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Tourism Economic Impact

The Role of Tourism in Economic Development


Use of tourism development as an alternative to help economic growth. Why?
There is a continuous demand for international travel in developed countries. As income in developed countries increases, the demand for tourism also increases at a faster rate. Developing countries need foreign exchange to aid their economic development

Economic Benefits
Employment - Tourism in the largest industry in the world. It far exceeds the automobile and information technology. - Currently over 200 million people work in the industry, representing 11% of global GDP. - The number of international tourists is expected to double by 2020, reaching around 1.5 billion arrivals- nearly half of these visiting Europe.

Economic Benefits
Revenue Generation - Income produced by the tourism business entity or by the government (both national and local units). - The business entity generates its revenue through the operation of its tourism programs. - On the other hand, the government can get its revenue share through direct tourist contribution (travel tax, room tax) and other forms of taxes and permits (VAT, business permits)

Economic Benefits
Foreign Exchange - Tourism is usually one of the largest foreign exchange contributors, especially in countries with minimal amounts of resources to sell internationally. - Tourists traveling to other countries would usually bring in foreign currencies and they change their money to local currencies of places they visit.

Economic Benefits
Income Redistribution - Many countries, especially the developing ones, would have very few highly developed centers. - Economic activities would usually be centered in these areas and leave much of the countryside with the very little income. - When the more economically blessed populations travel to other areas, they bring with them money that they spend in their destinations. Thus, income gets redistributed to the rural areas.

Economic Benefits
Added Liquidity - The money brought in by visitors to destinations provides added liquidity and thus helps increase the economic activities in the areas visited.

Economic Benefits
Multiplier Effect - The term multiplier is used to describe the total effect, both direct and secondary, of an external source of income introduced into the economy. - Tourism multiplier or multiplier effect is used to estimate the direct and secondary effects of tourists expenditures on the economy of a country.

Multiplier Effect
A tourist makes an initial expenditure into the destination. This expenditure is received as income by local tour operators, handicrafts store owners, hoteliers and taxi drivers. In the first round of transactions, a hotelier may use some of the money received to buy some supplies, pay some wages, and retain some profits.

Multiplier Effect
The income in the second round may be spend or saved, while the employee who has received payment for services rendered may spend some of it on rent and some on food, and may put some into savings. They money spent on supplies in the third round of spending goes for such things seed, fertilizers and imported raw materials.

Multiplier Effect
Any income spent on imports has leaked out of the local economy. Leakage is the value of goods and services that must be imported to service the needs of tourism.

What is International Tourism Receipts?


International tourism receipts are defined by WTO as expenditure of international inbound visitors including their payments to national carriers for international transport. They also include any other payments or payments afterwards made for goods and services received in the destination country.

International Tourism Receipts- Top 10 Destinations in 2012


United States of America US$128.6 Spain US$55.9 France US$53.7 China US$50.0 Italy US$41.2 Macau US$38.5 Germany US$38.1 United Kingdom US$36.4 Hong Kong US$31.7 Australia US$31.5

Tourism receipts in the Philippines

Tourism receipts in the Philippines

Undesirable Economic Impacts of Tourism


Some undesirable economic aspects of tourism 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. Since pleasure travel is a discretionary item, it is subject to changes in prices and income. These fluctuations may result in economic instability.

How to Maximize the Economic Effect of Tourism


Growth Theories These are the theory of balance growth and the theory of unbalanced growth. Proponents of the theory of balanced growth suggest that tourism should be viewed as an important part of a broad-based economy. This theory stresses that tourism needs the support of other industries.

How to Maximize the Economic Effect of Tourism


Growth Theories Its objective is to integrate tourism with other economic activities. To obtain maximum economic benefit, tourism goods and services should be locally produced. Supporters of the theory of unbalanced growth see tourism as the spark to economic growth.

How to Maximize the Economic Effect of Tourism


Growth Theories While the proponents of the theory of balanced growth stress the development of supply, supporters of the theory of unbalanced growth emphasize the need to expand demand. As demand is increased through the vigorous development of tourism, other industries will move to provide products and services locally.

How to Maximize the Economic Effect of Tourism


Economic Strategies The key to maximizing the economic effects of tourism is to maximize the amount of revenue and jobs developed within the region. To attain this objective, some economic strategies have been adopted such as import substitution, incentives and foreign exchange.

How to Maximize the Economic Effect of Tourism


Import Substitution It imposes quotas or tariffs on the transportation of goods which can be developed locally. It also grants subsidies, grants or loans to local industries to encourage the use of local materials. Its objective is to minimize the leakage of money.