Download tourism`s economic impact

Chapter 14
TOURISM’S
ECONOMIC
IMPACT
Learning Objectives
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Know the economic generators and
impact of tourism
Perceive the economic importance of
tourism in various regions of the
world
Know about tourism satellite
accounts
Understand multipliers
Know about balance of payments
Comprehend elasticity and
inelasticity
Introduction
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Tourism is powerful economic
force to provide employment,
foreign exchange, income, and
tax revenue.
Economic impact was included
airline, lodging, tour operators,
and travel agent revenue.
Tourism’s Economic Impact:
An International Perspective
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Expectations for 2004 and
Beyond
Comparing International and
Domestic Expenditures
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Employment
Optimization
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Goals
Constraints
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Demand
Supply of Attractive Resources
Technical and Environmental
Constraints
Time Constraints
Indivisibilities
Legal constraints
Self-Imposed Constraints
Lack of Knowledge
Limits on Supportive Resources
Optimization
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Optimizing the Experience
Optimizing Returns to Businesses
Optimizing for the Local Economy
Tourism Exports and Imports
Balance-of-Payments Effects
Y = C + I + G + (X – M)
Y = gross national product
C = consumer expenditures
I = investments
G = government expenditures
X = exports
M = imports
Optimization
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Investment Stimulation
Tourism Increases Tax Revenue
Inflationary Pressure
Economic Multipliers
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Direct Effect
Indirect Effect
Employment Multiplier
Income Multiplier
Economic Benefits Widely Distributed
Structural Changes
Dependence on Tourism
Investment Priorities
Quantity Demanded and Price Elasticity
Income Elasticity of Demand
More Advanced Economic
Concepts Related to Tourism
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Tourism Satellite Account
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What is Tourism Satellite Account?
The Nature of a TSA
Sources of Data Used in a TSA
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Canadian, as an Example
Summary
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Domestic and international tourism
are major economic strengths to
many of the world’s countries, states,
cities, and rural areas. Thus, those
who live there are affected by the
economic results of tourist spending.
This chapter explained why these
resulting effects vary greatly and
what brings about a large measure
of benefits or possible detriments to
a community..
Summary
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The main economic phenomena described
are various multipliers, balance of
payments, investments, tax consideration,
employment, economic impact generators,
travel expenditures, dependence on
tourism, price and income elasticity as
related to buying travel experiences, and
optimization. The chapter also discussed a
new method of measuring tourism
economic impact, satellite accounting.
Summary
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Many people do not understand or
appreciate the economics of tourism. The
following list summarizes the principal
economic effects.
1.
Expenditures by foreign visitors in one’s country
become exports (mainly of services). The
economic effects are the same as those derived
from exporting tangible goods. If there is a
favorable exchange rate (foreign currency
buying appreciably more of one’s own country’s
currency), the country that has the devalued
currency will experience a higher demand for
visitor services than before devaluation.
Summary
2. If citizens of one country spend money in
foreign countries, these expenditures
become imports for the tourists’ originating
country.
3. Sums of the values of national exports and
imports are used when calculating a
nation’s balance of payments. A positive
balance results when exports exceed
imports, thus increasing a nation’s gross
national product (GNP)
4. Tourism developments typically require
large investments of capital. Thus, local
economies where the developments take
place are stimulated by such investments.
Summary
5. Tourists pay various kinds of taxes directly and
indirectly while visiting an area. Thus, tax revenues
are increased for all levels of government.
6. Because tourists usually spend more per day at a
destination than they do while at home, these extra
expenditures may cause inflationary pressures and
rising prices for consumer goods in the destination
area.
7. Tourism expenditures injected into the economy
produce an income multiplier for local people. This
is because of the diversity of expenditures made by
those receiving tourist payments. Tourist receipts
are used to buy a wide variety of goods and
services over a year’s time. The money turnover
creates additional local income.
Summary
8. The amount of income multiplication, however, will
depend on how much leakage takes place.
Leakages are a combination of imported goods and
services purchased by tourism suppliers, and
savings 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.
9. Income multiplication caused by tourist expenditures
necessitates hiring more people. Thus, they also
affect an employment multiplier.
10. As increased spending produces more financial
transactions, they create a transactions multiplier.
These are of particular interest to governments that
have a sales or value-added tax on such
transactions.
Summary
11. As a tourist area grows, more capital is invested in
new facilities. This results in a capital multiplier.
12. It is an unwise policy for a society to place too
much dependency on tourism as a subsistence
industry.
13. Although tourism often has an excellent potential in
economic development, it is not a panacea for
economic ills. Its economic benefits should be
optimized rather than maximized.
14. We believe that tourism products are mainly price
elastic, meaning that as prices rises, the quantity
demanded tends to drop.
15. In general, we believe that tourism is income
elastic. This means that as family income rises, or a
particular market’s income rises, and tourism prices
do not rise proportionally, the demand for travel to
that particular area will increase.