How the process is significant for people: Economic Impacts of Tourism.

How the process is How the process is significant for people:significant for people:Economic Impacts of Economic Impacts of

TourismTourism

Economic Impact of TourismEconomic Impact of Tourism

• The tourism industry generates substantial The tourism industry generates substantial economic benefits to both host countries and economic benefits to both host countries and tourists' home countries. tourists' home countries.

• Especially in developing countries, one of the Especially in developing countries, one of the main motivations for a region to promote main motivations for a region to promote itself as a tourism destination is the expected itself as a tourism destination is the expected economic improvement.economic improvement.

• But this massive economic development But this massive economic development brings both positive and negative brings both positive and negative consequences.consequences.

Economic Impact of TourismEconomic Impact of Tourism

• The World Tourism Organisation (WTO) The World Tourism Organisation (WTO) estimates there were 880 million estimates there were 880 million international visitor arrivals globally in 2009international visitor arrivals globally in 2009 . .

• International tourism receipts combined with International tourism receipts combined with passenger transport currently total more passenger transport currently total more than US$ 575 billion - making tourism the than US$ 575 billion - making tourism the world's number one export earnerworld's number one export earner, , ahead of automotive products, chemicals, ahead of automotive products, chemicals, petroleum and food.petroleum and food.

NEGATIVE ECONOMIC IMPACTS OF TOURISMNEGATIVE ECONOMIC IMPACTS OF TOURISM

• There are many There are many hidden costshidden costs to tourism to tourism

• Often rich countries are better able to Often rich countries are better able to profit from tourism than poor ones. profit from tourism than poor ones.

• One reason for this is One reason for this is large-scale large-scale transfer of tourism revenuestransfer of tourism revenues out of out of the host country.the host country.

NEGATIVE ECONOMIC IMPACTS OF TOURISM: NEGATIVE ECONOMIC IMPACTS OF TOURISM:

• EXAMPLE: In most all-inclusive package EXAMPLE: In most all-inclusive package tours, about tours, about 80%80% of travellers' of travellers' expenditures go to the airlines, hotels expenditures go to the airlines, hotels and other international companies, and and other international companies, and not to local businesses or workers. not to local businesses or workers.

• This is called leakage.This is called leakage.

NEGATIVE ECONOMIC IMPACTS OF TOURISM:NEGATIVE ECONOMIC IMPACTS OF TOURISM:

• A study of tourism 'leakage' in Thailand A study of tourism 'leakage' in Thailand estimated that 70% of all money spent by estimated that 70% of all money spent by tourists ended up leaving Thailandtourists ended up leaving Thailand

• Estimates for other Third World countries Estimates for other Third World countries range from 80% in the Caribbean to 40% range from 80% in the Caribbean to 40% in India.in India.


Leakage occurs when: Leakage occurs when: • when tourists demand standards of when tourists demand standards of

equipment, food, and other products that equipment, food, and other products that the host country cannot supply. the host country cannot supply.

• e.g. goods and drinks must often be e.g. goods and drinks must often be imported, since local products are not up imported, since local products are not up to the hotel's (i.e. tourist's) standards or to the hotel's (i.e. tourist's) standards or the country simply doesn't have a the country simply doesn't have a supplying industry. supplying industry.

• much of the income from tourism much of the income from tourism expenditures leaves the country again to expenditures leaves the country again to pay for these imports. pay for these imports.

NEGATIVE ECONOMIC IMPACTS OF NEGATIVE ECONOMIC IMPACTS OF TOURISM:TOURISM:

export leakageexport leakage arises when overseas arises when overseas investors who finance the resorts and investors who finance the resorts and hotels take their profits back to their hotels take their profits back to their country of origin.country of origin.


Enclave tourismEnclave tourism• Local businesses often see their chances to earn Local businesses often see their chances to earn

income from tourists severely reduced by the income from tourists severely reduced by the creation of creation of "all-inclusive" vacation packages"all-inclusive" vacation packages..

• When tourists remain for their entire stay at the When tourists remain for their entire stay at the same cruise ship or resort, which provides same cruise ship or resort, which provides everything they need and where they will make everything they need and where they will make all their expenditures, not much opportunity is all their expenditures, not much opportunity is left for local people to profit from tourism. left for local people to profit from tourism.

• All-inclusive hotels generate the largest amount All-inclusive hotels generate the largest amount of revenue but their impact on the economy is of revenue but their impact on the economy is smaller per dollar of revenue than other smaller per dollar of revenue than other accommodation types.accommodation types.

• All-inclusives also import more and employed All-inclusives also import more and employed fewer people per dollar of revenue than other fewer people per dollar of revenue than other hotels. hotels.

• Smaller Smaller trickle-down effecttrickle-down effect on local economies. on local economies.


Infrastructure costInfrastructure cost• Tourism development can cost the local Tourism development can cost the local

government and local taxpayers a great deal of government and local taxpayers a great deal of money. money.

• Developers may want the government to Developers may want the government to improve the airport, roads and other improve the airport, roads and other infrastructure, and possibly to provide tax breaks infrastructure, and possibly to provide tax breaks and other financial advantages, which are costly and other financial advantages, which are costly activities for the government. activities for the government.

• Public resources spent on subsidized Public resources spent on subsidized infrastructure or tax breaks may reduce infrastructure or tax breaks may reduce government investment in other critical areas government investment in other critical areas such as education and health. such as education and health.


Increase in pricesIncrease in prices• Increasing demand for basic services and Increasing demand for basic services and

goods from tourists will often cause price goods from tourists will often cause price hikes that negatively affect local hikes that negatively affect local residents whose income does not residents whose income does not increase proportionately. increase proportionately.

• Tourism development and the related rise Tourism development and the related rise in real estate demand may dramatically in real estate demand may dramatically increase building costs and land values. increase building costs and land values.

• This makes it more difficult for local This makes it more difficult for local people to meet their basic daily needs.people to meet their basic daily needs.


Economic dependence of the local Economic dependence of the local community on tourismcommunity on tourism

• DiversificationDiversification in an economy is a sign of health, in an economy is a sign of health, however if a country or region becomes dependent for however if a country or region becomes dependent for its economic survival upon one industry, it can put its economic survival upon one industry, it can put major stress upon this industry as well as the people major stress upon this industry as well as the people involved to perform well. involved to perform well.

• Many countries, especially developing countries with Many countries, especially developing countries with little ability to explore other resources, have embraced little ability to explore other resources, have embraced tourism as a way to boost the economy. tourism as a way to boost the economy.

• In The Gambia, for instance, 30% of the workforce In The Gambia, for instance, 30% of the workforce depends directly or indirectly on tourism. depends directly or indirectly on tourism.

• Over-reliance on tourism carries risks to tourism-Over-reliance on tourism carries risks to tourism-dependent economies. dependent economies. Economic recessionEconomic recession, the , the impacts of impacts of natural disastersnatural disasters such as tropical storms such as tropical storms and and changing tourism patternschanging tourism patterns can all have a can all have a devastating effect.devastating effect.


Seasonal character of jobsSeasonal character of jobs

In some places tourism may only provide In some places tourism may only provide seasonal employment.seasonal employment.

Some problems that seasonal workers face Some problems that seasonal workers face include:include:

• job (and therefore income) insecurityjob (and therefore income) insecurity• no guarantee of employment from one season no guarantee of employment from one season

to the nextto the next• difficulties in getting training, employment-difficulties in getting training, employment-

related medical benefits, and recognition of related medical benefits, and recognition of their experiencetheir experience

• unsatisfactory housing and working conditions.unsatisfactory housing and working conditions.

NEGATIVE ECONOMIC IMPACTS OF NEGATIVE ECONOMIC IMPACTS OF TOURISM: TOURISM:

1.1. LeakageLeakage

2.2. Enclave tourismEnclave tourism

3.3. Infrastructure costInfrastructure cost

4.4. Increase in pricesIncrease in prices

5.5. Economic dependenceEconomic dependence

6.6. Seasonal character of jobsSeasonal character of jobs

POSITIVE ECONOMIC IMPACTS OF TOURISM:POSITIVE ECONOMIC IMPACTS OF TOURISM:

Foreign exchange earningsForeign exchange earnings

• Tourism expenditures generate income to the Tourism expenditures generate income to the host economy.host economy.

• Some countries seek to accelerate this growth Some countries seek to accelerate this growth by requiring visitors to bring in a certain by requiring visitors to bring in a certain amount of foreign currency for each day of their amount of foreign currency for each day of their stay. stay.

• An important indicator of the role of An important indicator of the role of international tourism is its generation of international tourism is its generation of foreign exchange earningsforeign exchange earnings..

• Tourism is one of the top five export categories Tourism is one of the top five export categories for as many as 83% of countries and is a main for as many as 83% of countries and is a main source of foreign exchange earnings for at least source of foreign exchange earnings for at least 38% of countries.38% of countries.


Contribution to government Contribution to government revenuesrevenues

• Direct contributionsDirect contributions are generated by are generated by taxes on incomes from tourism taxes on incomes from tourism employment and tourism businesses, and employment and tourism businesses, and by direct levies on tourists such as by direct levies on tourists such as departure taxes. departure taxes.

• Indirect contributionsIndirect contributions come from taxes come from taxes and duties levied on goods and services and duties levied on goods and services supplied to tourists. supplied to tourists.


Employment generationEmployment generation

• International tourism has led to significant International tourism has led to significant employment creation. employment creation.

• Tourism can generate jobs Tourism can generate jobs directlydirectly through hotels, restaurants, nightclubs, through hotels, restaurants, nightclubs, taxis, and souvenir sales, and taxis, and souvenir sales, and indirectlyindirectly through the supply of goods and services through the supply of goods and services needed by tourism-related businesses. needed by tourism-related businesses.

• Tourism supports some 7% of the world's Tourism supports some 7% of the world's workers.workers.


Infrastructure investmentInfrastructure investment

• Tourism can induce the local Tourism can induce the local government to make government to make infrastructure infrastructure improvementsimprovements such as better water such as better water and sewage systems, roads, electricity, and sewage systems, roads, electricity, telephone and public transport networkstelephone and public transport networks

• This can can improve the quality of life This can can improve the quality of life for residents as well as facilitate for residents as well as facilitate tourism. tourism.


Contribution to local economiesContribution to local economies

• As the environment is a basic component of the tourism As the environment is a basic component of the tourism industry's assets, tourism revenues are often used to industry's assets, tourism revenues are often used to measure the economic value of measure the economic value of protected areasprotected areas. .

• Money is earned from tourism through Money is earned from tourism through informal informal employmentemployment (e.g. street vendors, informal guides, (e.g. street vendors, informal guides, rickshaw drivers)rickshaw drivers)

• The positive side of informal employment is that the The positive side of informal employment is that the money is returned to the local economy, and has a money is returned to the local economy, and has a great multiplier effect as it is spent over and over great multiplier effect as it is spent over and over again. again.

• The WTO estimates that tourism generates an The WTO estimates that tourism generates an indirect indirect contributioncontribution equal to equal to 100%100% of of directdirect tourism tourism expenditures. expenditures.

POSITIVE ECONOMIC IMPACTS OF POSITIVE ECONOMIC IMPACTS OF TOURISM: TOURISM:

1.1. Foreign exchange earningsForeign exchange earnings

2.2. Contributions to government revenuesContributions to government revenues

3.3. Employment generationEmployment generation

4.4. Infrastructure investmentInfrastructure investment

5.5. Contribution to local economiesContribution to local economies

How the process is significant for people: Economic Impacts of Tourism.

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