Group 3 – The Economics of Tourism and Hospitality

COLLEGE OF INDUSTRIAL TECHNOLOGY (CIT)

Food and Apparel Technology Department

TOPIC 3
The Economics of Tourism and Hospitality

Leader:

Lapidez, Maria Elizabeth G.

Members:

Barcoma, Richelle

Flores, Dulce Marie

Rana, Saira
Group 3 – The Economics of Tourism and Hospitality

THE ECONOMICS OF TOURISM AND HOSPITALITY

Learning Objectives:

 To explain the role of tourism in economic development.

 To appreciate the contributions of tourism to an economy.
 To identify the strategies this can maximize the economic effects of tourism.
 To explain how does the economy affect tourism and how does tourism affect the economy. 
 To learn the economic flow of tourism and hospitality management in our society
Group 3 – The Economics of Tourism and Hospitality

THE ROLE OF TOURISM AND HOSPITALITY IN ECONOMICS

o Creates Employment

The biggest contribution that the industry makes to the economy of a country is creating a
host of new jobs. Direct job opportunities are available as tour guides, tour planners and
operators, travel consultants and in hotels, restaurants and resorts. As Hospitality and Tourism
grows so do these jobs. Jobs are also created in several related industries such as the cruise
industry, airlines, event management, amusement parks etc.

o Boosts Other Local Industries

Indirect jobs are also created for instance in the agriculture and food production sector, in
retail industry and so on. In India, the growth of the services sector has been largely due to the
tourists visiting different destinations.
Group 3 – The Economics of Tourism and Hospitality

o Generates Income

The biggest contribution that the industry makes to the economy of a country is creating a
host of new jobs. Direct job opportunities are available as tour guides, tour planners and
operators, travel consultants and in hotels, restaurants and resorts. As Hospitality and Tourism
grows so do these jobs. Jobs are also created in several related industries such as the cruise
industry, airlines, event management, amusement parks etc.

o Foreign Exchange Earnings

This is the most important contribution the industry can make to the economy of a
country. All touring expenditure incurred by foreign tourists is a source of foreign exchange
earnings. Many countries of the world make it mandatory for tourists from abroad to carry a
certain amount of foreign currency for the entire length of their stay. So, foreign tourists are the
best means of bringing in foreign currency to the host nation.

o Preserves Traditional Industries

Group 3 – The Economics of Tourism and Hospitality

Another advantage that the Hospitality and Tourism industry confers on to an economy is
preservation of traditional industries and handicrafts. Tourists all over the world take great
interest in the indigenous products of the places they visit. So communities make all efforts to
maintain any quaint industry or form of art they specialize in.

o Builds Infrastructure

This functions both ways. More and more tourists are attracted by good infrastructural
facilities. At the same time, when tourists come, much development of infrastructure takes
place with the income generated. Thus Hospitality and Tourism is an industry that benefits
almost every sector of the economy of a nation. Both developing and developed nations of the
world are working to promote this industry to accelerate growth and development in their
individual nations and in the world as a whole.

o Tourism Multiplier Effect

Group 3 – The Economics of Tourism and Hospitality

Tourism not only creates jobs in the tertiary sector, it also encourages growth in the
primary and secondary sectors of industry. This is known as the multiplier effect which in its
simplest form is how many times money spent by a tourist circulates through a country's
economy.

ECONOMIC EFFECTS OF HOSPITALITY AND TOURISM

Group 3 – The Economics of Tourism and Hospitality

● Economic Impact – The economic effects or impacts of hospitality and tourism includes tax
revenue, personal income, standards of living and some employment opportunities that can be
developed with local products, and is often compatible with other economic activities within a
place.

o Increasing foreign exchange earnings

o Increasing income
o Increasing employment

● Positive Effects: ROBUST FOREIGN EXCHANGE - Strong exchange of money currency from one
another country. Countries have used the foreign exchange to developing their economies,
thereby offering better services to the citizens. This has uplifted the living standards of the
people globally.

● Direct Impact - also called active income is the profit you make directly from selling products of
your business.

● Indirect Impact -also called active income is the profit you make directly from selling products of
your business. Magnitude of tourism businesses purchasing supplies and services from other
businesses

● GDP GROWTH (Gross Domestic Product Growth) - Tourism and Hospitality Management
contributes US$8.8 trillion or 10.4% of global GDP, and accounts for 319 million jobs or one in
ten of all jobs on the planet. Reducing poverty and fostering development.

o Employment Opportunity
o Income Increase
Group 3 – The Economics of Tourism and Hospitality

● Negative Effects: FEAST-OR-FAMINE ECONOMY

o UNAFFORDABILITY OF PROPERTY VALUES FOR LOCAL RESIDENTS

- Alternating, extremely high and low degrees of prosperity, success, volume of
business, etc. Communities may be vulnerable to any unexpected economic, social,
or environmental businesses

HOW TO MAXIMIZE THE ECONOMIC EFFECT OF TOURISM AND HOSPITALITY

● THEORY OF BALANCED GROWTH [Ragnar Nurkse (1907–1959)]. -The theory hypothesizes that
the government of any underdeveloped country needs to make large investments in a number
of industries simultaneously.

Illustration:
Group 3 – The Economics of Tourism and Hospitality

● THEORY OF UNBALANCED GROWTH (Albert Hirschman 1958) -This theory emphasizes the need
to expand demand. As demand is increased through the vigorous development of tourism and
hospitality, other industries will move to provide products and services locally.

● Economic Strategies

o IMPORT SUBTITUTION
- It imposes quotas or tares on the importation 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.

THE MOST COMMON FORMS OF INCENTIVES ARE:

o Tax exemptions/- reductions on imported machinery, materials, and the like.

o Reduction in company taxation by means of favorable depreciation allowances on
investment, or special treatment in relation to excise taxes, sales taxes, income taxes,
turnover taxes,
o Tax holidays (limited period) - Guarantee of stabilization of tax conditions (for up to 20
years).
o Grants (for up to 30% of total capital costs).
o Subsidies (guaranteeing minimum level of profit, occupancy, etc.).
o Loans at low rates of interest.
o Provision of land freehold at nominal or little cost or at low rents.
o Free and unrestricted repatriation of all or part of invested capital profits, dividends and
interest subject to tax provisions; and
o Guarantees against nationalization or appropriation.
Group 3 – The Economics of Tourism and Hospitality

BEFORE IMPLEMENTING AN INCENTIVE STRATEGY, A DESTINATION SHOULD:

o Examine the performance of the schemes of other countries in light of their resources and
development of objectives.
o Research the actual needs of investors.
o Design codes of investment concessions related to specific development objectives with precise
requirements of investors; and
o Establish targets of achievements and periodically monitor and assess the level of realization of
such targets.
Group 3 – The Economics of Tourism and Hospitality

REFERENCES:

Wikipedia contributors. (2021, October 6). Impacts of tourism. Wikipedia.

https://en.m.wikipedia.org/wiki/Impacts_of_tourism  

Parsons, R. (2018, June 1). Chapter 16 Hospitality & Tourism – Fundamentals of Business. Pressbooks.

https://viva.pressbooks.pub/fundamentalsofbusiness/chapter/chapter-16-hospitality-tourism/  

World Travel & Tourism Council (WTTC). (2021, June 4). WTTC Research Reveals Travel & Tourism

Sector’s Contribution  To  Canada’s GDP Dropped By More Than $59 Billion In 2020. Hospitality Net.

https://www.hospitalitynet.org/news/4104775.html  

BohatALA. (2021, April 1). Tourism and Hospitality | Negative Effects of Tourism on the Ecosystem.

https://bohatala.com/tourism-and-hospitality/  

F. (2021b, April 22). What is Difference Between Direct  And  Indirect Income and Examples. Forex

Education. https://www.forex.in.rs/direct-and-indirect-income-and-expenses/ 

Role of tourism and hospitality business in economic development. (2021, July 13). ScienceDirect.

https://www.sciencedirect.com/science/article/pii/S2214785321049117  

F. (2021b, April 22). What is Difference Between Direct  And  Indirect Income and Examples. Forex

Education. https://www.forex.in.rs/direct-and-indirect-income-and-expenses/ 
Group 3 – The Economics of Tourism and Hospitality

Role of tourism and hospitality business in economic development. (2021, July 13). ScienceDirect.

https://www.sciencedirect.com/science/article/pii/S2214785321049117  

ANNEX 2. TOURISM AS AN ECONOMIC DEVELOPMENT TOOL. (n.d.). OAS.Org. Retrieved October 10,

2021, from http://www.oas.org/dsd/publications/unit/oea78e/ch10.htm  

The Contribution of Sustainable Tourism to Economic Growth and Employment in Pakistan. (n.d.).

PubMed Central (PMC). Retrieved October 10, 2021, from

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6801594/  

Significance of Hospitality and Tourism in a Country’s Economy. (n.d.). Home. Retrieved October 10,

2021, from https://inurture.co.in/significance-of-hospitality-and-tourism-in-a-countrys-economy/  

A. (2021a, July 3). Importance of Hospitality Industry. IMPOFF. https://impoff.com/importance-of-

hospitality-industry/  

Hospitality and the development of a country. (2021, October 5). TORONTOSOM.CA.

https://www.torontosom.ca/blog/hospitality-and-the-development-of-a-country  

Positive and negative impacts of tourism - Tourism - KS3 Geography Revision. (n.d.). BBC Bitesize.

Retrieved October 10, 2021, from https://www.bbc.co.uk/bitesize/guides/zqk7hyc/revision/3