Preston Jones

Dr. Gabriela Rios

English Composition II
11 June 2014
In todays economy international exchange has grown to be more
important and more accessible than ever before seen in history. The
following six sources will answer the following question: How do exchange
rates effect international travel and tourism? The first source sets the
foundation and verifies the vitality of exchange rate in tourism demand,
arguing for its inclusion in the Tourism Demand Equation. (Why does it
matter-explain how international exchange makes the world better)

De Vita, Glauco, and Khine S. Kyaw. "Role Of The Exchange Rate In
Tourism Demand." Annals of Tourism Research. Vol. 43. N.p.: Elsevier,
2013. 624-27. Oxford Brookes University, UK, Cardiff School of
Management, UK. Web. 11 June 2014. <http://ac.els-
cdn.com/S0160738313001084/1-s2.0-S0160738313001084-main.pdf?
_tid=e7452fe8- f17f-11e3-8b28-
00000aacb361&acdnat=1402501919_7329808e1444e4a4189fb3350e92d5
c2>.
In economists Glauco De Vita and Khine Kyaw's 'Annals of In economists Glauco De Vita and Khine Kyaw's 'Annals of
Tourism Research; Role of Exchange Rate in Tourism Demand,' they argue Tourism Research; Role of Exchange Rate in Tourism Demand,' they argue
the urgency to include the variable of exchange rate (ER) in the Tourism the urgency to include the variable of exchange rate (ER) in the Tourism
Demand Equation. Introducing the logic that a nation with devalued Demand Equation. Introducing the logic that a nation with devalued
currency attracts a heavier flow of tourism, they argue to the international currency attracts a heavier flow of tourism, they argue to the international
community of economists " community of economists "that international tourists, being more aware of
ERs than prices (living costs) in the destination country, take the ER level
as the best proxy for the cost of their destination decision (Martin & Witt,
1988)" From this statement, they ask if ER is to be included in the Tourism
Demand Equation, how exactly should it be done? The relationship
between perspective and real monetary exchange is put under speculation
by analyzing the records of tourism from Germany to Turkey, compared
from year to year between 1996 and 2009, accounting for inflation,
exchange rate, consumer price index (CPI) and income (GDP). The data
collected about each nations economies were used in the equations to
compare the equations prediction of the tourism demand with the actual
tourism that was measured in those years. What they found is that the
current equation used for tourism demand is not accurate with real
measurements in the field. However, they also found that the deviations
made, combining ER and Inflation, didn't concur with the evidence either,
but was still closer than the original equation was. They conclude that the
evidence from this research provides data for "previously untested
propositions that should be of value in guiding future research."
I find this research to be very helpful in answering my question
because it displays the importance of exchange rate in the determination of
where an individual decides to travel. De Vita and Kyaw make a claim that
is seen in the real world, but unaccounted for in economic theory and
equation. I agree that the exchange rates are important numbers in the
predictions of tourism and traveling; this implies that a majority of tourists
find exchange rate really important when making plans to travel. The
question posed by these two researchers lies on an underlying argument:
that exchange rate is a determining factor in international travel. I know
many that don't travel like they would like to simply because of the costs.
When people struggle to afford living expenses at home, the thought of
paying more for less in another country warps the idea of vacation and
deters many from traveling to specific regions of the world or even
anywhere at all. Thus, exchange rate has a large impact on the flow of
Tourism demand. This is one answer to the question of how exchange
rates play a role in tourism and travel.
Jarosz, Andy. "Foreign exchange rates: should they influence our travel
plans?." 501Places. WordPress, n.d. Web. 11 June 2014.
<http://www.501places.com/2011/07/foreign-exchange-rates-should-
they-influence-our-travel-plans/>.
Found on 501Places.com, Andy Jarosz, a freelance travel
writer from England, writes a piece asking if exchange rates should
influence an individuals travel plans. He discusses how he will be
exchanging his "hard earned pounds for yen" in a month when he goes to
Japan. He points out that four years prior, he could have exchanged the
money and received more than double the yen he will receive this time due
to the increased strength of the Japanese currency in correlation with the
weakening of his pound. He states how the pound in its prime "could buy
US $2, 1.6 Euros, or 2.5 Swiss Francs. A little further back in 2001 we
changed our pounds for 2.8 Australian dollars, while at 3.5 NZ$ to the
pound we didnt need to watch our budget too closely in New Zealand."
Everyone wants to save money and get the most they can for their money,
but Jarosz argues that people shouldn't let the exchange rates dictate
where and when they can take vacations. He makes the argument that the
rates are created as a result of many factors and events; that nobody can
predict the future. Therefore, he argues, that if one waits for the exchange
rates to lean more in their favor, its possible that it never will and could
likely even lean less in their favor. In his exact words: "We might look at
visiting Australia now and see that a pint of beer is now more than 5 a
pint, double its price only a few years back, while a modest hotel room that
was under 30 is now a whopping 60. Should we put Australia off for a
couple of years to let the prices come back to a more sensible level? Or do
we go now before beer reaches 10 and a motel on the outskirts of
Melbourne costs the same as a London 5 star hotel?" He concludes
claiming that many make vacation decisions based on something "not
country specific (usually sun, sea and sand)". In this situation he admits
that exchange rates are great for helping to determine a destination,
however for those "dream trips" to specific locations, he believes one
shouldn't wait around for a better time because it might never come.
I agree and understand the logic that Jarosz presents in this article.
His argument is valid, however I don't believe it is the mindset that most
people have. Jarosz would concur on the fact that otherwise his argument
isn't an argument at all. Most people think with more focus on the present
situation than anything else, and if they think about the future possibilities,
the current situation is more likely to encourage optimism for the future,
discouraging them from a mindset like Jarosz'. While this article
discourages the idea of predicting the flow of tourism this man supports the
idea that exchange rate directs tourism and travel, and even with his
proposed way of thinking, the effects are just as powerful, only opposite
because the bad exchange rates give a since of urgency to those with a
bucket list of places to see. With this said, the effect of exchange rates for
'marvels of the world' are polar from that of any average getaway.
Ruggia, James. "Will Good Exchange Rate Affect Travel?" Travel Agent 13
June 2005: 12. EBSCO Host. Web. 11 June 2014.
<http://web.a.ebscohost.com.ezproxy.net.ucf.edu/ehost/pdfviewer/pdf
viewer?sid=4a893e44-9a4a-4a8c-8566-5472ec1cb0ac
%40sessionmgr4005&vid=4&hid=4209>.
On June 13, 2005, Travel Agent magazine published an article by
James Ruggia titled "Will Good Exchange Rate Affect My Travel?" In this
piece, the travel writer, now Executive Editor for TravelPulse.com,
discusses his take on the role of exchange rates, which he observes in the
2005 economy. Ruggia introduces us to the exchange rate situation
between US dollar and euro. From here he makes the point that although
the rates have been in favor of the euro, "Americans had been going to
Europe in record numbers for the past two years." He continues with
support from Hank Phillips, National Tour Association president, who states
that "Americans going to Europe care about value, and they'll seek the best
prices. But if they're confident about their economic situation, they will
spend the money in Europe." Nigel Osborne, senior vice president of sales
and marketing for Auto Europe, agrees, saying that "American travelers are
not really currency watchers." extending from that to claim that the focus for
American travelers is on the press. This article goes on to argue that the
effect of the exchange rates, although a loss in purchasing power for
Americans, is a motivation for Americans to travel. He says this because he
is certain that the exchange rate situation is the power behind package
deals and bundled vacations. So in this situation, the bad exchange rate is
the reason for the creation of these 'savings packages' which sell really well
in America. Those who are more "confident consumers" don't pay much
regard to the altered purchasing power from the exchange, and those who
are more "cost-conscious" become the living demand for the pre-packaged
vacations.
Reading this article definitely altered on my view of the effects of
exchange rate. The basic effect of exchange rate, being that better
currency exchanges motivate more tourism towards that specific location,
in turn creates a new problem for those countries with an appreciated
currency: they now have to convince tourists that the loss of purchasing
power is worth the trip. How do they do this? Package deals. Plan the trip
for them. Combine plane tickets with hotel reservations, shuttle service,
admittance to local attractions, etc. Companies use the challenge to their
advantage and market their tourist attractions more and drop prices for
everything to better market to the international consumer. This is a very
interesting piece that I believe answers my question from an angle I didn't
think about until reading this.
British Tourist Authority. Employment generated by tourism in Britain.
British Tourist Authority. London, England: VisitBritain, 2003. 1-6.
Web. 11 June 2014. <http://www.visitbritain.org/Images/Employment
%20gatefold%20PDF_tcm29-15224.pdf>.
In this pamphlet for British Tourism, VisitBritain refers to research by
Caledonian Economics Ltd. to show the effects that economic variables
have on the tourism industry in Britain. The article is aimed to have a
complete understanding for specifically where the tourism industry benefits
and hurts the most, how revenue is effected and why certain things occur in
the fragile industry of tourism. When they analyze the effects of exchange
rate, they find that "visitors to Britain are highly price sensitive and that for
every 1% increase in the exchange rate, tourism revenue will decrease by
1.3%." This ratio is much more significant than I believe most would
accredit it. This is important to many in London because it directly effects a
large portion of jobs in the region.
Being from Orlando, Florida, I understand the presence that the
tourism industry can have in a local economy. The article doesn't really hold
an argument for importance. It doesn't fight for a way of thought. This
article blatantly analyzes the numbers for what they are and displays how
the tourism industry is being effected. It shows the direct impact that
exchange rate has with its revenue. I find this article to be a very helpful
piece in answering my question; the more purchasing power lost by the
tourist, the less revenue for the tourism. This is a very clear and sensible
answer that I believe holds great support for itself and from other articles as
well.
Allen, Katie. "Tourism takes a pounding as exchange rates deter
Americans." The Gaurdian 19 Aug. 2007: 1+. Web. 11 June 2014.
<http://www.theguardian.com/travel/2007/aug/20/useconomy>.
In "Tourism takes a pounding as exchange rates deter Americans",
The Gaurdian's global economics reporter Katie Allen discusses the
exchange rate between the US and Britain. At two US dollars per pound,
literally everything costs twice as much for an American touring Britain. She
argues that this terrible exchange for Americans is the reason for London's
fall in tourism, and "getting dropped off the list of the top 10 destinations for
American tourists." On the reverse side of things, she discusses how the
British have been taking advantage of their spending power in the U!
"Book"ing# holida$s in the %aribbean and shopping trips to destinations
such as &ew 'ork( pick"ing# up cheaper i)ods, designer handbags and
bargain*price clothes on the other side of the Atlantic." Allen reall$ gets
straight to the point on the fact that the e+change rates effects are
definitivel$ opposite to one another between the U and Britain.
,hen asking the effects of e+change rate on tourism, this article is
ver$ useful in understanding the consumers mindset from both sides of the
atlantic. -he distinct changes of the tourism in both nations is ver$ distinctl$
connected to the rates of currenc$ e+change and goes to show that the
comparativel$ weak U dollar results in an increase in sales. -his article
serves a great help to the understanding of the effects e+change rate has
on the individual and can also be used as support for an argument inferring
an increase in ./) relative to that nations weak currenc$ and the
converse.