economic impact of tourism.ppt

Globalisation and TourismGlobalisation and Tourism

Impact of TourismImpact of Tourism

Economic Impact of TourismEconomic Impact of Tourism

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

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

• As with other impacts, this massive As with other impacts, this massive economic development brings along both economic development brings along both positive and negative consequences.positive and negative consequences.

Economic Impact of TourismEconomic Impact of Tourism

• According to the World Tourism Organization:According to the World Tourism Organization:

• 698 million people698 million people traveled to a foreign traveled to a foreign country in 2000, spending more country in 2000, spending more US$ 478 US$ 478 billionbillion. .

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

NEGATIVE ECONOMIC IMPACTS OF TOURISMNEGATIVE ECONOMIC IMPACTS OF TOURISM

• There are many There are many hidden costshidden costs to tourism, which to tourism, which can have unfavourable economic effects on the can have unfavourable economic effects on the host communityhost community. .

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

• Whereas the least developed countries have the Whereas the least developed countries have the most urgent need for income, employment and most urgent need for income, employment and general rise of the standard of living by means of general rise of the standard of living by means of tourism, they are least able to realize these tourism, they are least able to realize these benefits. benefits.

• Among the reasons for this are Among the reasons for this are large-scale large-scale transfer of tourism revenuestransfer of tourism revenues out of the host out of the host country and country and exclusion of local businessesexclusion of local businesses and and products. products.

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

LeakageLeakage

• The The direct incomedirect income for an area is the amount of for an area is the amount of tourist expenditure that remains locally after tourist expenditure that remains locally after taxes, profits, and wages are paid outside the taxes, profits, and wages are paid outside the area and after imports are purchased; these area and after imports are purchased; these subtracted amounts are called subtracted amounts are called leakageleakage. .

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

• In addition, significant amounts of income In addition, significant amounts of income actually retained at destination level can leave actually retained at destination level can leave again through leakage.again through leakage.


LeakageLeakage

• 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.


LeakageLeakage


LeakageLeakage

• There are two main ways that leakage occurs: There are two main ways that leakage occurs: Import leakageImport leakage • This commonly occurs when tourists demand standards This commonly occurs when tourists demand standards

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

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

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

• The average The average import-related leakageimport-related leakage for most for most developing countries today is between developing countries today is between 40% and 50% of 40% and 50% of gross tourism earningsgross tourism earnings for small economies and for small economies and between 10% and 20% for most advanced and between 10% and 20% for most advanced and diversified economies.diversified economies.


LeakageLeakageExport leakageExport leakage

• TNC's have a substantial share in the export TNC's have a substantial share in the export leakage. leakage.

• Often, especially in poor developing Often, especially in poor developing destinations, they are the only ones that destinations, they are the only ones that possess the necessary capital to invest in the possess the necessary capital to invest in the construction of tourism construction of tourism infrastructure infrastructure andand facilitiesfacilities. .

• As a consequence of this, an As a consequence of this, an export leakageexport leakage arises when overseas investors who finance the arises when overseas investors who finance the resorts and hotels take their profits back to resorts and hotels take their profits back to their country of origin. their 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.


Enclave tourismEnclave tourism

• The The cruise ship industrycruise ship industry provides provides another example of economic enclave another example of economic enclave tourism. tourism.

• Non-river cruises carried some 8.7 million Non-river cruises carried some 8.7 million international passengers in 1999. international passengers in 1999.

• On many ships, especially in the On many ships, especially in the Caribbean, guests are encouraged to Caribbean, guests are encouraged to spend most of their time and money on spend most of their time and money on board, and opportunities to spend in some board, and opportunities to spend in some ports are closely managed and restricted.ports are closely managed and restricted.


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 its however if a country or region becomes dependent for its economic survival upon one industry, it can put major economic survival upon one industry, it can put major stress upon this industry as well as the people involved to stress upon this industry as well as the people involved to perform well. perform well.

• Many countries, especially developing countries with little Many countries, especially developing countries with little ability to explore other resources, have embraced 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. In small island depends directly or indirectly on tourism. In small island developing states, percentages can range from 83% in developing states, percentages can range from 83% in the Maldives to 21% in the Seychelles and 34% in the Maldives to 21% in the Seychelles and 34% in JamaicaJamaica

• 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 ofimpacts of natural disastersnatural disasters such as tropical storms such as tropical storms andand changing tourism patternschanging tourism patterns can all have a can all have a devastating effect.devastating effect.


Seasonal character of jobsSeasonal character of jobs

Problems that seasonal workers face Problems that seasonal workers face include:include:

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

season to the nextseason to the next• difficulties in getting training, difficulties in getting training,

employment-related medical benefits, and employment-related medical benefits, and recognition of their experiencerecognition of their experience

• unsatisfactory housing and working unsatisfactory housing and working conditions. 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 and can stimulate the investment host economy and can stimulate the investment necessary to finance growth in other economic necessary to finance growth in other economic sectors. sectors.

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

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

• Tourism is one of the Tourism is one of the top five exporttop five export categories categories for as many as for as many as 83% of countries83% of countries and is a and is a main main sourcesource of foreign exchange earnings for at least of foreign exchange earnings for at least 38% of countries38% of countries..


Contribution to government Contribution to government revenuesrevenues

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

• The WTO estimates that travel and tourism's The WTO estimates that travel and tourism's direct, indirect, and personal tax contribution direct, indirect, and personal tax contribution worldwide was over worldwide was over US$ 800 billion in 1998US$ 800 billion in 1998 - - a figure it expects to double by 2010. a figure it expects to double by 2010.


Employment generationEmployment generation

• The rapid expansion of international tourism has The rapid expansion of international tourism has led to significant employment creation. led to significant employment creation.

• For example, theFor example, the hotelhotel accommodation sector accommodation sector alone provided aroundalone provided around 11.3 million jobs11.3 million jobs worldwide worldwide in 1995. in 1995.

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

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


Stimulation of infrastructure Stimulation of infrastructure investmentinvestment

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

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

• Other local revenues that are not easily quantified, as Other local revenues that are not easily quantified, as not all tourist expenditures are formally registered.not all tourist expenditures are formally registered.

• 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 great money is returned to the local economy, and has a great multiplier effect as it is spent over and over again. multiplier effect as it is spent over and over 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

economic impact of tourism.ppt

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