Tourism is one of the fastest growing industries in the world. Besides its sustained growth the tourism industry has shown in the first years of the twenty first century that it can deal with political, military and natural disasters. The present paper accrisis, international tourism, travel

Akosz Ozan

Bac Dorin

English

Research Papers in Economics

29 
 
EXOGENOUS CHALLENGES FOR THE TOURISM INDUSTRY IN THE BEGINNING 
OF THE TWENTY FIRST CENTURY 
 
Bac Dorin 
University  Of  Oradea,  Faculty  of  Economics  1st  Universitatii  St.  Oradea,  county  of  Bihor, 
Romania dbac@uoradea.ro 0040 745 911 884 
Aksoz Ozan  
Anadolu  University  School  of  Tourism  and  Hotel  Management  Yunusemre  Kampusü,  26470 
Eski ehir, Turkey ozana@anadolu.edu.tr 90 (222) 335 0580 / 2120 
 
Tourism is one of the fastest growing industries in the world. Besides its sustained growth the tourism 
industry has shown in the first years of the twenty first century that it can deal with political, military and 
natural disasters. The present paper accounts some of the most important exogenous challenges that have 
hit  the  industry  in  different  regions  of  the  world.  We  have  tried  to  present  these  challenges  in  a 
chronological order, not according to their importance.  
 
Key words: crisis, international tourism, travel 
 
The article’s JEL code: L83, L93,  
 
Introduction  
In  the  second  part  of  the  twentieth  century  international  tourist  arrivals  increased from  25.3 
millions in 1950 to approximately 700 million in 2000, and expenditure from $ 2.1 billions to 300 
billion
1. There is a wide range of factors which can influence the demand for tourism. These 
factors are normally to be found within the tourist-generating countries. However, there are also 
pull  factors  which  are  often  based  on  tourism  attractiveness  and  are  determined  within  the 
tourism-receiving country. In this paper we consider the factors which can influence and direct 
demand. These factors are not necessarily discrete and for the purpose of exemplification certain 
arbitrary distinctions are made. The exogenous factors that we will take into consideration in this 
paper are: 
- the terrorist attacks of September 11 
- wars in Afghanistan and Iraq 
- the SARS outbreak 
- the tsunami in South East Asia 
- the present financial crisis.       
 
1. September 11 – the blow to the travel industry 
The events on September 11
th 2001 might be the most devastating and future-shaping tragedy in 
the 21
st century. Thousands of people died and the overwhelming majority of casualties were 
civilians, including nationals of over 90 different countries. Although some authors argue that 
September  11  appeared  to  have  provided  Washington  with  the  green  light  to  stop  asking 
countries if they wanted the U.S. version of "free trade and democracy" and to start imposing it 
with Shock and Awe military force
2, we still have to accept the major implications on the politics 
and economy at a global level. 
The year 2001 was the first in almost two decades in which international tourism suffered a 
negative growth of 0.6 per cent which was due to the impacts of the September 11
th terrorist 
attacks in the USA. 
                                                       
1  Smith,  V.,  Eadington,  W.,  Tourism  Alternatives,  potentials  and  alternatives  in  the  development  of  tourism, 
University of Pennsylvania Press , Philadelphia, 1992, p.3 
2 Klein, N. The Shock Doctrine, Picador Publishing, USA, 2007, p.9. 30 
 
From the tourism industry’s perspective, the airline segment has been most affected and high-end 
hotels, restaurants, car rental agencies have also seen a marked drop in patronage, for the most 
part due to the reduction of  business travel. Planned, package travel has also been hard hit. 
Motorcoach  tours,  and  other  forms  of  large  group  travel,  have  experienced  a  high  rate  of 
cancellation. The cruise industry has responded by taking ships to the passengers by opening new 
ports so passengers do not have to fly.
3 (p 303) 
Because of mass-media coverage, the September 11 attacks hit the tourism industry in London in 
2001, accounting for 10 percent and 11 percent drop in visitors and spending, respectively, in 
comparison with the previous year. The loss in tourism business of the city was estimated at 
around US$1.8 billion, and full recovery is not expected in the short term.
4 
However, a few discount airlines and start-up carriers ultimately discovered a new formula for 
success. The new kids on the block have managed not only to survive but to grow and achieve 
greater profitability than the high cost major airlines. In the United States, Southwest, Jet Blue, 
Air Tran, ATA, and a couple of other lowcost, low-fare airlines will soon account for about 40 
percent of market share. Their growth has been a greater contributor to the huge losses and 
bankruptcy filings of major airlines early in the twenty-first century than the terrorist attacks on 
the New York, or the economic downturn that began in the late 1990s and continued into late 
2003.  Almost  every  segment  of  the  travel  industry  throughout  the  world  now  feels  strong 
pressure to reduce costs in order to remain competitive in a fast changing world.
5 
We  can  consider  this  one  event  with  global  consequences  and  thus,  the  travel  and  tourism 
industry was also affected.  
 
2. The military conflicts in Afghanistan and Iraq 
The  war  on  terror  has  been  characterized  as  the  greatest  security  challenge  in  the  new 
millennium.
6 It started in Afghanistan in 2001 and the stated purpose of the invasion was to 
capture Osama bin Laden, destroy al-Qaeda, and remove the Taliban regime which had provided 
support and safe harbor to al-Qaeda. Two years later, in 2003, the war in Iraq began. The reasons 
for  the  invasion  stated  by  U.S.  officials included  Iraq's  financial  support  for the  families  of 
Palestinian suicide bombers, Iraqi government human rights abuses, and an effort on the part of 
the coalition forces to spread democracy in the country and region. 
Of course these conflicts had influenced the world economy in general and tourism in particular. 
In 2002 and 2003 international tourism has been shadowed by the combination of an overall 
weak economy and a high level of uncertainty because of the struggle against terrorism and the 
looming Iraq and Afghanistan conflicts. The global economic downturn following the boom and 
bubble of the late nineties put pressure on expenditure resulting in an increased price sensitivity 
in general and cost cutting on business travel in particular (less and cheaper). The terrorist attacks 
of 11 September 2001 added a huge amount of uncertainty to this already difficult climate. The 
subsequent war on terrorism and the tension resulting from the threat of an intervention in Iraq 
prolonged this uncertainty even more. For tourism these abrupt changes of conditions resulted not 
so much in a decrease in overall volume but, above all, shifts in demand towards trips to familiar 
destinations  closer  to  home  by  car,  coach  or  train  instead  of  plane.  Consumers  adopted  a 
wait-and-see  attitude,  with  late  bookings  as  a  result.  Many  sectors  went  and  are  still  going 
through a difficult time, in particular airlines and all sectors dependent on long-haul traffic.
7  
                                                       
3 Taylor, G., Chesworth, N., Travel styles, Global Tourism (edited by Theobald W. ), Elsevier, USA, 2005, p.303. 
4 Aktas, G., Gunlu, E., Crisis management in tourism destinations, Global Tourism (edited by Theobald W. ), Elsevier, 
USA, 2005, p.451. 
5 Plog, S., Targeting segments: more important than ever in the travel industry, Global Tourism (edited by Theobald 
W. ), Elsevier, USA, 2005, p.273. 
6 Miller, R., Funding extended conflicts, Praeger Publishing, USA, 2007, p.69. 
7 World Tourism Barometer vol.1, no.1 June 2003 31 
 
Other products or segments of the market, however, have resisted well or even benefited, such as 
accommodation other than hotel (apartments, country houses, etc), special interest trips with a 
high  motivation  factor  related  to  culture,  sports,  entertainment,  or  travel  for  the  purpose  of 
visiting family, friends and relatives. 
These conflicts had a major influence for the Middle East tourism. In the Middle East tourism 
continues  to  be  one  of  the  most  dynamic  economic  sectors.  The  permanent  development  of 
tourism infrastructures, the support and investment of most governments in tourism, the low-cost 
airline  phenomenon  and  the  increasing  cooperation  regarding  border  facilities  among  the 
countries in the region, along with some difficulties in important generating markets, such as 
Saudi Arabia, in obtaining visas to the USA and Europe, are all reinforcing intraregional as well 
as domestic traffic. 
 
3. SARS – Asia in trouble 
In 2002, Asia was hit by another challenge – the outbreak of SARS (Severe Acute Respiratory 
Syndrome). 
SARS clearly dominated the results of tourism in Asia and the Pacific in 2003. After a positive 
beginning for most countries in January and February, the following months brought decreases of 
over 50%. Although recovery generally came quick, most of the major destinations of the region 
in North-East and South-East Asia have not been or will not be able to return to end the year with 
positive figures. 
The countries that show the highest decreases over the first eight months of the year are Malaysia 
(-31%), Guam (-29%), Taiwan (-28%, 7 months), Singapore (-28%) and Indonesia (-21%, 7 
months).
8 
International institutions estimated that in 2003: in Vietnam 15% of industry GDP and 62,000 
industry jobs will be lost; in Singapore, 43% of industry GDP and 17,500 industry jobs will be 
lost;  in  Hong  Kong,  41%  of  industry  GDP  will  be  lost,  as  well  as  27,000  industry  jobs, 
representing 38% of total industry jobs in Hong Kong. In China, 25 per cent of the industry GDP 
will be lost and a total of 2.8 million industry jobs, or one fifth of total industry employment.
9 
 
4. Tsunami over South East Asia 
The 2004 Indian Ocean earthquake was an undersea megathrust earthquake that occurred on 
December 26, 2004, with an epicentre off the west coast of Sumatra, Indonesia. The world was 
shocked by the sad news and images of the seaquake and following tsunami in the Indian  
Ocean affecting the northern provinces of the Indonesian island of Sumatra, the Maldives, the 
eastern  coast  of  Sri  Lanka  and  India,  the  Andaman  and  Nicobar  islands,  the  west  coast  of 
Thailand, and to a lesser extent Malaysia, Myanmar, Bangladesh, Somalia, Tanzania, Kenya and 
Seychelles. More recent analysis compiled by the United Nations lists a total of 229,866 people 
lost, including 186,983 dead and 42,883 missing.  
The  incident  happened  when  finally  the  South-Asian  destination  were  having  a  prosperous 
period. Sri Lanka, India, Bangladesh and Maldives all posted double digits.
10 Its greatest impact 
in tourism terms was on Thailand. In 2004, there were 11.68 million visitors to Thailand, just 
missing  the  12  million target  because  of  the  tsunami  in  the  last  week  of  the  year.  Tourism 
accounted for 6.4 per cent of the country’s US $164 billion economy in 2004. The tsunami killed 
more than 5400 people in Thailand, half of them tourists. Although the direct impacts in terms of 
                                                       
8 World Tourism Barometer, volume 1. no.2, October 2003, p.7. 
9  http://www.wttc.org/eng/Tourism_News/Press_Releases/Press_Releases_2003/Impact_of_SARS/  last  access  3rd 
May 2009 
10 World Tourism Barometer, volume 2. no.1, January 2004, p.7. 32 
 
destruction of coastal infrastructure were substantial, the greatest effects were with respect to the 
image of the destination in terms of safety in area affected by the tsunami.
11 
 
5. The present financial crisis 
Around the world stock markets have fallen, large financial institutions have collapsed or been 
bought out, and governments in even the wealthiest nations have had to come up with rescue 
packages to bail out their financial systems. Globally, many people are concerned that those 
responsible for the financial problems, for example banks, are the ones being bailed out, while on 
the other hand, a global financial meltdown will affect the livelihoods of almost everyone in an 
increasingly inter-connected world. 
International tourism registered solid growth in the first half of 2008  at around 5% between 
January and April, compared to the same period of 2007. 
The slowdown began with the summer holidays in the northern hemisphere. The panel of experts 
of the UNWTO World Tourism Barometer
12, which up until then maintained favorable views of 
the  sector's  situation,  now  shows  a  perceptible  loss  of  confidence  regarding  the  short-term 
outlook.  
Early  in  2008,  signs  of  en  economic  downturn  emerged.  In  considering  these  matters,  the 
members  the  UNWTO  Executive  Council  confirmed  the  deterioration  in  their  own  markets, 
while maintaining the long-term confidence in the resilience of the tourism sector. The challenge 
lies ahead for late 2008 and the first half of 2009, when the economic slowdown is expected to be 
more widely felt and consumers might decide to cut back further on their travel expenditures.  
 
Conclusions  
One of the most significant observations of flows of international tourists is that there is a great 
deal of year-to-year stability in aggregate travel patterns. This situation has long been recognized. 
Nevertheless, identifying causal factors remains useful.
13 
Also we can conclude that all the above mentioned events have taken their toll on the tourism 
industry. But as we have seen, tourism is expected to continue to grow. The total of international 
arrivals has grown from 682 millions in 2000 to 924 million in 2008, and we can notice that 
because of the globalization of tourism different regions were able to sustain the industry while 
countries were hit by different challenges. However, the nature of this growth and development 
will in many ways be quite different from that of the previous five decades. As has become 
abundantly  clear  over  the  past  several  years,  the  period  of  the  2000s  proved  itself  to  be 
dramatically different from that of the previous three decades. As a global community we are 
living through widespread changes whose scope and significance are barely perceptible at this 
point in time. 
Still, the industry has to take care of the endogenous challenges also. The issue of ethics has 
become increasingly important in both commercial and social life. Ethics refers to the codes by 
which human behaviour is guided – how people respond to each other, how they travel, how 
business is done. “In travel and tourism, ethics is concerned with how tourism is managed at the 
level of both the industry and the individual tourist”.
14 
 
Refrences: 
1. Aktas, G., Gunlu, E., Crisis management in tourism destinations, Global Tourism (edited by 
Theobald W. ), Elsevier, USA, 2005 
                                                       
11 Cooper, C., Hall, M., Contemporary tourism – an international approach, Butterworth – Heinemann, USA, 2008, p 
.55 
12 World Tourism Barometer, volume 7. no.1, January 2009, p.1-2. 
13 Cooper, C., Hall, M., Contemporary tourism – an international approach, Butterworth – Heinemann, USA, p .58 
14 Sharpley, R., Travel and tourism, Sage Publications, London, 2006  p.155 33 
 
2. Barrows, C., Powers, T., Introduction to the hospitality industry, John Wiley and Sons, New 
Jersey, 2009 
3.  Cooper,  C.,  Hall,  M.,  Contemporary  tourism  –  an  international  approach,  Butterworth  – 
Heinemann, USA, 2008 
4. Glaesser, D., Crisis management in the tourism industry, Butterworth – Heinemann, USA, 
2003 
5. Klein, N. The Shock Doctrine, Picador Publishing, USA, 2007 
6. Lickorish, L., Jenkins, C., An introduction to tourism, Butterworth – Heinemann, USA, 1997 
7. Miller, R., Funding extended conflicts, Praeger Publishing, USA, 2007 
8. Plog, S., Targeting segments: more important than ever in the travel industry, Global Tourism 
(edited by Theobald W. ), Elsevier, USA, 2005 
9. Sharpley, R., Travel and tourism, Sage Publications, London, 2006 
10.  Smith,  V.,  Eadington,  W.,  Tourism  Alternatives,  potentials  and  alternatives  in  the 
development of tourism, University of Pennsylvania Press , Philadelphia, 1992 
11. Taylor, G., Chesworth, N., Travel styles, Global Tourism (edited by Theobald W. ), Elsevier, 
USA, 2005 
12. Tribe, J., The economics of recreation, leisure and tourism, Elsevier, USA, 2004 
13. World Tourism Barometer, volume 1, no.1, June 2003 
14. World Tourism Barometer, volume 1. no.2, October 2003 
15. World Tourism Barometer, volume 2. no.1, January 2004 
16. World Tourism Barometer, volume 7. no.1, January 2009 
17. http://www.wttc.org 
   

EXOGENOUS CHALLENGES FOR THE TOURISM INDUSTRY IN THE BEGINNING OF THE TWENTY FIRST CENTURY

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EXOGENOUS CHALLENGES FOR THE TOURISM INDUSTRY IN THE BEGINNING OF THE TWENTY FIRST CENTURY

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