TOURISM

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Travel and tourism have been one of the important sectors that have contributed majorly to economic development for both developed and developing countries. Tourism industry helps in raising the level of national income and improve the standard of BOP (balance of payments). It also makes indirect contributions through the promotion of good diplomatic relationships among countries. These attributes are important in establishing a competitive economy for any nation. Developing the travel and tourism sector requires effective policies that can help in solving possible obstacles that can prevent the desired progress (Klingmann 2007). Therefore, this paper will present an analysis of the tourism sector in Iceland by identifying the current influences on travel organizations within the tourism industry. In addition, there will be an analysis of theories and models that help explain travel flows and trends in important destinations within Iceland.
Influences on travel organizations
The performance of travel organizations depends on the political systems within a region. The political setup has a significant impact on how companies form their structures and the way of operation. For example, the relationship established between two countries based on the political ties play a significant role in opening the global market for the tourism industry in Iceland. Also, an annual budgetary allocation which reflects on the spending priorities of the federal government also has a massive impact on travel agencies. That is, if the country decides to spend on security and cultural promotion, people from another region can consider it preferred destination due to the level of awareness created. The political system determines how the legal systems operates and laws are always changed depend on the type of political regime. These rules help in governing all the social and economic activities in Iceland. These rules assist in creating the image of the country to the global community hence determining whether Iceland is suitable for both domestic and foreign tourists (Page 2011).
There is also economic influences, which are also related to the social factors within a region. Any economy experiences various fluctuations that result from different economic activities or functions. During an economic boom, businesses always enjoy high rates of profits as opposed to recession period. Other factors that determine the economic conditions include interest rates, which is generally used to determine wage and inflation rate within an economy. The economic conditions determine a number of money people are willing to spend on goods and services. Therefore, the performance of travel agencies depends on the economic conditions.
Travel organizations are also affected by the social factors, which is reflected in the code of conduct and general behavior pattern of individuals. According to economic activities, social influences is always portrayed through consumer behavior that results from personal and cultural values, changes in style and fashion. The age structure of a population is also an important consideration when determining the social influences on any business activities. A country like Iceland has a population composed of adults, therefore; travel agencies tend to perform better since most adults enjoy traveling from one destination to another as they go for vacations. Also. Social factors determine the future existence of any business depending on the type of commercial activities and services.
The organizations can be influenced by the technological factors that determine the process of communication and service delivery. Tourism industries rely on media platforms for reaching full market coverage. For example, the 21st century is characterized by fast access to information due to the existence of the internet services. To gain market advantage, travel organizations use various technologies to advertise and market their services to consumers. Technology has both negative and positive influences on the businesses especially those within the tourism sector (Middleton 1994). The political, economic, social and technological factors have the huge influence on the travel organizations, as they are capable of determining the level of competition, costs of operation, increased the negative or positive popularity of tourist destinations and the efficiency of service delivery (Kozak,& Andreu, 2006).
Travel flows and trends in Iceland
Over the years, Iceland has experienced several changes in its diplomatic relations, which has, in turn, influenced the important, and export sectors. Based on the PEST analysis above, these changes have had a tremendous impact on the tourism industry. Iceland is considered a late bloomer when it is compared to other European countries. Annually. Over seven hundred million individuals travel from one region to another for leisure, formal and other forms of reasons. Various theories and models explain how travelers utilize various services and goods offered through travel organizations, in this case, Iceland.
According to the tourism demand model, there is an explanation of how tourism occurs between two or more countries internationally. There is also an analysis of dependent and independent variables where by, the dependent variables include the rate of tourist flow that is indicated by the number of arrivals to a destination or the level of expenditure (Safferstone 2001). However, the level of expenditure is considered superior to another variable as it helps indicate the number of days individuals spend in their preferred destination. The tourism demand model is illustrated by the income variable, which is determined by the level of income acquired through the tourism sector. There is also the population, exchange rates and the cost of living and commuting within a country (Dinnie 2008).
The demand model is based on the explanation of how the change in income level can have an impact on the demand for various services offered by travel organizations within a country (Horner& Swarbrooke, 2004). Given the current economic condition in Iceland, the demand model indicates that there is the high chance of determining the performance of the sector in the short run (Smith & Puczkó 2009). Based on the recent economic performance, Iceland showed increased GDP based on the, induced, indirect and direct contributions accrued from the tourism sector. This is indicated in the graph below:
Source: (Iceland, 2016)
Trade services
According to this model, there is the analysis of two types of trade services. The first type of service includes cross-border supply, which refers to the movement of goods and services from abroad to the native country. This can affect the flow of tourists into a country as it depends on the availability of efficient infrastructure and means of transportation to the destination country (Iceland). For example, when a tourist wants to go to Iceland from the Middle East, he or she can face a tremendous challenge in getting a direct flight from his country to Iceland. This determines the number of tourists from a region at a particular period in Iceland.
There is also presence commercial type of trade, which refers to the service delivery within the resident country. This refers to the business activities that occur within a region that can aid several activities that happen within the tourism industry. However, there is always an enormous challenge in categorizing services that clients acquire from sectors such as the banking sector. According to the trade activities model, it comprises of all the supply models within the tourism industry. For example as illustrated before, travel services involve cross-border supply where most tour services are classified under. Internationalized commercial services also include hotel industry and accommodation services.
Trade activities determine the performance of the tourism sector as it influences the motivation factor that can encourage tourists to visit a country like Iceland. For example, availability of commercial services can be a motivating factor for individuals to visit a country.
In the tourism industry, various factors motivate individuals to move from one country to another. In the case of Iceland, people tend to visit the country due to its culture and unique natural cites that act as tourist attraction sites. In addition, this form of movement results in consumption of goods and services such as food, textiles and handcrafts. This makes it an extremely composite activity that includes use of both commodities and services that can be acquired through cross-border supply and consumption abroad type of trade. Consumer behavior (decision-making)
Iceland is one of the unique countries in the world based on its unique culture and natural sites that distinguish it with other tourist destinations. There exist numerous factors that influence the way travel organizations function. Consumer behavior regarding the selection of preferred travel agencies and destinations is one of the influencing factors. In the most cases issue related to security, health, available infrastructure and culture of a place influences consumer behavior. Therefore, it is important for travel organizations to consider these factors in establishing how to deliver their services efficiently to tourists (Thomson 2009).
Individual decisions or experiences play a significant role in determining how tourist behave, and they directly relate to how clients obtain and utilize various services offered by travel organizations. Having clear knowledge about consumer decision-making process is an important factor for any travel organization in the tourism industry. Consumer behavior model is based on the assumption that buyers choose goods and services following a precise sequence of using same products and services.
Tourists use travel organizations to get access to accommodation, meals, transport and other forms or requirements at retail prices. Offering these services to visitors depend on the ability of a travel agency to establish effective marketing strategy that differentiates it from its competitors. Therefore, use of effective marketing strategies can be significant in influencing the consumers’ behavior. Marketing provides tourists with information that they use in making the suitable decision before making any form of purchase or payments (Baum and Lundtorp, 2001).
There exist several challenges such as the increasing media attention that expose people to unsettling occurrences such as disease out brakes and terrorist attacks result in high level of uncertainties to travel organizations within Iceland. These difficulties force tourists to evaluate adequately any travel agency according to its physical location, hours of operation and the level of convenience. Determining the reputation of a travel organization is important in the selection process for both domestic and international travelers (Woodside 2011).
In conclusion, various factors can influence tourism organizations according to the pest analysis. These factors include political, economic, and social and technology that influences the way people consume goods and services offered in the tourism industry. In addition, there are several theories and models that tend to explain how people choose their favorable tourism organizations based on services that they acquire. The process of consumer decision-making depends on the availability of infrastructure, technology, health services and security. In Iceland, the tourism sector is an important sector due to its significant contribution to the economic development through direct, induced and indirect contributions.

BTA's Travel Trends Report 2015 identifies the key trends in travel for 2015 and highlights the ‘destinations to watch’ that are expected to capture our imagination in 2015. Consumer confidence is continuing to return slowly to the market and to the UK economy with some ABTA Members reporting a positive but measured outlook. Reports indicate that recovery is being driven by more affluent consumers and that the cautious optimism that has characterised recent years is now ingrained as the ‘new normal’ for the rest of the market. How these signs of confidence translate for people will be a key issue in the lead-up to 2015’s general election. This tentative recovery is reflected in the findings of ABTA’s Consumer Trends Survey 2014 which shows that more consumers are planning to spend more on their holidays in 2015 than those looking to cut back; 20% state they will spend more on holidays and only 15% say they are planning to spend less. Those in the social category ‘AB’, where recovery is more apparent, are more likely than average to state that they will be spending more on holidays in 2015 – 29% of ‘A’ holidaymakers and 24% of ‘B’ holidaymakers stated this. Additional growth is also set to come from those aged 25-34 who are the most positive about 2015 with three in ten (30%) saying they will spend more on holidays and only 14% saying they will spend less. In the rest of the market, the search for value rather than the lowest prices is set to continue with holidaymakers making their holidays work harder, looking to combine holidays with wellness, family time, relaxation and new experiences. Barclaycard’s Consumer Spending Report1 showed that although total holiday spend is up overall, people are buying holidays ‘little and often’, which is reflected in the rise of city breaks seen elsewhere in this report. The annual family holiday of seven nights or more overseas was a staple in 2014, accounting for 0.8 of the 3.0 holidays taken per person, and this is expected to continue in 2015 as holidays remain an important part of the family calendar. Families seeking to have more control over their budgets will play a role in the continued growth of all-inclusive holidays; 20% of people are planning an all inclusive holiday in 2015 rising to 25% of people with a young family. The abolition of Air Passenger Duty (APD) for children under 12 from 1 May 2015 will also provide some financial respite for families and will support the annual family break and the visiting friends and relatives market.
City breaks will continue their popularity in 2015 and short haul, short break destinations will feel the benefit of this. Italy is expected to remain popular as are other established favourites such as Barcelona and Paris. Eastern European cities such as Ljubljana should see a boost from holidaymakers looking to try somewhere new that is also still easily accessible – Istanbul is also hotly tipped. Popular long haul destinations for 2015 will include the USA, Australia, New Zealand, Mexico, Canada and Thailand. Flying long haul will become more affordable in April 2015 due to the removal of APD bands C and D; this is expected to save UK passengers £200m a year. Wider availability of new aircraft, such as Boeing’s Dreamliner and Airbus A380 is also making long haul travel more attractive and will continue to support popular routes to destinations including Cancun and Duba

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