2

Economics o
f Tourism
Chapter 4
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 ROLE OF TOURISM IN ECONOMIC
DEVELOPMENT
Several developing countries have used
tourism development as an alternative to
help economic growth .
 THE REASONS FOR THIS ARE :
1. There is a continuous dema
nd for international travel in
develop countries .

2.As income in developed coun

tries increases , the demand
for tourism also increases at
a faster rate .

3.Developing countries need fo

reign exchange to aid there
economic development

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The ORGANIZATION for ECONOM
IC COOPERATION and DEVELOP
MENT(OECD)

This organization has concluded that tourism pr

ovides a major opportunity for growth for count
ries that are the intermediate stage of economic
development and require more foreign exchang
e earnings.

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Tourism is an invisible export, which differs from
the international trade in many ways:

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1. In tourism , the con
sumer collects the pr
oduct from the expo
rting country, thereb
y eliminating the frei
ght costs for the exp
orter , except in case
s in which the airline
used are those of the
tourist receiving cou
ntry
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2. The demand for pleasure travel is largely depe
ndent on non-economic factors, such as:

• Local disturbances
• Political unrest
• Changes in fashionabilit
y of resorts/countries cr
eated mostly by media
coverage.
• Price elastic
• Income Elastic
This means that changes in price and
income will also change the dema
nd for pleasure travel .

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3. By using specific fiscal measures,
• The exporting or tourist receiving
country can manipulate exchang
e rates so that those for tourists a
re higher or lower (normally the l
atter is implemented in order to a
ttract large number of tourists ) t
han those in foreign trade market
s.
• Tourists are also allowed to buy in
domestic markets at the same pri
ce as the local residents (the exce
ptions are the duty-free tourist sh
ops operated in many Caribbean i
slands and elsewhere).

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 4. Tourism is Multifaceted Industry
That directly affects several sectors i
n the economy such as:
• Shops
• Hotels
• Restaurants
• Local Transport Firms
• Entertainment Establishments
• Handicraft Producers

Indirectly affects many others such a

s:
• Equipment Manufacturers
• Utilities

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 5. Tourism brings many more
NON -MONETARY BENEFITS and costs than ot
her export industries such as:
• Socials
• Cultural
• Environmental bene
fits

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ECONOMIC IMPACT
• When travelers outside the destination area spend on goods a
nd services within the destination, tourism acts as export indu
stry by bringing in revenues from outside sources.

• Tourists expenditures also increase the level of economic activ

ity in the host area directly.

• Many countries have utilized tourism as a means to increase f

oreign exchange earnings to produce investment necessary to
finance economic growth.

• Tourism’s economic impact in an area provides a source of in

come, employment, and foreign exchange.
Direct and Secondary Effects
• In order to measure the economic impact of tourism
on the destination area, it is important to know the d
irect and secondary effects of visitor expenditures on
the economy of the area.

• Tourists expenditures received as income by business

es such as hotels, restaurants, ca rentals, tour operat
ors, and retail shops serving tourists have a direct eff
ect on the economy of the host area.

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Direct and Secondary Effects
• The term direct means that the income is received di
rectly.

• Indirect or secondary effects mean that the money p

aid by tourists to businesses are in turn used to pay f
or supplies, wages of workers, and other items used i
n producing the products or direct services bought by
tourists.

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Tourism Multiplier
• The term multiplier is used to describe the tot
al effect, both direct and secondary, of an exte
rnal source of income introduced into the eco
nomy.

• Tourism multiplier or multiplier effect is used

to estimate the direct and secondary effects of
tourist expenditures on the economy of a cou
ntry.
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 THANK YOU FOR LISTENING ...

GODBLESS :)

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