ORGANIZATIONS NATIONAL INDUSTRY SECTORS NATIONAL AND LOCAL GOVERNMENT AUTHORITIES INDUSTRY SECTORS OVERSEAS INTERNATIONAL GOVERNMENTAL AND NONGOVERNMENTAL AGENCIES Figure 1.2: Scope of Tourism Crises single enterprises to those which involve the global industry over a prolonged period, and the manner in which crises are handled can determine their extent and life. Such observations suggest a propensity to crisis in the tourism industry which is partly derived from its distinctive features, which are summarized below. Characteristics of the Tourism Industry First, the tourism industry’s relative immaturity and dramatic expansion are noteworthy. Tourism has a long history, but modern mass tourism and the industry which supports it date from after the Second World War. International arrivals rose from 25 million in 1950 to 760 million by 2004, although geographical imbalances persist and most tourists and their spending circulate within the developed world (WTO, 2005). The World Tourism Organization (WTO) predicts that there will be 1.6 billion international tourists in 2020 (WTO, 1999) and domestic tourism, estimated to be 10 times greater in volume (Weaver and Lawton, 2002), must not be overlooked. Growth has been fueled by new product development, aggressive marketing and intense competition. Looking to the future, the WTO is not alone in its optimistic forecasts and analysts concur that tourists demonstrate considerable resilience in the face of setbacks. Any downturns ahead for whatever reason, including crises, could therefore be quickly overcome. However, there is also an appreciation that tourists can be fickle 6 Introduction in their decision making and behavior. Leisure tourism demand is renowned for its elasticity, seasonality and volatility whereby a change in price will produce a disproportionate change in demand, movement is often heavily concentrated in certain months and flows can fluctuate wildly (Bull, 1998). It is driven by economics, subject to fashion trends and deterred by social and political upheaval. Tourists are unlikely to cease traveling in reaction to negative forces, but could shift their direction of travel and choice of destination. Business tourism is more stable, as perhaps is tourism for purposes of education and health care, but most markets are sensitive to uncertainties. The tourism industry, which has grown to meet the needs of all these travelers, is unusual because of its size and structure, with a number of components playing a part. It consists of all the commercial and non-commercial enterprises and agencies which make tourism possible, encourage it and deal with the consequences. Collectively, they form a network made up of inputs from a series of individual industries, rather than a discrete and homogenous industry, and some of the participants may have customers who are not tourists such as excursionists and local residents. Core industry sectors are tourism administration and development, passenger transportation, hospitality, attractions, tour operation and retail travel. The tourism administration segment determines the environment within which the overall industry works while transport, hospitality and attractions sell the services essential to the tourist experience. These may reach tourists directly or indirectly through intermediaries of tour operators, who combine separate ingredients into single products, and travel agents, who are the retailers in the distribution chain. An additional miscellaneous category includes providers of travel insurance, currency exchange and travelers’ checks and travel literature. Conventional structures and ways of doing business are, however, changing. Intermediaries are being challenged by new channels of distribution and especially Internet technology, which facilitates direct communications and transactions between customers and suppliers. This has resulted in the threat of disintermediation, raising questions about the prospects of “bricks and mortar” travel agents in particular. Vertically integrated giant travel groups are another power reshaping industry systems, especially in Europe where companies like TUI have their own hotels, airlines, travel agents and tour operators. Nevertheless, the various functional elements still depend on one or more of the others to a greater or lesser degree and are bound together by assorted ties, represented by alliances and partnerships. Any significant occurrence in one unit and country of tourist arrival or departure thus has implications for them all. The tourism industry caters to nationals traveling within their country of residence (domestic tourists), residents crossing international borders (outbound tourists) and visitors entering from another country (inbound tourists). Transport, hospitality and attractions sectors supply domestic and inbound tourists, and tour operators and travel agents deal mainly with residents going overseas, with some sales of domestic products. However, outbound and inbound tourists travel by 7 Tourism Crises: Causes, Consequences and Management foreign air and surface transport carriers and the latter may buy from overseas agents and operators. Linkages thus transcend national boundaries to create an international network or industry. Some of the largest organizations operate globally and the tourism industry is an outcome of globalization as well as a vehicle for its diffusion, creating opportunities and constraints. It is not only markets that exhibit great diversity, but also tourism products. While encompassing some physical elements, tourism also has a psychological and sociological meaning (Krippendorf, 1987) and the industry has to aim to understand and satisfy both emotional and material requirements. In addition, its products possess the inseparability, variability, perishability and intangibility which characterize all services (Kotler et al., 1999). They comprise encounters among individuals in which the tourist is part of the production process. Maintaining the desired standard and consistency is thus made difficult, aggravated by the fact that suppliers of one constituent rely on others to deliver the complete experience. Sales and marketing are further complicated by perishability whereby lost revenue from unsold airline seats and hotel rooms cannot be recovered at a later date so that yields must be managed effectively. Vulnerability of the Tourism Industry to Crisis The above comments indicate why and how the tourism industry is prone to crisis. It has a complex structure and sells experiential products which are the collective work of several suppliers, leading to possible problems of fragmentation and control. Relationships of mutual dependence among components also mean that a crisis for one may spread to another. Such contagion is evident in destination crises when a precipitating event leads to a sudden fall in arrivals which has repercussions for accommodation, attraction and transport providers as well as government agencies and tour operators and travel agents at home and abroad. There is fierce competition among destinations and within sectors, with a trend toward concentration and consolidation. Extremely large and powerful companies have emerged and commercial pressures can result in corporate crises, often related to financial matters. It must also be remembered that the industry is not the preserve of large corporations and small businesses are very active; some of these are particularly vulnerable and may be ill equipped to handle crises (Cushnahan, 2004). There are striking contrasts between tourist products and other consumer goods which elevate the probability of crisis. The industry must move people to the primary place of consumption and accommodate and entertain them on arrival, the journey itself being one aspect of production. These visits could be marred and tourist safety compromised by a host of incidents which may or may not be the fault of those making the practical arrangements. Examples include transport accidents, hotel fi res, street riots in which tourists are caught up and their victimization by criminals. Destinations where there are doubts about safety and security are near to a crisis of a tarnished image, official warnings against travel and a decline in visitors. 8 Introduction Tourism has also expanded at a rapid rate to become one of the world’s leading industries, but movement on such a scale and development at such a pace have had economic, socio-cultural and environmental impacts. These impacts have inspired debate about the costs and benefits of tourism, not least for Third World countries, and strong opposition in some instances. The industry has been criticized for its pursuit of short-term economic gains and exploitation of resources which have impeded progress toward more sustainable tourism (Tourism Concern, 2005). The presence of tourists and their capacity to act as an instrument of destructive change are reasons underlying certain types of destination crises. At the same time, national and international events unconnected to tourism can curtail demand and the working of the industry, and it has been argued that the result is a state of “dynamic chaos and turbulence” (Laws et al., 1998, p. 5). Given this apparent predisposition to many types of crises, warnings about the inevitability of confrontation (Blaikie et al., 1994; Kash and Darling, 1998) are especially apposite for the tourism industry. The question is not whether a crisis will have to be faced, but when and what the reaction should be. Investment in planning and management are therefore vital and the next section outlines key tasks to be performed before and during the evolution of a crisis. Managing Tourism Crises Crisis management is perhaps a self-explanatory term and there is, again, no standard definition. Santana (2004, p. 308) did, however, capture its scope and intentions when he wrote of an “ongoing integrated and comprehensive effort that organizations effectively put into place in an attempt to first and foremost understand and prevent crisis, and to effectively manage those that occur, taking into account in each and every step of their planning and training activities, the interests of their stakeholders.” Such an outline is applicable to tourism crisis management, which is described in the list of concept definitions at the end of the chapter as planning for and managing tourism crises in order to protect the interests of the industry, tourists and other stakeholders involved and contain any long-term damage. It should be stressed that the industry incorporates public bodies with tourism planning, development and promotion functions as well as commercial operators. General theories postulate that crises advance in stages which have been labeled prodromal (warning), acute (at the height of the crisis), chronic (aftermath), and resolution (Fink, 1986). They can be conceived of as circular journeys which begin and end at normality after moving through incubation; precipitating event; immediate consequences; rescue, salvage and first stage of adjustment; and full cultural adjustment (Turner, 1976). Essentially, these authors depicted three intervals of pre-crisis, crisis and post-crisis which are likely to be of varying lengths. There may be no, or very little, time for action prior to crises which arrive without warning and duration will depend on the particular case, as will the speed of recovery. Nevertheless, complete restoration of the status quo may be impossible 9 Tourism Crises: Causes, Consequences and Management because people and organizations are permanently altered by crisis and sometimes do not survive. The evolution of a crisis can also be viewed as a set of tasks for managers who must detect signals, prepare and try to prevent, contain, limit damage and pursue recovery (Pauchant and Mitroff, 1992). These tasks imply the assumption of either a reactive or proactive stance while interactivity permits learning, knowledge gained helping to ensure that organizations are better placed to withstand or avert future crises (Burling and Hyle, 1997). Practical measures to reduce the chances of a similar crisis recurring or another emerging should also be seen to be taken in order to reassure and restore confidence amongst tourists, industry partners and investors. Managers must anticipate and evaluate the likelihood of crises, devise policies designed to prevent them and formulate strategies for coping when they do happen (Regester and Larkin, 1998). The main aims are therefore to reduce risks, get ready, respond and recover (Heath, 1998). Documented and tested crisis plans, detailing actions and staff roles and responsibilities, occupy a central place in crisis management (Smith, 1990; Smith and Sipika, 1993). Teams need to be identified in advance and duties allocated accordingly. Plans should be informed by comprehensive research into, and understanding of, national and global trends of relevance to operations. Risk awareness is fundamental to preparation and prevention and more serious situations require mechanisms for industry-wide and perhaps international cooperation. Internal and external communications is a key area, with many audiences to address. The plan does not end with publication and circulation and it should be monitored and revised in the light of new circumstances. It also cannot be relied on alone and organizations should strive to foster a suitable culture with competent staff able to rise to the most difficult and demanding of occasions. Specific studies of tourism organizations, industry sectors and destinations in crisis echo these conclusions about crisis evolution and management while acknowledging tourism’s distinctiveness as a human, administrative and commercial activity (Atkas and Gunlu, 2005; Brewton, 1987; Doeg, 1995; Evans and Elphick, 2005; Henderson, 1999; Pottorff and Neal, 1994). For example, the parameters of initial risk assessment or environmental scanning exercises must be comparatively broad for the tourism industry in view of the importance of developments in outside arenas. Marketers cannot recall faulty tourism products and lives are endangered in the worst examples of service failure, necessitating appropriate safety procedures. Tourists may have to be repatriated or moved from destinations struck by crisis and arrangements made for those whose departure is imminent, with logistical and resource implications to be planned for. There is also recognition that certain tourism crises unfold in ways that cannot be forecast. Reality is more confused than logical models imply, those in charge may be unable to adhere to prearranged programs and managers have to struggle with formidable dilemmas for which they have no instructions. Faulkner’s (2001) conceptual framework pertains to a tourist destination hit by a natural disaster and is one of the most commonly quoted. It has been employed, 10 Introduction with and without amendment, in analyses of other types of tourism crises. The process commences with an initial pre-event phase, when avoiding a disaster or containing its consequences is still feasible, and moves on to a prodromal state in which this is no longer an option. The emergency period is a time for action to protect life and property and is followed by intermediate and long-term recovery before ultimate resolution. A list of responses to match each phase is presented, alongside management strategies founded on thorough and continuously reviewed and updated risk assessment and contingency plans. Overall, prerequisites of success in managing a tourism crisis are maximum preparedness, a willingness to accept responsibility, rapid action, transparency and good communications. Realizing these objectives is facilitated by a plan setting the direction for all personnel; some examples are discussed in the final chapter. Researching Tourism Crises Research exploring tourism crises and their management is often grounded in the wider literature about corporate crises which is extensive (Barton, 2001; Booth, 1993; Mitroff, 2004; Shiva, 2000). This draws on empirical data and personal experience, commentators coming from different management sciences and other disciplines such as psychology, sociology and economics. The strong interest in communications means that it is now a sub-field, indicative of the crucial influence of the media on the intensity and duration of crises (ten Berg, 1990; Bland, 1998; Ogrizek and Guillery, 1999). Many publications are targeted at business executives and several cite illustrations from the tourism industry, especially transport accidents (Harvard Business School, 2004; Lagadec, 1993; Laye, 2002; Levitt, 1997). However, the spate of tourism crises in the past decade and predictions of more to come have meant that the subject is attracting much greater attention among tourism academics (Beirman, 2003; Faulkner and Russell, 1997; Glaesser, 2005; McKercher, 1999; Nankervis, 2000; Ritchie, 2004; Santana, 2001; Wilks et al., 2005) alongside practitioners (PATA, 2003; WTO, 1996 and 2002; WTO and WMO, 1998). Indeed, it appears to be emerging as a distinct stream in the tourism literature. Much of this work is centered on case studies and concentrates on recovery marketing and management, demonstrating both good and bad practice. There is perhaps an emphasis on extrinsic causes of crisis rather than intrinsic organizational weaknesses and on destination perspectives. Tourism crises are shown to generate widespread, and potentially very damaging, publicity (Gonzalez-Herrero and Pratt, 1998; Lehrman, 1986). Findings reveal some evidence of reluctance on the part of the tourism industry in the past to accept the possibility of crisis and prepare for it. Actual and potential hazards facing tourists have tended to be downplayed because of fears about adverse media coverage and commercial losses. For example, a Pacific Asia Travel Association (PATA) survey undertaken in 1991 disclosed that only a minority of members included crisis management in strategic planning, despite the 40% chance of them 11 Tourism Crises: Causes, Consequences and Management facing a crisis (Cassedy, 1991). The formulation and execution of crisis management strategies do not seem to have become universal in the intervening years (Prideaux, 2003) and plans that do exist have their limitations (de Sausmarez, 2003; Drabek, 1995). However, the major tourism crises experienced recently and described in this book are leading to a re-assessment of attitudes toward crisis management planning and the topic is now taken more seriously within the tourism industry. It is being allocated a much higher priority with a search for flexible plans which strike a balance between being too precise and overly generic and are capable of accommodating envisaged scenarios. Summary and Conclusions Crises and their management are thus matters of great importance generally and with specific reference to tourism. Tourism crises display a striking diversity and have a variety of causes founded in economic, political, socio-cultural, environmental, technological and corporate domains. Patterns of evolution differ in terms of speed and the duration of each crisis stage and consequences are felt at multiple levels of industry and geographical area, with corresponding contrasts in gravity. It appears that the tourism industry is susceptible to crisis, with defining qualities which set it apart from other industries, and that the incidence of crisis will intensify. Knowledge about crises and preparing for them is advancing and those responsible have perhaps more information at their disposal than ever before to assist in decision and policy making. However, despite the enlarged body of literature devoted to theoretical and more practical themes, there is still a lack of quantitative and qualitative data about the extent, composition and effectiveness of formal crisis management planning within the tourism industry. Opportunities for research are likely to grow as both crises and crisis management activity increase. Avenues for further study are discussed in the fi nal chapter of this book, which also returns to questions of the efficacy of tourism crisis management plans. Nevertheless, it is hoped that the following chapters on the separate domains of crisis will contribute to an improved understanding of the reasons underlying tourism crises, the ensuing results and processes of resolution. Concept Definitions 䊏 䊏 12 Crisis: A situation in which an individual or organization is faced with the prospect of fundamental change, usually sudden and unforeseen, which threatens to disrupt and overturn prevailing philosophies and practices. Crisis management: Preparing for and managing the process of crisis from inception to resolution with the primary objective of minimizing damage. Introduction 䊏 䊏 䊏 Tourism crisis: Circumstances in which tourists and members of the tourism industry individually or collectively, including destinations, are faced with change which is potentially destructive for every, or certain, parties. Tourism crisis management: Planning for and managing tourism crises in order to protect the interests of the industry, tourists and other stakeholders involved and contain any long-term damage. The tourism industry: The public and private organizations which provide tourist products and services, market them and deal with development and planning. Review Questions 1. 2. 3. 4. 5. 6. 7. What are the main causes of tourism crises? How can tourism crises be classified? Is tourism more prone to crisis than other industries? What are the main stages in the evolution of crises in general? Do tourism crises always conform to the general pattern of evolution? What are the most important components of a tourism crisis management plan? Could a tourism crisis management plan prevent an industry crisis occurring? Additional Readings Beirman, D. (2003). Restoring tourism destinations in crisis: A strategic marketing approach. Wallingford: CABI Publishing. Faulkner, B. (2001). Towards a framework for tourism disaster management. Tourism Management, 22, 134–147. Glaesser, D. (2005). Crisis management in the tourism industry (2nd ed.). Oxford: Butterworth-Heinemann. Ritchie, B.W. (2004). Chaos, crises and disasters: A strategic approach to crisis management. Tourism Management, 25(6), 669–683. References Aktas, G. and Gunlu, E.A. (2005). Crisis management in tourist destinations. In W.F. Theobald (Ed.), Global tourism (3rd ed., pp. 440–457). Amsterdam: Elsevier. Barton, L. (2001). Crisis in organizations II. Cincinnati: South-Western College. Beirman, D. (2003). Restoring tourism destinations in crisis: A strategic marketing approach. Wallingford: CABI Publishing. Blaikie, P., Cannon, T., Davis, I., and Wisner, B. (1994). At risk: Natural hazards, people’s vulnerability and disasters. London: Routledge. Bland, M. (1998). Communicating out of a crisis. Basingstoke: Macmillan Business. Booth, S.A. (1993). Crisis management strategy: Competition and change in modern enterprises. London and New York: Routledge. 13 Tourism Crises: Causes, Consequences and Management Brecher, M. (1978). A theoretical approach to international crisis behavior. Jerusalem Journal of International Relations, 3(2–3), 5–24. Brewton, C. (1987). Managing a crisis: A model for the lodging industry. The Cornell Hotel and Restaurant Administration Quarterly, 28(3), 10–15. Bull, A. (1998). The economics of travel and tourism (2nd ed.). Melbourne: Addison Wesley Longman. Burling, W.K. and Hyle, A. (1997). Disaster preparedness planning policy and leadership issues. Disaster Prevention and Management, 64, 234–244. Cassedy, K. (1991). Crisis management planning in the travel and tourism industry: A study of three destination cases and a crisis management planning manual. San Francisco: Pacific Asia Travel Association. Cushnahan, G. (2004). Crisis management in small-scale tourism. Journal of Travel and Tourism Marketing, 15(4), 323–338. de Sausmarez, N. (2003). Malaysia’s response to the Asian financial crisis: Implications for tourism and sectoral crisis management. Journal of Travel and Tourism Marketing, 15(4), 217–231. Doeg, C. (1995). Crisis management in the food and drinks industry. London: Chapman and Hall. Drabek, T.E. (1995). Disaster responses within the tourism industry. 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Madrid: World Tourism Organization. 16 2 Economic Tourism Crises Learning Objectives By the end of the chapter, the reader should be able to 䊏 䊏 䊏 䊏 Appreciate some of the important connections between economics and tourism of relevance to tourism crises and their management. Understand how economic changes in generating and destination countries may create conditions of crisis for the tourism industry. Recognize how tourism’s economic impacts can be a primary or secondary cause of crises. Identify the means by which the likelihood of a tourism crisis related to economics can be reduced and appropriate actions to take should such a crisis occur. Introduction Economics is a key influence on both the demand for tourism and supply of facilities and services. Economic circumstances in generating and receiving countries help to shape flows of tourists and their spending patterns and the nature and speed of development, which also react to general economic movements. Such economic forces may operate to create both opportunities and problems for the tourism industry, certain of the latter having the potential to evolve into a crisis. Tourism crises of an economic origin are discussed in this chapter, which examines tourism’s vulnerability to economic conditions in the wider environment and approaches to alleviating any damage arising from these conditions. Attention is also given to how the economic impacts of tourism may themselves be a cause or catalyst of crises and measures that can be adopted to lessen the risk of these occurring. Case studies at the end of the chapter explain how outbound tourism from Japan has been damaged by economic uncertainty and describe the repercussions 17 Tourism Crises: Causes, Consequences and Management of the 1997 Asian financial crisis for tourist activity, both indicative of the linkages which connect tourism and economics. The Economics of Tourism Characteristics of local, national and international economies and any alterations in them exercise a crucial influence on the tourism industry (Bull, 1998) which has its own internal economic dynamics (Lundberg et al., 1995). Depending on the nature of change, it will stimulate or depress demand in source markets and make destinations more or less attractive regarding prices and products. Costs of travel and perceptions of these costs, as well as an individual’s financial position, also play an important part in vacation decisions. The health of an economy additionally helps to determine resources available for investment at home and abroad in the transport, accommodation and attractions sectors which are essential to tourism. Business travel too benefits from the heightened trading which is generated by economic progress (Davidson and Cope, 2003). Income is a key variable of levels of participation in leisure tourism and there appears to be a close relationship between economic prosperity and a buoyant market. This was evident during the years following the Second World War in the West when rises in personal disposable income allowed lower and middle income groups to spend more on tourism than ever before. Destination choices expanded from nearby locations to more distant centers with a corresponding shift from national to intra-regional and then inter-regional travel (Murphy, 1985). Such a trend was later apparent amongst the Asian “tiger” economies of Korea, Taiwan and Singapore and is now spreading to other countries experiencing development. Affluent middle classes of consumers are emerging, notably in China which has seen rapid expansion in domestic and international tourism fueled by its exceptional economic achievements (Zhang et al., 2000). However, economic downturn can undermine demand and possibly result in crises for industries in origin and destination countries if the slump is sufficiently intense or prolonged. The recession of the 1990s on the US mainland contributed to a decline in Hawaii’s tourism from 1990 to 1993, and Japan’s economic difficulties had adverse consequences for its outbound tourism in the same decade, including travel to Hawaii (see Case One). Deterioration in the global economy at the end of the twentieth century was considered partly responsible for a slowing down in worldwide tourism, recovery believed to be driven partly by the economic cycle. At the same time, domestic industries can gain from these reversals as it seems that many tourists choose less expensive options and remain closer to home when anxious about monetary and employment matters. Such a pattern of response suggests the importance of drawing tourists from a range of overseas markets, rather than relying on only a few, together with the need for domestic promotion. It should also be noted that much of the world’s population is debarred from tourism because of poverty, although there may be great disparities in income dis18 Economic Tourism Crises tribution with the presence of a wealthy elite of international travelers in the poorest of countries. A less advanced stage of development does not preclude countries from receiving visitors, but a certain amount of finance is required to permit the construction and maintenance of the necessary tourism infrastructure. One reason the African continent as a whole has been prevented from reaching its tourism potential is the parlous state of the economy (Christie and Crompton, 2001) and similar barriers apply in parts of Central and South America and Asia. An absence of funds and uncertain investment climate could lead to a crisis for the tourism industry, compounded by the political and social tensions that frequently accompany economic turbulence. Government economic programs and fiscal policies can impinge on travel behavior and the operation of the industry directly and indirectly, not least in the arena of taxation. The World Travel and Tourism Council (WTTC) uses the four indices of car rental, lodging, meals and air passenger charges to monitor taxes levied. It claims that these have steadily increased around the world in recent years (WTTC, 2002) and cities with the highest rates are depicted in Table 2.1. There are also departure taxes applicable to all modes of transport and visa fees are another official Table 2.1: Highest taxation rates in selected cities Barometer City Tax rate (as % of overall costs) Car rental Vienna Brussels London 33.22 32.90 30.08 Copenhagen Buenos Aries New Delhi 20.00 17.35 16.67 Copenhagen Stockholm Mumbai 20.00 20.00 19.03 Lodging Meals Airport Miami Los Angeles San Francisco 7.66 6.95 5.19 Total Copenhagen London Vienna Brussels Miami 24.25 21.26 20.65 20.17 19.51 Source: WTTC, 2002. 19 Tourism Crises: Causes, Consequences and Management revenue earner. Such financial burdens are opposed by commercial practitioners and destination marketers who argue that they project a poor image, alienate visitors and may undermine the financial viability of tourism enterprises (Lipman, 1997). Their sudden imposition and deficiencies in administration can be disruptive and there is scope for corrupt practices in certain instances. Currency Rates and Controls Currency values and their fluctuation are an additional determinant of tourist trends and investment. Substantial alterations are felt by tourists and reflected in the prices charged by operators and agents with consequences for demand. An exceptionally strong currency may deter inbound visitors but encourage outbound travel, as demonstrated by Switzerland, where the hotel industry confronted a crisis due to uncompetitive prices in the 1990s. Switzerland became an expensive destination for foreigners while its nationals were lured abroad to take advantage of their enhanced purchasing power there, accommodation occupancy levels declining as a result. Hotels were advised to be more creative and energetic in their marketing in order to regain lost market share and attract more mature travelers interested in escaping from the stresses of everyday life to the delights of an alpine environment (Marvel and Johnson, 1997). A markedly appreciating currency and prevailing notions of the costliness of locations are thus challenges for the tourism industry, which must strive to offset a drop in arrivals by stimulating greater expenditure among those who do elect to visit. A currency which is falling dramatically in value does not inevitably boost arrivals and excessive volatility may deter investors and make tour operators and travel agents cautious about selling places thus afflicted. The Turkish lira depreciated by 70% over a few days at the beginning of 2001, but this did not have a favorable effect on inbound tourism and severely curtailed departures (Okumus et al., 2005). Brazil’s 2002 currency crisis led to an overall contraction in inbound visitors, especially from other Latin American countries (Euromonitor, 2004) like Argentina where there was also economic and political turmoil. Visitors caught up in the chaos were seriously inconvenienced and tourists in Buenos Aries described being unable to cash travelers checks or use credit cards because of emergency banking measures intended to stem cash withdrawals. Surcharges were imposed and retailers raised prices in anticipation of a continuation in the collapse of the peso. Outbreaks of violence were reported (BBC News, 2002b), indicative of how economic anxieties can fuel broader unrest which might endanger tourist safety. The Asian financial crisis and its aftermath have been well documented and the case provides insights into the complex dynamics of an economic tourism crisis initiated by currency volatility (see Case Two). Studies suggest different experiences and the presence of success factors which enabled some destinations to manage the crisis better than others. While at the heart of the economic turbulence, Thailand exhibited an ability to weather the storm attributable to its long-standing reputation 20 Economic Tourism Crises as a tourist destination, range of attractions and amenities and intensive advertising. Indeed, the crisis was exploited as an opportunity to reposition Thailand as a country of nature-based, cultural and MICE (meetings, incentives, conferences and exhibitions) tourism rather than mass tourism coastal resorts. Indonesia lacked these advantages and the economic crisis there was a source of a social and political agitation, posing a more serious threat to tourism and impeding effective action and the pace of recovery (Henderson, 1999a). The introduction of the euro as the common currency for most members of the European Commission in 2001 created a single market of 300 million residents who, alongside visitors, no longer had to worry about currency transactions when traveling within the euro zone. However, it was a threat to some destinations where a lack of price competitiveness was revealed by comparisons which were easier for tourists to make. There was negative publicity about struggles with software and price hikes, particularly in Italy, where it was reported that visitors had to pay more for public transport and museum admission. The adoption of the euro also meant a drastic loss of currency exchange business and a doubtful future for smaller scale providers of this service (BBC News, 2002a). Official attempts to control balance of payments deficits may incorporate limits on money taken out of a country and the purchase of foreign currency. Some countries also enforce compulsory currency exchange, insisting that visitors convert a minimum sum of local currency and restricting amounts they can leave with. In an example of the former, an individual’s foreign travel allowance was set at £50 in the UK in the late 1960s. The decision proved beneficial for the domestic industry and companies selling all-inclusive foreign package holidays (Holloway, 1998), but constrained aspects of independent international travel. Escalating Costs Certain sectors of the tourism industry are characterized by the intensity of competition which is often expressed in terms of price. Minimization of costs is therefore essential, and significant rises can precipitate crisis, especially if unexpected and beyond the control of management. This is demonstrated by rapidly rising oil prices, which have the capacity to slow down growth in global, domestic and tourism economies. Economic recession damages consumer and investor confidence in general and within the context of tourism, as already noted, while all businesses have to contend with higher fuel bills. Transport companies and especially airlines are likely to be among the worst hit with fuel accounting for between 10% and 20% of the latter’s costs, the second highest after labor. The issue acquired greater urgency when a surge in prices for crude oil added to the problems of airlines in the early years of the twenty-first century (see Boxed Case One). Business had already slumped because of terrorism, the Iraq war and the Severe Acute Respiratory Syndrome (SARS) virus which resulted in a number of airline bankruptcies worldwide and government intervention and financial aid 21 Tourism Crises: Causes, Consequences and Management Boxed Case One: Rising Airline Fuel Costs When fuel costs spiraled at the beginning of the current decade, certain airlines were in a stronger position than others. This partly depended on the extent of hedging, which is a term used to describe buying fuel in advance at a set rate. The practice does, however, carry the risk of prices falling below those agreed on. European companies appeared to be better protected than others and also gained from the weakness of the US dollar, in which oil is traded, against the euro. British Airways had hedged 45% of its fuel needs for 2004 at US$28.50 a barrel and Lufthansa had covered 89% of its requirements for 2004 and 35% for 2005. Delta and Continental in the USA were reported not to have hedged for 2005; American Airlines had hedged 15% for the first quarter of 2005, reduced to 5% thereafter. The limited activity in the USA was attributed to a belief that excessively high oil prices would eventually drop, credit ratings which discouraged the purchase of oil on the futures market and a need for cash which had led to the disbanding of former hedging arrangements. The exception was Southwest, which had hedged 85% of its demands for 2005 at US$26.00 a barrel and a proportion in subsequent years up to 2009 as part of a long-term cost control strategy. In response to the crisis, several companies started to hedge again and some waited in anticipation of a price fall while all tried to cut costs. A common reaction was the introduction of fuel surcharges which was supported by IATA and price hikes. Nevertheless, these surcharges could not apply to advance bookings and over capacity and intense rivalry among American carriers made it difficult for them to increase fares significantly compared to their European counterparts, although undercutting by budget carriers was a concern in the latter case. There were additional concerns about effects on demand. Sources: Airwise News, 2005; Daniel, 2005; USA Today, 2004. to prevent further collapses (BBC News, 2004). Oil, trading at US$30 a barrel at the start of 2004, reached US$50 in September with the Organization of Petroleum Export Countries (OPEC) talking about the possibility of US$80 by 2007. The International Air Transport Association (IATA) anticipated that these prices would lead to an overall loss of US$7.4 billion in 2005 as fuel bills doubled from 2003, “robbing the industry of a return to profitability” (IATA, 2005b). Volatile oil prices seem set to continue, but the civil aviation industry appears to have learned lessons from recent experiences about the necessity of planning ahead and taking action to reduce exposure to escalating charges. These charges cannot always be passed on to customers in their entirety for fear of compounding the original crisis by alienating passengers and depressing demand. IATA also launched 22 Economic Tourism Crises a “fuel action campaign” to help member airlines by promoting greater efficiency in fuel usage, a reduction in taxes and lower hedging costs (IATA, 2005a). Tourism’s Economic Impacts The potential economic gains from tourism are widely recognized and a powerful rationale underlying growth strategies in many countries at differing stages of development. However, there are also negative economic outcomes (Dwyer et al., 2004; Mathieson and Wall, 1996; UNEP, 2002) which may precipitate crisis or play a part in its emergence. Major problems are outlined below and are particularly acute in the less-developed world, where several states may be looking to tourism to diversify their export base and earn hard currency, yet are not always able to secure these goals and are vulnerable to the hazards of over-dependence. While income is generated by tourism, the public sector also has to spend in order to develop and support the industry. National and sub-national governments have responsibilities for the building and running of the necessary infrastructure, including communications and utilities such as water and power. They may also be providers of amenities like museums and parks and owners, or part owners, of transport companies. There are other less obvious areas of expenditure. Frechtling (1994, p. 395) identified life quality and fiscal costs borne by communities and officials which are depicted in Table 2.2. Such environmental damage must be factored into Table 2.2: Life quality and fiscal costs of tourism Life quality costs Fiscal costs Traffic congestion Highway construction, police services, public transportation, port and terminal facilities Police services, justice system Fire protection Water supply and sewage treatment Police services, public transportation Solid waste disposal, police services Police services, zoning Police services, park and recreation facilities, forestry maintenance, fish and game regulation Park and recreation facilities, police services Maintenance of museums and historic sites, police services Hospital and other health maintenance facilities, food service regulation Police services, justice system Crime Fire emergencies Water pollution Air pollution Litter Noise pollution Destruction of wildlife Destruction of scenic beauty Destruction of social/cultural heritage Disease Vehicular accidents Source: Frechtling, 1994. Reproduced with permission from the publishers, John Wiley & Sons, Inc. 23 Tourism Crises: Causes, Consequences and Management any analysis which attempts to calculate the overall value of tourism for destinations (Tisdell, 2001). There will be additional spending on administration, planning and marketing and authorities may offer an assortment of subsidies and rebates to developers and operators in a bid to win projects and investment. In some situations, host communities appear to be subsidizing tourism and this could provoke hostility which is aggravated when tourist demand inflates prices for goods and services. Land and property may become more expensive and perhaps exceed the reach of the local population. Outsiders from second home owners to foreign hotel developers are thus privileged at the expense of residents and these issues can be a matter of political contention, any disputes interfering with the functioning and prospects of the tourism industry. As tourism grows so do the costs and more money leaves the economy to pay for imported equipment, materials, and goods as well as interest on loans. Design, consulting and management fees of external agencies may have to be paid and not all profits and salaries will be retained. Leakages are heaviest in smaller economies and the magnitude of multipliers too depends on the size of the economy, resources, access to supplies, diversity, import substitution possibilities, local skills and labor availability. When these aspects are unfavorable, multipliers may be extremely low and caution should be exercised about the priority allocated to tourism. There are also opportunity costs associated with tourism when it draws capital, land and labor away from other sectors. Traditional economic structures may thereby be weakened and social welfare projects deprived of funding, provoking criticism of tourism. In less-developed countries, indigenous businesses may not possess the capital requirements for entry into parts of the tourism industry so that there is a reliance on foreign direct investment and multinational enterprises. These companies are often based in tourist generating countries and in a position to exercise considerable control. Such economic relationships can erode the authority of local decision makers and the profitability of the private sector, leaving residents feeling excluded and alienated. Enclave tourism typifies these tensions with its self-contained resorts designed so that guests do not have to leave the compound, restricting their contribution to the surrounding formal and informal economies. These economic impacts can incite animosity which has the potential to erupt into crisis, especially if reinforced by social and political grievances. Tourism employment is another controversial matter and its merits have been questioned due to work which is largely low skilled and poorly paid. Other limitations relate to unsociable hours, seasonality and seasonal unemployment, inflows of migrant labor and workforce displacement. Nationals in less-developed countries also are likely to occupy menial posts while expatriates are found in management positions; this also means the drain of their salaries being remitted home. Strikes over pay are rare among hotels, especially in the Third World, but there was an example in Cambodia in 2004 (see Boxed Case Two). In another unusual case, three aggrieved employees set fire to a hotel in San Juan, Puerto Rico, on New Year’s Eve 1986, killing 98, to protest against their low wages and working conditions. Inequalities of income between tourists and those who serve them are symptomatic 24 Economic Tourism Crises Boxed Case Two: Striking Over Pay An international hotel management company included two luxury properties in Cambodia among its portfolio. Staff from both hotels first went on strike at the end of 2003 and industrial action continued into 2004 in a dispute over the 10% service charge levied on customer bills. Workers wanted to receive the money thus collected directly whereas the hotel management preferred distributing it indirectly through set monthly allowances and meals and training. Cambodian law required that employees receive the service charge, but did not specify in what manner and the issue had become a cause of disagreement between local unions and foreign hotels in particular. Two judges ruled the strikes illegal in April and the company sacked about 300 personnel who were participating. However, other judges found in favor of the workers and an Arbitration Council later advised that those who had been dismissed should be re-employed. There were demands for a boycott from the Cambodian Tourism and Services Workers Federation (CTSWF) which was supported by international unions and labor agencies. Protestors, sometimes as many as 200, gathered regularly outside the hotels and a loss of business was reported. For example, the US Embassy changed its plans to hold a July 4 reception at one hotel and the other was closed for much of April. Press articles commented on the extent of poverty in a country where 45% of the population existed on US$1 per day with government estimating that a family needed an average monthly income of US$300 and US$200 in order to live comfortably in the capital and other areas, respectively. Average monthly salaries at the hotels were said to be US$160 and US$210, but the CTSWF argued that some staff were paid only US$1 or US$2 daily. Guest rates for a double room ranged from US$176 to US$276 in 2004. A representative of the company claimed its actions were legal and that “we just need to step out and walk the streets to be reminded what wonderful employment it is to work in a hotel.” A settlement was reached between the company and CTSWF in September 2004 when it was agreed that 60% of those sacked would be reinstated and receive 75% of their salaries for the previous six months. Others had found alternative employment, but would get redundancy pay. The agreement was to last one year and the service charge question had still to be resolved by the Labor Ministry. Sources: Asian Labour News, 2004; Associated Press, 2004; Dow Jones, 2004; Far Eastern Economic Review, 2004; New Frontiers, 2004. 25 Tourism Crises: Causes, Consequences and Management of the gulf which can separate visitors and residents, disparities which may lead to crises of a socio-economic nature if inappropriately managed. Addressing the Problem of Adverse Economic Impacts Tourism can make a positive difference to economies of contrasting size and character, but there are also constraints which destination authorities need to acknowledge. Plus, it may not be the best solution to economic problems or the most suitable vehicle for general development. A heavy reliance on tourism could lead to economic weaknesses, so an effort must be made to integrate it into a wider economic program which incorporates diversification. These imperatives are more pressing in less-developed countries which are striving to overcome what is often a relationship of dependency on wealthy tourist markets (Harrison, 2001). There are, however, signs of movement in the direction of achieving more equitable relations between Third World governments and the international tourism industry. Some of the former now insist that hotel companies from overseas purchase a specific amount of materials locally, hire a proportion of local labor, train a number of these employees for management positions, contribute to an improved infrastructure and donate to natural and cultural heritage conservation schemes (Kusluvan and Karamustafa, 2001). Such undertakings may be a prerequisite to gain approval to do business, but organizations should be prepared to take these actions voluntarily and exercise corporate social responsibility which incorporates a “triple bottom line” of environmental, social and economic returns (Zadek, 2002). The efficacy of tourism taxation remains debatable. It can be both a factor underlying crisis and a possible remedy. The WTTC has campaigned against fiscal measures that harm the competitiveness of the industry, calling for participation by the private sector in tax policy formation. Nevertheless, there is support for the principle that those who enjoy a product or service should pay for it (Lipman, 1997). A similar argument can be applied to meeting the expense of environmental pollution and other damage caused by tourism, acceptance of these obligations by tourists and the tourism industry providing useful funding and helping to avert local opposition to tourism. The industry can also seek to communicate the many economic advantages of tourism to communities, interest groups and politicians; this is especially important in circumstances in which development might be fiercely resisted. Adopting such a measure and the others noted above could assist in the amelioration of some of tourism’s negative economic outcomes, frustrating the evolution of crises connected to the costs of tourism and criticism of these costs. Summary and Conclusions Participation in tourism and public and private sector activity is closely related to prevailing economic circumstances in countries which generate and receive 26 Economic Tourism Crises visitors. Economic growth stimulates demand and new investment, but its absence may result in crises for outbound and inbound industries. Tourism development can itself harm economies, especially those of less-developed nations, and such repercussions may trigger crises. External economic structures and processes are beyond the control of the tourism industry which can only react to changes which occur, although some can be anticipated and planned for. In comparison, appropriate measures can help to minimize economic disruption due to tourism and thereby lessen the intensity of related crises or avoid those which might otherwise evolve. Case One: The Japanese Outbound Market in the 1990s Japan saw substantial growth in overseas travel after government restrictions were relaxed in the 1960s. International outbound travelers increased from approximately 2.5 million in 1975 to just under five million in 1985, over 10 million in 1990, and 16.7 million in 1996. The main factors accounting for this strong upward trend were greater prosperity, more leisure time, and the availability of package tours. Expenditure also rose at a corresponding rate to produce what has been described as one of the most spectacular success stories of the modern tourist era, the volume of Japanese tourists and their high per capita spend attracting the attention of many destination marketers. The onset of recession and a decline in value of the yen started to have an impact by the middle of the 1990s, and over 40% of respondents cited costs as a barrier to international travel in a 1995 Japan Travel Bureau survey. As the Asian financial crisis unfolded, the Japanese economy deteriorated further with problems in the banking sector, fluctuating stock exchange prices and unemployment. Tourism figures, already showing much slower growth, responded by entering a decline for the first time in 20 years. Numbers fell from 16.8 million in 1997 to 15.8 million in 1998 and travel agency bankruptcies rose by about 40%. An official of the All Nippon Travel Agents Association described the industry as a casualty of the economic situation, with the emergence of a new type of budget traveler who was looking for value for money and likely to travel independently rather than in the traditionally organized tour group. Japan did, however, manage to retain its third position in the list of the world’s top 40 tourism spenders in 1997, even though expenditure had shrunk by over 10% compared to 1996. Nevertheless, the yen lost a third of its value in US dollar terms between 1995 and 1997. These trends were of concern to many centers which were heavily reliant on Japanese tourists such as Hawaii where they comprised two-thirds of the eastbound visitors on which tourism, and the economy as a whole, depended. Japan’s faltering economy and stagnation in demand caused a revision of forecasts and reassessment of the segment’s significance, prompting diversification with regard to new markets and products. The Bank of Hawaii recommended stressing the state’s function as a 27 Tourism Crises: Causes, Consequences and Management center for business and conferences, exploiting its location and access to other Asian Pacific and Latin American markets. Sources: Bank of Hawaii, 2003; JNTO, 1999; JTB, 1999. Case Two: The Asian Financial Crisis The Asian financial crisis was centered on South East Asia and had its origins in a combination of factors which included structural economic weaknesses, inappropriate government policies and global liquidity problems. Difficulties started in Thailand, which devalued its currency in the middle of 1997 and asked for help from the International Monetary Fund, and quickly spread to neighboring countries. Currencies declined sharply, Indonesia’s losing 70% of its value against the US dollar with a figure of 40% in the case of Malaysia and Thailand. There was also intense speculation on stock markets and recessions ensued. The stronger economies of Hong Kong, Singapore, South Korea and Taiwan were not spared and there was a general erosion of confidence. Many investors in the region decided to withdraw funds and postponed planned investment or channeled it elsewhere. Excessive economic volatility was followed by mounting unemployment, rising prices and business failures. Such conditions were accompanied by social disturbances and some political unrest, notably in Indonesia, and all of these developments had consequences for tourism. Unprecedented exchange rates were attractive to some long-haul visitors from countries unaffected by the economic turmoil, but travel within the region declined sharply. Asian Pacific countries as a whole recorded a fall in arrivals and spending from within and outside the region by the end of 1997. There were exceptions to the trend; Thailand and South Korea, for example, reported an expansion in volume. Nevertheless, income generated was disappointing when converted into US dollars. The spending power and confidence of Asian consumers, who traditionally account for about 75% of the region’s tourists, had been badly hit by the crisis which depressed their demand for travel. The slight growth seen in European and North American arrivals in some destinations was unable to offset the contraction of the regional market. Economic uncertainty inhibited tourism investment and planning by both public and private sectors. Financial constraints delayed existing and new projects, some of which were abandoned. There were doubts about the survival of some businesses and a number of hotels chose to charge in US dollars so that guests were denied the advantages of lower prices due to weak currencies. Events attracted widespread media coverage around the world and several stories were devoted to the social and political tensions associated with economic collapse. Such material served to communicate negative images and a sense of risk. There was a common pattern of response to the crisis by tourism industries and authorities, although circumstances did differ from country to country. Emphasis 28 Economic Tourism Crises was given particularly to increased domestic and international promotion. Attempts were made at innovation in pursuit of a more diversified product offering and wider market. However, National Tourism Organizations (NTOs) found that the purchasing power of their budgets was substantially reduced outside Asia and therefore explored possibilities of partnerships and greater private sponsorship. The fi nancial allocation of marketers was cut in some cases and they had to cope with this alongside rationalization of air services due to declining passenger traffic, higher accommodation costs and a heavier taxation burden on tourists. There had been some discussion at the height of the financial crisis about whether it was the beginning of the disintegration of the world economy due to a contagion effect, but such dire forecasts were not realized. Conditions were more ordered by mid-1998 and economies were expanding again by 1999. Most of the tourist destinations which had been hit were also returning to normality and actually drawing more international arrivals than they had been prior to the onset of the crisis. Nevertheless, tourism was revealed to be very vulnerable to economic change and its full recovery was also dependent upon economic improvement. Confidence in the region as a whole had been badly shaken and the crisis had a lingering impact. Sources: de Sausmarez, 2003; Henderson, 1999a, 1999b and 1999c; Muqbil, 1998; Prideaux, 1999; Roubino, 2002; WTO, 1999. Concept Definitions 䊏 䊏 䊏 䊏 䊏 Economic tourism crisis: A crisis for the tourism industry which arises from economic changes within the tourism system or wider economy. Tourism economic impacts: The consequences of tourism for a destination economy. Over-dependence: A situation in which destinations are economically reliant on the tourism industry. Tourism taxation: Taxes levied on individual tourists and the tourism industry which can be both general charges and those specific to tourism. Leakages: Money flowing out of a destination economy in assorted forms in order to develop and maintain inbound tourism. Review Questions 1. 2. 3. 4. How might demand for tourism be adversely affected by economic movements? Why might economic conditions in destination countries result in tourism crises? Which economic impacts of tourism could result in a crisis for the industry? Can the industry exercise any control over crises which owe their origins to developments in the wider economy? 29 Tourism Crises: Causes, Consequences and Management 5. What steps can destination authorities take to reduce the likelihood of a crisis related to tourism’s damaging economic consequences? 6. In what ways was the slowdown in Japanese outbound travel a potential crisis for some tourist destinations? 7. What does the Asian financial crisis reveal about the relationship between economics and tourism? Additional Readings Dwyer, L., Forsyth, P., and Spurr, R. (2004). Evaluating tourism’s economic effects: New and old approaches. Tourism Management, 25, 307–317. Muqbil, I. (1998). The fall-out from the Asian economic crises. Travel and Tourism Analyst, 6, 78–95. UNEP. (2002). Economic impacts of tourism. UNEP website at http://www.uneptie. org, accessed 11 March 2005. References Airwise News. (2005). European airlines review hedging as oil prices rise. Airwise News website at http://news.airwise.com, accessed 28 March 2005. Asian Labour News. (2004). Cambodia: Staff woes at Raffles hotels in Cambodia drag on. Asian Labour News website at http://www.asianlabour.org, accessed 18 March 2005. Associated Press. (2004, 17 August). Hotel workers in Cambodia jobless over claim to tips. Associated Press Newswires. Bank of Hawaii. (2003). Hawaii Annual Economic Report. Bank of Hawaii website at http://www.boh.com, accessed 23 March 2005. BBC News. (2002a, 10 January). Tourist gripes in Italy. BBC News website at http:// www.bbc.co.uk, accessed 15 March 2005. BBC News. (2002b, 11 January). Unwitting victims of crisis. BBC News website at http://www.bbc.co.uk, accessed 15 March 2005. BBC News. (2004, 7 June). Oil prices to hit airline profits. BBC News website at http:// newsvote.bbc.co.uk, accessed 28 March 2005. Bull, A. (1998). The economics of travel and tourism. Melbourne: Addison Wesley Longman. Christie, I.T. and Crompton, D.E. (2001). Tourism in Africa. World Bank Working Paper. New York: World Bank. Daniel, C. (2005, 25 March). From Financial Times. Economist Intelligence Unit Executive Briefing. EIU Client Access website at http://db.eiu.com, accessed 28 March 2005. Davidson, R. and Cope, B. (2003). Business travel. London: Pearson. de Sausmarez, N. (2003). Malaysia’s response to the Asian fi nancial crisis: Implications for tourism and sectoral crisis management. Journal of Travel and Tourism Marketing, 15(4), 217–231. 30 Economic Tourism Crises Dow Jones. (2004, 7 May). Raffles Cambodia staff OK deal. Dow Jones Newswires. Dwyer, L., Forsyth, P., and Spurr, R. (2004). Evaluating tourism’s economic effects: New and old approaches. Tourism Management, 25, 307–317. Euromonitor. (2004). Travel and tourism in Brazil. London: Euromonitor. Far Eastern Economic Review. (2004, 8 July). Raffles Cambodia campaign bites. Frechtling, D.C. (1994). Assessing the impacts of travel and tourism: Measuring economic costs. In J.R. Brent Ritchie (Ed.), Travel, tourism and hospitality research: A handbook for managers and researchers (pp. 393–402). New York: Wiley. Harrison, D. (Ed.). (2001). Tourism and the less developed world: Issues and cases. New York: CABI. Henderson, J.C. (1999a). Southeast Asian tourism and the fi nancial crisis: Indonesia and Thailand compared. Current Issues in Tourism, 2(4), 294–303. Henderson, J.C. (1999b). The Asian financial crisis and tourism. Insights, 7(January), A99–A105. Henderson, J.C. (1999c). Tourism management and the Southeast Asian economic and environmental crisis: A Singapore perspective. Managing Leisure, 4, 107–120. Holloway, C. (1998). The business of tourism. London: Longman. IATA. (2005a). Fuel action campaign. International Air Transport Association Information sheet. IATA website at http://www.iata.org/pressroom, accessed 1 December 2005. IATA. (2005b, 12 September). US$7.4 billion losses for global aviation in 2005. International Air Transport Association Press release, 26. IATA website at http://www. iata.org/pressroom, accessed 1 December 2005. JNTO. (1999). Statistics. Japan National Tourism Organization. JNTO website at www.jnto.go.jp, accessed 23 July 1999. JTB. (1999). All about Japanese overseas travelers. Tokyo: Japan Travel Bureau. Kusluvan, G. and Karamustafa, K. (2001). Multinational hotel development in developing countries. International Journal of Tourism Research, 3, 179–197. Lipman, G.H. (1997). Rethinking travel and tourism tax policy. WTTC’s Travel & Tourism Tax Barometer, 4, 8–16. Lundberg, D.E., Krishnamoorthy, M., and Stavenga, M.H. (1995). Tourism economics. New York: Wiley. Marvel, M. and Johnson, C. (1997). A crisis of currency or creativity? Problems and prospects for the Swiss hotel industry. International Journal of Hospitality Management, 16(3), 279–288. Mathieson, A. and Wall, G. (1996). Tourism: Economic, physical and social impacts. London: Longman. Muqbil, I. (1998). The fall-out from the Asian economic crises. Travel and Tourism Analyst, 6, 78–95. Murphy, P. (1985). Tourism: A community approach. New York and London: Methuen. New Frontiers. (2004). Raffles Hotel gives in to workers. New Frontiers, 10(5), 5. Okumus, F., Altinay, M., and Arasli, H. (2005). The impact of Turkey’s economic crisis of February 2001 on the tourism industry in Northern Cyprus. Tourism Management, 26, 95–104. 31 Tourism Crises: Causes, Consequences and Management Prideaux, B. (1999). Tourism perspectives on the Asian financial crisis. Current Issues in Tourism, 2(4), 279–293. Roubino, N. (2002). Global macroeconomic and fi nancial policy site: The Asian crisis. http://pages.stern.nyu.edu/~nroubini/asia, accessed 7 November 2002. Tisdell, C.A. (Ed.). (2001). Tourism economics, the environment and development: Analysis and policy. Northampton, MA: Edward Elgar. UNEP. (2002). Economic impacts of tourism. United Nations Economic Programme. UNEP website at http://www.uneptie.org, accessed 11 March 2005. USA Today. (2004, 10 December). Airlines hike fares, brace for turbulence as oil prices soar USA Today website at http://www.usatoday.com, accessed 28 March 2005. WTO. (1999). Impacts of the financial crisis on Asia’s tourism sector. Madrid: World Tourism Organization. WTTC. (2002). World travel and tourism tax barometer. London: World Travel and Tourism Council. Zadek, S. (2002). Third generation corporate citizenship. AccountAbility website at www.accountability.org.uk, accessed 2 August 2005. Zhang, G., Pine, R., and Hanqin, Q.Z. (2000). China’s international tourism development: Present and future. International Journal of Contemporary Hospitality Management, 12(5), 282–290. 32 3 Political Tourism Crises Learning Objectives By the end of the chapter, the reader should be able to 䊏 䊏 䊏 䊏 Appreciate the close relationship between politics and tourism. Understand how political cultures, conditions and developments affect tourism and can be a source of crises for the industry. Recognize different types of political instability, their consequences and significance as causes of crises. Identify and evaluate tools for dealing with politically inspired tourism crises. Introduction This chapter is concerned with the political domain of tourism crises and begins with a brief summary of selected aspects of the relationship between politics and tourism, including the role of government in tourism policy making. These aspects have implications for tourism crises as governments may be authors of crises in addition to key actors in their management and resolution. Forms of political instability are then identified and their capacity to precipitate tourism crises is discussed, using a variety of illustrations from around the world. Possible responses to difficult circumstances are finally reviewed, but the industry is shown to have little control over adverse political forces. Case studies at the end of the chapter describe political circumstances in Myanmar/ Burma, which have led to calls for a tourism boycott, and Yemen where tourist safety has been threatened by challenges to government authority. The differing situations represent tourism crises initiated by politics which have industry-wide repercussions. 33 Tourism Crises: Causes, Consequences and Management Politics, Governments and Tourism The study of tourism, and tourism crises, cannot be divorced from that of politics and tourism itself is an issue of political debate and contention (Cheong and Miller, 2000). Tourism movements and the operation of the industry at home and abroad are shaped by government structures and processes at national and international levels. Nearly all governments around the world have some interest in tourism and participate in various ways. Decision making and policy making by official agencies and the drafting and enforcement of laws and regulations can affect tourism, which in turn impinges on the institutions of the state (Hall, 1994). NTOs are usually given specific responsibility for tourism matters and financed by central government, although often having a degree of independence from it, and engage in marketing and development activities. Other formal agencies such as those dealing with customs and immigration and transport infrastructure contribute to the administration of tourism and affect the functioning of the industry. Subnational tiers of government also participate in policy making and the allocation of resources and can be very influential in larger countries with a federal style of government. Politicians and civil servants are thus important in determining approaches to tourism, whether it merits special attention and assistance, amounts of public funding allocated, the nature of any public-private or international partnership arrangements and growth targets. Such deliberations about tourism are usually framed within the context of broader policies and wider objectives, especially related to economics. These incorporate a commitment to economic growth and prosperity, a healthy balance of payments surplus, maximization of foreign exchange earnings and foreign direct investment, employment generation and regional development which extends to rural areas. Obligations regarding the welfare of nationals at home and overseas, the protection of consumers, the conservation and preservation of natural and cultural heritage and the construction and communication of favorable national images also involve governments in tourism directly and indirectly. They may also be suppliers of attractions, transport and assorted amenities and services which are used by tourists. International relations and foreign policy, sometimes leading to the imposition of barriers to travel, are further determinants of tourist volumes and flows. Developments have implications for the way nationals perceive other countries and their residents, with consequences for destination choice. The specific stance adopted by governments and the steps they undertake are an outcome of overall political circumstances, the power of the state and the ways in which this power is distributed and the socio-cultural environment (Hall and Jenkins, 1995). Stages of tourism and general development are also of relevance regarding the priority given to the former and its place in political systems and agendas. The result is that contrasts are discernible within and between developed and lessdeveloped countries in terms of how tourism interests and responsibilities are defined, interpreted and exercised. The subject tends to have greater prominence in 34 Political Tourism Crises the Third World, where the potential benefits of international tourism are likely to be more keenly appreciated and urgently required. While differences do exist, tourism’s economic rewards appeal to most governments whatever their current circumstances or geographical location (Go and Jenkins, 1997; Williams and Shaw, 1998). There is a common view that tourism is an industry to be taken seriously and one that can be a vehicle for economic development and diversification. It also serves useful purposes in other arenas such as nation building, representations assisting in the articulation of national and cultural identities which is of particular value for young nations of mixed ethnicity. Tourism can thus be exploited politically and employed in reinforcing government authority and demonstrating its legitimacy to the world (Richter, 1994). Growth is therefore highly desirable, although there is an appreciation of the importance of sustainable tourism development. This is frequently made reference to in official statements, yet cynics may question the extent of meaningful commitment to the concept and its implementation. Political dynamics as a whole act to encourage or discourage tourism, with a distinction to be made between the domestic and international theaters. Domestic politics impacts on destination attributes and attractiveness and industry operations, as well as on demand for travel. National policies inform global happenings and good relations between countries facilitate tourist flows. The reverse applies and international tensions tend to depress or redirect travel. Such relationships and widespread interest mean that governments have an essential part to play in the management of tourism crises and are sometimes a primary or secondary cause of their evolution. Political Ideologies and Tourism Politics are partly a consequence of prevailing ideologies and more liberal democratic political philosophies might be seen as best suited to tourism because they favor the unimpeded circulation of people, goods and capital and place stress on individual freedoms. However, such models are not critical to the popularity of tourist destinations and totalitarianism may be compatible with success (Hall and Oehlers, 2000). One noteworthy example is Spain, the coastline of which became the holiday playground for large numbers of Europeans during the 1960s when mass inbound tourism boomed under the dictatorship of General Franco. At the same time, there have been regimes reliant on force and lacking democratic credentials which have found it difficult to promote their territories as international tourism centers. The clash between disturbing political realities and enticing destination images is illustrated by Myanmar/Burma, where visitor arrivals have been severely damaged by the attitudes and actions of its military rulers. Opponents of the government have championed a boycott of tourism, leading to a crisis of its politicization encompassing practical and ethical dilemmas for the tourism industry and tourists to settle (see Case One). Nevertheless, their distinctive political ideology and mode of operation are not discouraging the authorities in Myanmar/Burma from pursuing tourism growth. 35 Tourism Crises: Causes, Consequences and Management They seem to be motivated by a combination of economic and political factors which have been exhibited by other authoritarian states of the right and left. In what is now an historic illustration, with the exception of North Korea, communist bloc countries of Europe and Asia were reluctant to expose their citizens to subversive values and behavior epitomized by outbound tourists from Western markets. However, there was an awareness of possible gains from tourism and a willingness to allow controlled entry and regulated internal movement. Most tourists had to travel in parties under the strict supervision of a local guide and follow a set route, minimizing contacts with the local population which were carefully managed. The visitor experience became an exercise in political propaganda, often unconvincing, designed to showcase governments and their achievements. Political reforms around the world have since led to a relaxation of such restrictions, but there are still concerns among some governments about the capacity of forms of modern tourism to undermine orthodox beliefs and ways of life. This is evident in parts of the Muslim world, although attitudes are changing even there with a growing appreciation of the advantages of tourism in diversifying oildependent economies. Overt and covert anti-Western feeling, commonly directed against Americans, is another powerful political sentiment in many Islamic and other communities. Muslim travelers to non-Muslim destinations may also confront suspicion and hostility with which the industry and individuals have to contend. These conflicts have a socio-cultural dimension which is explored more fully in a later chapter, but they echo political disputes and can result in tourists becoming objects of verbal abuse and physical violence. Political Instability and Tourism Crises Political philosophies and practices in destination and generating countries therefore have repercussions for tourism and can engender crises, especially when instability is generated. A regime can be defined as stable when it is “durable, violence and turmoil are limited and the leaders stay in office for several years” (Wilson, 1996, p. 25). By contrast, instability implies constant and unpredictable change and disruption to the established political order, including by external parties which use illegitimate tactics (Poirier, 1997). Media reports and popular conceptions of such instability are key determinants of decisions made by travelers, the industry and investors who generally show an aversion to risk. Relatively peaceful locations where there are few perceived threats to personal safety and security and least commercial uncertainty are preferred by all parties. Political instability has numerous manifestations and six types of “international wars, civil wars, coups, terrorism, riots and political and social unrest, and strikes” have been proposed (Hall and O’Sullivan, 1996, p. 109). A more detailed list of 28 instances is reproduced below and further indicates the range of political events to which tourism is vulnerable (Seddighi et al., 2001, p. 185). Corruption co…



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