Htt313 - Chapter 3

DEMAND AND SUPPLY
Tourism and transport has thus far been positioned as

somewhat co-dependent, but what remains to be considered
is how the relationships discussed, transfer to the actual use
of transport by tourists.
A number of elements or variables effectively govern the

extent to which modes of transport are selected, include:
i.
Family structure
ii. Social and behavioral considerations

iii. The total cost of the trip
FAMILY STRUCTURE:
The role of family structures (associate
with lifestyle variables) in the selection of
the destinations is paramount.
I.e.; The mode or type of transport use
by adults, adult with children, the
effect ageing populations, etc. Will give
impact on the choice of transportation.
SOCIAL AND BEHAVIOURAL

CONSIDERATIONS
The ability to undertake travel. e.g;
VFR travellers choose a particular mode of transport based
on economic reasons.
Visitors to national parks who tend to utilized their own
vehicle for transport purpose may be persuaded to use public
transport in order to keep pace with sustainable management
of the park system and to enhance the value of the
experience.
THE TOTAL COST OF THE TRIP

The selection of a mode of transport based on the availability of
the total trip budget.
Transport is one element within a series of variables that include

activities, accommodation and other expenditures.
Priduex
(2000) suggests that the demand for transport can be

expressed as follows:
E = (D, A, T)
Where:
E is the total holiday expenditure for destination
D is the discretionary income
A is the accommodation costs
T is the transport access costs
Time, cost, reliability, convenience and comfort

= dominant importance for modal choice.
3.1 DEMAND FOR TRANSPORT

Although
there are numerous variables involved, it is

possible to generate new models that illustrate the
relationship they have with transport demand.
Prideauxs
(2004) transport cost model (Figure 2.2) not

only outlines how expenditure on transport cost is affected
by the function of distance, but it also highlight how other
variables are also considered when selecting a destination.
Prideauxs model suggests:
AD: accomodation cost

DE: distcretionary spending
EC: transport access cost
Trade-offs become necessary as an individual

considers vacation destinations (H, G, F)
further away from their point of origin (A).
The important to consider is the maximum
personal holiday budget (CC) and the access
cost for each destination depending on the
mode of transport. i.e.; accessing destination
H using transport mode/type T is clearly
whithin budget.
Travel using mode T is within the budget.
Travel using T2 is not within personal holiday
budget.
As destination G is further away from the
point of oigin, the model suggests that the
cost of T and T modes of transport will be
higher.
Selecting G as the destination will still be
within budget, although note that selection
mode T for destination G will result in
maximizing the total amount of money for the
entire trip.
Few issues with respect to how this model can be operationalized

deserve consideration:
1.
What appears as fixed costs for both accommodation (AD) and

discretionary spending (DE) are, in reality, anything but fixed.
2.
The transport access cost for some destination does in fact

increase the further away from the point of origin one travel.
3.
The model treats transport as for tourist as opposed to as

tourism, and thus the blurry distinction between transport as
facilitator and transport as the attraction.
FACTORS RELATED TO TRANSPORT DEMAND, PROVISION

AND ASSESSMENT
Demand
Provision
Assessment
Demographic
conditions
Structure,
density/distribution/accessibility/connectivity, mobility.
Economic
structures
Resource planning, land use, eployment, other

sectors.
Trade relations
Structure/flows, markets and market access, controls,

regulations.
Political
structures
Planning, investment, regulations, partnerships.
Environmental
constraints
Management, conservation.
Finance
Cost/revenue, investment, regulation.
Technology
Cost, distribution.
Usage
Cost/behaviour, trends, modal split.
Scales
Local, national/regional, international, global.
Dimensions
Spatial, temporal, structural.
Influences
Development, land use, marketing.
Source: adapted from Hoyle and Knowles (1998)
The study on demand for particular goods may not be

entirely appropriate to be adopted into the study of demand
for tourist transport.
Price
Play a fundamental role in measuring or assessing demand,
yet when the mode of transport is also the attraction, i.e.;
Cruise experience, the price of the cruise is weighed up
against the other benefits and services on offer.
Costs
Price versus cost of the time:
i.e.; A business traveller deciding between taking the train or
taking a plane may include in his/her decision the cost of
parking or other forms of transport that are necessary.
i.e.; The cost of transport mode A is lower than mode B, the
amount of time spent travelling B may be less than A. Thus,
for some travellers the added cost may be a justifiable
expenses and thus select mode B.
Transport economist recognize that the cost of transport and

the time utilized in-transit are not the sole variables to
consider in demand for transport.
The
additional variables that have some bearing on the

demand for transport include:
The cost of transport to and from the modal transport point.
The amount of time necessary fro transport from a place of
residence or an office to the node (i.e. traffic congestion).
ELASTICITY OF DEMAND
Elasticity of demand (or price elasticity) refers to the degree
to which customers or users respond to shifts in prices.
Price elasticity =
% change in quantity
% Change in price
Understanding elasticity in relation to transport and tourism

is important for two reasons:
1.
It is not entirely clear in all cases whether the price of

transport in elation to tourism is elastic or inelastic.
2.
Where price is not a discriminating factor in either the

selection of a particular mode or type of transport, or
where competition exists to the point where the price
differentiation is negligible, the elasticity of the service
becomes important.
3.1 SUPPLY FOR TRANSPORT

The supply side of transportation in relation to tourism is
generally concerned with the ability of firms to provide
adequate levels of service to support nodes and affiliated
networks.
MACRO DETERMINANT PERSPECTIVE

Political environment and the role of the government
Bilateral agreements
Regulation/deregulation
Competitors
Perfect competition
Oligopoly
Monopoly
MICRO DETERMINANT PERSPECTIVE

Micro determinant can be said to focus on the transaction
levied between the transport provider and the
customer/user.
Product & service

Technology used
Form of distribution
Customer loyalty
3.3 FORECASTING THE DEMAND FOR

TOURIST TRANSPORT
Forecasting the demand for tourist transport is essential
for commercial operators.
Forecasting
is the process associated with an

assessment of future changes in the demand for tourist
transport.
Forecasting is not exact science.

It attempts to make estimations of future traffic potential
and a range of possible scenarios, which provide an

indication of likely scale of change in demand.
The principal methods of forecasting are:
The projection by extrapolation, of historic trends.

Extrapolation, subject to the application of weights or
variables.
Structured group discussion among panel of tourism
transport experts may be used to assess factors
determining future traffic forecast (Delphi Method).
Bull (1991) classifies the quantitative techniques for forecasting:

1.
2.
Time-series analysis of trends (i.e. seasonality in travel)

Economic theory models
The most common variables used for forecasting include:

1.
2.
3.
4.
Number of tourist trips

Total tourist expenditure and expenditure per capita
Market shares of tourism
The tourism sectors share of Gross Domestic Product.
Reliable forecast is vital for decision makers to try and ensure

adequate supply to meet demand, whilst avoiding oversupply,
since this can erode the profitability.
Forecasting is a technique used to suggest the future

pattern of demand and associated marketing activity.
The process associated with an assessment of future changes
in the demand.
Attempts to make estimation of future traffic potential and a
range of possible scenarios, which provide an indication of
likely change of demand.
THE END
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DEMAND AND SUPPLY

Tourism and transport has thus far been positioned as

A number of elements or variables effectively govern the

ii. Social and behavioral considerations

SOCIAL AND BEHAVIOURAL

THE TOTAL COST OF THE TRIP

Transport is one element within a series of variables that include

(2000) suggests that the demand for transport can be

Time, cost, reliability, convenience and comfort

3.1 DEMAND FOR TRANSPORT

there are numerous variables involved, it is

(2004) transport cost model (Figure 2.2) not

Prideauxs model suggests:

AD: accomodation cost

Trade-offs become necessary as an individual

Few issues with respect to how this model can be operationalized

What appears as fixed costs for both accommodation (AD) and

The transport access cost for some destination does in fact

The model treats transport as for tourist as opposed to as

FACTORS RELATED TO TRANSPORT DEMAND, PROVISION

Resource planning, land use, eployment, other

Structure/flows, markets and market access, controls,

Planning, investment, regulations, partnerships.

Cost/revenue, investment, regulation.

Cost/behaviour, trends, modal split.

Local, national/regional, international, global.

Spatial, temporal, structural.

Development, land use, marketing.

Source: adapted from Hoyle and Knowles (1998)

The study on demand for particular goods may not be

Transport economist recognize that the cost of transport and

additional variables that have some bearing on the

Understanding elasticity in relation to transport and tourism

It is not entirely clear in all cases whether the price of

Where price is not a discriminating factor in either the

3.1 SUPPLY FOR TRANSPORT

MACRO DETERMINANT PERSPECTIVE

MICRO DETERMINANT PERSPECTIVE

Product & service

3.3 FORECASTING THE DEMAND FOR

is the process associated with an

Forecasting is not exact science.

and a range of possible scenarios, which provide an

The principal methods of forecasting are:

The projection by extrapolation, of historic trends.

Bull (1991) classifies the quantitative techniques for forecasting:

Time-series analysis of trends (i.e. seasonality in travel)

The most common variables used for forecasting include:

Number of tourist trips

Reliable forecast is vital for decision makers to try and ensure

Forecasting is a technique used to suggest the future

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