CHAPTER 3

The Economics of Tourism and Hospitality and its Sub-Topics.

Many developing countries used tourism and hospitality industries as a alternative to help
the development of the economy. Some developing countries used tourism and hospitality
industry because, first the demand of international travels in developing countries increases.
second, as the income in developing countries increase the demand of tourism and hospitality also
increase in a faster rate, third developing countries need foreign exchange to aid their economic
development.

Tourism and hospitality industry have big impacts to economic development of developing
countries. The industry generate income, employment and opportunities to locals that will help to
uplift the standard living of the people it also help the developing countries attract investor. In order
to measure the economic impact of tourism and hospitality on its area of destination, it is important
to know the direct and secondary effects of tourist expenditure on the destination area. The term
direct means that there's a direct income receive by the establishment from tourist, an example of
this establishment are hotel, restaurant, car rentals, tour operator and retail shops. The secondary
effect means that the money paid by tourist to the business is used to pay wages of workers and
used to produce service and products bought by tourist. The tourism multiplier used to describe
the total effect both direct and indirect of external source of income in the economy. Its used to
estimate the direct and secondary effects of tourist expenditures on the economy of the country.
Tourism multiplier is like domino effect, the tourist makes an initial expenditure into destination.
The expenditure is receive as an income of local tour operator, handicrafts store owners hoteliers
and taxi driver, some of this expenditure are save or spend to pay the wages of people and used
produced product in services. The expenditure or the money will circulate to the economic activity
in the country and it will help the country's economic status improve.

Tourism and hospitality industry are crucial for a country to develop their economy
especially third world country, like the Philippines. Tourism and hospitality industry help country to
stabilize their economy, but a country should promote their product in order to entice travelers and
compete in global platform.