TOURIST AREA LIFE CYCLE MODEL : POLICY IMPLICATIONS FOR SINGAPORE

Abstract

International tourism has enjoyed unprecedented growth in the last forty five years and as a major industry in the world economy, it is expected to become more important in future. The first chapter gives an overview of international tourism, highlighting its growth trends and resilience in recessionary periods. It is interesting to note that international trends bear three characteristics: dominance of intra-regional travel, popularity of domestic tourism and the exodus of tourist flows emanating from mostly the developed countries. The life cycle concept has been extensively used in the literature. The concept was first applied in marketing to study the evolution of products as well as market characteristics throughout a given time period. Later, applications were made in economics to study the trade flows in manufacturing goods. The second chapter provides a brief understanding of these works. The Tourist Area Life Cycle model (TALC) studies the evolution of a tourist area, assessing its development in terms of the number of tourist arrivals. The product life cycle adopted by Vernon (1966), however, studies dynamic comparative advantage and explains shifts in international trade patterns for manufacturing products. Different countries possess different factor endowments and this results in different comparative advantages for the provision of tourism. Generally, developing countries are claimed to have a comparative advantage in promoting tourism. A synthesis of the above fundamentals forms the sprouting ground for a proposed trade theoretic model in the third chapter. To establish a trade perspective, it is necessary to use the figure that constitutes travel balances. This is the net difference between travel exports (i.e. tourist receipts) and travel imports (i.e. residents' expenditures abroad). The number of tourist arrivals and the level of tourist expenditures are both indicators for the assessment of the progress of a tourist industry. Tourism expenditures, unlike the former, which is merely a headcount, contributes to the starting point for any economic impact analysis. These analyses would show the economic contribution of tourism to output, employment and import leakages. Moreover, it would also show the amount of value added and indirect tax to be generated from these tourist expenditures (i.e. tourist earnings to the host country). With the use of expenditures, the study can also be extended to include an analysis on how influencing factors like exchange rates and comparative prices can affect a country's competitiveness in its provision of tourism vis-a-vis neighbouring destinations. International travel/tourism brings about different costs and benefits to both developing and developed countries. Moreover, it is generally agreeable that tourism and economic development are closely related. The proposed new model provides an analysis to illustrate how a tourist area internalizes and responds to changes that emanates from the economic environment. Base conditions of low economic environment would be established at the commencement of tourist development. This helps to ascertain progressive changes between tourism and economic development. In addition, the life cycle has been adopted as a framework because it allows a dynamic interpretation of changes over time. In chapter four, the TALC model has been utilised to determine the stage of Singapore's tourism development, which is deemed to be at the maturity stage. The results of the empirical studies based on the proposed model have also supported this conclusion. The fifth chapter is dedicated to formulating some policy measures. The suggestions stem from the implications/conclusions of both models. Finally, the concluding chapter presents a brief summary and some recommendations for further research in this topic. As Singapore aims to be a developed nation by the first decade of the next century, it is certain that the tourism industry will play a more important role in future. Indeed, tourism as a significant contributor to the local economy. Tourism should be viewed as one of Singapore's engines to economic growth. Tourism/ travel is an activity, with an undefined periphery, involves not only tourist traffic but also capital flows. Hence, with the anticipation that tourism growth trend may soon be stagnating, it is necessary to more concerted efforts in order to ensure sustainable development of Singapore's tourism industry.