ECON1318 SGS2 Group Report Paper Spain PDF

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Semester 3, 2021Title of Assignment Group reportName & Student IDs Dinh Nguyen Mai Phuong (s3777291)Pham Thi Thuy Linh (S3891605)Yanagisawa Akira (S3826378)Trinh Thi My An (s3810622)Nguyen Si Ke (s3695684)Nguyen Sinh Quan (S3891665)Location Sai Gon SouthLecturer Mr Charles Tengco-FajardoWord Cou...

Description

Semester

3, 2021

Title of Assignment Group report

Name & Student IDs

Dinh Nguyen Mai Phuong (s3777291) Pham Thi Thuy Linh (S3891605) Yanagisawa Akira (S3826378) Trinh Thi My An (s3810622) Nguyen Si Ke (s3695684) Nguyen Sinh Quan (S3891665)

Location

Sai Gon South

Lecturer

Mr Charles Tengco-Fajardo

Word Count

2725

A.Attractions:

1. Natural attraction. 1.1.Specific Demand Determinant: Demographic and Natural Condition. Tourist sites are created to meet the need to relax and explore famous lands. In Spain, the Cueva de Nerja cave and Teide national park are known for famous natural attractions, bringing many economic benefits for the national tourism industry. Natural factors play an important role in the determinants of tourism demand because they create a connection between people and nature, therefore they have attracted many tourists living in different regions, especially busy cities. In the past, the De Nerja cave welcomed about 450,000 visitors per year (Yolanda del Rosal 2014). The reason it attracts a large number of visitors is because this cave is composed of stalactites and is extremely artistically structured. Moreover, this place was once inhabited by ancient people, which displayed the tools of living as well as knowledge of life in the pre-technological era . This special feature is a key factor hitting the curiosity and wanting to discover visitors, especially history lovers who want to find the origin. In addition, Teide National Park was recognized as a UNESCO world heritage site in 2007, this title helps the national park become the national park that attracts the most tourists in the country, stimulating the main tourism demand of the whole country. Spain. In 2016 Teide accounted for 27% of travel network traffic, the most of all. Over 1996, the number of tourists reached more than 3 million people, up to now, it has increased by more than 36%, receiving an average of more than 9,000 visitors per day (Rosa Marina González and friends 2018). The reason why Teide owns this large number is because of its favorable geographical position, many beautiful sights and fresh air to bring both relaxation and discovery experiences to visitors. 1.2. Specific Supply Determinant: Health regulations The main factor determining the supply of the Spain host community is the permission to operate from the government, as well as important changes strongly influenced by the Covid-19 pandemic . If the epidemic situation is controlled favorably, the government will create opportunities for businesses to resume operations. In 2020, De Nerja is closed from June 23 to September due to the situation of Covid-19. After the closure, the Spanish government reopened this place but limited it to 120 visitors per hour instead of 360 visitors per hour before Coronavirus (nerjatoday 2020). This has more than halved the number of tourists visiting the cave, leading to many negative economic consequences 1.3.Equilibrium

De Nerja cave In theory, when supply is constrained due to the impact of Covid-19 and government health requirements, demand has decreased by a third so prices tend to decrease. In fact, precovid fare at the Cueva de Nerja caves was 14€ for adults and 6€ for children at Nerja (nerja-turismo). However, now the ticket price has dropped by 2€ (Jams, W 2020).

Teide national park In theory, when supply and demand are constrained, quantity should decrease and price should go up. In fact, the ticket price of Teide national park has increased to 4 euros (volcanoteide 2021).

2. Primary man-made structures 2.1.Specific demand determinant: Taste and Preferences and pandemic The fact that The Royal Palace of Madrid was a royal residence and is currently used for solemn events makes this palace attractive to visitors. Spain is a constitutional monarchy, meaning that the Royal Family is not the only ruler, but the Royal Family and the issues surrounding it still have its own appeal to the people of Spain and even countries that no longer have monarchies. Dr. Frank Farley, who is a professor and psychologist at Temple University and a former American Psychological Association president, said this was “parasocial behavior”. The Royal expresses the desire and curiosity about power, wealth and inheritance in each person's subconscious (Ducharme 2018). The numbers of visitors who come to the palace gradually increased before Covid-19, exceeding 1.5 million people for 3 consecutive years (López 2021). During Covid- 19, the palace was only used for ceremony for Covid-19 victims and health workers led by King Felipe VI (Reuters 2020). The number of museum visitors in Spain who preferred to visit the art museum over all other museums accounted for 47% according to the latest surveys in 2015 (López 2021). This led to the Guggenheim Bilbao Museum being one of the most loved museums with over 1.17 million visits in 2019 (Basque Country 2020). Although visitor numbers decreased by 73% in 2020 due to Covid-19, Guggenheim Museum Bilbao still ranked 73rd in the world's 100 most-visited art museums by The Art Newspaper (Sharpe et al. 2021).

2.2.Specific supply determinant: Health regulations During Covid-19, The Royal Palace of Madrid closed for visitors until June 2020. The palace set some health regulations when reopening, such as maintaining 2 meter distance between people and use of masks will be compulsory, and the capacity needs to be reduced (Patrimonio Nacional 2021). The Guggenheim Bilbao Museum also reduced capacity by restricting the number of people in elevators, bathrooms or on benches, no more than 400 people at any time in each space (Museums + Heritage 2020), but they remained open because they obtained certification AENOR COV-2020/0012 (Guggenheim Bilbao 2020). 2.3.Equilibrium Compare and contrast theory and reality

Royal Palace of Madrid. In theory, demand decreases and supply fall sharply will lead to price increases but quantity decreases. In reality, The ticket prices of Royal Palace of Madrid Post Covid-19 increased to about 2 € (Patrimonio Nacional 2021), compared with 2019. Market equilibrium diagram of Royal Palace of Madrid:

Guggenheim Bilbao Museum In theory, demand decreases and supply slightly increases will cause a fall in price and quantity. In reality, Guggenheim Bilbao museum decreased ticket prices and the members are free (Guggenheim Bilbao 2021). The visitor numbers decreased by 73% in 2020 (Sharpe et al. 2021), compared with 2019.

Market equilibrium diagram of Guggenheim Bilbao Museum:

3. Purpose-built attractions: This section will focus on two popular theme park locations that were mainly built to attract tourists in Spain, Portaventura World established in 1995 and Tibidabo Amusement Park opened in 1905. Furthermore, these places have been famous for a long time and still attract tourists. 3.1. Demand determinants: The number of the consumers in the market- International visitors The number of international tourists from the Pre-covid to the Covid period changed dramatically, causing a significant reduction in purpose-built sites. Based on Figure 1 and Figure 2, arrivals have plummeted through 2021 compared to 2019. Moreover, 83.7 million arrivals were recorded in 2019, because of the severity of covid has plummeted to around 49.6% tourists (Schengenvisainfo 2021). Therefore, the reduction in tourist arrivals to Spain is also part of the economic downturn.

Figure 1: Number of international tourist arrivals to Spain from 2018 to May 2021 (Statista)

Figure 2: Number of tourists stay in Spain from 2019 to 2021 (Statista) 3.2. Supply determinants: The External factor- The limit of social contact Because of the impact of the covid pandemic, the number of tourists visiting tourist sites in Spain has also decreased significantly. Specifically, the increasing number of covid cases until October 2021 (figure 3) has not yet seen the number of covid cases has a state of remission, leading to increasing social disparities and also affecting tourist destinations. serious. Moreover, the two locations Portaventura World and Tibidabo Amusement Park before the pandemic were still operating normally and bustling. Since closing for a year due to the impact of the covid epidemic, the two above-mentioned tourist destinations have reopened and Portaventura World has invested more than 5 million euros in safety measures throughout the area to combat the spread of the virus due to covid (ACN 2021).

Figure 3: Number of Covid cases in Spain from 2020 to 2021 3. Equilibrium: Theoretically, equilibrium should economically balance supply and demand, but when demand falls sharply relative to supply, the balance will shift, and supply outstrips, so prices fall to new levels to be able to stay in the current state. new equilibrium. In fact, Portaventura World offers discounts when purchasing packages, and fares are reduced from €64 to €58 to accommodate customer demand (Portaventuraworld n.d). For Tibidabo Amusement Park, the old price remains unchanged after the covid period.

B. Accommodations 1. Specific demand determinants In Spain, roughly 15 percent of domestic visitors and 60 percent of international arrivals preferred a hotel for their stay (Brida, Esteban, Risso & Devesa 2010). From 2020, strict bans on the global movement led to a drop in international tourists. As such, the number of guests decreased by 70 percent. Also, the total nights spent on the premises fell by nearly 75 percent (Eurostat Statistics Explained 2021). The annual rate of the hotel bed occupancy decreased by half to 34 percent, with August 2019 recording the highest value at around 45 percent. The Spanish regions where the occupancy rate got 50 percent were the Canary Islands (Mariz-Pérez, Rodríguez-Carro & Abeal-Vázquez 2021 May). In 2020, the number of tourists at Spanish accommodation establishments decreased to nearly 2.97 million, down from 8.92 million indicated in the same period of the previous year. (Figure 2.1) (Statista n.d.). Interestingly, the month of April saw no arrivals as the government implemented the lockdown restrictions and hotels fully closed their business(Harchandani & Shome 2021). As the restrictions were removed after, the number of monthly tourists in their premises increased to nearly 6.6 million in July 2020.

Figure 1.The number of monthly visitors staying in Spanish accommodation from August 2018 to July 2020 (in millions) 2. Specific supply determinants Spain has been one of the top global tourist attractions, which led to an evolution of the hotel industry before the coronavirus outbreak (Rodríguez-Antón, & Alonso-Almeida 2020). As of January, 2020, there were 12,600 businesses with more than 17,000 hotel establishments in Spain (González-Torres, Rodríguez-Sánchez & Pelechano-Barahona 2021). Meanwhile, holidaymakers in Spain aged 16 and over have to pay for the Sustainable Tourist Tax (Goodwin 2017). Barcelona, as one of Europe’s tourist attraction, records the highest fee up to 3.5 euros per person per day, from January 2021 (Table 1) (Carrera-Hueso, ÁlvarezArroyo, Poquet-Jornet, Vázquez-Ferreiro, Martínez-Gonzalbez, El-Qutob, Ramón-Barrios, Martínez-Martínez, Poveda-Andrés, and Crespo-Palomo 2021). Table 1. Tourist tax in Spain, by type of accommodation Type of establishment

Barcelona

Rest of Catalonia

5-star, luxury hotels or campsite

€3.50

€3

4-star, 4-star superior hotels

€1.70

€1.20

Tourist use housing

€2.25

€1

Camping, apartments, villas, others

€1

€0.60

Cruise ships (more than 12 hours)

€3

€3

Cruise ships (12 hours or less)

€1

€1

2020 was a challenging year for enterprises in hospitality. The average number of hotels running their business fell by 35 percent, to 10 thousand, the lowest in decades (MorenoLuna, Robina-Ramírez, Sánchez & Castro-Serrano 2021). Major Spanish hotel chains are Meliá Hotels International, Barceló Hotel Group, Iberostar Hotels & Resorts, NH Hotel Group, and Eurostars Hotel Company, with the highest supply of rooms (Brida, Driha, Ramón-Rodriguez & Such-Devesa 2016). The construction cost associated with Spanish hotels projects are uniform throughout Europe because the hotel industry in most European nations 3. Equilibrium: Comparing Theory & Reality

Price

Dpre-COVID19 DCOVID19

SCOVID19 SpreCOVID19

Ppre-COVID19 PCOVID1 9

QCOVID19 Qpre-

Quantity

In theory, a fall in demand and a decrease in supply will result in a drop in the equilibrium COVID19 quantity and price. In reality, during the Covid-19 pandemic, the significant fall in demand affects the business operations of the hotel industry. As a result, numerous hotels and accommodation services were forced to close, and rooms offered deals to bring back the customers.

C. Transportation 1.Specific demand determinants: Cleanliness standards Before the pandemic of the covid, service quality was one of the most important elements of the airline industry. According to Han et al.(2020), passengers tend to choose airlines based on their experiences which are their past flights and their satisfaction of it. However, this standard is replaced by the Covid. “More stringent cleanliness standards have become a key feature of air-lines’ operations.” (Amankwah-Amoah, Joseph. 2021, pp3) Moreover, Covid requires services even before the travel to keep passengers safe. Iberia, spanish airline, PCR discount program to the travellers. (quironprevencion, 2021) Spain has strict restrictions for entering the country. Spain Visa announced that only Europe nationals and residents, and only 19 countries are permitted to enter Spain. (Spain Visa, 2021) Also, passengers who are over 12 years old are required to have a Negative covid antigen or NAAT test, Vaccination Certificate, and Covid recovery certificate. Moreover, air travel is an elastic demand. For these reasons, the demand for traveling in Spain has decreased by air. 2.Specific supply determinants: Regulations because of the Covid The Eurocontrol, European Organization for the Safety of Air Navigation, shows that Spain lost 1.5 million flights from March 2020 to June 2021. Moreover, the number of current flight average has also declined 54% from 2019 which is before the pandemic (Eurocontrol, 2021). These numbers show that the amounts of flights have decreased from pre covid. Iberia, the largest Spanish airline, is looking at three ways to address long term revenue shortfalls and fixed costs: reducing costs, improving liquidity and new source of funding. To mitigate the impact of reduced demand, they reduced supplier spending by delaying aircraft rental payment. (Sánchez-Prieto, 2020) As explained above, the number of seats provided has also decreased due to the decline in the number of flights and the downturned in the number of passengers from the original amount of passengers to ensure social distance. 3.Comparing Reality and Theory, and Equilibrium:

Theoretically, if the quantity of demand decreased, the line should be shifted to the left. And low supply will also lead to the line shift to the left. According to the above facts and the figure, it can be defined that the transition of the aviation demand and supply are as theoretical.

D. Travel organizer/intermediate 1. Determinant of Demand: Opportunity to consume To begin with, in 2019, Spain's travel industry served 84 million international tourists, with at least as many visitors expected in 2020. However, due to the pandemic of the Covid 19, the mobility restrictions applied in Spanish have put a stoppage and decline in the number of international travellers. To be more specific, there were no regular flights except for repatriation and cargo, and no open hotels except those that sheltered healthcare workers from other regions and served as makeshift hospitals in big cities like Madrid and Barcelona. According to the statistics provided by PhocusWright, The Spanish travel industry is expected to decline 70% to just €8.9 billion gross bookings in 2020, with online bookings dropping 66% to €4.5 billion, compared to 2019. Most of the hotel booking in Spain was made from their residents, with 14.9 million hotel bookings in July 2020.

2. Determinant of Supply: Number of sellers. First of all, the number of businesses in the travel agencies industry in Spain has grown approximately 1.5% per year on average over the period of 5 years between 2016-2020 and reached 14,913 enterprises in 2021, despite the effect of the Covid 19. The reason is that, in order to maintain the economy, travel companies were offered low-interest loans with longer repayment terms by the Spanish central government, as well as the ability to lay off workers temporarily while continuing to receive a portion of their salaries from the government. In response to the pandemic, the government has increased aid measures and set a target date for reopening the tourism industry.

3. Equilibrium: Comparing Theory & Reality According to the theory of market equilibrium, when the demand decreases (due to the opportunity to travel to Spain being affected by Covid 19) and the supply increases (due to the growth of the number of travel agencies in Spain), the price to visit Spain will go down.

In reality, Spain's domestic tourism expenditure dropped by nearly 51 percent from nearly 60 billion euros in 2019 to nearly 30 billion euros in 2020.

Furthermore, the COVID-19 impact on the Spanish international tourism spending was even stronger. The consumption of worldwide travelers in Spain dropped by 77% from more than 70 billion euros in 2019 to around 16 billion euros in 2020.

E. Elasticity of demand 1. Price elasticity of demand of travel According to INE, the national statistics institute of Spain, the number of people living in Spain who have traveled abroad in 2019 is as follows. 1st quarter: 4,020,463, 2nd quarter: 4,933,015, 3rd quarter: 7,272,153, 4th quarter: 3,894,113. (INE 2021) From these numbers, June to August have the highest demand in 2019. Therefore, airfare will be increased during June to August, and will decrease from October to December which have the lowest demands in the year. According to the demand of 2019, the average year abroad travelers are 5,029,936. Based on this number, the lowest demand which is the 4th quarter is -33% than average. According to Cntraverler, even after the epidemic is finished, the price of ticket tends to drop by up to 20%, based on data from the International Air Transport Association Price elasticity demand == +1.65 The quantity of demand reduced by 33% as a result of the price reduction of 20%. Because the absolute value of ∈d is greater than 1.0, demand for air travel is more elastic than demand for other goods. 2. Income elasticity 20Spain's GDP per capita in 2019 was $29,565, dropping nearly 2.71% from the previous year ($30,389). According to UNWTO data, there were almost 23 million tourist departures (including sameday and overnight travellers) from Spain to other nations in 2019, which is 2.3% increased compared to 2018. 2018 GDP: $30,389

2019 GDP: $29,565

Income Elasticity % change in income: 2.71%

Outbound travel: 22,29

Outbound travel: 22,82

% change in quantity of

million trips

million trips

demand: 2.3%

According to the theory of Income Elasticity of demand, in this case of Spain, the demand for outbound travel in Spain will be considered as a normal good and will be categorized as necessity because the income elasticity of demand in Spain is around 0.85.

F. References 1. Amankwah-Amoah, Joseph. “COVID‐ 19 Pandemic and Innovation Activities in the Global Airline Industry: A Review.” Environment ...