Tourism – Forex Academy

Since the introduction of online flight booking, the global tourism industry has grown exponentially – thanks to the convenience of making flight reservations from a mobile device. Despite the efficiency brought by such technologies, the travel industry is populated by a myriad of intermediary companies that make traveling quite a hassle. From flight companies, travel agents, tour operators, to destination management companies, all of which defeat the purpose of using travel solutions for convenience. Additionally, throughout the travel, customers’ data is exchanged numerous times, which ends up compromising their privacy, especially if the systems used aren’t secure enough.

Just as Bitcoin was conceived as a method of bypassing financial intermediaries, its underlying technology – blockchain, can also be used in the tourism industry. The technology will enable customers to interact directly with service providers making traveling less of a hassle while also safeguarding their privacy.

Potential use cases of blockchain in travel

Blockchain technology is lauded for its high data security, immutability, and decentralization. These are the fundamental properties most industries seek to leverage. Here’s how the tourism industry can make use of this revolutionary technology:

1. Decentralized booking marketplaces

Although intermediaries in the tourism industry aim to make traveling less hectic, their services make traveling expensive. For instance, online travel agencies (OTAs), despite helping customers book flights and accommodation, usually charge a service fee, which adds to the overall cost of traveling.

With the employment of blockchain technology, a decentralized booking marketplace is created where intermediaries become obsolete. Travelers are connected directly to flight companies, hotels, and other service providers, making traveling more affordable. Moreover, without intermediaries, customers’ experience is enhanced as they can make seamless transactions with minimal delays.

Smart contracts could serve as automated intermediaries that utilize data oracles to source a range of relevant services like traditional OTAs. Smart contracts will hold funds in escrow as remotely executable agreements and release them when and if services are properly offered.

2. Secure payment systems

The traveling process is characterized by numerous payments right from flight booking to accommodation and everything in between. Unfortunately, customers’ privacy of their financial details isn’t guaranteed, which means they are at risk of identity theft or even losing their funds to hackers. Also, to make these payments, travelers must carry debit cards or fiat cash, which can be cumbersome, not to mention the risk of theft.

If the tourism industry was to integrate blockchain technology into their payment model, all transactions would be done using cryptocurrencies. As such, travelers’ financial details will be secured, protecting their privacy while minimizing fraud. What’s even better is that paying using cryptocurrencies eliminates the need to carry cash or use third-party payment processors such as Visa and MasterCard. With the intermediaries out of the way, payment transactions become more affordable, especially cross-border payments.

Since blockchain technology can create a seamless inventory tracking mechanism, it can also be used to track payments. This will ensure flights are booked to a maximum capacity only, preventing overbooking, which can ruin an airline’s publicity.

3. Identity management

Identification services play a crucial role in the tourism industry as it helps promote security. Immigration officials are always keen when verifying travelers’ identities in compliance with national security guidelines. However, identity verifications tend to be time-consuming and repetitive, resulting in long queues at airports and hotel check-ins.

Blockchain can transform the current identity verification process by creating an immutable database containing the necessary details of a traveler. This way, identity verification will be reduced to a simple fingerprint or iris scan instead of the traditional document verification. As a result, there will be fewer check-in times and shorter or no queues in airports, facilitating a time-efficient experience.

Relevant authorities can also share the necessary data required for identity verification without compromising travelers’ privacy. This is enabled by blockchain’s zero-knowledge protocol that allows parties in a peer-to-peer network to verify specific data’s accuracy without revealing it to each other.

Also, if all governments were to use blockchain in identity verification, passports would be rendered obsolete. This would, in turn, reduce verification time and unite all nations in providing digital passports for efficient traveling experience.

4. Baggage management

It is estimated that airlines lose about two bags for every 1,000 passengers. While the odds may seem almost negligible, it’s disappointing to lose your luggage, especially if it contains essential business documents or other valuables. In most cases, baggage mishandling and loss is as a result of human error since multiple parties are involved in the handling process throughout one’s journey.

Moreover, each of the involved entities in the baggage handling process, from the airline, security personnel to ground staff, all have different baggage tracking infrastructures that operate in isolation. As such, when reconciling their databases, discrepancies may occur, resulting in loss of luggage.

In collaboration with AI and sensor technologies, blockchain can be used to monitor and track travelers’ luggage. Also, tracking data is recorded on a distributed database that can be shared among entities responsible for handling baggage, eliminating the baggage loss menace facing the tourism industry.

5. Customer reward system

Airlines, travel agencies, and even hotels offer customer reward systems to win new customers and incentivize loyal ones. However, there have been complaints that these programs are too restrictive and limited to a small set of rewards.

Moving the reward system to a blockchain network means that rewards will be issued in the form of digital tokens. This enhances transparency in the way rewards are issued, which then improves customers’ trust. The tokens can be exchanged or rather redeemed for a variety of products from different providers, unlike traditional loyalty programs, where the rewards are restricted to specific rewards. Various entities within the travel industry can also collaborate in offering digital token as rewards. This way, the tokens can be exchanged easily between the entities, allowing customers to compare the relative value of schemes and rewards they offer.

6. Transparent business rating

Before traveling to new destinations, it’s common for one to read reviews of either the hotel or airline one will be using. There are even dedicated platforms where users share their experiences and rate destinations, airlines, and accommodation hotels. Although some of the reviews may be genuine, others are outright fake and fabricated by the service providers to attract more customers. These fraudulent activities have become rampant due to increased competition among service providers. If a user’s experience is different from what they read in online reviews, it breeds mistrust and ruins the reputation of the service provider.

The transparency offered by blockchain technology could go a long way into ensuring that online reviews are genuine, therefore, restoring consumer trust. In this case, the reviews of customers are made public in a secure blockchain platform, ensuring everyone sees and verifies its accuracy.

7. Travel insurance

Blockchain is best suited for application in travel insurance to ensure data integrity for fair compensation of claims. For instance, say, an insured customer loses their bag and makes a claim to the insurance company. A smart contract using data oracles within a decentralized network could validate a claim and ascertain if the agreed thresholds have been met. Upon verification, the claim is automatically settled through cash deposits or refunds in delayed flights.

Conclusion

The travel industry is a fertile ground for blockchain technology to thrive, given the wide network of intermediaries that create a tangled web of interaction in a travelers’ journey. That said, only the established industry players can lead to the adoption of blockchain in tourism. This is because they hold the resources needed to materialize proof of concept of blockchain solutions and advocate for their use.

Introduction

The global connectivity through the internet, powerful smartphones and gaming technology, we may be led to believe that more and more people prefer to spend time in their home using their entertainment gadgets, but it is not so.

The internet has brought the world closer than ever before, making remote tourist places more accessible and affordable than ever. Tourism Revenues contributes to 2-10% of the total GDP of most countries. Tourist hot spots like Dubai, Mexico, France, Thailand, etc. have Tourism as one of their primary source of revenue generation.

Tourism Revenues, factors affecting it, and measures to improve it all have significant changes in Tourism employment labor, economic growth, and overall development of the economy. Hence, our fundamental analysis needs to understand the Tourism patterns and its resultant changes in the marketplace.

What is Tourism Revenues?

Tourism is the act of people traveling to and staying in locations outside their usual residing place for leisure, recreation, business, or other purposes for a specified period. For the general public, a tour typically implies leaving behind their work and home to travel and explore tourist spots with family, friends, or by themselves for refreshment.

Tourists are people coming from outside the current locality into consideration (be it a city, state, or even country) to temporarily visit the place. Business people having to travel on work purposes are also categorized under tourists. Below we have mentioned the three types of Tourism.

Inbound Tourism

Tourists coming into the country to visit are called inbound tourists. This adds to the revenue of the nation as people pay and spend money in domestic currency.

Outbound Tourism

When our citizens go out of our country to foreign destinations for tours, it is called Outbound Tourism. This takes away revenue from our country and adds to the foreign countries, as the domestic currency is exchanged for foreign currency for expenditure purposes.

Domestic Tourism

People of one state visit another state within the country; it is called Domestic Tourism. This is helpful for the visiting state as it brings revenue to the state.

Tourism Revenues

As per the United States Travel Association, in 2019, domestic and international travelers spent 1.1 trillion U.S. dollars. This spending has directly supported 9 million jobs and has generated 277 billion U.S. dollars to the payroll income an 180 billion dollars in tax revenues for federal and local governments.

Travel Industry accounts for 7% of the total private sector employment. The power of job growth through travel is higher than in many other industries. For example, every 1 million dollar sale of travel-related items directly adds to eight jobs compared to only five jobs in the non-farm sectors.

How can the Tourism Revenues numbers be used for analysis?

The following factors affect Tourism Revenues:

✰ Climate: The environmental conditions at the tourist destination adversely affect tourism. For example, In summer, hill-stations and colder regions see a rise in tourist numbers. If the ecology of the tourist place is balanced (avoiding over-exploitation of nature and over urbanization), unexpected adverse weather conditions can be avoided.

✰ Economic Situations: A healthy economy can support tourism. Financially weak people neither travel nor the Government of a weak economy create and promote an excellent tourist destination. Disposable Income of the people determines whether they can afford to spend on discretionary things like tours and travel. Political unrest and terrorist activities adversely affect tourism. Safeguarding and protection are essential from the Government’s side to assist tourism.

✰ Cultural importance: It is the historical and cultural significance of the places, monuments that attract tourists. Preserving and maintaining heritage sites over urbanization (building roads, houses, malls, or buildings for commercial use) can help foster tourism.

✰ Research value: Researchers actively seek places undisturbed by human exploitation. The preservation of natural forests, seas, oceans can attract tourists who are Archeologists, Geologists, Biologists, Oceanographers, etc.

✰ Religious places: Tourists usually take tours to escape from their daily challenges and find peace. In this sense, religious destinations are always flooded during specific periods in a year. India is one such example where there are a lot of pilgrimage sites that bring in good revenue for the nation. Preservation and regulation of such religious places support tourism.

✰ Internet: Ease of accessibility to new people via the internet encourages people to explore these places. Enthusiasts only visit unknown and remote sites. The more people have reviewed an area, the more people would be comfortable visiting it.

✰ Amenities: Availability of transport, hotels, guiding services enhance the tourist’s travel experience. Lack of all these necessary facilities would contribute to a mediocre travel experience that would slowly decline the tourist numbers. Ratings of the place affect the tourist numbers in the long run.

✰ Economic Impact of Travel: Travelers create a “multiplier” effect on the economy. Apart from the direct purchase of goods and services by travelers, the indirect acquisition of raw materials needed to manufacture them adds to the indirect travel output.

Due to spending in the local areas, additional sales are generated that are categorized as induced output by tourism. For instance, the total jobs supported by Tourism is 15.8 million. As per the U.S. Travel Association, one in ten non-farm jobs indirectly relies on the travel industry. The travel industry has generated 2.6 trillion U.S. dollars for the economy, contributing about 2.6 % of GDP.

Impact on Currency

Tourism revenue supports jobs and the Income of the economy. Tourism is a proportional indicator. An increase in tourism revenues positively correlates to the currency value. As more tourists arrive, the more the domestic currency is in demand and hence appreciating the currency value and vice-versa.

Changes in Tourism Revenues from year-to-year have a low impact on the currency as it makes up less than 5% of GDP for many countries. For this reason, tourism is seen as a low impact indicator.

Economic Reports

The World Travel and Tourism Council provides a comprehensive summary of Tourism Revenues and its contribution to GDP for most countries on their official website. They publish monthly updates in cooperation with Oxford Economics to provide a brief overview of short term trends in the Travel and Tourism Sector.

The Travel Price Index (TPI) published monthly by the U.S. Travel Association measures the travel inflation and is comparable to CPI (Consumer Price Index).

Sources of Tourism Revenues

The information regarding tourism and related statistics can be found in the sources mentioned below.

Monthly Updates- WTTC | World Travel and Tourism Council | Monthly Statistics – USTA for (TPI, Travel Trends, etc.)

Impact of the ‘Tourism Revenues’ news release on the price chart

Tourism Revenues are slowly becoming a significant source of income for various countries, especially for emerging economies. These revenues contribute a lot to the GDP of a country. Recently, this sector has been gaining a lot of attraction, and as a result, governments of almost all countries are promoting the tourism industry. Today, we even have an official media release of the revenue generated by tourism alone released by the monetary agency of that country. Therefore, some traders around the world create and remove positions in the market based on the Tourism Revenues data.

The below image shows the previous and latest Tourism Revenues data of Turkey. This is essentially the amount spent in billions of U.S. Dollars by Foreign tourists. This data is particularly important for developing countries. It is released on a monthly, quarterly, and yearly basis, depending on when the country chooses to publish. A higher than expected reading is considered to be positive for the economy, while a lower than expected reading is considered to be negative.

USD/TRY | Before The Announcement

We shall start with the USD/TRY currency pair and find out the impact of the news release on the pair. As we can see in the above image, the market is moving in a range, and just before the news announcement, it is at the bottom of the range. Technically, this is an area from where the price bounces and moves higher, but since there is a news announcement in some time, it is possible that this level could be broken. Therefore, we need to wait and then trade based on the news outcome and shift in volatility.

USD/TRY | After The Announcement

After the Tourism Revenues data is announced, volatility suddenly increases on the upside, and the candle closes as a bullish candle. The reason behind the sudden weakness in Turkish Lira is from the fact that the Tourism Revenues were almost halved in the fourth quarter compared to the third quarter. This made traders sell Turkish Lira and buy U.S. dollars. The buying strength coming exactly from the ‘support’ is a confirmation sign that the market will move higher, and one can go ‘long’ in the pair with stop loss below the ‘news candle.’

NZD/USD | Before The Announcement

NZD/USD | After The Announcement

The above images represent the TRY/JPY currency pair, where we see that, here too, the market is moving in a range before the news announcement. Since the Turkish Lira is on the left-hand side, price is at the ‘resistance’ area just before the announcement. As volatility is high, traders should wait for the Tourism Revenues announcement to get a clarity of the data. Once we know the actual result, we can trade based on the news.

After the data is released, the market expectedly reacts negatively, and price falls to the downside. This fall is due to extremely weak Tourism Revenues data, which made traders sell the currency. As the volatility increases on the downside and the price goes below the moving average, one can take a ‘short’ trade with a stop loss above the ‘resistance’ of the ‘range.’

NZD/USD | Before The Announcement

NZD/USD | After The Announcement

Lastly, we analyze the impact on the EUR/TRY currency pair, where also the market is moving in a range but with a downward bias. As we witness some selling pressure before the announcement, a positive Tourism Revenue data can be an ideal case for going ‘short’ in the pair expecting further downside. However, if the data was to be positive for the Turkish economy, one should wait for additional confirmation before entering for ‘buy.’

After the Tourism Revenues data released, the moves in both the direction and the candle managed to close in green. We do not see a strong up move in spite of weak Tourism Revenues data because selling pressure is high on the downside. As the candle closes, forming an indecision pattern, it is advised to go ‘long’ in the market only after volatility expands on the upside.

That’s about the macroeconomic indicator – ‘Tourism Revenues’ and the impact of its news announcements on the Forex market. If you have any questions, please let us know in the comments below. Cheers.