Elaborate four (4) effects of recession on the tourism sector of a country.

(10marks)

Recession will take place after the period of prosperity ends, which is
characterized by these four characteristics; a decrease in the volume of
output, trade and transactions, an increase in the level of unemployment, a
reduction in aggregate income in terms of wage and profit and last but not
least, a decline in consumption expenditure and investment level.

When recession happens in a country, especially in the tourism industry, it will

lead to more unemployment. Unemployment may cause the loss of job skill
which is basically due to lack of application. To re-train them and educate
them again may be extra expensive for the company. Unemployment may
also result in social and political problem.

Besides that, the Gross Domestic Product (GDP) of a country will also
decline. This is because when recession happens, less tourists will come over
and travel in the country. When this happens, the money will not circulate
within the country, which causes the GDP to decline. For example in the F&B
industry, when a restaurant is open and fully operating, they will have to cook
a lot of food. And this will require them to purchase raw materials from the
locals. When they purchase from the locals, the money will be spent in the
country which helps increase the GDP of a country.

Effect of recession on the tourism industry also includes the reduction of

wages of the employee. This may cause some workers to work as part-timers
with their hours cut. For example, a travel agency has 5 full time workers.
When recession happens and the travel agency has to cut cost, the full time
workers are either laid off work or have their hours cut in half. They may be
asked to work only half day as oppose to their normal working hours.

Recession may also cause the decline in spending in the country. This may
be seen where the citizens spends less as a result of recession because they
are laid off or their wages are cut.

Lastly, recession will cause the quality of a good or services to decrease. This
is mainly due to the firm’s initiative to cut cost. When costs are cut, this may
result in the decline of a quality of good and services. As an example, a hotel
reduces their housekeepers to only 10 housekeepers to clean 31 floors. When
there is limited number of workers, and so many rooms to be cleaned in a
very limited time, their work may be affected in terms of the quality and
cleanliness
National income data provides a reasonably accurate and useful measure of a
country’s well-being. Using examples in the hospitality industry, explain
four(4) uses of national income statistics.

National Income accounting is very important both to individual and the

government.

One of the uses of National Income is that it helps with National Planning. It is
important to formulate a country’s short term and long term economic
planning. The government cannot formulate any economic planning without
the knowledge of the trends in national income. They also cannot forecast
future developments. For example in the tourism industry, the government
uses the National Income Statistic to help with the future development. For
instance, based on the national income statistic, they foresee an increasing
number of tourist arrival in the next five years. This allows them to plan on
what to do such as building new hotels or improving the public transportation
sector.

Next is it helps with sectorial contributions. National Income helps to identify

the important sectors which contributes to economic growth and invests more
in them. In Malaysia now, the major contributor to the gross domestic
product(GDP) is the services sector.

National income also helps with Economics Performance over time. National
income estimates are given to measure the performance of an economy over
time by comparing the national income of one time period to that of another.
The national income tells us whether the economic performance of a nation is
growing, stagnant or declining. In Malaysia, the national income has been
improving over time. The tourism industry has brought a lot of currency
exchange into Malaysia.

Lastly, national income helps with economic policy. The national income
statistic are a vital tool in macroeconomic policy and analysis. It estimation are
the most comprehensive measures of aggregate economic activity in an
economy. With national income estimation, future economic policies for
development of a nation can be formulated. For example in the tourism
industry, the national income helps the government to set aside a budget for
the tourism industry to help attract tourists all over the world/.