Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.1 The economic impact of tourism Chapter 5

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.2 International tourist arrivals and receipts In 2014, there were billion international tourist arrivals worldwide, with a growth of 4.3% as compared to billion in The top 10 international tourism destinations in 2014 were:

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.3 International tourist arrivals and receipts International tourism receipts grew to US$1,245 billion in 2014, corresponding to an increase in real terms of 3.7% from The World Tourism Organization reports the following countries as the top ten tourism earners for the year 2014, with the United States by far the top earner. (Turkey is in the 12th place in the list – 29.5 billions $)

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.4 Travel propensity Net Travel Propensity –Percentage of population which have travelled at least once Will be less than 100% reflecting that some of the population will not have travelled at all Gross Travel Propensity –Total number of trips taken in relation to the size of the population May be more than 100% due to some of the population taking multiple trips

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.5 Economic value of tourism is influenced by the level of demand Demand levels –Relative cost compared to income –Influence of exchange rates –Time to travel –Paid holiday entitlements –Including cost of travel

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.6 The economic impacts of tourism 1.Income is generated from pay and salaries, interest, rent and profits. In a labour-intensive industry such as tourism, the greatest proportion is likely to be derived from pay and salaries for those working in jobs either directly serving the needs of tourists or benefiting indirectly from the tourists’ expenditure. Income will be greater in those areas that generate large numbers of tourists, where visitors tend to stay for longer periods, where destination attracts an upmarket or more free-spending clientele and where there are many opportunities to spend. 2.Employment 3.Balance of Payments 4.Investment and development The flow of tourist between generating and receiving areas can be measured in four distinct ways. We must examine the effect on income, employment, the area’s balance of payments and investment and development.

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.7 Economic factors (Continued) 1. Income Generated through: –Wages –Interest –Rent –Business profits –Taxes

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide Employment May be influenced by the level of dominance of the tourism industry Is tourism employment just a low-wage job? –Some jobs may offer low salaries but may not be true for management positions –Some tourism jobs may require fewer entry-level skills, making it accessible to more people –Jobs may be created in areas where there are few alternatives, thus, tourism can be better paid than other opportunities –Seasonal and part-time work may suit some employees (students, parents with young children) Economic factors (Continued)

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide Tourism Balance of Payments Receipts minus payments = Balance of Payments –Example: Country A receives £50 billion from overseas tourists who visit its lands. However its own residents travel overseas, spending a total of £60 billion –The balance of payments is a £10 billion deficit ($50bn – £60bn = – £10bn) –Country B receives £20 billion from overseas tourists who visit whilst its residents spend only £5 billion when they travel overseas –In this case the balance of payments is in credit to the amount of £15 billion. (£20bn – £5bn = £15bn) Economic factors (Continued)

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide Investment and Development Investment in tourism development traditionally seen as risky –Need tourists to justify investment but need investment to attract tourists Public sector often involved in starting investments –Often use grants or loans to encourage development but may actually construct facilities directly Need to minimize leakages to maximize benefits of investment Need to balance economic diversification, avoiding over-reliance on single industry Economic factors (Continued)

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.11 Tourism multiplier Considers the circulatory effect of changes in the economy caused by tourism Compounds the direct, indirect and induced effects Figure 5.2 The multiplier effect of the circulation of income Commonly considers income but can also consider employment and government revenue Production errors in the text book have let to incorrect labelling of the circulations: the above image is a corrected version of this model

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.12 Leakages – reducing the multiplier effect Leakages of expenditure can occur through the: –Cost of imported goods, especially food and drink –Foreign exchange costs of imports for the development of tourist facilities –Remittance of profits abroad –Remittance of wages by expatriates –Management fees or royalties for franchises –Payments to overseas carriers and travel companies –Costs of overseas promotion –Additional expenditure on imports resulting from the earnings of those benefiting from tourism

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.13 Opportunity costs ‘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, J.L. (2006) Economic Impact Studies: Instruments for Political Shenanigans?, Journal of Travel Research, Vol 45, No 1 pp67–82)

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.14 Statistical measurement Measure a variety of themes: –Numbers of travellers (arrivals, departures and domestic tourists) –Demand over time (each year, each month) –Country of origin for international tourists, regions generating domestic tourists –Level and distribution of spendings –Mode of travel –Duration of visit –Facilities and resources used (accommodation, attractions and transport, etc.) –Purpose of visit –Demographic profiles (e.g. age, social class) and sociographic profiles (personality, lifestyle, interests and activities) –Satisfaction levels

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 5.15 Tourism Satellite Accounts (TSA) UNWTO approach designed to establish standardized procedure for measuring tourism’s economic contribution to GDP –Includes the indirect values Considers –Level of tourism expenditure –Contribution to GDP –Level of tourism employment