Impacts of Tourism

Business of tourism
Economic Impacts of Tourism
Tourism is considered by many to be the largest industry in the world and the fastest growing. Tourism can provide many benefits for host communities and countries but there are also negative effects. Impact studies are carried out with the aim of improving our understanding of the positive and negative impacts of tourism so that steps can be taken to lessen the negative effects and work at sustainable tourism development. In other words, sustainable tourism development is concerned with maximising the benefits while minimising the negative effects.
Tourism is seen by governments as a useful tool for economic development. The economic benefits tourism may offer include:
• Employment: tourism is a labour intensive industry,
• Entrepreneurial opportunities,
• Generate tax revenues,
• Development in rural regions,
• Foreign exchange generator,
• Tourism promotes other industries, particularly in services sectors of the economy.
Tourism contributes in four major areas of the national economy:
• Income
• Balance of Payments
• Employment
• Regional economic development

Income


Salaries, interest, rent and profits all contribute to income generation. In the tourism industry, which is labour intensive, the greatest proportion of income will be derived from salaries paid to the workers both directly serving tourists or from those benefiting indirectly from tourists’ spending.

Tourism is the main income generator for one-third of the developing nations but is also a major generator in the Western world. In New Zealand, tourism is of prime importance in areas where there is little other industry such as in Wanaka and the Bay of Islands. Interest, rent and profits can generate income from loans to companies building hotels or rental paid to the landowner for a tourism attraction.

Taxation also contributes to income in the form of G.S.T. in New Zealand and V.A.T. in the United Kingdom. In Fiji, there is an accommodation tax of 3% levied on hotel rooms. Departure taxes are now levied by most countries and some including the USA also have an arrival tax.

The sum on all incomes is called the national income and the importance to a country’s economy is measured by looking at the proportion of national income created by tourism. In New Zealand, for the year ended 2004, tourism contributed $6.2 billion or 4.9% of New Zealand’s total industry contribution the GDP.
Multiplier Effect


The tourist income multiplier or ‘ripple’ effect accounts for the indirect impact of tourist spending on the economy. The multiplier is expressed as a ratio between one dollar of tourist spending and the number of times it is re-spent. For example, a multiplier of 0.72 has been calculated for Fiji. This means that 72 % of each dollar of original visitor spending is re-spent in the Fijian economy.

Some major weaknesses have been identified in calculating economic multipliers. One particular problem is the difficulty involved in collecting accurate data of tourist expenditure. Tourism involves a large number of sectors in the economy and tourists spend their money on extremely diverse goods and services. Also, tourism comprises many small, owner-operated businesses. It is likely that a number of operators do business informally, though cash or barter transactions and some transactions are never recorded. Due to the difficulties in obtaining accurate data on how much money is spent by tourists and the numerous small and informal businesses in the industry, multiplier ratios can only be approximations.
Leakages
Determining the economic impact of tourism is more complicated than simply calculating tourist expenditure. The value of tourist expenditure to the host country is reduced by the value of imported goods and services required to satisfy the needs of tourists. This is referred to as leakage. If the host country has constraints on its ability to supply goods and services to tourists, the grater the number of visitors the more imports will be required and the multiplier ratio will fall. Imports may include materials for construction, petrol, information technology and even food and water for some small island communities. Leakages explain why only a portion of the income generated is re-spent in the local economy.

Balance of payments
International tourists contribute to a receiving country’s balance of payments through money being spent credited to their balance of payments. A New Zealander spending money in Australia, places a debit on New Zealand’s and a credit on Australia’s balance of payments. The outflow of New Zealand money being spent abroad by New Zealanders is an import, while the inflow of foreign tourists’ money spent in New Zealand counts as an export.
The total value of receipts minus the total payments made during the year represents a country’s balance of payments of the tourism account.
International tourism is an ‘invisible’ export which helps to balance imports and thus improve the balance of payments.

Employment
The UNWTO has estimated that around 260 million people work in jobs directly related to tourism worldwide and will represent approximately 8.3% of total world employment.
In tourism dependant countries such as the Caribbean, as many as 25% of all jobs are associated with the tourism industry. An estimated 102,700 full-time employees (or 5.9% of total employment in New Zealand were actively engaged in producing goods and services for tourists in 1994.
Developments in technology are affecting labour opportunities in employment. Computer reservation systems are replacing manual systems and as a result fewer agents are working in airlines and hotel chains. The increasing use of the Internet for reservations has also reduced numbers of travel agencies are airline offices.
Call centres are replacing branches, often situated in low-wage countries like India. The success of the tourism industry relies on the supply of a skilled labour force to serve the needs of the tourists.

Investment and development
The level of investment in tourism can determine the success of a region. The investment can be private of public. Often there is a ‘chicken and egg’ situation where there is an unwillingness to invest until there is a flow of tourists but the tourists will not come to the region until there is facilities e.g. hotels, restaurants to attract them.
Often there is a flow on effect and other industries will be attracted to the area to provide services for both tourists and workers
Another consideration in calculating the economic effects of tourism involves the opportunity costs. Money and other resources, committed to tourism could have been used for different purposes, providing alternative benefits for the host community. Labour is a good example. If local workers are employed in tourism then other industries such as fruit picking or agriculture may suffer. If there is a shortage of skilled labour, workers may be imported from other countries, resulting in further leakages from the economy. Capital expenditure on developing tourism-related establishments precludes spending scarce resources on other types of development with alternative uses. Inflation can be caused by high levels of expenditure by foreign tourists which increase the prices of food, transportation, and clothing and as in the case of Queenstown, land values,

Social and Environmental Impacts of Tourism
A cost-benefit analysis for tourism developments should assess the social and environmental impacts as well as economic effects. Sustainable development means that tourism is designed to fit with the social and natural environment and not cause the destination to become less desirable for visitors and permanent residents. Social and environmental can also have the negative impact, for example, tourist that coloring the tree, destroy the pathway of the forest and so on