Tourism and the Economy

Introduction

“India was the 10th most preferred destination in 2004, the 4th in 2006 and is now at the top in 2007 and that is where we want to be,” Union Tourism Minister Ambika Soni said while receiving the award at a glittering ceremony Monday night in London.

(http://timesofindia.indiatimes.com/India/India_is_the_numero_uno_travel_destination_/articleshow/2337923.cms)

Literature Review

Tourism industry today is the fastest growing industry in the world. According to a report by WTTC (World Travel & Tourism Council) tour and travel industry is expected to grow at the rate of 4.3% per year over the next 10 years. Tourism industry today, on a global scale has become a US$662 billion industry. It generates around 10.3% of the global economic output, and provides employment to 234 million people. Also, a report by World tourism Organization states that more than 698 million people visited one or more foreign countries (in 2000), and spent more than US$478 billion. A recent report states that the number of international tourists have increased form 234 million in 1950 to 763 million till the last few years. Looking at the above facts one can very well conclude that tourism industry can impact the economy of a country to a very high extent.

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How, and in what ways can tourism impact a countries economy?

Tourism impacts a countries economy by bringing in Foreign Exchange, contributing to government revenues, generating new jobs, demanding investment for new infrastructure or for the maintenance which in turn helps the country develop and cater to the tourists needs better.

Now let’s take each one of these one by one and see how deeply each of these aspects contributes to the economy of the country.

Foreign Exchange

Tourism invites a lot a foreign residents to come and bring with them foreign currency in the country. To accelerate growth and development, each economy needs these tourists to bring and spend this foreign currency in the country. All economies need this foreign exchange to maintain a positive balance of payments (“Balance of payment is defined as a record of all economic transactions between residents of a country and the residents of all other countries that trade with that nation.”) Theory and Practice by Mohammad Reza Vaghefi. Tourism marks to the top in export categories in around 83% of the countries and has become the main source of foreign exchange for as high as 38% of the countries all over the world. A Report by World Tourism Organisation (http://www.uneptie.org/pc/tourism/sust-tourism/economic.htm)

Government Revenues

There can be direct and indirect contributions towards the government revenues by the tourism sector. Direct contributions include the taxes on incomes generated by tourism employment and businesses, and by imposing direct taxes like departure taxes. Whereas indirect contributions come from taxes and duties paid by these tourists on goods and services consumed. “The world Travel and Tourism Council estimates that travel and tourism’s direct, indirect, and personal tax contribution worldwide was over US$ 800 billion in the 1998 – a figure it expects to double by 2010.”(WTTC/Michigan State University Tax Policy Centre)

Employment Generation

A report by WTO states that tourism sector worldwide provides employment to move than 7% of the total workforce. Over the years, tourism has created new jobs through hotels, pubs, restaurants, taxis, stalls etc. and through other tourism related service sectors.

Investment for Infrastructure

Tourism creates revenue for the economy so it demands development and improvement for the present systems and services available to serve the tourists better. This not only caters to the needs of the tourists and the native people but also improves the infrastructure, giving the place a new better look.

Types of tourism

Adventure Tourism

Pleasure Tourism

Cultural Tourism

Sports Tourism

Study Tourism

Research Tourism

Professional Tourism

This report talks about use of sports related mega-events as a tool of regeneration and development by various countries.

What is Sports Tourism?

“Sports tourism: A social, cultural and economic phenomenon arising from the unique interaction of activity, people and place.”(John Beech and Simon Chadwick (eds.), THE BUSINESS OF TOURISM MANAGEMENT)

There have been various arguments over the definition of sports tourist/ tourism. Some people described it as, ‘A sports tourist is an individual who participates in sports on holiday.’ (De Knop’s, 1987), ‘active participation of tourists in sport events is also a part of sport tourism’ (Glyptis and Jackson, 1993). “Sport tourist is a temporary visitor staying at least 24 hours in the event area and whose primary purpose is to participate in a sport event, with the area visited being a secondary attraction.” (Nogawa et al., 1996) There are reports that show 26% of the holidays planned all over the world are solely related to sports.

Sports tourism has a history going beyond 776BC, where we have descriptions of Romans and Greeks organising fabulous sport events to attract people from various places.(Coakley, 1990). The first ever Olympic, for which we have written records, was played in 776BC. It was started by the Romans, and is still organised every four years. Athletes, Organising Teams and Spectators travel from all over the world to make Olympics a successful event for over 1200 years.

What are the impacts?

Events like these (E.g. Olympics, Commonwealth Games, and World Cup Series etc.) attract millions of visitors from all over the world to the host country. This brings in a lot of revenue in local and foreign currency both. Moreover locations associated with these mega events gain a special charisma for themselves, attracting people from all over, not only to see the events but even before and after the events. Places like the Cricket Museum (Lords) , Basketball Hall of Fame (Massachusetts), Olympic Stadia (Atlanta and Barcelona) not only generate revenue by hosting events, but over a period of time have became places of great tourist interest.

Delpy (1992, 1997) surveyed English speaking spectators at the Barcelona and Atlanta Olympic Games in an attempt to understand the motivations of individual who attended the Games. She found that although the Olympic Games are orchestrated for television, for those attending the Games, nothing compared with the excitement of “being there”. Indeed, Baines (1996) likened sport tourism to the “leisure pursuit of being there.” Both Baines and Delpy addressed the market trends for event based tourism with a focus on the spectator. Chalip et al. (1998) also looked at the motivations of individuals from the United States and assessed the likelihood that they would travel to attend an Olympic Games. They focused their investigation on three polysemic variables (Chalip, 1992): narratives, genres, and symbols associated with the Olympics. They examined the effect these variables had on Americans’ interest and intent to travel to the Olympics. Chalip et al. (1998) found that the genres of sport and spectacle can be used to predict interest and intent to travel, while narratives about Olympic athletes used by the media to promote the Games seemed to increase interest in watching them on television, rather than travelling to actually “be there”.

Another study that is noteworthy from a methodological perspective is a longitudinal study of the British Columbia Games (Carmichael & Murphy, 1996). The researchers were particularly interested in identifying patterns and trends across several years of the Games so that future events could be planned more effectively. Carmichael and Murphy also focused on how best to measure the number of spectators at “open access” events and how to determine the economic impact of smaller scale short term sports events. They recommended that future studies separate sport tourists into two groups: spectators and participants, as the two groups differ in their length of stay and spending patterns. Moreover, in a study of sport tourists attending ten US collegiate national championships, Irwin and Sandler (1998) found that degree of team affiliation impacted tourist expenditure and length of stay in the host community, with the more avid fans tending to stay an average of a day longer at the event.

Other studies have taken a more comprehensive approach to measuring the economic impact on a community of hosting major sports events. Again methodological difficulties regarding how to accurately measure economic impacts have been encountered. In fact, Hall (1992a) warns of the possibility of “displacement effect” whereby tourists and locals alike avoid the event destination because of the inflated prices which may accompany such an event. Similarly, Crompton (1995) warns of the direct, indirect, and opportunity costs generated by large events. These can be quite considerable. Burgan and Mules (1992) suggest that it is best to err on the conservative side when estimating the economic impact of an event. They assessed the utility of using various economic models to measure the economic impact of hallmark sports events. The authors argue that many studies fail to deal adequately with the expenses incurred in organising and marketing the event. Also, they suggest that any estimate of economic impact should incorporate the “psychic income” experienced by members of the host community in addition to visitor expenditures and event organisation costs. In a study of the 1995 Northern Conference University Sports Association Games (Lismore, Australia), Walo, Bull, and Breen (1996) found that the Games did have a positive economic impact on the community and that the use of existing facilities and volunteer staff were important not only in defraying the costs of hosting the event, but also in getting the community involved. The authors found that the most significant difference between hosting a hallmark event and hosting a small scale local event was that a small scale event is more likely to enhance the way of life of the host community. In other words, small events may have a greater positive effect on the psychic income of the residents, as more community residents are likely to be involved in the event in some way.

The psychic income of hosting a sports event for a community is not always positive, however. Soutar and McLeod (1993) in a study of resident’s perceptions regarding the America’s Cup Defence (1986-87) hosted by Fremantle, Australia found that both the positive and the negative impacts of the event did not live up to expectations. Prior to the event, many believed that Fremantle would become a “boomtown,” while, residents feared that the event would also bring severe congestion to their city. Using a longitudinal approach, Soutar and McLeod found that residents’ expectations were more extreme than what actually occurred. While the economic benefits did not reach their predicted levels, the apriori fear of congestion was worse than that experienced during the event. In fact, Ritchie (1984), used an analysis of the (then) forthcoming Winter Olympic Games in Calgary (Canada) to develop a list of both the positive and negative impacts a community might expect to encounter from hosting a hallmark event. Moreover, even within one community the impacts of an event may not be distributed evenly. For example, in a New Zealand based study, Garnham (1996) found that in hosting the Ranfurly Shield (a national rugby tournament which takes place over a two week period), some segments of the community gained, while others lost. While restaurants, pubs, and clubs reported increased business, retail shops saw no increase in trade. Nevertheless, Garnham found that community morale was the highest it had been in 22 years. The event provided a central focus for the local population which inspired a sense of pride in their community. Thus, once gain the psychic income of hosting an event may have counterbalanced some of the negative impacts.

Another much touted benefit of hosting sports events is that they may promote tourism beyond the event itself. For example, people who attend the event may return for a vacation, or those who watch the event on television may decide to visit the destination later. Initially, as Collins (1997) writes, “sports events can provide a tourist focus where nature has failed to do so, or can spread the use of accommodation into off-peak periods or stimulate accommodation provision” (p. 199). Later, especially in the case of the televised events, it is hoped that the exposure afforded the town or city hosting the event will generate tourism in the form of individuals wishing to visit the community. This may include nostalgia sport tourists, who wish to visit the stadia and venues associated with an event. For example, in many Olympic cities, the stadium is open for tours on a daily basis. Even in the years leading up to hosting the Games, venues are open for visitors. In Park City, Utah (one of the venues for the Winter Olympic Games in 2002) visitors can take a bobsled or luge run down the chute, even before the Olympians themselves.

There is a growing body of literature which adopts a critical approach towards the impacts of hallmark events on communities. Dovey (1989) using Perth, Australia which hosted the Commonwealth Games in 1962 and the America’s Cup in 1987 as a case study charges that “the real value (and damage) of such events for cities is quite unpredictable” (p. 79) and frequently “… it is revealed, often all too late in the domain of the everyday experience of the inhabitants …” (p. 79). Likewise, Roche (1994) argues that too much emphasis is given to the economic benefits (events often do not live up to expectations) and the political and planning processes which underlie hallmark events are inadequately evaluated. Roche suggests that future research on the effects of hallmark events on urban communities needs to address the contextual forces at work in all major western cities. These would include unemployment and the decline of traditional industries, as well as the “situational rationality” of the policies and actions taken in the planning of the event, such as the effect of local politics on the planning process.

Sack and Johnson (1996) conducted a study very much along these lines. They investigated the policy processes which brought the Volvo International Tennis Tournament to New Haven Connecticut in 1989. As hosting sports events is becoming a common strategy for the economic regeneration of many urban communities, Sack and Johnson wanted to gain insight into the workings of the various political groups in attracting the tournament to New Haven. The authors found that the main policy decisions had been made long before the general public became involved. Further, the workings of the local elites had a powerful impact on decisions concerning how the event would be financed and how the event would be run. Public funds to the amount of US$15 million would be used to build the tennis stadium needed to host the event. Yet, despite this public investment, the facility would not be open to the general public except when “special events” were held.

Sports related tourism has geared up to a great extent in the last few years.