Tourism and Economy in the Philippines

Definition of Economy and Tourism

• Economy refers to the production and consumption of goods and services alongside the supply of money in a country or region.
• In many nations, tourism is a foundational industry essential for economic growth and development.

Philippines Tourism Act of 2009

• Declares tourism as a vital part of the national economy.
• Recognizes tourism as an industry of national interest, promoting socio-economic growth, cultural affirmation, and job creation.

Tourism Multiplier Effect

• The tourism multiplier effect is the revenue generated by inbound tourism that benefits the economy through new resource injections.
• Four pathways of the multiplier effect include direct, indirect, dynamic, and induced effects.

Pathways of Tourism Multiplier Effect

• Direct Effect:

  • Resulting from tourist spending on accommodation, food, transportation, and attractions.
  • Driven mainly by domestic travel and international tourist expenditures.

• Indirect Effect:

  • Arises from tourism investments and government spending on tourism infrastructure.
  • Involves economic activities from suppliers like farms, while supporting services and utility companies.

• Dynamic Effect:

  • Long-term benefits of tourism encompass improved job skills, enhanced social services (health, education), and infrastructure development (airports, roads).
  • Example: Increased employment opportunities, better public facilities due to rising tourist numbers.

• Induced Effect:

  • Accounts for spending by employees in the tourism sector on local goods and services.
  • Example: Hotel staff purchasing lunches from nearby eateries.

Positive Economic Impacts of Tourism

• Job Creation:

  • Diverse employment opportunities range from entry-level positions (e.g., hotel staff, airline ground staff) to middle-management roles and specialized jobs (e.g., executive chefs).
  • Job creation extends to industries supporting tourism (e.g., construction for infrastructure).

• Livelihood Opportunities:

  • Small businesses thrive, providing goods and services like handicrafts, agritourism experiences, and local delicacies.
  • Local transport services benefit from tourism demand.

• Share of Tourism Income:

  • Economic benefits also extend to areas related to tourism, such as businesses along transit routes.
  • Revenue generated from food purchases, resupply points, and other travel necessities.

• Taxes and Fees:

  • Government revenue increases through tourism-related taxes and fees (e.g., passport, visa, parking, and airport fees).
  • Businesses involved in tourism contribute through taxation.

Negative Economic Impacts of Tourism

• Leakage:
  • Occurs when tourist spending goes to suppliers outside the local economy, reducing direct economic benefits to the destination.
  • Affects locations that rely on imported goods or services instead of utilizing local resources.