The economic impacts of tourism The flow of tourists b/n generating and receiving areas can be measured in 4 distinct ways: income employment the area’s balance of payments and investment and development

1. Income Income is earned from selling goods and services to tourists Income pays: interest, rent, wages and salaries (labor-intensive industry) Income is greater where more tourists visit, where tourists spend longer time at the destination or where there is higher expenditure or more opportunities to spend Tourism is of great importance, especially in areas with few opportunities in employment Tourism in areas with little manufacturing industry, have seasonal and low-pay jobs (low-pay or no-pay?)

1. Income (continued) Income is also from interest, rent and profits of tourism businesses Interest: e.g. interest paid on loans to an airline i. o. t. buy aircraft Rent: rent paid to landowner for a campsite by the sea Taxation on tourism activities, sales tax (VAT, room taxes on hotel bills, duty and tax on petrol) Austria, Belgium, Hungary, Spain and the Netherlands = tourist tax Most countries levy a departure tax on all passangers travelling by air National income: sum of all incomes in a country The importance of tourism to a country’s economy can be measured by looking at the proportion of national income that is created by tourism

1. Income (continued): The Tourism Multiplier TIM (tourism income multiplier: tourism’s contribution to the income of an area Money spent by tourists (direct income) in the area will be re-spent by recipients, augmenting the total Direct income is spent to receive goods and services required for holiday (e.g. accommodation, meals, activities) Tourism businesses spend some of the direct income obtaining goods and services to fulfil obligations to the tourist Secondary spend of income: Indirect income: e.g. entry fees to attraction paid by guide of the tourism business or attraction paying its guide Induced Income: e.g. resident spending their pay on food or a visit to the cinema

1. Income (continued): The Tourism Multiplier FORMULA: Multiplier = 1 proportion of leakages

1. Income (continued): Leakages Each time the money is circulated in this way, some money will be lost to the area / money that is lost from the system are known as leakages Examples: taxes paid are transmitted outside the area savings removed from the area and spend elsewhere some spend has gone to goods imported into the area from elsewhere Therefore, if there are high tax rates or many goods demanded to be imported, the TIM may be low and the economy will not benefit greatly from tourism Discussion: what about foreign-owned local hotels or coach operators?

1. Income (continued): Leakages Principle reasons for leakages: cost of imported good, especially food and drink foreign exchange costs of imports for the development of tourist facilities remittance of profits abroad remittance of pay to expatriates management fees or royalties for franchises payments to overseas carriers and travel companies costs of overseas promotions additional expenditure on imports resulting from the earning of those benefiting from tourism

2. Employment Jobs are created in travel agencies, tour operators and other intermediaries who supply tourist services in generating and destinations areas Jobs range from hotel managers, deckchair attendants, excursion-booking clerks, home cleaners open to the public and maintenance staff at theme parks Many of these jobs are seasonal or part-time, tourism’s contribution to full-time employment is much less than total figures – much effort is spent to lengthen the tourist season – but still important to consider that these jobs are created in areas where little alternative employment exists This attracts students to work during holidays or households to open their house as B&B establishments

2. Employment (continued) Tourism as a form of employment is economically beneficial, but efforts must be made to create more full-time jobs in the industry Tourism is important for regions within an economy as it affects employment = resident families who stay in the area need to buy goods, services, education for families and medical care This in turn, give rise to jobs in shops, schools and hospitals Recent developments in technology are threatening labor opportunities in tourism e.g. CRS is replacing manual reservations systems – booking clerk jobs are disapprearing This is similar to online bookings done via the Internet (threatens travel agents) FORTUNATELY: tourists seek a high level of personal service

3. Balance of payments Nationally, tourism has a major influence on a country’s balance of payments International tourists are buying tourist services in another country and those payments are noted in a country’s accounts as ‘invisibles’ The total value of receipts minus the total payments made during the year represent a country’s balance of payments on the tourism account – this is part of the country’s entire invisible balance, and includes other services (e.g. banking, insurance, transport) READ EXAMPLES ON PAGE 112

4. Investment and Development Investments can be private or public Unfortunately, tourism is considered by private investors as high-risk investments This often means that tourism cannot take off until the public sector is prepared to ‘kick-start’ the economy (invest risk capital) This takes on the form of grants or low-interest loans to private developers or government itself builds and runs facilities

4. Investment and Development (continued) There will be unwillingness to invest until a flow of tourists can be demonstrated Accelerator Concept: once tourism is shown to be successful, private developers and government agencies are willing to invest even further (success breeds success) Unfortunately, the relationship b/n tourism growth and economic development is uneven, owing to the rate of inflation, the ability of an area to diversify and attitudes to work among the local labor force Often, key workers are resourced from outside the area if locals are either unwilling or unable to adapt to the needs of the tourism industry

Balancing economic diversification with overdependence on tourism Tourism may offer an opportunity to diversify the economy, increasing the variety of empowerment opportunities available for the local population (especially in rural areas or declining industrial areas) In some rural areas, tourism is being amalgamated with farming businesses to provide additional income and new products for an area (FarmTourism / AgriTourism) In some developing countries, overreliance on tourism is of concern- attracting tourists from many different regions and market segments may help to spread the risk

Inflationary pressures The demand for resources (land and labor) in a destination can push the cost of those resources higher as that very demand creates an imbalance in supply This creates an inflationary effect – as prices rise, employees seek higher pay to afford the higher costs of land/property, food and entertainment Some locals might not be able to afford the increased costs and become excluded from accessing their own community’s resources

The opportunity cost of tourism 1. Opportunity cost = by developing tourism, many resources (land, labor, capital investment) are used to support the industry, thus making them unavailable for other industries “opportunity costs are the benefits that would be forthcoming if the public resources committed to a tourism project were 1) redirected to other public services or 2) retained by the taxpayer” (Crompton, 2006) 2. Taxation = when governments tax residents, i. o. t. invest in tourism projects, they reduce the spending capability of the local population, which impacts on the multiplier effect of indirect or induced expenditure

Statistical measurement of tourism Gathering data on tourism is a vital task for the government of a country Governments need to know the contributions that tourism makes i. t. o. income, employment, balance of payments and investment Governments need to examine trends over time in the country and in comparison with the performance of competing countries National tourist offices use this information to forecast growth, plan for tourism in their areas and as a guide for promotional campaigns. Information must be quantitative (numbers and composition of tourists) and qualitative (nature and purpose) in nature

Statistical measurement of tourism: National Statistics on tourism the number of international visitors (arrivals) and domestic tourists how these are distributed over the months of a year the countries generating the international tourists and regions generating domestic tourists The growth, year on year, of those tourists Their spend – in absolute terms and how they distribute it b/n accommodation, transport, shopping, catering, etc. Their mode of travel – what transport they use, whether they are travelling independently or on an inclusive tour The duration of their visit The types of accommodation they use The purpose of their visit – whether leisure, business or VFR Demographic profiles – age, group composition, social class Psychographic profiles – personality, lifestyle, interests and activities What these tourists seek and the extent to which they are satisfied with what they find

Statistical measurement of tourism: National Statistics on tourism This information related to inbound, outbound and domestic travel This data allows the nation to know what trends are developing over time, what patterns of growth are taking place and how tastes and preferences are changing over time Governments: to determine where to site roads and airports where to make provision for expansion in local gov plans and in what countries to increase or decrease the spend on advertising Private Sector: when deciding whether or not and where to invest and the forms of those facilities should take

The most commonly used measurements in tourism International Surveys: The systematic collection of tourism data on a global scale Global tourism statistics (covering traffic flows, expenditure and trends over time) are collected annually by the UNWTO and the Organisation for Economic Cooperation and Development (OECD) Other surveys are undertaken by private organisations: providing additional data on the volume of tourists and their expenditure

The most commonly used measurements in tourism 2. National Surveys: National and regional governments must have data on domestic tourism – tourism flows within a country Many govs invest in surveys that provide details of the travel habits of residents The EU has encouraged its member states to extend statistical data collection related to the tourism market and industry National Survey Information includes: volume and value of all trips with one overnight stay, the purpose of the trip, accommodation and transport used, activities engaged in, booking method used and their demographic details

Techniques and problems regarding measurement of tourism Criticism: most research employs quantitative methods (when and where tourists travel, where they come from, how long they stay and how much they spend) The demand for qualitative research Research dealing with why people travel is far more limited (understanding the behavior of tourists; how they choose their destinations, what do they do when they arrive and why, what satisfies them, their purchasing patterns (booking directly or through an agent / book early or close to departure time)

Techniques and problems regarding measurement of tourism 1. The demand for qualitative research (continued) this involves lengthy interviews where consumers talk about their behaviours or through observation This type of research is expensive and time-consuming The accuracy of the information cannot be determined (unlike quantitative research) and the honesty of the respondent is unknown This research produces richer and more complete data

Techniques and problems regarding measurement of tourism 2. Some criticisms of quantitative methods Asking participants when arriving at the destination is not accurate, as it is intentions and not accurate picture of what really happened Departing visitors need good levels of recall (especially expenditure) The categories or definitions used may vary by survey (residents vs. nationality) If common definitions are used, direct comparisons may be misleading (EU countries, visiting neighboring country for a meal, The Schengen Agreement)

Techniques and problems regarding measurement of tourism 3. Tourism Satellite Accounts (TSAs) To provide more accurate assessment, the UNWTO introduced TSA This technique includes all indirect expenditures and their resultant contribution to GDP and employment A set of standardized procedures that aim to ensure that all countries are operating similar systems and the resulting data is comparable across nations This provides info regarding the economic importance of tourism for the national economy and employment created by tourism and the tax revenues earned as a direct result from tourism activity

Techniques and problems regarding measurement of tourism 3. Tourism Satellite Accounts (TSAs) - continued This info can assist with planning tourism resources and encourages greater awareness of tourism and further investment in the industry Problems: expensive and time-consuming to employ, disregards sustainability, requires full-scale research in an area of research

Future Issues Although international travel declined in 2009, there was an immediate rebound in 2010 During this downturn, domestic tourism continued to provide significant contribution to many economies Arguments about the need for sustainability are helping to address the ‘grow at all cost’ attitude towards tourism development Emerging markets of China and India – large markets, provision to meet the demands of these markets The UNWTO and WTTC allows free online access to many reports and statistics to improve planning and development to make informed decisions

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