Business cycle and tourism demand in Germany (FRG)

Scientific investigations into the influence of fluctuations in the economic cycle on tourism have revealed that demand in this sector is indeed dependent on such fluctuations 1). The diagram shows prima vista the close relationship between the fluctuations in the economic cycle and tourism demand in West Germany. However, in some cases there is a typical time‐lag effect on tourism demand in response to fluctuations in the economic situation, which makes it more difficult to accurately diagnose the underlying correlation between the economic cycle and tourism. For example, tourism demand re‐acted with a time‐lag of one year upon the 1968 up‐swing which followed the recession of 1967. The second post‐war recession reached the bottom in 1975, the decline of tourism demand induced by fluctuations of the business cycle however first manifested itself with a time‐lag in the year 1976. The “un‐typical” development of tourism demand in 1975 may be explained validly by economic and psychological factors 2). In the course of the years 1981 and 1982 the dependence of tourism on fluctuations of the business cycle is evident from the diagram. The main causes of this sensitivity on the part of tourism demand to changes in the economic situation can be attributed to economic and psychological factors. The demand by private households for a vacation and for recreational travel depends to a very large extent on the growth of the real income available to the private households. The comparatively high rates of growth of private households' real incomes — accompanied by a large increase in leisure time — during the sixties and early seventies prevented heavy recessions of tourism demand in cyclical downswing phases. Any stagnation or decline in real income of private households, registered for the first time in the post‐war period during the recession‐years 1981 and 1982 in West Germany, has a negative effect on tourism demand. Increased numbers of unemployed during a recession encourages uncertainty and pessimism regarding future economic development, leading many households to increase the amount of money they hold in the form of savings. It is true that consumers sooner show reluctance to buy durable consumer goods (for example cars, household appliances etc.) than to buy vacation travel. The annual vacation journey has changed — in general opinion — from a “luxury good” to a necessity or has today become for many people a “status symbol” nobody likes to give up. It should also be pointed out that such fluctuations in tourism demand resulting from the economic situation are not as pronounced as fluctuations in demand that can be observed in other sectors such as in the construction industry, in the automobile sector or in the furniture industry.