Chapter 10

Contributions of
Tourism to Economic
Development
Economic Development and
Tourism
 Tourism has been seen as an important form of
economic development.
 It also promoted as an agent of an economic and social
change
 A service based industry capable of creating employment
and income.
 An important form of economic activity
 The impact and role of tourism will vary from region to
region.
 Destinations can rise and fall in popularity.
 Understanding Economic
Impacts

Tourism in the Global Economy

1997 2007 Growth

Jobs 262 Million 383 Million 68.4%

GDP 3,3 Tr. USD 6,3 Tr. USD 52.4%

Investments 801 Billion USD 1,5 Billion USD 53.4 %

Taxes 716 Billion USD 1,3 Billion USD 55.1 %

 Understanding Economic
Impacts

Tourism in the Global Economy

1995 2000 2006 2020

Arrivals 567 million 698 million 842 million 1.560 billion

Receipts 372 billion 500 billion 715 billion 1.600 billion

Jobs 212 million 262 million ? 340 million (2005)

Taxes 166 billion ? ?

Understanding Economic
Impacts
Tourism in the National Economy
 Tourism is a significant economic contributor to
a nation’s GNP.
 Tourism impacts on KENYA’s economy
 Foreign exchange earnings from tourism are a
significant percentage of gross receipts
 Kenya 90%, Tunisia 6 %, Maldives 18 %,
Barbados 32%.
 Understanding Economic
Impacts

Impacts of Tourism on Employment

• 1 in 9 workers worldwide (212 million people)
• Tourism payroll $ 1.7 trillion (10.3 % of total payroll)
• Provides direct and indirect employment

Direct Indirect
Employment Employment %
Year of Total Total
% of Total
1991 4.9 5.3 10.2
1994 5.1 5.5 10.6
2005 5.4 5.9 11.3
Measuring Tourism Economic
Impacts
Identifying Tourism Activity
 Encompasses private and public sectors-transportation,
accommodations, retail, food and beverage, reception, and
convention centers.
 Difficult to distinguish tourism activity from other economic
activity.
 Common standards are vital to make comparisons
 Difficulty measuring industry: conflict on visitors-non-visitors
 Tourism activity is best defined by a demand characteristics.
Measuring Tourism Economic
Impacts

Structure of the Tourism Industry

Type of companies
 Lodging
 Food service
 Passenger transportation
 Channelers (intermediaries)
 Tourist activities
 Tourism organizations
 Measuring Tourism Economic
Impacts
Direct, Indirect and Induced Benefits
 Direct Benefits
 Direct tourist expenditures for goods and services
 Indirect Benefits
 Re-spending of tourism expenditures expenditure, such
as payments to employees, payments to suppliers.
 Induced Benefits
 Additional income spending within a tourism destination,
such as consumption of employees.
 Measuring Tourism Economic
Impacts
Multiplier Model of Tourism Revenue Turnover
 Leakage: Tourism receipts leave the destination’s
economy.
 Multiplier Effect
(Direct expenditures + Indirect Expenditures + Induced
Expenditures) / Direct expenditures
Example:
Direct expenditures….. : $ 500 Multiplier Effect:
Indirect expenditures…: $ 300 (500+300+150) = 950
Induced Expenditures. : $ 150 950/500 = 1.9

If direct expenditures $ 700, total effect will be $700 x 1.9 = $

1330.
 Measuring Tourism Economic
Impacts
Input-Output Analysis
 Analyzing industry relationships by tracking the flow of goods
and services in an areas economy.
 Sales of the total output of each sector
 Total inputs from other sectors
 Measuring Tourism Economic
Impacts
Tourism Satellite Accounts
 A satellite account re-organizes the national system
of accounts to identify the contribution of tourism to
a state or national economy.
 Identify the benefit enjoyed by various tourism sectors of
the economy and employment, income, taxes, and other
benefits that flow from these sectors.
 Provide a comprehensive picture of the size and scale of
tourism in the country, thereby helping governments and
businesses asses the value of tourism to the economy.
Measuring Tourism Economic
Impacts
Cost Benefit Analysis
 Potential Economic Benefits of Tourism
 Increased income and standard
of living
 New employment opportunities
 Increased tax base
 Improved infrastructure and
facilities
 Increased resources for the
protection of natural and
cultural resources.
 Potential Costs
 Seasonal employment
 Increased cost of living for
residents
 Increased traffic and congestion
 Negative impact on cultural and
natural heritage resources
 Increased crime
 Increased taxes
 Leakage of revenue and
dependency on imported goods
and services
Monitoring Economic Impacts
 Overall economic development of the destination
 Analysis of the social, cultural, and environmental costs
and benefits of tourism
 Tourism development depend on more sophisticated
understanding and documentation of the benefits and
costs
 Land values changes
 Higher-price projects replace traditional and less
profitable land uses
 The local economy may have to rely on food imports due
to limited land uses
Monitoring Economic Impacts

Indicators in tourism monitoring

 Establishing indicators that measure success and failure
 Indicators are statistical devices that serve to measure
conditions, such as the amount of air pollution in the area.
 Site protection
 Waste management
 Consumer satisfaction
 Overcrowding
 Lack of safety
 Loss of flora and fauna
 Diminished water quality
 Currency leakage
 Fresh water shortage
 Obstacles to Economic Development
Through Tourism
 Market Obstacles
 Much of tourism activity is dependent on a variety of market factors, such as
income levels, cost of fuel, job security, physical conditions, travel motivations.
 Community Obstacles
 Negative perception of tourism at the local level.
 Environmental Obstacles
 Protecting social and natural environments
 Lack of Integration
 Limited cooperation between many tourism business
 Institutional Obstacles
 Little public support
 Employment and Training Obstacles
 Limitation on training and education opportunities.
Facilitating Employment in the Tourism
Sector
 To take advantage of tourism as a form of economic
development a number of programs and changes are
necessary:
 Better tourism planning and management practices
 Coordination of activities
 Improved cooperation between businesses and communities as well as
between public and private sectors
 The design and delivery of a wide range of tourism education and
training opportunities
 The provision of marketing and promotional assistance
 More equitable access to employment, promotion, education and
training for marginalized population groups
 End
Chapter 10