Tourism Economic Impacts

1
Chapter 8-1 Tourism Economic Impacts
2
Learning Objectives

• Explain the major economic impacts of tourism
  on destination areas and how these impacts are
  measured
• Describe the strategies to maximize the economic
  impact of tourism and how tourisms role in
  economic development can be analyzed.

3
Economic Impacts of Tourism

• Increasing foreign exchange earnings
• Increasing income
• Increasing employment

4
Invisible Export
Differences With Other International Trade
Freight Costs
More-than-proportional Changes
Non-monetary Benefits
Affection
Exchange Rates Prices
5
Increasing foreign exchange earnings

• Many countries have embraced tourism as a way to
  increase foreign exchange earnings.
• However, there is danger of overstating the
  foreign exchange earnings generated by tourism
  unless the import factor is known
• The money spent leaks destinations economy and
  must be subtracted from foreign exchange earnings
  to determine the true impact.

6
Leakage

• Definition
• The value of goods and services that must be
  imported to service the needs of tourism.

• Occurs from at least 6 factors
• Cost of goods and services that must be
  purchased to satisfy the needs of visitors
• Importing goods and materials for infrastructure
  and buildings required for tourism development

7

• 3. Payment to foreign factors of production
• 4. The expenditure for promotion public
  relations/publicity, and similar service abroad
• 5. Some ways of transfer pricing
• 6. Host government exempt duties or taxes for
  foreign-owned companies or offer financial
  inducements to attract investment

Its critical to determine the net foreign
exchange earnings from different types of
visitors and types of tourism purchases within
the destination.
8
Increasing income

• The Ad Hoc or Simple Multiplier
• Visitors make an initial round of expenditures in
  the destination area
• In the second round, the tourism businesses use
  some of the money to purchase and expenses
• The income in third round may be spent or save
• This process continues until the additional
  income generates by a new round of transactions
  become zero.

9
Income impact of tourism

• Direct The first round of spending by visitors
  in the destination area.
• Indirect The second round of expenditures by
  businesses who receive the first round of visitor
  spending.
• Induced The subsequent rounds of expenditures
  after the second round.

10
Input-output Analysis

• A method of looking at interactions among
  different economic sectors and determining the
  effects of any possible changes
• A means analyzing inter-industry relationships in
  the production process in a destination areas
  economy
• A inpu-output table shows how transactions flow
  through an economy in a given time period

11
Economic Impact Models

• TEIM (Travel Economic Impact Model)
• TEAM (Tourism Economic Assessment Model)

Increasing Employment

• Direct employment lodging, restaurants,
  attractions, transportation and sightseeing
  operations

Indirect employment /secondary employment
construction ,agriculture and manufacturing
12
Economic Considerations Analysis
13
Cost/Benefit Analysis

• Cost/benefit analysis is used to determine which
  economic sector produces the most benefit in
  terms of foreign exchange, employment, taxes, or
  income generated relative to the costs of
  development

Structural Analysis

• Accumulation processes
• Resource allocation processes
• Demographic distribution processes

14
Modifying the Host Destinations Socioeconomic
Structure

• Change the economic structure of a destination
  area
• Encourage workface migration
• Cause profound changes within a society in terms
  of economic power
• Change the value land ownership patterns

15
Satellite National Accounting

• In 1993, the United Nations Statistics
  Division produced a publication called the UN
  System of National Accounts that recommended the
  creation of a satellite accounting system for
  complex service sectors such as tourism

16
Maximizing Tourism Positive Economic Impacts
17

• Encouraging import substitution
• Implementing incentive programs
• Dealing with multinational tourism companies

18
Encouraging Import Substitution

• Supporting the promising industries through
  specific subsidies, grants or loans.
• Placing quotas or tariffs on the import goods

19
Implementing Incentive Programs

• Types of Incentives
• Tax holidays or deferrals
• Remission of tariffs
• Tax reductions
  
  
• Nonrefundable grants
• Low-interest loan
• Interest rebates
• Forgivable loans
• Loan guarantees
• Working capital loans
• Equity participation
• Training grants
• Infrastructure assistance
• Leasebacks
• Land donations

Categories of Incentives Fiscal
Incentives Direct and Indirect Incentives
20
Implementing Incentive Programs

• Before implementing an incentive strategy, a
  destination should
• Examine the performance of other countries
  incentive programs in light of their resources
  and development objectives.
• Research the actual needs of investors.
• Design codes of investment concessions related to
  specific development objectives, with precise
  requirements of the investors.
• Establish targets of achievement and periodically
  monitor and assess the level of realization of
  such targets.

21
Dealing with Multinational Tourism Companies
Hotels
22
(No Transcript)
23
Tour Operators
24
The Economic Impact of Tourism in China and Hong
Kong
25
What is TSA ?

• Tourism Satellite Accounts
• The Canadian Tourism Commission defines a TSA as
  following
• A statistical tool that measures the
  total economic ad employment impact of tourism,
  allowing researchers to directly compare the
  impacts of tourism with those of other industries
  and from country to country.

26
WTTC TSA economic impact model

• Three element
• 1)Travel and Tourism Consumption
• 1.personal travel and tourism.
• 2.business travel.
• 3.government expenditure-individual.
• 4.visitor exports.

27
WTTC TSA economic impact model

• 2)Travel and Tourism Demands
• 1.goverment expenditure-collective.
• 2.capital investment.
• 3.exports-non-visitor .
• 3)Employment
• 1.travel and tourism industry employment.
• 2.travel and tourism economy employment.

28
TSA and economic forecast

• The Impact of Travel and Tourism on Jobs and the
  Economy China and China Hong Kong SAR.(
  including two simulated TSA and economic forecast
  for China and Hong Kong)
• WTTC forecast the baseline forecast for China are
  staggering ,over the next ten years (the
  following table )

29
(No Transcript)
30
(No Transcript)
31
The Challenge

• The tables suggest that Chinas most
  difficult challenge will be to manage the project
  growth as China is predicted to become the
  worlds tourism superpower, leading all
  destination in international tourism arrivals and
  in in outbound tourists by the year of 2020.

32
The End !