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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.
Economic benefits
Foreign exchange earnings and the balance of payments
Economic benefits
Foreign exchange earnings and the balance of payments Generation of income
Economic benefits
Foreign exchange earnings and the balance of payments Generation of income Generation of employment
Economic benefits
Foreign exchange earnings and the balance of payments Generation of income Generation of employment Improvement of infrastructure
Economic benefits
Foreign exchange earnings and the balance of payments Generation of income Generation of employment Improvement of infrastructure Encouragement of Entrepreneurial activity
Economic benefits
Foreign exchange earnings and the balance of payments Generation of income Generation of employment Improvement of infrastructure Encouragement of Entrepreneurial activity Stimulation of regional economies and mitigation of regional economic disparities
Leakage
Multiplier inversely related to leakage Common sources of leakage - Overseas promotion - Import of materials for construction - Consumables - Repatriation - Foreign loans
Import leakage The average import-related leakage for most developing countries today is between 40% and 50% of gross tourism earnings for small economies and between 10% and 20% for most advanced and diversified economies, according to UNCTAD. Export leakage (Repatriation) Multinational corporations and large foreign businesses have a substantial share in the import leakage.
A study of tourism 'leakage' in Thailand estimated that 70% of all money spent by tourists ended up leaving Thailand (via foreign-owned tour operators, airlines, hotels, imported drinks and food, etc.). Estimates for other Third World countries range from 80% in the Caribbean to 40% in India.
Source: Sustainable Living
Impacts explained
http://www.youtube.com/watch?v=1WgvKEqDI3k&l ist=PL0B4B5A329608FA23&index=1&feature=plpp_vi deo
Economic Impact
Direct
visitor expenditure minus the value of imports
Multiplier
multipliers are coefficients that express the amount generated in an area by an incremental unit of tourist expenditure (Getz, 1994: 442) The multiplier is a numerical ratio which seeks to express the relationship between a unit of tourism expenditure and its wider impact in the economy. 1. transaction (or sales) multiplier 2. output multiplier 3. Income multiplier 4. employment multiplier 5. government revenue multiplier
Indirect
Re-spending of tourism expenditures expenditure, such as payments to employees, payments to suppliers, builders, accountants, banks
Induced
re-spending of the income in the local economy generating another round of economic activity
Might sound simple, but actual collection of data is very difficult, especially for induced effects!
The Multiplier
Allows total impact of initial expenditure to be calculated Can calculate MULTIPLIER by dividing a unit of tourist expenditure by the proportion of it which leaks out of the economy in the form of savings or imports Inversely related to LEAKAGE
(Cooper et al 1998)
National vs regional
National multipliers usually higher than regional Larger economic base Smaller leakages
Weaknesses of multipliers
Data deficiencies Secondary data inadequate Time, expense of collecting primary data Partial industrialisation
References
Archer, B.H. 1982. The value of multipliers and their policy implications. Tourism Management 3(2): 236-241. Cooper, C., Fletcher, J., Gilbert, D. and Wanhill, S. 2005, Tourism principles and practice, Pitman Publishing,London. Wall, G. and Mathieson, A., 2006, Tourism : change, impacts, and opportunities, Wiley, Harlow, Essex, England. Smith, S.L.J., 1995, Tourism analysis: A handbook, Longman Group, England. http://www.uneptie.org/pc/tourism/sust-tourism/economic.htm