CORDIS Archive

May 2005

INNOVATION IN TOURISM

1. A European industry

f we take just the core businesses in the tourism sector – hotels and travel agents, for example – they account for 5-6% of gross domestic product (GDP) in the EU,” says Jean-François Omnes, Deputy Head of the Tourism Unit in the European Commission’s Enterprise and Industry DG. “Adding in those businesses which gain indirect benefits from tourism, including restaurants, transport and even souvenir shops, that figure doubles to 10-12% of GDP.”

That economic impact translates into a sector with around 2 million enterprises, of which 99% have fewer than 50 employees. In the hotel and restaurant sector, in particular, 92.4% are microenterprises, with fewer than 9 employees. But while smaller enterprises account for four-fifths of the jobs in this sector, the 0.1% of firms with more than 250 employees account for more than one-quarter of the value added.

Jobs

“The tourism sector has a high potential for employment,” Omnes underlines, “since the core businesses alone account for 7% of jobs in the Union. But in employment terms, the sector’s impact is highly significant. For young people, for example, the tourism sector provides many opportunities to gain a first job, or to get their foot on the career ladder. It gives them good experience – particularly when it comes to dealing with customers – which will be very useful in other industrial sectors.”

Across the Union overall, then, tourism accounts for as much as one-eighth of total EU GDP. But for many regions, for example Mediterranean coasts and Alpine resorts, tourism is the biggest industry, and the biggest employer. In such places, external factors such as economic shocks, fears over terrorism, or poor weather can ruin the season. And with the memory of the Asian tsunami disaster fresh in our minds, nobody needs to be reminded of the effect of a natural disaster on a region.

Empty hotel beds, restaurant tables and barstools have a knock-on effect throughout such an area’s economy. Even if many seasonal workers come in from other regions and countries, the local population will be most affected by a poor season. But it is factors within the control of those in a given region which most affect the long-term earnings of the tourism sector.

In what is a very competitive business, tourists have enormous freedom to choose the type of holiday they want, so if a destination does not respond to demand it will rapidly lose business. Changes in tourist demand could devastate a region’s economy, so it is vital that regions dependent on tourism continually renew the services they provide.

“A recent study attempted to develop an early warning system, to predict a reduction in tourist numbers,” says Omnes. “This found that declining quality of service was the main reason that visitor numbers fell. Often this was because capacity was being exceeded. Therefore to raise quality in such a destination, it is essential to retrieve the balance.”