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Matakuliah : V0162 - Pengantar Industri Hospitality dan Pariwisata Tahun : 2008 Economic Impact of Tourism (Harapan Masa Depan Pariwisata) Week 10 Subject • International economic impact (Dampak pariwisata terhadap perekonomian internasional) • Optimization of tourism resources (Optimalisasi sumber-sumber daya pariwisata) • Economic multiplier Bina Nusantara HO@0808 Economic Impact of Tourism Week 10 Objectives: On completion of this lesson, the students will be able to explain the international economic impact, optimization of tourism resources and economic multiplier Bina Nusantara HO@0808 An International Perspective Week 10 Tabel 1 Arrivals (millions) 2002 2003 Change Rate Market 2003/2002 2003 World 702.6 694.0 -1.2 % 100 % Africa 29.1 30.5 4.9 % 4.4 % Americas 114.9 112.4 -2.1 % 16.2 % Asia and the Pacific 131.3 119.1 -9.3 % 17.2 % Europe 399.8 401.5 0.4 % 57.8 % 27.6 30.4 10.3 % 4.4 % Middle East Source: Goeldner & Ritchie (2006 : p. 375) Bina Nusantara HO@0808 An International Perspective Week 10 • The war, terrorism, SARS and a weak economy made 2003 another difficult year for international tourism. According to WTO, the total number of international arrivals reached 694.0 million in 2003, a decrease of 1.2 % from 2002 (see table 1 above) Bina Nusantara HO@0808 An International Perspective Week 10 • Expectation for 2004 and Beyond – The future prospect of tourism appear to be very positive. Asia and the Pacific is showing a strong rebound from 2003. – Business travel is showing signs of recovery: low cost airlines are continuing to increase their capacity and expand their coverage – WTO’s Tourism 2020 Vision forecasts that international arrivals are expected to reach over 1.56 billion by the year 2020 Bina Nusantara HO@0808 Comparing International and Domestic Expenditures Week 10 • The total tourists arrivals by regions shows that by 2020 the top three receiving regions are: • Europe: 717 million tourists • East Asia and Pacific: 397 million • The Americas: 282 million • Employment – WTTC (The World Travel and Tourism Council) estimates that employment in travel and tourism economy was 221,568,000 jobs in 2005, or 8.3% of total employment (1 in every 12 jobs). By 2015, it will grow to 269,556,000 jobs, or 8.9% of total employment (1 in every 11.2 jobs) Bina Nusantara HO@0808 Comparing International and Domestic Expenditures Week 10 • Employment – Tourism provides both direct and indirect employment • Direct employment: – The employees are in contact with tourists and provide tourists experience – E.g. Hotels, restaurants, airlines, cruise liners and resorts • Indirect employment: – Employees of companies providing goods and services to the direct employment companies – E.G. Aircraft manufacturers, construction firms, restaurant suppliers Bina Nusantara HO@0808 Direct Travel-Generated Employment by Industry Category in the U.S., 2002 (Employees in thousands) 2002 % of total Public Transportation 990.4 15.8 Auto Transportation 251.8 4.0 Lodging 1,165.1 18.6 Food Service 2,346.9 37.5 Entertainment/ Recreation 987.1 15.8 General Retail 331.7 5.3 Travel Planning 183.3 2.9 6,255.8 100.0 Total Source: Goeldner & Ritchie (2006 : p. 378) Bina Nusantara HO@0808 Optimization Week 10 • Economics is concerned with the attainment of an optimum return from the use of scarce resources • Economic agents seek to allocate the limited supply of tourism resources as they seek to meet the demands of tourists • The problem that economics attempts to solve is how to achieve an economical optimal allocation of scarce tourism resources, when facing the constantly shifting demand (generated by physical needs and psychological wants) for these sources. Bina Nusantara HO@0808 Optimization Week 10 At least 3 major goals can be identified in tourism: 1. Maximize the amount of psychological experience for tourists 2. Maximize profits for firms providing goods and services for tourists 3. Maximize the direct (primary) and indirect (secondary) benefits of tourist expenditures on a community or region Bina Nusantara HO@0808 Optimizing the Experience Week 10 • The tourist is particularly constrained by time and budget. To optimize the experience, it is necessary to determine the combination of destinations preferred and the possibilities within the money and time constraints. • This explains some of the popularity of package tours where both time and cost can be known in advance Bina Nusantara HO@0808 Optimizing for the Local Economy Week 10 • Tourism affects a region during periods of intense investment activity and afterwards when the investments are producing • The multiplier effects in both cases are dependent upon the strength of the linkages • Linkages will be strong and the income multiplier will be high if resorts in a tourist destination hire local labor and buy products such as meat, fruits, flowers, vegetables and poultry from local farmers • If most of the goods and services are imported from another state or country, then linkages will be weak and the income multiplier will be low Bina Nusantara HO@0808 Weak Linkage and Low Income Multiplier Strong Linkage and High Income Multiplier $$$ $$$ Buy food products from local farmers Employee local labor $$$ $$$ Buy food products from local farmers Employee local labor $$$ Buy furnishings for guest rooms from local manufacturers RESORTS IN A TOURIST DESTINATION $$$ Buy furnishings for guest rooms from local manufacturers Bina Nusantara RESORTS IN A TOURIST DESTINATION Hire local entertainment Imported Goods and Services $$$ Hire local entertainment Imported Goods and Services Imported Goods and Services HO@0808 $$$ Tourism Exports and Imports Week 10 • Japanese tourists traveling to Indonesia presumably earned their income in Japan. When spending money in Indonesia as tourists, they are “injecting money” into our economy. As such, expenditures by foreigners in this country (for travel purposes) represent TOURISM EXPORTS for Indonesia. • Why Export? Because when the tourists leave the country, they take their experiences back with them. Thus, we have exported travel experiences. • Thus when Indonesian tourists travel to Japan and spend money there, this becomes a TOURISM IMPORT to the Indonesia economy. Bina Nusantara HO@0808 Tourism Exports and Imports Indonesia Commodity Exports Indonesia Tourism Exports Commodity Flow Indonesia Tourist Flow Japan Indonesia Payment Flow Bina Nusantara Japan Payment Flow HO@0808 Balance-of-Payments Effects Week 10 • Balance-of-payments situation directly affects the gross national products of a country (Y). The formula is: Y = C + I + G + (X – M) • Where: Y = gross national products C = consumer expenditures I = investments G = government expenditures X = exports M = imports Bina Nusantara HO@0808 Balance-of-Payments Effects (a case in the U.S.) Week 10 • Based on the formula, if M (imports) > exports (X), then the difference (X – M) will be a negative number, and Y will thus be smaller • Thus it is advantageous to American economy to attract more visitor spending in the U.S. These “tourism exports” are like credits and help the American economy • It is economically better to have foreign visitors come to the US than to have U.S. citizens travel abroad • However, this situation is not entirely positive or negative. Expenditures by U.S. tourists abroad make possible purchasing power in foreign countries for those countries to buy Americanmade products. Bina Nusantara HO@0808 Balance-of-Payments Effects (a case in the U.S.) Week 10 • For example, most airlines of the world use American-made equipment. Purchase of these equipment and so forth makes an important contribution to the export trade of the U.S. • When the U.S. dollar is high against foreign currencies, a dampening effect occurs on America’s tourism exports because this condition is seen as unfavorable by prospective foreign tourists. But if the dollar is low, more foreign tourists will visit the U.S. This will increase America’s tourism exports, improve its balance of payment and raise the gross national products. Bina Nusantara HO@0808 Investment Stimulation Week 10 • The tourist industry has a unique structure. It contains a large number of very small units, covering a variety of different trades – the small restaurants, motels, guest houses, laundries, arts, craft shops and others. • Thus investment in infrastructure by the government stimulates investment in numerous smaller businesses • The initial investment in tourism brings forth a large investment in supporting and tertiary industries. This also includes large investments in major hotels, restaurants, shopping centers, airports, marina, etc. Bina Nusantara HO@0808 Tourism Increases Tax Revenue Week 10 • Tourists must pay taxes. Besides the usual sales tax, sometimes they pay taxes in less direct ways: airport taxes, exit fees, customs duty and charges for granting visas • The taxes paid by tourists will increase revenue for the host government Bina Nusantara HO@0808 Inflationary Pressure Week 10 • Tourists inject money into the destination economy. While this increases the income of a region/ country, it also might cause inflationary pressures. • Tourists typically have a higher expenditure capability than the residents do (this is because tourists have higher income or they have saved money for their trip and are inclined to spend them while on vacation). Hence, they are able to bid up the prices of such commodities as food, transportation, and arts and crafts. • This causes inflationary pressures which can be detrimental to the economic welfare of residents of the host community. Bina Nusantara HO@0808 Inflationary Pressure Week 10 • This is true when inflation affects the prices of essentials such as food, clothing, transportation and housing • According to Lundberg (Caribbean Tourism, Cornell Hotel and Restaurant Administration Quarterly vol. 14. no. 4, pp. 30-45, Feb 1974), as the tourist industry developed in an area, land prices rose sharply. Bina Nusantara HO@0808 Economic Multiplier Week 10 • Direct Effect – Direct effect result from the tourist spending money in tourist enterprises and providing a living for the owners and managers and creating jobs for employment • Indirect Effect – The visitor expenditure gives rise to an income that, in turn leads to a chain of expenditure-income-expenditure and so on, until leakages bring the chain to a halt Bina Nusantara HO@0808 Economic Multiplier Week 10 • Indirect Effect (an example) – A skier buys a lift ticket for $50. The money received from the ski area will be used to pay the wages of the lift operators. – The lift operator spends the money on groceries – The grocer uses the money to pay part of his rent to the local landlord – The landlord uses it to pay for his dry cleaning – The dry cleaner spends it in a restaurant for lunch – The restaurant owner spends it for steak shipped in from Kansas City – The cycle stops as the money is lost to the local economy – This last transaction is known as leakage from the economy Bina Nusantara HO@0808 Leakage Week 10 Savings Multiplier = Leakage = 1 MPS Imports Where: Savings = not loaned to another spender Imports = spending on tourism needs in sources outside country (state) Bina Nusantara HO@0808 Suppose the MPS is 1/3, then Multiplier = 1 : 1/3 = 3 Income Multiplier Week 10 • Tourism expenditures injected into the economy produce an income multiplier for local people • Tourists receipts are used to buy a wide variety of goods and services over a year’s time • The money turnover creates additional local income • The amount of income multiplication, however, depend on how much leakage takes place. Leakages are a combination of: – Imported goods and services purchased by tourism supplier – Saving made of tourist receipts not loaned to another spender within one year of receipt • Thus, the more tourist goods that are supplied locally, the higher will be the multiplier Bina Nusantara HO@0808 Employment Multiplier Week 10 • Increased spending necessitated more jobs, which results in an employment multiplier • The employment multiplier varies from region to region depending on its economic base • The smaller the multiplier value, the smaller employment opportunity and vice versa Bina Nusantara HO@0808 Employment Multiplier Week 10 • Example: – The multiplier value in country A is 1.13 and in country B is 2.63 – Country A would provide employment opportunities for approximately 0.13 person for each person directly employed in servicing export demand and country B would provide employment opportunities for approximately 1.63 person for each person directly employed in servicing export demand Bina Nusantara HO@0808 Transactions Multiplier Week 10 • As increased spending produces more financial transactions, they create a transactions multiplier • There are of particular interest to governments that have a sales or valueadded tax on such transactions Bina Nusantara HO@0808 Capital Multiplier Week 10 • As a tourist area grows, more capital is invested in new facilities – more infrastructure and superstructure are constructed. This results in a capital multiplier. Bina Nusantara HO@0808 Distribution of Tourism Expenditures Week 10 Visitors Spend For Travel Industry Spends Ultimate Beneficiaries Lodging Wages and salaries Accountants Food Tips, gratuities Advertising & PR Beverages Payroll taxes Appliance stores Entertainment Commissions Architects Clothing etc Music & entertainment Arts & craft producers Gifts and souvenirs Administration & general Automobile agencies Photography Legal services Attorneys Personal care Purchase of F&B Bakers Bina Nusantara HO@0808 Distribution of Tourism Expenditures Week 10 Visitors Spend For Travel Industry Spends Ultimate Drugs and cosmetics Purchase of materials & Banks Internal transportation Repairs & maintenance Beach accessories Tours & sight-seeing Advertising, promotion Cashiers Miscellaneous Utilities Clothing stores Transportation Clubs Insurance premiums Contractors Rental of premises & Cultural organization Bina Nusantara HO@0808 Distribution of Tourism Expenditures Week 10 Visitors Spend Travel Industry Spends For Ultimate Investment and principal borrowed funds Department stores Income and other taxes Dry cleaning Replacement of capital Engineers Return to investors Farmers Fishermen Gardeners Gas stations Bina Nusantara HO@0808 Distribution of Tourism Expenditures Week 10 Visitors Spend Travel Industry Spends Ultimate Beneficiaries Government Grocery stores Gift shops Furniture shops Importers Restaurants Resort etc….. Bina Nusantara HO@0808 THANK YOU AND HAVE A GOOD DAY Bina Nusantara HO@0808