REVIEWER IN MPTH
products or direct services bought by the tourists.
Module 6: The economics of tourism and hospitality
The role of tourism and hospitality in economic development
Several developing countries have used tourism and hospitality
development as an alternative to help economic growth. The
reasons for this are:
1. There is a continuous demand for international travel in
developed countries;
2. As income in developed countries increases, the demand
for tourism and hospitality also increases at a faster rate;
3. Developing countries need foreign exchange to aid their
economic development.
The Organization for Economic Cooperation and Development
(OECD) has concluded that tourism and hospitality provide a
major opportunity for growth to countries that are at the
intermediate stage of economic development and require more
foreign exchange earnings.
Tourism and hospitality are invisible export that differs from
international trade in many ways.
1. In tourism and hospitality, the consumer collects the
product from the exporting country, thereby eliminating
the freight costs for the exporter except in cases in which
the airline uses those of the tourist-receiving country.
2. The demand for pleasure travel is largely dependent on
non-economic factors, such as local disturbances, political
unrest, and changes in the fashionability of
resorts/countries created mostly by media coverage.
3. By using specific fiscal measures, the exporting or tourist-
receiving country can manipulate exchange rates so that
those for tourists are higher or lower than those in other
foreign trademarks.
4. Tourism and hospitality are multifaceted industries that
directly affect several sections of the economy.
5. Tourism and hospitality bring many more non-monetary
benefits and costs than other export industries.
Economic Impact
When travelers outside the destination area spend on goods and
services within the destination, tourism and hospitality act as an
export industry by bringing in revenues from outside sources.
Tourist expenditures also increase the level of economic activity
in the host area directly. The tourism and hospitality industry’s
economic impact on a destination area can be immense since it
provides a source of income, employment, and foreign exchange.
Direct and Secondary Effects
Tourist expenditures received as income by businesses such as
hotels, restaurants, car rentals, tour operators, and retail shops
serving tourists have a direct effect on the economy of the host
area. The term “direct” means that the income is received
directly. Indirect or secondary effects mean that the money paid
by tourists to businesses is, in turn, used to pay for supplies,
wages of workers, and other items used in producing the
Tourism Multiplier
The term “multiplier” is used to describe the total effect, both
direct and secondary, of an external source of income introduced
into the economy. The tourism multiplier or multiplier effect is
used to estimate the direct and secondary effects of tourist
expenditures on the economy of a country.
Cost-Benefit Ratio
Those concerned with developing the tourism and hospitality
industry, whether a government or private individual, would like
to know the extent of potential benefits and their costs. Benefits
divided by costs equal the cost-benefit ratio. To arrive at these
ratios, the following procedures are used:
1. Determine where the tourist dollar is spent;
2. Determine what the percentage of each expenditure
leaves the local economy;
3. Derive a “multiplier effect,” ratio applied to the income
that reflects multiple spending within an economy;
4. Apply the multiplier effect to the tourist expenditures to
arrive at the total benefits of tourist expenditures in
dollars;
5. Derive a cost-benefit ratio expressed as dollars
received/dollars spent; and
6. Apply the cost-benefit ratios to tourist expenditures to
provide estimates of income and costs of tourist business
to a community.
Undesirable Economic Aspects of Tourism
Some undesirable economic aspects of tourism and hospitality
are higher prices and economic instability. Because of additional
demand and/or increased imports tourist purchases may result
in higher prices in a destination area.
How to maximize the economic effect of tourism and
hospitality
GROWTH THEORIES
1. Balanced Growth - Suggest that tourism and
hospitality should be viewed as an important part of
a broad-based economy.
2. Unbalanced Growth - See tourism and hospitality
as the spark to economic growth.
ECONOMIC STRATEGIES

The key to maximizing the economic effects of tourism and

hospitality is to maximize the amount of revenue and jobs
developed within the region. Category II Support services - lend support to direct providers. It
provides goods and services for both the traveler and for
IMPORT SUBSTITUTION organizations that sell goods and services directly but not
It imposes quotas or tariffs on the importation of goods that can exclusively to tourists.
be developed locally.

INCENTIVES

The wise use of incentives can encourage the influx of capital

both local and foreign, necessary to develop tourism and
hospitality supply. Before implementing an incentive strategy, a Category III Tourism developmental organizations –deal with
destination should: tourism and hospitality development, which tend to be more
1. Examine the performance of the schemes of other complex and broader in scope than the production of daily travel
countries in light of their resources and development of services.
objectives;
2. Research the actual needs of investors;
3. Design codes of investment concessions related to specific
development objectives with precise requirements of
investors; and
4. Establish targets of achievement and periodically monitor
Tourism and Hospitality Supply Components
and assess the level of realization of such targets.
1. Natural resources
FOREIGN EXCHANGE
2. Infrastructure
Many countries have placed restrictions on spending to 3. Superstructure
maximize foreign exchange earnings. They have limited the 4. Transportation and transportation equipment
amount of their currency that tourists can bring in and take out 5. Hospitality resources
of the destination to ensure that foreign currency is used to pay
Natural Resources
bills in the host region.
The physical characteristics of an area can be generalized as:
Module 7: The Tourism and Hospitality Network and Supply
Components  Natural scenery
 Climate
The travel industry is a tourism and hospitality network, which
 Comfortable cold climate
includes both the public and private sectors. Gee, Choy, and
 Comfortable warm climate
Makens (1997) define the travel industry as: “the composite of
 Environment
organizations both private and public, that are involved in the
development, production, and marketing of products and
services to serve the needs of the travelers.”
Infrastructure – consists of all underground and surface
developmental construction of a region.

1. Water
2. Power
3. Communication
4. Sewage/drainage
5. Healthcare
6. Streets/highways
Category 1 - Direct providers - provide services, activities, and 7. Transportation terminal
products that are consumed and/or purchased directly by 8. Security
travelers. The following are the problems in terminal facilities and ground
transportation:
A. General - there is an almost complete lack of coordination
among the three modes of air, rail, and bus. There is also a
noticeable lack of consistency in standards and procedures
within each mode.
B. Air – long walks are required in many terminals
C. Rail
 parking is inconvenient and inadequate near larger
terminals;
 use of facilities by local transients and inadequate
cleaning procedures lead to crowded and unsanitary
waiting rooms and restrooms; etc.
D. Bus – terminals are dirty and crowded due to use by
unauthorized people; - lack of system in boarding gates and
inadequate protection is afforded to passengers against
traffic.

Hospitality Resources - refers to the general feeling of being

welcomed that the visitors receive while visiting a destination
area.

Hospitality Training – This aims to motivate service providers to

be hospitable in dealing with tourists.

The three aspects of attitudes are:

 Attitude Toward Self

 Attitude Toward Other
 Attitude Toward the Tourism and Hospitality Industry

Community Awareness Programs - Although the tourists are

most directly affected by the degree of hospitality shown by
service providers, the overall feeling of being welcomed within a
community will also enhance or detract from the vacation
experience. The program aims to build acceptance of tourism
and to build an understanding of the tourists.

The travel industry is a tourism and hospitality network

encompassing both the public and private sectors. Businesses
and organizations can be thought of as components of the travel
industry and categorized as direct providers, support services,
and tourism developmental organizations. Tourism and
hospitality supply components are classified into five main
categories: natural resources, infrastructure, transportation,
superstructure, and hospitality resource.
Module 8: Tourism and Hospitality Components
TRANSPORTATION
Transportation is of paramount importance in developing
tourism and hospitality. Tourists need easy access to various
forms of transportation, such as road, rail, air, and water.
 Land travel
1. Taxi and Limousine Service
2. Bus Service
3. Rail Service
 Air Travel
Porter service is important at air terminals. The porter’s
helpful behavior and attitude are essential and their
training and supervision should be adequate. Although
airport facilities differ from place to place, the comfort of
travelers should always be kept in mind.
 Sea Travel
Sea travel is a major factor in the tourism and hospitality
industry. Cruise ships have developed into “floating
resorts” or “floatels”. Because of this idea, the demand for
sea travel has increased and cruises became popular in
recent years.
SUPERSTRUCTURE
 Accommodation
While away from home, the tourist needs to eat and sleep.
Sleeping accommodation range from hotels of international
standards and condominiums to campgrounds and the
homes of relatives and friends. The demand for
accommodations varies according to the price the guest is
willing to pay, the services required, and similar
considerations.
Types of accommodations
1. Hotels – provide accommodation, meals, and refreshments
for those who may reserve their accommodations in
advance but need not do so.
2. Condominium –an apartment or individual dwelling unit
owned by an individual but the management and services
are handled by an independent company.
3. Motels or motor hotels – provide bedrooms, baths, and
parking to motorists; rooms are usually accessible from the
parking lot. They are usually near the highways.
4. Inns – are lodging establishments catering to transients
that do not meet the minimum requirement of an economy
hotel;
5. Apartments – are hotels (apartelles), buildings, or edifices
containing several independent and furnished or semi-
furnished apartments that are regularly leased to tourists
and travelers for dwelling, on a more or less long-term
basis and offering basic services to its tenants similar to
hotels;
6. Paradores – are old convents, monasteries, castles, or
fortresses converted into hotels by the government and
operated by a national tourism office.
7. Pensions –private or family-operated tourist
accommodations similar to boarding houses or
guesthouses.
8. Bed-and-breakfast accommodations – provide a room,
bath, and hearty breakfast for tourists and/or travelers.
9. Hostels – provide minimal amenities such as bunk beds and
a commonly shared toilet and bathroom.
10. Campgrounds – appeal mostly to families who travel in
recreational vehicles.
11. Health spas – are hostels and resorts which cater to
individuals who go to spas or mineral springs for weight
reduction or medical treatment; and
12. Private homes – provide lodging to tourists when
accommodations are not available during peak periods.
 Hotel Classifications
Different ways of classifying hotels:
1. By location
2. By type of guest
3. Based on price
The Star rating system - is often used to classify hotels in Europe
and other parts of the world outside the United States. Stars are
assigned according to the quality of restaurants, rooms,
amenities, and service. The highest is the five-star hotel and the
lowest is the one-star hotel. Other classifications are deluxe,
first-class, standard, and economy.
 Food and Beverage
More of the tourist dollar is spent on food and beverage than on
any other service. The type of food service provided will be
related to the needs of the tourists. Many destination areas have
successfully developed menus that are indigenous to the area to
promote local economy food.
Restaurants
- Are establishments offering refreshments and/or meals to the
public? Some of the basic standard requirements for restaurants
are the following:
1. The facades and architectural features of the building shall
be appropriately designed.
2. The dining room shall be adequate in size, with sufficient
and well-maintained furniture;
3. There shall be the cuisine of good quality and presentation
and served with distinction.
4. An Adequate number of well-trained, experienced,
efficient, and courteous staff shall be employees.
Module 9: Tourism and Hospitality Organizations
TOURISM ORGANIZATIONS
Since tourism and hospitality is a diverse industry made up of
many different segments, there is a need to interrelate and
share information. This has led to the establishment of several
public and private organizations at the international, national,
regional, state, and local levels.
INTERNATIONAL ORGANIZATIONS
United Nations World Tourism Organizations (UNWTO)
The UNWTO is the chief international organization in the field of
travel and tourism. It is an intergovernmental technical body
that deals with all aspects of tourism. It began its legal existence
on January 2, 1975. It was born of the International Union of
Official Travel Organizations (IUOTO), a nongovernmental
technical body first set up in The Hague, Netherlands in 1925 to
promote tourism for the economic, social, and cultural
advancement of all nations. This work was interrupted by the
Second World War and in 1946, the organization was re-
established in London.
The value of the work of the IUOTO was recognized in 1963
when the United Nations Conference on International Travel
and Tourism recommended that the United Nations should
consider the IUOTO as the main instrument for the promotion
of tourism.
In October 2003, the WTO became an established agency of the
United Nations and thus, the name was changed to UNWTO. It
is the only organization whose activities cover all sectors of
tourism on a worldwide basis. The UNWTO works in
cooperation with all international organizations, particularly the
United Nations, as well as with commercial and noncommercial
bodies involved in tourism.
Membership
There are three classes of members:
1. Full members - are sovereign states
2. Associate members - are territories or groups of
territories not responsible for their external relations,
but whose membership is approved by the state which
assumes responsibility for their external relations.
3. Affiliate members - are international bodies, both
governmental and non-governmental, concerned with
specialized interests in tourism, as well as commercial
and noncommercial bodies, and associations whose
activities are related to the aims of UNWTO.
The UNWTO has created several regional Commissions
1. Regional Commissions for Tourism in Europe,
2. Regional Travel Commission for the Americas,
3. African Travel Commission
The UNWTO has the same legal character as the United
Nations and its specialized agencies. Three important legally
functioning bodies:
1. General Assembly
 Which meets once every two years,
 is the supreme organ of the UNWTO. It is composed
of representatives from all member states. Each
member has the right to vote in the decision-
making process.
2. The Executive Council
 Meets at least twice a year
 Composed of members elected by the Assembly for
a four-year term based on fair and equitable
geographical distribution.
3. Secretariat directed by a secretary-general
 Carries out the decisions of the General Assembly
and the Executive Council.
 The secretary-general is elected every four years by
the GA on the recommendation of the EC
UNWTO OBJECTIVES
The primary aim of the UNWTO is to promote and develop
tourism; and to contribute to economic development,
international understanding, peace, prosperity, and universal
respect for human rights; and fundamental freedoms for all
without distinction as to race, sex, language, or religion.
International Civil Aviation Organization (ICAO) – This is an
organization of around 134 governments established to promote
civil aviation on a worldwide scale. it was established at the
Chicago conference of 1944.
International Air Transport Association (IATA)
 Was established in 1945 in Havana. It was composed of
airline operators attached to the national delegations of
the ICAO conference in Chicago. At present, membership
includes more than 112 scheduled airlines.
 Their objectives are to promote safe, regular, and
economical air transport, faster air commerce, and study
problems connected with the industry. World
Travel and Tourism Council (WTTC)
 Is the only global forum whose members are the top
decision-makers in the travel and tourism industry. It is the
only body representing the private sector in all parts of the
industry worldwide.
 150 members comprise CEOs, presidents, or chairmen of
airlines, airports, hotels, cruise lines, travel agencies, tour
operators, and travel technology suppliers.
WTTC drives three strategic priorities
 Freedom to travel;
All of whichPolicies
have been
for established
growth; and to coordinate tourist activities among
and within member countries
 Tourism for tomorrow
Development Organizations (DO)
 The World Bank (US) Organization of American States (OAS)
 OPEC Fund for International Development (Austria)
 The main objective is to strengthen relations between the
 Asian Development Bank (Philippines)
American States by providing advisory services and
 Islamic Development Bank (Saudi Arabia)
training programs in many fields including tourism.
REGIONAL ORGANIZATIONS
Others:
Economic Cooperation and Development (OECD)
 South American Tourism Organization (SATO)
 Was set up in a convention signed in Paris on December 14,  European Travel Commission (ETC)
1960.  Common Market Travel Association (CMTA)
 It provides that the OECD shall promote policies designed
to achieve the highest sustainable economic growth and
employment and a rising standard of living in member
countries, while maintaining financial stability and
contributing to the development of the world economy; to
contribute to sound economic expansion in economically
developing nonmember countries; and to contribute to the
expansion of world trade on a multilateral,
nondiscriminatory basis by international obligations.

Pacific Asia Travel Association (PATA)

 Was organized in Hawaii in 1951.

 It is composed of more than 1,000 organizations. Its
purpose is to develop, promote, and facilitate travel in the
Pacific area.
 PATA has initiated the “PATA Code for Environmental
Tourism”. In this code, environmentally responsible
tourism means recognizing the necessity of ensuring a
sustainable future.
 PATA organizes a wide range of conferences, reports,
advertising, training programs, and seminars.

The following is a list of some of PATA’s publications:

1. Pacific Travel News

2. Annual Statistical Reports
3. Travel Market Study
4. Meeting Pacific (a country-by-country facilitates guide)
5. PATA Trade Manual
6. Tourism International Research Pacific (quarterly)

Caribbean Tourism Association (CTA)

 Was founded in 1951 to encourage and assist in the

development of tourism throughout the Caribbean area.

Asia-Pacific Economic Cooperation (APEC)

 It represents 15 countries.
 The purpose of APEC is to establish coordination of
national economies for the benefit of countries in the
Asia-Pacific region as a whole.
 The specific goals are to sustain the growth and
development of capital and technology in keeping with
the principles of the General Agreement on Tariffs and
Trade (GATT) and to develop and strengthen the open
multilateral trading system in the interest of Asia-Pacific
and all other economies.