Tourism

PAPER II

Types of Tourism and Impacts of Tourism

Types of Tourism

• International Tourism – Understanding & definition of Inbound Tourism & Outbound Tourism;

• Domestic Tourism - Understanding & definition of Inbound Tourism & Outbound Tourism

• Dimensions of Tourism – economic significance, foreign exchange earnings, regional development, multiplier effect, employment generation, contribution to International goodwill and peace

Travel Insurance

• Need and Importance of travel Insurance,

• Air Travel Insurance, • Baggage claim and insurance, • Medical travel insurance

Types of Tourism

• INTERNATIONAL TOURISM

– Inbound Tourism– Outbound tourism

• DOMESTIC TOURISM

– Inbound Tourism– Outbound tourism

TYPES OF TOURISM IN MT

• INTRABOUND DOMESTIC

Economic Impact

• Tourism is a powerful economic force providing employment, foreign exchange, income, and tax revenue.

• The generators of economic impact for a city, a state, a province, a country, or a destination area are visitors, their – expenditures, and the– multiplier effect

Economic Impacts

• We can say that incoming tourist spend is an export, while outgoing tourist spend is an import.

• Economic impact is measured in four ways:– effect on income, – on employment, – on the area’s balance of payments and– on investment and development

Effect on Income

• Income is generated from – wages and salaries,– interest, – rent and – profits.

• In a labour intensive industry such as tourism, the greatest proportion is likely to be derived from wages and salaries paid to those working in jobs either directly serving the needs of tourists or benefiting indirectly from the tourists’ expenditure.

• The total number of international arrivals reached 898 million in 2007, an increase of 52 million over 2006.

• Arrival of tourists is one of the indicators of their expenditure also.

• International receipts increased by $ 57 billion, for a 4.5 percent increase, very similar to the increase in arrivals

• Receipts per arrival averaged $ 870. The Americas averaged the highest receipts per arrival at $ 1130, followed by Asia and the Pacifi c with an average of $ 920, Europe with $ 830, the Middle East with $ 660, and Africa with $ 590.

• Income will be greater in the areas which:– generate large numbers of

tourists, – where visitors tend to stay for

longer periods, – where the destination attracts an

up-market or more free-spending clientele, and

– where there are many opportunities to spend.

Effect on Income

• Tourism is the main income generator for one-third of the developing nations,

• It is also a major income generator in the Western world.

• In Britain, to take one example, tourism is of prime importance in areas where there is little industry, such as in the Scottish Highlands

Effect on Income

• Income is also generated from interest, rent and profits on tourism businesses.

• This could include, for example, the interest paid on loans to an airline in order to buy aircraft, or rent paid to a landowner for a car park or campsite near the sea.

Effect on Income

• Taxation on tourism activities, such as value added tax (and occasionally additional room taxes) on hotel bills, duty and taxation on petrol used by tourists, and other direct forms of taxation which countries may choose to levy on tourists to raise additional public income.

• In Austria, to give one example, there is a Kurtaxe imposed on accommodation to raise money for the local authority

Effect on Income

• The World Travel and Tourism Council estimates that in 2008, employment in the travel and tourism economy was 238,277,000 jobs or 8.4 percent of total employment which is 1 in every 11.9 jobs.

• By 2018, this should grow to 296,252,000 jobs, 9.2 percent of total employment or 1 in every 10.8 jobs.

• The 80,749,000 travel and tourism industry jobs accounted for 2.8 percent of total employment in 2008 and are forecast to rise to 97,983,000 jobs or 3.1 percent of the total by 2018.

Employment

• Tourism provides both direct and indirect employment.

• Firms such as hotels, restaurants, airlines, cruise lines, and resorts provide direct employment because their employees are in contact with tourists and provide the tourist experience.

• Employees of firms providing goods and services to the direct employment firms, such as aircraft manufacturers, construction firms, and restaurant suppliers, create indirect employment.

Employment

Multiplier Effect

• Tourism’s contribution to the income of an area is enhanced by a phenomenon known as the tourism income multiplier (TIM).

• This arises because money spent by tourists in the area will be re-spent by recipients, augmenting the total.

• The multiplier is the factor by which tourist spend is increased in this process

• The multiplier can be found by applying the formula:

Multiplier = 1/ Proportion of leakages• So in an economy with a high proportion of

leakages, such as high tax rates (although we must remember that the government may choose to reinvest this tax money in the local economy, so much of it may not be lost for all time), or where many of the goods demanded by consumers are imported, TIM may be quite low, and the economy will not benefit greatly from tourism

Multiplier Effect

Multiplier Effect

• Local hotels may also be foreign owned, so that profits achieved are then transmitted to the hotel chain’s head office and so lost to the area

• This might be true of other tourist facilities in the area, and even local ground-handling agents or coach operators may be owned by companies based elsewhere, leading to further losses in the multiplier effect.

• Leakage is minimum when the firms are in the hands of the locals hence TIM is higher

LEAKAGES

• The principal reasons for leakages include:• cost of imported goods, especially food and drink• foreign exchange costs of imports for the

development of tourist facilities• remittance of profits abroad• remittance of wages by expatriates• management fees or royalties for franchises• payments to overseas carriers and travel

companies• costs of overseas promotion• additional expenditure on imports resulting from

the earnings of those benefiting from tourism.

Balance of payments

• International tourists are buying tourist services in another country, and these payments are noted in a country’s accounts as ‘invisibles’

• The money spent by an American visitor to Britain is credited to Britain’s balance of payments, becoming an invisible receipt for Britain, while it is debited as a payment against the American balance of payments

• The total value of receipts minus the total payments made during the year represents a country’s balance of payments on the tourism account

• It is always beneficial to have a large number of inbound tourists rather having bigger number of outbound travelers.

• Countries like Germany and Japan are struggling to increase inbound tourism as these were the countries producing a large number of tourists traveling to different countries.

• Italy and Spain are the examples of having a high number of tourists coming to their country hence high balance of payments.

Balance of payments

Conclusion

• Tourism has a great potential in generating employment (direct and indirect)

• Lesser the leakages from the economy greater is multiplier effect of the expenditure made in the local economy.

• TIM is very low for the developing countries as compared to the developed nations because of their dependency on imports of tourism products from outside.

• It is economically beneficial for a nation to have greater number of inbound travelers as compared to outbound.