Economic Imapacts of Tourism

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A Seminar on

ECONOMIC IMPACTS OF TOURISM

PRESENTED IN THE SECOND REFRESHER COURSE
IN MANAGEMENT

AT

UGC Academic staff College
Osmania University, Hyderabad

By

Fr. Roy Abraham P
Lecturer in Management
Marian College Kuttikkanam
Kerala, 685531, India

Contents

ECONOMIC IMPACTS OF TOURISM

A. INTRODUCTION

B. NEGATIVE ECONOMIC IMPACTS OF TOURISM

i. LEAKAGE

a. Import leakage

b. Export leakage

ii. ENCLAVE TOURISM

iii. OTHER NEGATIVE IMPACTS

a. Infrastructure cost
b. Increase in prices
c. Heavy dependence on tourism by large population
d. Seasonal character of jobs

IV. OTHER INDUSTRY IMPACTS AFFECTING TOURISM

C. POSITIVE ECONOMIC IMPACTS OF TOURSIM

i. Foreign exchange earnings
ii. Contribution to government revenues
iii. Employment generation
iv. Stimulation of infrastructure investment and improvements in the quality of life of residents Vi Contribution to local economies
vii. Income for the people of lower economic strata.
D. KEY ISSUES IN TOURISM PROJECTS
E. SUGGESTIONS AND CONCLUSION

ECONOMIC IMPACTS OF TOURISM

A. INTRODUCTION

Tourism is frequently cited as the world’s fastest growing economic sector, currently the world’s largest employer and soon to be the world’s largest industry. The tourism industry generates substantial economic benefits to both host countries and tourists' home countries. Especially in developing countries, one of the primary motivations for a region to promote itself as a tourism destination is the expected economic improvement. As many developing countries have a comparative advantage in forms of tourism which value a wide range of unspoiled natural environments, tourism is promoted for its potential revenue benefits and as a means of attracting foreign direct investment. In some developing countries, especially small island states, it is now the dominant economic sector. However, the economic impact of tourism varies enormously. As with other impacts, this massive economic development brings along both negative and positive consequences.

|According to the World Tourism Organization, 698 million people traveled to a foreign country in 2000, | |spending more US$ 478 billion. International tourism receipts combined with passenger transport currently | |total more than US$ 575 billion - making tourism the world's number one export earner, ahead of automotive | |products, chemicals, petroleum and food. | |Source WWTTC |

B. NEGATIVE ECONOMIC IMPACTS OF TOURISM

There are many hidden costs to tourism, which can have unfavorable economic effects on the host community. Often rich countries are better able to profit from tourism than poor ones. Whereas the least developed countries have the most urgent need for income, employment and general rise of the standard of living by means of tourism, they are least able to realize these benefits. Among the reasons for this are large-scale transfer of tourism revenues out of the host country and exclusion of local businesses and products.

i. LEAKAGE

The direct income for an area is the amount of tourist expenditure that remains locally after taxes, profits, and wages are paid outside the area and after imports are purchased; these subtracted amounts are called leakage. In most all-inclusive package tours, about 80% of travelers' expenditures go to the airlines, hotels and other international companies (who often have their headquarters in the travelers' home countries), and not to local businesses or workers. In addition, significant amounts of income actually retained at destination level can leave again through leakage.

|A study of tourism 'leakage' in Thailand estimated that 70% of all money spent by tourists ended up leaving| |Thailand (via foreign-owned tour operators, airlines,...
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