PESTEL analysis of the tourism industry
This detailed ‘PESTEL analysis of the tourism industry’ aims to examine some of the macro factors that may have influences on the tourism industry in a number of countries and regions particularly, the USA, the UK, the EU, China, India, Canada, and Australia. The global travel and tourism industry is absolutely enormous. Indeed, it contributed 2.9 trillion U.S. dollars in 2019 to the global GDP (Lock, 2020).
Political factors that may have influences on the tourism industry
Tourism is greatly influenced by the political will and policies of the governments around the world. For instance, free movement of people has been greatly beneficial for the tourism industry in the European Union. Likewise, Canadian citizens usually do not need a visa to enter the USA directly from Canada for the purposes of studying or visiting. This is also beneficial for both country’s tourism industries.
Many countries have bilateral trade relations which allow their citizens to travel to each other’s territories without a visa. Likewise, many countries have special arrangements for Chinese visitors who have a good reputation for high spending.
No doubt that political instability and disputes between countries badly impact on the travel and tourism industry. For instance, many people are cautious about visiting some of the popular destinations in the Middle East. Likewise, how Brexit impacts on British citizens traveling to the EU countries in the future is yet to be seen.
Economic factors that may have influences on the tourism industry
Tourism is one of the biggest and fastest growing industries in many countries. It contributed around $580.7 billion to the U.S. GDP, 35.37 billion Canadian dollars to the Canadian GDP, and 47.5 billion Australian dollars to the Australian GDP in 2019.
British tourism industry is expected to be worth around £257 billion by 2025 (VisitBritain, 2021). Many other countries are also expected to see their tourism industries growing up with a great speed by 2025. Many people who were previously unable to afford to go on holidays be in country or abroad, are now financially able to do so. Demands for cruising, hiking, skiing, and many other types of tourism products and services are on the rise in many countries.
2020 was an abosolutely dismal year for tourism industry. With planes grounded and hotels closed, this industry witnessed a massive drop in demand. However, many governments have already taken a variety of initiatives to attract foreign tourists to their countries.
Social factors that may have influences on the tourism industry
Examining some of the social factors is the next stage in the PESTEL analysis of the tourism industry. Tourism has achieved a great social standing over the years, and therefore, many people now-a-days go on holidays who may have otherwise stayed back. It has indeed become a very important yearly ritual for many people, particularly the young generation.
Though racial tension still exists in many societies, people are generally friendly towards tourists. This has positively impacted on the number of people travelling around the world. Likewise, many people love different cultures, languages, religions, and traditions and go abroad to experience them.
However, mass tourism has social consequences as well. Surely, tourism can benefit from local economies; however, it can also damage the residents’ day-to-day lives, culture and heritage (Hunt, 2018). Many European cities have witnessed protests by local residents against mass tourism.
Diamond (2017) reports that many cities and attractions such as Venice and Rome (Italy), Dubrovnik (Croatia), Reykjavik (Iceland), Cozumel (Mexico), Barcelona (Spain), New York, Machu Picchu (Peru), Santorini (Greece), Prague (Czech Republic), Big Major Cay Island (Bahamas), Amsterdam (The Netherlands), and Cuba have faced so many problems with tourists (particularly, anti-social behaviour) that some of them introduced caps on how many people can visit the place per day.
Technological factors that may have influences on the tourism industry
Technology has played a significant role in the development of tourism industry around the world. Development of commercial airlines and improved infrastructure have brought the globe to the next door of the tourists. Tourists are now using technology to book their tickets and hotels. Likewise, almost all travel and tourism companies use social media and some of them use both traditional and social media to reach out to their customers.
However, technology has driven out many small tourism businesses out of the market. For instance, many travel agents have disappeared altogether as travellers purchase airline tickets online. Likewise, many people share their frustration and bad experience on social media that may damage a brand’s reputation badly.
Environmental factors that may have influences on the tourism industry
In 2018, the total number of tourists arrived in France was 89.4 million, and 82.77 million in Spain. 79.62 million arrived in the USA, while 62.9 million in China. Italy received 62.15 million, while the UK received 36.32 million. Other countries that received above 38 million to up to 46 million visitors were Turkey, Mexico, Germany, and Thailand (Statista, 2020).
The figures above are fantastic for each country for the standpoint of business; however, influx of such a great number of people in a year has affected the environment of the host countries as well. Many local areas have experienced anti-social behaviour from visitors. Other major environmental challenges caused by mass tourism are damages to the ecosystem, congestion, pollution, increase in carbon emissions, and increase in the amount of waste and sewage.
Legal factors that may have influences on the tourism industry
Flexible tourist visa systems certainly increase the number of people visiting a particular country. However, advanced nations usually have stricter visa systems that are applied for people from poor and developing countries.
Tourists need to be aware of the local laws and restrictions. For instance, some activities and practices allowed and exercised in Europe and other western nations, may not be allowed in some countries in the Middle East, South East Asia, and Africa.
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Last update: 13 February 2021
Diamond, M. (2017) 13 places around the world that are being ruined by tourists, available at: https://www.businessinsider.com/cities-hurt-by-tourism-2017-12? (accessed 01 Jnuary 2021)
Hunt, E. (2018) Residents in tourism hotspots have had enough. So what’s the answer? Available at: https://www.theguardian.com/cities/2018/jul/17/residents-in-tourism-hotspots-have-had-enough-so-whats-the-answer (accessed 10 February 2021)
Lock, S. (2020) Global tourism industry – statistics & facts, available at: https://www.statista.com/topics/962/global-tourism/ (accessed 11 February 2021)
Statista (2020) Countries with the largest number of international tourist arrivals in 2018, available at: https://www.statista.com/statistics/261726/countries-ranked-by-number-of-international-tourist-arrivals/ (accessed 12 February 2021)
VisitBritain (2021) Britain’s visitor economy facts, available at: https://www.visitbritain.org/visitor-economy-facts (accessed 10 February 2021)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.