courtesy : Travel and Tourism
Economic impacts
About 1.4 billion people visited another country in 2019, with tourist spending contributing about US$1.45 trillion to the global economy. Europe is by far the dominant origin and arrival region for tourists, accounting for 51% of arrivals and 48% of travelers in 2019.
Tourism can be divided into subcategories into which impacts fall: spending from visitors on tourism experiences, like beach holidays and theme parks (domestic and international), business spending, and capital investment.
The economic contribution of tourism is felt in both direct and indirect ways, where direct economic impacts are created when commodities like the following are sold: accommodation and entertainment, food and beverages services, and retail opportunities. Residents, visitors, businesses, and various levels of governments (municipal to federal) all influence direct tourism impacts through their spending in or near a given tourism area. The key component of direct economic impacts of tourism is that they occur within a country’s borders and are implemented by “residents and non-residents for business and leisure purposes”.
In contrast, indirect economic impacts of tourism can be found in investment spending surrounding a tourism offering from private and governmental interests. This investment may not explicitly be related to tourism, but benefits the tourist and local stakeholders all the same. Indirect impacts of tourism are exemplified by the purchase and sale of intermediary items, like additional supplies for restaurants during the high tourism season, or widened sidewalks in busy downtown centres. Indirect economic impacts (the supply chain, investment, and government collective) account for 50.7 percent of the total GDP contribution from travel and tourism in 2014.
Induced spending, which is the re-circulation of a tourist dollar within a community, is another way that tourism indirectly has an impact on a community. For example, a foreign tourist injects money into the local economy when he spends a dollar on a souvenir made by a local at the tourism destination. That individual goes on to spend that dollar on lunch from a local vendor, and that vendor goes on to spend it locally.
Positive and negative economic impacts of tourism
Crowded beach in Mar del Plata during summer
There are both positive and negative effects on communities related to the economic impacts of tourism in their communities. A positive impact can refer to the increase in jobs, a higher quality of life for locals, and an increase in wealth of an area. Tourism also has the advantage of rebuilding and restoring historic sites and encouraging the revitalization of cultures. A positive impact is to increase or to make better either for the tourist, the host community and residence and/or the tourist destination. Positive impacts are related more to the materialistic well-being, rather than to the happiness of a host community or tourist.
The tourist destination enjoys positive impacts, if there have been improvements to the natural environment such as protection, national parks, or man-made infrastructure, waste-treatment plants. Tourism provides the economic stimulus to allow for diversification of employment and income potential, and develop resources within the community. Improvements in infrastructure and services can benefit both the locals and the tourists. Whereas, heritage tourism focuses on local history or historical events that occurred in the area, and tends to promote education. Positive impacts begin when there is an increase in job opportunities for locals as the tourism industry becomes more developed. There is also an increase in average income that spreads throughout the community when tourism is capitalized on. In addition, the local economy is stimulated and diversified, goods are manufactured more locally, and new markets open for local business owners to expand to. Unfortunately, these benefits are not universal nor invulnerable. While more employment may be available, tourism-related jobs are often seasonal and low-paying. Prices are known to fluctuate throughout the year. They rise in the high tourist season to take advantage of more tourist dollars, but have the side effect of pricing goods above the economic reach of local residents, effectively starving them out of a place that was once their home.
Negative impacts are the effects, that are caused in most cases, at the tourist destination site with detrimental impacts to the social and cultural area, as well as the natural environment. As the population increases so do the impacts, resources become unsustainable and exhausted, the carrying capacity for tourists in a destination site may become depleted. Often, when negative impacts occur, it is too late to impose restrictions and regulations. Tourist destinations seem to discover that many of the negative impacts are found in the development stage of the tourism area life cycle (TALC).
Additionally, the economics of tourism have been shown to push out local tourism business owners in favour of strangers to the region. Foreign ownership creates leakage (revenues leaving the host community for another nation or multinational business) which strips away the opportunity for locals to make meaningful profits. Foreign companies are also known to hire non-resident seasonal workers because they can pay those individuals lower wages, which further contributes to economic leakage. Tourism can raise property values near the tourism area, effectively pushing out locals and encouraging businesses to migrate inwards to encourage and take advantage of more tourist spending.
Employment
Employment, and both its availability and exclusivity, are subsets of economic impacts of tourism. Travel and tourism create 10.7 percent of the total available jobs worldwide, in both the direct and indirect tourism sectors. Direct tourism jobs, those that provide the visitor with their tourism experience include, but are not limited to: accommodation (building, cleaning, managing), food and drink services, entertainment, manufacturing, and shopping Indirect tourism employment opportunities include the manufacturing of aircraft, boats, and other transportation, as well as the construction of additional superstructure and infrastructure necessary to accommodate these travel products (airports, harbours, etc.)
Tourism satellite account
The World Travel and Tourism Council (WTTC) tourism satellite account (TSA) is a system of measurement recognized by the United Nations to define the extent of an economic sector that is not so easily defined as industries like forestry or oil and gas Tourism does not fit neatly into a statistical model; because it is not so much dependent on the physical movement of products and services, as it is on the position of the consumer. Therefore, TSAs were designed to standardize these many offerings for an international scale to facilitate better understanding of current tourism circumstances locally and abroad. The standardization includes concepts, classifications, and definitions, and is meant to enable researchers, industry professionals, and the average tourism business owner to view international comparisons.
Before TSAs were widely implemented, a gap existed in the available knowledge about tourism as an economic driver for GDP, employment, investment, and industry consumption; indicators were primarily approximations and therefore lacking in scientific and analytical viewpoints. This gap meant missed opportunities for development, as tourism stakeholders were unable to understand where they might be able to better establish themselves in the tourism economy. For example, a TSA can measure tax revenues related to tourism, which is a key contributor to the level of enthusiasm any level of government might have towards potential tourism investment. In addition, Tyrrell and Johnston suggest that stakeholders in tourism benefit from the TSA because it:
- provides credible data on the impact of tourism and the associated employment
- is a framework for organizing statistical data on tourism
- is an international standard endorsed by the UN Statistical Commission
- is an instrument for designing economic policies related to tourism development
- provides data on tourism’s impact on a nation’s balance of payments
- provides information on tourism human resource characteristics
Through collection of more qualitative data and translating it into a more concise and effective form for tourism providers, TSAs are able to fill the previous knowledge gap. Information delivered and measured by a TSA includes tax revenues, economic impact on national balances, human resources, employment, and “tourism’s contribution to gross domestic product”.