The Economic Effect of Tourism on a Country

Spending holidays abroad with family, is trendy these days. People around the world visit different places during summers and winters. I and my family too visit different places during vacations. When in a foreign country, I have always wondered, “How does the country benefit from attracting tourists?” I roughly knew the answer that the money that tourists spend in that particular country is the income of the tourism industry. But after this research, I have now understood that tourism is an important part of an economy and the money it earns is helpful to everyone.

GENERAL IMPACTS:

General positive effects of tourism:

1. It creates employment for people of the country.
2. It promotes cultural awareness and also helps to preserve local culture and traditions.
3. Money gained from tourism can be used to develop the infrastructure and services e.g. new roads and airports.
4. In LEDCs money can be invested on developing education, clean water and sanitation.
5. The foreign money can become aid to local people.
6. Natural attractions can be protected using income from tourism.

Positive economic impacts of tourism:

1. It generates foreign exchange.
2. It creates new job and employment opportunities.
3. It stimulates trade, income and entrepreneurship – especially in small business sectors.
4. The provision of new infrastructure which is available for non-tourism uses.
5. It increases regional development – particularly in isolated areas.
6. It generates greater collection of taxes and revenues.

General negative impacts of tourism:

1. It can have a negative impact on the environment. It increases air travel and thereby contributes towards air pollution.
2. Mostly local people are employed in low skill, poorly paid work in unhygienic working conditions.
3. Travel agents, airline companies and hoteliers benefit more than local companies when holidays are booked to destinations in LEDCs.
4. Destroys local culture and traditions.
5. Locally run accommodation companies face competition with foreign companies which build hotels in this new tourist destination.

Negative economic impacts of tourism:

1. Necessity to import goods increase.
   This is especially with small economies which often do not produce what the tourists demand, and therefore import to meet the demands of the tourist.
2. Displacement effects.
   When a new tourism project takes customers away from an existing industry or facility, the economy is said to be shifted.
3. Over-dependence on tourism.
   When initially developing, the tourism industry is in vigour. The people start investing their money in this industry, resulting in downfall of other industries that were initially present. But soon tourists begin to dislike the particular tourist location and the economy falls.
4. Over-reliance on labour.
   As the tourists would increase, the labour required to fulfil their requirements would increase. The industry would extensively rely on labour; therefore these companies would highly exploit labour to meet the tourist demands.
5. Higher land values.
   Higher number of tourists would require more accommodation. Therefore hotels, lodges and rest houses are built. These results in shortage of land and the prices shoot up, which affect the locals.
6. Prices of goods increases.
   More tourists’ means more needs of supplies example: food, water, electricity, gas supply, etc. Also maintenance and repair would increase. These would make the market more expensive, making difficult for local people.

UNITED KINGDOM:

According to World Travel & Tourism Council (WTTC), the industry grew by 1.3% in 2012. This rate of growth means that Tourism industry directly contributed £35.6 billion to the British economy. The number of jobs that tourism supported was forecasted to increase by 250,000 between 2010 and 2020, from 2.645 million to 2.899 million. One in twelve jobs is currently supported by tourism.

The UK has the fifth largest tourism industry in the world. It comprises of 200,000 enterprises. 70,000 establishments include major world-class hotels, country house hotels, guest houses, holiday parks, 110,000 restaurants, bars and pubs are surviving on Tourism. Moreover 7,000 businesses including theme parks, museums, heritage sites, parks, gardens, zoos; 25,000 businesses staging conferences, festivals, exhibitions and concerts are also dependent on Tourism.

It has low barriers to entry making it able to respond quickly to changes in demand, and highly efficient in rapidly creating employment. Recently increased visa and Air Passenger Duty charges worsened the situation, as the UK’s VAT rates for accommodation and restaurants, have become twice of the main tourism industries in Europe. If these VAT rates are reduced, the Tourism industry might not suffer much.

FUTURE SCENARIOS: Tourism is forecasted to contribute over £100 billion to the UK economy.

INDIA:

The demand tourism in India is expected to grow by 8.2 percent between 2010 and 2019 and will place India at the third position in the world. India’s tourism sector is expected to be the second largest employer in the world, employing 40,037,000 by 2019. The report forecasts India to get capital investment worth US$ 275.5 billion in 2018.

Positive Impacts:

1. It has generated income, resulted in poverty alleviation and has generated great number of jobs.
2. The tourism industry in India generated about US$100 billion in 2008 and that is expected to increase to US$275.5 billion by 2018 at a 9.4% annual growth rate.
3. It helps in preservation of heritage sites like old monuments (ex. Taj Mahal and Qutab Minar) and saving the biodiversity; therefore attracting more tourists and resulting in more income.
4. It encourages infrastructure development, health care facilities, recreation areas, hotels and restaurants; which again increases the number of tourist’s attractions.

Problems in India:

The major problem in the development of tourism in India is inadequate infrastructure including less air seat capacity, accessibility to tourist destinations, accommodation and trained manpower in sufficient number. Poor visitor experience and poor hygienic conditions are also some of the problems.

It sometimes leads to the destruction of social fabric of country. When too many tourists visit a place, the chances of development of crime and human trafficking may happen at a great extent. And therefore India has to spend money on crime control. It may lead to suspicion, tension and hostility between locals and the tourists, as they share different cultural backgrounds and lifestyles. This may lead to disputes and violence, overall reducing the tourist count.

AUSTRALIA:

1. In Australia, tourism directly and indirectly employed 907,100 persons.
2. In 2010-11, Australia nearly earned $73.3 billion from tourism industry.
3. The total output multiplier is 1.92, which means every $1 tourism industry earns, adds 92 cents extra indirectly to other parts of country’s economy.

State Tourism Satellite Accounts (2011) show that out of $65.4 billion, which were contributed by the states mostly were:

New South Wales: 21.3 billion (33 per cent)

Queensland: $16.3 billion (25 per cent)

Victoria: $13.4 billion (21 per cent).

The number of tourists by 2021-2022 is forecasted to increase by 0.8 %, which means around 308 million tourists would visit in Australia.

SPAIN:

The tourist boom that began in the mid-1950s was based on the recreational assets of the Mediterranean seashore areas. In 1970s and 1980s, when the tourist boom was playing its role, tourism development lead to the loss of traditional jobs, when workers moved from industries such as : Farming, forestry, mining and Shing into service jobs in tourism and made a serious impact on the overall economy.

Tourists had spent around 49 billion Euros in Spain in 2010. The real foreign tourism has increased by 8.65 %. The income was about 159.9 billion Euros in 2011 according to world tourism and travel council. The industry is predicted to gain 180 billion Euros by 2022.

Tourism also contributed to 12.7% of total employment and 2,304,500 jobs were created. The employment number is predicted to rise to 2,369,000 by 2022. But if the country experiences major drawback in tourism industry in the future, it would for 12.7 % of the people to lose their jobs.