risk management applied to tourism 2012

8/12/2019 Risk Management Applied to Tourism 2012

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Research note

Developing a risk management model in travel agencies activity: An empirical

analysis

Maria Oroian a,*, Marinela Gheres b

a Dimitrie Cantemir University of Targu Mures, Bodoni Sandor 3-5, Targu Mures, Romaniab Babes-Bolyai University, Cluj-Napoca, Teodor Mihali 58-60, 400591, Romania

a r t i c l e i n f o

Article history:

Received 3 December 2011

Accepted 20 December 2011

Keywords:

Risk

Risk management model

Tourism

Travel agencies

a b s t r a c t

This study applies a risk management model to identify risks for Romanian travel agencies. Through

extrapolation, the results of this study may be useful to all intermediaries in tourism, whether in

Romania or not. Risks are identied by factor analysis and categorised as being organisational, envi-

ronmental, competitive, economic, political, those of infrastructure, circumstance, business deciencies

and specic (local) risk. Depending on the position relative to the risk we proposed a risk management

model in tabular format, where any travel agency can add, delete, or move risks from a category to

another.

2011 Elsevier Ltd. All rights reserved.

This research note presents the results of an empirical analysis

aimed at substantiating a model of risk management in travel

agencies activity. The main sources of information and data are

from the specialized literature and from empirical research on

travel agencies in the city of Targu Mures (Romania). Depending on

the responses received, we could select then the most important

factors that a travel agency must consider to properly manage risks

of their activity.

The questionnaire (seeAppendix 1) is concerned with the risks

associated with the tourism industry and how the operators rate

the identied risks in respect of intensity (impact) to their business

(Shaw, 2010). A descriptive analysis was carried out on all the valid

data to determine the mean intensity rating and standard deviation

for the responses to all the statements in the questionnaire (see

Appendix 2). Using the descriptive analysis made it possible to

identify and distinguish between signicant and insignicant risks

(Cooper & Schindler, 2001).The methods used for determining and assessing the risk were

found to be in order actions of competitors (76.19%), market-

related statistics, seminars, workshops, media reports (71.4%),

complaints, interviewing tourists (66.6%) and economic forecasts,

group discussion (61.9%). This shows the attention that travel

agencies give to the market competition, specialized publications,

but not least, emphasis covers the needs of tourists. The groups

discussion (brainstorming) method proved to be equally

important.

The initial analysis of risks using the descriptive statistics (see

Appendix 2) and the frequency distribution of responses to the

individual risk statements has identied a number of risk types

classied as extremely low or low (with mean intensity rating

between 2.06 and 2.62) e 21.56% of the risks and high or extremely

high (with mean intensity rating between 3.29 and 4.38) e 39.21%

of the risks. Those considered being in the category high to

extremely high must be included in any risk management model

that is developed for the travel agency.

The high/extremely high category of risk requires more atten-

tion when identifying the causes of these risks, the evaluation and

the response that is developed to minimize any negative impact ofespecially domestic risks or to obtain maximum benet from

exploiting international risks.

The factor analysis was also used to identify the risk categories

that are the most important (Steyn, 2000). We have grouped the

categories of risks according to the mean variables that entered into

their composition as it follows: organisational risk, environment

risk, competitiveness risk, economic risk, political factors, infra-

structure, circumstantial risk, business insufciencies and specic

(local) risk (see Appendix 3). A closer analysis of the factors

revealed that although statistically correct, some of the risk state-

ments do not fall logically to the factor to which they have been

* Corresponding author. Tel./fax: 40 365 401 125, 40 760 279 720 (mobile).

E-mail addresses: [email protected] (M. Oroian), marinela_gheres@

yahoo.com (M. Gheres).

URL: http://www.cantemir.ro

Contents lists available at SciVerse ScienceDirect

Tourism Management

j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m/ l o c a t e / t o u r m a n

0261-5177/$e see front matter 2011 Elsevier Ltd. All rights reserved.

doi:10.1016/j.tourman.2011.12.020

Tourism Management 33 (2012) 1598e1603
mailto:[email protected]:[email protected]:[email protected]://www.cantemir.ro/http://www.sciencedirect.com/science/journal/02615177http://www.elsevier.com/locate/tourmanhttp://dx.doi.org/10.1016/j.tourman.2011.12.020http://dx.doi.org/10.1016/j.tourman.2011.12.020http://dx.doi.org/10.1016/j.tourman.2011.12.020http://dx.doi.org/10.1016/j.tourman.2011.12.020http://dx.doi.org/10.1016/j.tourman.2011.12.020http://dx.doi.org/10.1016/j.tourman.2011.12.020http://www.elsevier.com/locate/tourmanhttp://www.sciencedirect.com/science/journal/02615177http://www.cantemir.ro/mailto:[email protected]:[email protected]:[email protected]


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allocated. An example of such misallocation is the inclusion of lack

of qualied staff and lack of experienced staff in Factor 7, which are

infrastructure factors. A redistribution of risks into risk categories

will therefore be necessary when constructing the risk manage-

ment model.

The factor correlation matrix for the nine factors indicates that

decision makers in travel agencies should pay special attention

not only to risks ranked as having the highest risk but also to risk

factors in risk analysis grouped by organizational risk and busi-

ness insufciencies respectively. Many of the risks in the two

categories can be signicantly reduced through an adequate

management.

Risk management models can be constructed in various ways,

for example using ow diagrams, mathematical models or

simple means such as tables and spreadsheets (Gray & Larson,

2006). The model proposed as part of this research will be

kept simple and will be presented in tabular format, which is

easily converted into a spreadsheet. The operator of any business

in the tourism industry has then the opportunity to select only

those risk items that are identied for his/her business at any

particular point in time.

The risk assessment matrix in Table 1 is used toclassify the risks

severity as insignicant (1), minor (2), moderate (3), major (4) and

catastrophic (5).

It is recommended for travel agencies and other agents in the

tourism industry to use the risk severity matrix in Table 1 to

categorize and classify the risks that have been identied. The

process of quantifying the risk is subjective as it is based on the

users ability to determine the probability of occurrence and the

cost of the consequence (or benet) if the risk occurs. Risk

management could be considered as a useful tool to minimize the

negative impact or maximize the benet to the individual busi-

ness, its owners and the industry as a whole ( Robertson, Kean, &

Moore, 2006).

The tabular model (Table 2) is an example of what the nal

working model for a specic business may look like. The ratings

inTable 2are arbitrarily chosen to serve as an example only and

have no scientic basis. These ratings may not be applicable to

all business and therefore every operator/owner of a business

associated with the tourism industry must decide on the

probability of occurrence and the consequence of the risk as

applicable to the business and then use these values to

Table 1

Qualitative risk analysis matrix eLevel of risk.

Table 2

The tabular model.

Category/risk item Likelihood Consequence Category Response type Response/action

Factor 1 - Organizational risk (Internal business risk)

Lack of funding for product development A 2 H Mitigation Accessing funds available through

government or local programs

Theft in business by tourists C 3 H Transfer of risk Greater attention given to training staff

Lack of proper nancial systems C 3 H Mitigation Raise issue with government

Insufcient funding for training B 2 H Mitigation Accessing funds available through

government or local programs

Change of tourists needs C 3 H Mitigation Adaptation to the demand

Unable to ful

ll needs of tourists C 2 M Mitigation Changing marketing strategyTheft/fraud in business by staff E 3 M Transfer of risk Dismissal of the guilty one(s)/a better

human resource management

A - Almost certain, B - Likely, C - Possible, E - Rare, H - High risk, M - Moderate risk, 2 - minor, 3 - moderate.

M. Oroian, M. Gheres / Tourism Management 33 (2012) 1598e1603 1599


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categorize and classify the risk using the risk severity matrix in

Table 1.

The tabular model presented can be easily stored in electronic

format in MS Word format for easy reviewing and updating as

conditions change or new risks are identied. It is recommended

that the risk management model be enhanced and made more

user-friendly by transporting the data into a suitable and expert

system shell, with or without learning capabilities.

Appendix 1. A risk management model for the tourism

industry in Romania

Dear Sir/Madam,

The following questionnaire is part of an extensive research

study designed to investigate the risks associated with the tourism

industry. Your contribution is very important to the outcome of

this research. Please ll in this questionnaire carefully. All infor-

mation will be treated condentially and we will be used only for

academic purposes. Finally the results of the study will be made

available.

I am looking forward to hearing from you.

Yours faithfully,

xxxxxxxxxxx

Instructions for completion:

1. Please answer all questions regarding your assessment of

tourism risk as honestly and objectively as possible.

2. Place a tick or a cross that reects your answer most accurately

in the spaces provided.

3. Where asked for comments or to specify, please keep these as

briey, yet as thoroughly, as possible.

1. Please indicate which of the following you use to determine

and evaluate risks in your business.

2. What are the key factors that you consider important when

determining a risk?

3. Please rate the following risks in your business on the

intensity scale:

4. What specic actions and recommendations can you suggest

to ensure a proper and successful Risk Management Plan?

________________________________________________________________________________________

________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

__________________________________________________________________________

Thank you for your co-operation.

Physical inspection Yes no

Complaints Yes no

Economic forecasts Yes no

Market statistics Yes no

Actions of competitors Yes no

Drop in turnover Yes no

Group discussion (brainstorming) Yes no

Interviewing tourists/visitors Yes no

Seminars, workshop, media reports Yes no

Working closely with government institutions Yes no

Global trends Yes no

Political decisions Yes no

Crime stats Yes no

Other (Specify) Yes no

Physical inspection

Economic forecasts

Market statistics

Actions of competitors

Global trends

Political decisions

(5) Extremely high risks

(4) High risk

(3) Moderately

(2) Low risk

(1) Extremely low risk1. Stress 1 2 3 4 5

2. Diseases 1 2 3 4 5

3. Crime in general 1 2 3 4 5

4. Cost of transportation 1 2 3 4 5

5. Road safety 1 2 3 4 5

6. Air line safety 1 2 3 4 5

7. Airport safety and security 1 2 3 4 5

8. Currency uctuations 1 2 3 4 5

9. Decrease in disposable income 1 2 3 4 5

10. Ination 1 2 3 4 5

11. Interest rates 1 2 3 4 5

12. Lack of qualied staff 1 2 3 4 5

13. Lack of experienced staff 1 2 3 4 5

14. Aging tourist markets 1 2 3 4 5

15. Decreasing leisure time of tourists 1 2 3 4 5

16. Urbanization 1 2 3 4 5

17. Seasonality 1 2 3 4 5

18. Water pollution 1 2 3 4 5

19. Air pollution 1 2 3 4 5

20. Natural disasters 1 2 3 4 5

21. Fire 1 2 3 4 5

22. Image of the country/destination 1 2 3 4 5

23. Increased competition, nationally 1 2 3 4 5

24. Increased competition, internationally 1 2 3 4 5

25. Change of tourists needs 1 2 3 4 5

26. Insufcient funding for training 1 2 3 4 5

27. Lack of funding for product development 1 2 3 4 5

28. Carrying capacity e too many tourists/visitors 1 2 3 4 5

29. Insufcient marketing by local authorities 1 2 3 4 5

30. Wars/conicts 1 2 3 4 5

31. Pol iti cal instabili ty i n nei ghbor in g co un tri es 1 2 3 4 5

32. Terrorist activities 1 2 3 4 5

33. Climate change 1 2 3 4 5

34. Lack of proper nancial systems 1 2 3 4 5

35. Theft/fraud in business by staff 1 2 3 4 536. Theft in business by tourists 1 2 3 4 5

37. Unable to fulll needs of tourists 1 2 3 4 5

38. Too high prices in tourism industry 1 2 3 4 5

39. Technological changes e.g reservation

systems, new programs

1 2 3 4 5

40. Legislation 1 2 3 4 5

41. Political instability in Romania 1 2 3 4 5

42.Increase in fuel cost 1 2 3 4 5

43. Amount of overtime worked by employees 1 2 3 4 5

44. Number of temporary personnel vs the total

number of personnel

1 2 3 4 5

45. Customer complaints 1 2 3 4 5

46. Repeat business vs new business 1 2 3 4 5

47. Range of products too limited 1 2 3 4 5

48. Working point location (business) 1 2 3 4 5

49. Distance from main competitor 1 2 3 4 5

50. The range of products belonging to competitors 1 2 3 4 551. Prices of competitors 1 2 3 4 5

M. Oroian, M. Gheres / Tourism Management 33 (2012) 1598e16031600


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Appendix 2. Descriptive statistics (Arranged in high to low sequence of intensity)

Descriptive statistics

Statements N Range Minimum Maximum Mean Std. deviation

Increase in fuel cost 21 2 3 5 4.38 .669

Cost of transportation 20 4 1 5 3.90 1.119

Image of the country/destination 20 2 3 5 3.85 .813

Decrease in disposable income 20 2 3 5 3.80 .768

Terrorist activities 21 3 2 5 3.76 .995

Air line safety 21 4 1 5 3.67 1.238

Natural disasters 21 3 2 5 3.67 1.111

Currency uctuations 21 3 2 5 3.67 1.065

Airport safety and security 20 4 1 5 3.60 1.188

Ination 21 3 2 5 3.57 .870

Seasonality 21 4 1 5 3.52 1.123

Wars/conicts 21 4 1 5 3.52 1.289

Road safety 20 4 1 5 3.50 1.504

Political instability in neighboring

countries

21 3 2 5 3.48 1.078

Increased competition, nationally 21 3 2 5 3.43 .811

Change of tourists needs 21 4 1 5 3.43 1.028

Lack of qualied staff 21 4 1 5 3.33 1.317

Too high prices in tourism industry 21 3 2 5 3.33 .913

Lack of experienced staff 20 4 1 5 3.30 1.129

Increased competition, internationally 21 4 1 5 3.29 1.007

Political instability in Romania 21 4 1 5 3.24 1.091

Fire 21 4 1 5 3.24 1.179

Insufcient marketing

by local authorities

21 4 1 5 3.14 1.153

Stress 19 4 1 5 3.11 1.286

Climate change 21 4 1 5 3.05 .973

Customer complaints 21 4 1 5 3.05 1.161

Unable to fulll needs of tourists 21 4 1 5 3.00 1.049

Decreasing leisure time of tourists 21 3 1 4 2.95 .973

Prices of competitors 21 3 1 4 2.95 .973

Air pollution 21 4 1 5 2.86 1.195Technological changes e.g

reservation systems,

new programs

21 4 1 5 2.86 1.153

Water pollution 21 4 1 5 2.81 1.250

Lack of proper nancial systems 20 4 1 5 2.80 1.005

Range of products too limited 20 4 1 5 2.80 .894

Working point location (business) 21 2 2 4 2.76 .831

Lack of funding for product development 21 3 1 4 2.76 .944

Theft/fraud in business by staff 21 4 1 5 2.71 1.454

The range of products belonging

to competitors

21 3 1 4 2.71 1.007

Legislation 21 4 1 5 2.71 1.056

Insufcient funding for training 21 3 1 4 2.71 1.007

Amount of overtime worked

by employees

21 4 1 5 2.62 1.117

Interest rates 20 3 1 4 2.60 1.095

Carrying capacitye

too manytourists/visitors

20 3 1 4 2.60 .995

Distance from main competitor 21 3 1 4 2.57 1.028

Repeat business vs new business 20 3 1 4 2.45 .945

Theft in business by tourists 20 3 1 4 2.40 1.188

Aging tourist markets 20 4 1 5 2.40 1.142

Diseases 19 3 1 4 2.32 .946

Urbanization 20 4 1 5 2.25 1.070

Number of temporary personnel vs

the total number of personnel

20 3 1 4 2.20 1.005

Crime in general 18 3 1 4 2.06 .998

Valid N (listwise) 13



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Appendix 3. Summarized factor analysis results

Risk items Factor Loading Mean value

Factor 1 - Organizational risk (Internal business risk) 2.83

Lack of funding for product development .906

Theft in business by tourists .857

Lack of proper nancial systems .710

Insufcient funding for training .663Change of tourists needs .610

Unable to fulll needs of tourists .529

Theft/fraud in business by staff .403

Factor 2 - Environmental (Nature) 3.12

Water pollution .963

Air pollution .963

Fire .884

Natural disasters .759

Climate change .359

Factor 3 - Competitiveness 3.08

The range of products belonging to competitors .973

Distance from main competitor .935

Prices of competitors .725

Technological changes e.g reservation systems, new programs .639

Too high prices in tourism industry .505

Increase in fuel cost .540

Working point location (business) .420

Factor 4 e Economic risk 3.50

Decrease in disposable income .916

Ination .909

Cost of transportation .755

Interest rates .428

Currencyuctuations .349

Factor 5 - Political factors 3.34

Political instability in neighboring countries .970

Legislation .820

Terrorist activities .757

Political instability in Romania .719

Wars/conicts .556

Factor 6 - Infrastructure 3.48

Air line safety .946

Airport safety and security .937

Lack of qualied staff .884

Lack of experienced staff .637

Road safety .407Factor 7 - Circumstantial risk 3.19

Increased competition, internationally .928

Increased competition, nationally .845

Stress .673

Decreasing leisure time of tourists .445

Factor 8 - Business insufciencies 2.57

Number of temporary personnel vs the total number of personnel .842

Urbanization .750

Crime in general .693

Repeatbusiness vs new business .692

Amount of overtime worked by employees .611

Image of the country/destination .566

Range of products too limited .524

Aging tourist markets .492

Factor 9 - Specic (local) risk 2.92

Insufcient marketing by local authorities .806

Customer complaints .464Carrying capacity etoo many tourists/visitors .554

Diseases .451

Seasonality .447

Ranking of factors

Factor Mean Ranking

Factor 4 - Economic risk 3.50 1

Factor 6 - Infrastructure 3.48 2

Factor 5 - Political factors 3.34 3

Factor 7 - Circumstantial risk 3.19 4

Factor 2 - Environmental (Nature) 3.12 5

Factor 3 - Competitiveness 3.08 6

Factor 9 - Specic (local) risk 2.92 7

Factor 1 - Organizational risk 2.83 8

Factor 8 - Business insufciencies 2.57 9

M. Oroian, M. Gheres / Tourism Management 33 (2012) 1598e16031602


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References

Cooper, D. R., & Schindler, P. S. (2001). Business research methods (7th ed.). Boston:Mass.: McGraw-Hill Irwin.

Gray, C. F., & Larson, E. W. (2006). Project managemente The managerial process(3rded.). Boston: Mass.: McGraw-Hill Irwin.

Robertson, D., Kean, I., & Moore, S. (2006). Tourism risk management for theAsia Pacic region: An authoritative guide for the managing crises anddisasters. Singapore: APEC International Centre for Sustainable Tourism

(AICST).Shaw, G. K. (2010). A risk management model for the tourism industry in South

Africa [www page]. Accessed on 18.09.11 from. http://www.satsa.com/Downloads/A-risk-management-model-for-the-tourism-industry-in-South-Africa.pdf.

Steyn, H. S. (2000). Practical signicance of the difference in means. South AfricanJournal of Industrial Psychology, 26(3), 1e3.

Additional bibliography

Alexander, C., & Sheedy, E. (2004). The professional risk managers handbook: Acomprehensive guide to current theory and best practices (1st ed.). Wilmington,DE: PRMIA Publications.

Callandera, M., & Page, S. J. (2003). Managing risk in adventure tourism operationsin New Zealand: a review of the legal case history and potential for litigation.Tourism Management, 24, 13e23.

Dwyer, L., Edwards, D., Mistilis, N., Roman, C., & Scott, N. (2009). Destination andenterprise management for a tourism future. Tourism Management, 30(1),63e74.

Eagles, P. F. J., McCool, S. F., & Haynes, C. D. A. (2002).Sustainable tourism in protectedareas. Guidelines for planning and management. Switzerland and Cambridge, UK:IUCN Gland.

Evans, N., Campbell, D., & Stonehouse, G. (2003). Strategic management for travel andtourism. Oxford: ButterwortheHeinemann.

Evans, N., & Elphick, S. (2005). Models of crisis management: an evaluation of theirvalue for strategic planning in the international travel industry. International

Journal of Tourism Research, 7, 135e150.Glaesser, D. (2004).Crisis management in the tourism industry. Oxford: Butterworth-

Heinemann.Kim, H., Kim, J., & Gu, Z. (2010). An examination of US hotel rmsrisk features and

their determinants of systematic risk. International Journal of Tourism Research,14(1), 28e39.

Regester, M., & Larkin, J. (2002). Risk issues and crisis management: A casebook of bestpractice(2nd ed.). London: Kogan Page.

Ryan, C. (2003). Risk acceptance in adventure tourism e paradox and context. InJ. Wilks, & S. J. Page (Eds.), Managing tourist health and safety in the newmillennium(pp. 55e65). Oxford: Pergamon.

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Factor correlation matrix

Component correlation matrix

Component 1 2 3 4 5 6 7 8 9

1 1.000 .173 .153 .135 .224 L.208 .139 .282 .198

2 .173 1.000 .116 .062 .120 .010 .005 .007 .147

3 .153 .116 1.000 .005 .165 .007 .097 .150 .008

4 .135 .062 .005 1.000 .067 .103 .116 .024 .026

5 .224 .120 .165

.067 1.000

.014 .010 .022 .0756 L.208 .010 .007 .103 .014 1.000 .122 .190 .015

7 .139 .005 .097 .116 .010 .122 1.000 .275 .196

8 .282 .007 .150 .024 .022 .190 .275 1.000 .214

9 .198 .147 .008 .026 .075 .015 .196 .214 1.000

Factor correlationmatrix shows thatnone of theabsolutevalues of thecorrelations coefcients areabove 0.282, which indicates thatthe factors arenot veryclosely correlated.

Althoughcorrelationdoes notindicatecausality, it doesindicatethe nature of the linear relationship - positiveor negative. The factors withthe highest correlation coefcients

are bold.

Ranked correlations

Factors Correlation coef cient

(1:8) Organizational risk/Business insufciencies .282

(7:8) Circumstantial risk/Business insufciencies .275

(1:5) Organizational risk/Political factors .224

(1:6) Organizational risk/Infrastructure .208

http://www.satsa.com/Downloads/A-risk-management-model-for-the-tourism-industry-in-South-Africa.pdfhttp://www.satsa.com/Downloads/A-risk-management-model-for-the-tourism-industry-in-South-Africa.pdfhttp://www.satsa.com/Downloads/A-risk-management-model-for-the-tourism-industry-in-South-Africa.pdfhttp://www.satsa.com/Downloads/A-risk-management-model-for-the-tourism-industry-in-South-Africa.pdfhttp://www.satsa.com/Downloads/A-risk-management-model-for-the-tourism-industry-in-South-Africa.pdfhttp://www.satsa.com/Downloads/A-risk-management-model-for-the-tourism-industry-in-South-Africa.pdf

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