Tourism: Does demand create supply or supply create demand?

Written by on July 1, 2018 in Perspectives - Comments Off on Tourism: Does demand create supply or supply create demand?

Does demand create supply or does supply create demand? A question that sounds like something taken from an economics class.

When it comes to the travel industry, the same question can still be asked, and indeed both scenarios could be said to be equally relevant although the argument is that in today’s modern travel world, supply would seem to create demand.

If we think back to the start of low cost Airlines across Europe, quite often they would fly (for example) from somewhere in the UK that few people had ever heard of to somewhere in France that equally few people had heard of.

One could hardly say that there was a pent-up demand for travel between the two places, yet the planes were full. The offer of such flights created a previously nonexistent demand for travel for whatever reason between the two places.  We might transpose this onto the local level.

Sofia in particular is a boom city at the moment, both on the business front and on the leisure front. On the leisure side of things, Sofia has long existed but was hardly flush with weekend breakers or short stay tourists. Marketing attempts by the government were inept and indeed still are, but something happened along the way that saw Sofia becoming a newly discovered short break destination for Europeans and non-Europeans alike.

True, being a part of the EU helped although holding the EU Presidency probably didn’t!  Being the “cheapest” country in Europe definitely helped as did having an excellent abundance of inexpensive new-built hotels. What really is the catalyst in the supply demand theory though is connectivity; which in lay speak means flights that connect Sofia with other places.

The number of flights connecting Sofia to Europe and beyond continues to grow and a huge portion of this is down to Wizz Air and Ryanair (though not exclusively). These two airlines now carry approaching 50 per cent of the passengers into and out of Sofia, but it’s important to note that they have largely not replaced other carriers that were already doing the job, but rather they are bringing in new flights with new travellers and on the flip side of that, introducing air travel to Bulgarians who previously could not afford such a luxury, with the result that passenger footfall levels year on year using Sofia Airport are increasing by about eight per cent.

In effect, the circle of having the perfect combination of flight connectivity, great inexpensive hotels, value-for-money eating and drinking, great climate and enough history and culture to keep most occupied for a few days, means Sofia is probably either in the Premier League of European City breaks or is about to enter it.

While on the theme of supply and demand, we can also take a local view on the same theory with flights to the Middle East.

Not so very long ago, apart from flights to Tel Aviv, there were no flights to the likes of Dubai and Doha, yet just few years later, we now have 16 flights a week combined to these destinations, the breakdown of passengers being a mixture of business and leisure travellers but with the emphasis on the latter.

If we take the leisure section of this, then quite clearly the vast majority of people have/had never travelled to not just the Middle East but beyond into Thailand and Bali and so on, the sudden availability of this option via the airlines created the demand, a demand that is equally as buoyant as the incoming short break visitors to Sofia.

Equally, we should turn full circle with the supply and demand theory for flights to the Middle East and realise that not insignificant number of visitors from these areas are now also coming to Bulgaria, be it for skiing, shopping or even gambling. The ongoing cycle creates a win-win scenario for all aspects of our industry and long may it continue.

Now, who said demand creates supply?

(Photo of Alexander Nevsky cathedral in Sofia: Clive Leviev-Sawyer)

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About the Author

Mark Thomas is Managing Director of Jamadvice HRG Bulgaria, one of Bulgaria’s leading Travel Management Companies with a 20 years market leading presence on the Bulgarian market.