How Does the Tourism Industry Influence the Economy of a Destinaion

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PBL Individual research
Problem Statement: : How does the tourism industry influence the economy of a destination? Date: 10.11.12
Group: 1E
Student: Radina Alexandrova
Tutor: Jörg Wenzel

Define economy.
According to” Economics: Principles and Applications” by Robert E. Hall, Marc Lieberman economy is a social system that produces, distributes, and consumes goods and services in a society. The sectors that make up an economy are the primary, the secondary, and the tertiary. * The primary sector is related to the part of the economy that creates raw materials, such as crude oil, timber, grain, or cotton. * The secondary sector, made up of mills and factories, turns the raw materials into factory-made goods, like fuel, lumber, flour, or fabric. * The tertiary sector refers to services rather than goods, and includes distribution of manufactured goods, food and hospitality services, banking, sales, and professional services like architects, physicians, and lawyers.

2. Explain the multiplier effect; give example .

Page and Connell discuss that multiplier is a statistical expression of how much income or employment is generated by a certain amount of tourist spending. The multiplier effect is based on the principle that tourism expenditure will inject additional cash flow into the regional economy and increase regional income. The income is received by other business who also spend within the region.

3. Explain leakage.

In the “Tourism, Leisure and Recreation” by Garrett Nagle is said that leakage from tourism is the money that is generated by tourism but is transferred back to the other country. For example in Kenya 17% of the tourists expenditure goes out to the developed countries. Leakage can take place in 5 main ways:

* Foreign workers send the money home
* Travel costs to airlines and ships
* Payment for goods and services imported for tourism
* Payment to foreign owners of hotels and other amenities * Foreign...
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