Government impact on tourism
The government regulates the tourism sector directly through the Ministry of Tourism or National Tourism Organizations (NTOs), as well as indirectly through legal leverage, support for its infrastructure and international policy. The state influences tourism in two ways: by managing demand and income, or by managing supply and prices.
The government uses the following tools to manage demand: marketing and promotion, pricing and restricting access.
The marketing toolkit is detailed in Chapter V. Here we just note that to conduct effective marketing, you need to have a clear goal setting, knowledge of the market and tourism products.
Tourism promotion activities are an integral part of government marketing and aim to awaken demand from potential customers. According to the WTO recommendations, these measures should be aimed at creating a high-quality image of the country based on its attractive symbolic characteristics. There are different ways to create a high-quality image of the country - these are meetings of specialists with journalists invited to the country, business trips of domestic specialists abroad, television and radio performances, free distribution of brochures, slides and video materials, as well as participation in various exhibitions and fairs, for which they purchase stand. Since the number of organizations involved in tourism promotion activities is large, coordination of activities, which is usually carried out by representative offices of government organizations abroad, plays an important role.
Funds allocated from the budget for activities to promote the country's tourist image may exceed half of the budget of state organizations, and most of the budget goes to finance public relations (from one thirds to two thirds).
The effectiveness of promotional activities can be increased through international cooperation agreements between tourism ministries or organizations responsible for tourism. The purpose of these actions is to exchange or combine promotional efforts (distribution of posters, audio and visual materials, sharing of representative offices, etc.).
There are various means by which the state can regulate the prices of tourism products. First, many of the country's attractions are under the influence of the public sector, most airlines are government-controlled, and in many developing countries even hotels are government-owned. As a rule, social infrastructure and transport networks are considered natural monopolies, and if they are not owned by the state, they should at least be controlled by it. Indirectly, the state can influence the price with the help of economic levers (for example, using currency controls, which can lead to restrictions on currency exchange, as a result of which tourists will be forced to change currency at an inflated price and thereby increase the real price of travel); through sales taxes, store openings in customs zones, etc.
The state, in addition to the above levers, can influence demand through licensing or grading according to the quality of service. This measure is especially common in the hospitality industry when the number of rooms on offer exceeds demand and the government cannot correct this imbalance through price regulation. Price regulation is a very unpopular measure in the market economy, which the governments of some countries still go for in order to deter domestic companies from the temptation to obtain momentary benefits at the expense of the long-term interests of the country's tourism business. In addition, by controlling prices, the government can protect the interests of tourists, insulate them from overspending and, thus, maintain the country's reputation.
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