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Contributions of Tourism to Economic Development


Contributions of Tourism to Economic Development 

Economic Development and Tourism 

Tourism has been seen as an important form of economic development. 

It also promoted as an agent of an economic and social change 

A service based industry capable of creating employment and income. 

An important form of economic activity 

The impact and role of tourism will vary from region to region. 

Destinations can rise and fall in popularity.


Understanding Economic Impacts 

Tourism in the Global Economy 

1997 2007 Growth Jobs 262 Million 383 Million 68.4% GDP 3,3 Tr. USD 6,3 Tr. USD 52.4% Investments 801 Billion USD 1,5 Billion USD 53.4 % Taxes 716 Billion USD 1,3 Billion USD 55.1 %  

1995 2000 2006 2020 Arrivals 567 million 698 million 842 million 1.560 billion Receipts 372 billion 500 billion 715 billion 1.600 billion Jobs 212 million 262 million ? 340 million (2005) Taxes 166 billion ? ?  

Tourism in the National Economy 

Tourism is a significant economic contributor to a nation's GNP. 

Tourism impacts on KENYA's economy  

Foreign exchange earnings from tourism are a significant percentage of gross receipts 

Kenya 90%, Tunisia 6 %, Maldives 18 %, Barbados 32%.

Impacts of Tourism on Employment 

1 in 9 workers worldwide (212 million people)  

Tourism payroll $ 1.7 trillion (10.3 % of total payroll) 

Provides direct and indirect employment

Year Direct Employment 

% of Total Indirect Employment % of Total  

Total 1991 4.9 5.3 10.2 1994 5.1 5.5 10.6 2005 5.4 5.9 11.3  

Measuring Tourism Economic Impacts 

Identifying Tourism Activity 

Encompasses private and public sectors-transportation, accommodations, retail, food and beverage, reception, and convention centers. 

Difficult to distinguish tourism activity from other economic activity. 

Common standards are vital to make comparisons 

Difficulty measuring industry: conflict on visitors-non-visitors 

Tourism activity is best defined by a demand characteristics.

Structure of the Tourism Industry 

Type of companies 


Food service 

Passenger transportation 

Channelers (intermediaries) 

Tourist activities 

Tourism organizations

Direct, Indirect and Induced Benefits 

Direct Benefits 

Direct tourist expenditures for goods and services 

Indirect Benefits 

Re-spending of tourism expenditures expenditure, such as payments to employees, payments to suppliers.  

Induced Benefits 

Additional income spending within a tourism destination, such as consumption of employees.

Multiplier Model of Tourism Revenue Turnover 

Leakage: Tourism receipts leave the destination's economy. 

Multiplier Effect 

(Direct expenditures + Indirect Expenditures + Induced Expenditures) / Direct expenditures 


Direct expenditures..... : $ 500 

Indirect expenditures...: $ 300 

Induced Expenditures. : $ 150

If direct expenditures $ 700, total effect will be $700 x 1.9 = $ 1330.

Input-Output Analysis 

Analyzing industry relationships by tracking the flow of goods and services in an areas economy. 

Sales of the total output of each sector  

Total inputs from other sectors

Tourism Satellite Accounts 

A satellite account re-organizes the national system of accounts to identify the contribution of tourism to a state or national economy.  

Identify the benefit enjoyed by various tourism sectors of the economy and employment, income, taxes, and other benefits that flow from these sectors. 

Provide a comprehensive picture of the size and scale of tourism in the country, thereby helping governments and businesses asses the value of tourism to the economy.

Cost Benefit Analysis 

Potential Economic Benefits of Tourism 

Increased income and standard of living  

New employment opportunities 

Increased tax base 

Improved infrastructure and facilities 

Increased resources for the protection of natural and cultural resources. 

Potential Costs 

Seasonal employment 

Increased cost of living for residents 

Increased traffic and congestion 

Negative impact on cultural and natural heritage resources 

Increased crime 

Increased taxes 

Leakage of revenue and dependency on imported goods and services


Monitoring Economic Impacts 

Overall economic development of the destination 

Analysis of the social, cultural, and environmental costs and benefits of tourism

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