Tourism and Hospitality Economic Development

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Questions and Answers

What is the goal of economic strategies in tourism and hospitality?

To maximize revenue and jobs developed within the region.

How does import substitution aim to impact local industries?

By imposing quotas or tariffs on imports to protect and encourage local production.

How does tourism and hospitality contribute to economic development in developing countries?

Tourism and hospitality generate revenue, create jobs, and provide foreign exchange, which helps boost the economy.

What are tax redemptions and how do they support the tourism sector?

They provide reductions on imported machinery and materials to lower operational costs for businesses. Signup and view all the answers

What is the relationship between income levels in developed countries and tourism demand?

As income levels in developed countries increase, the demand for tourism and hospitality services also rises. Signup and view all the answers

What type of financial support do subsidies offer to local industries?

Subsidies guarantee a minimum level of profit or occupancy for businesses. Signup and view all the answers

Explain the direct effects of the tourism and hospitality industry.

Direct effects refer to the income businesses earn directly from tourist spending. Signup and view all the answers

What is the significance of guaranteeing stabilization of tax conditions?

It provides businesses with long-term predictability regarding their tax liabilities. Signup and view all the answers

How do low-interest loans assist in the development of tourism?

They provide affordable capital for businesses to invest in growth and improvements. Signup and view all the answers

What are indirect or secondary effects of tourism spending on a local economy?

Indirect effects are the income generated from tourism spending that is reinvested in the local economy, such as paying employees and purchasing local supplies. Signup and view all the answers

What restrictions do countries place to maximize foreign exchange earnings?

They limit the amount of their own currency that tourists can bring in and take out. Signup and view all the answers

Define the term 'tourism multiplier.'

The tourism multiplier refers to the total economic impact—both primary and secondary—of tourism-related revenue introduced into an economy. Signup and view all the answers

What does the free repatriation of profits entail for foreign investors?

It allows them to transfer back their invested capital, profits, and dividends with minimal restrictions. Signup and view all the answers

How can changes in price and income influence travel demand?

Changes in price and income can lead to fluctuations in demand for leisure travel, as higher prices may deter travel and increased income may encourage it. Signup and view all the answers

What role does foreign exchange play in the economic development of developing countries?

Foreign exchange is crucial for economic development, as it allows countries to purchase necessary goods and services internationally. Signup and view all the answers

What non-economic factors might influence travel demand?

Non-economic factors such as cultural events, political stability, and social trends can significantly influence travel demand. Signup and view all the answers

What is the tourism multiplier effect?

The tourism multiplier effect refers to the direct and indirect economic impact resulting from tourist spending in a local economy. Signup and view all the answers

How is the cost-benefit ratio derived in tourism?

The cost-benefit ratio is derived by dividing the total benefits from tourist expenditures by the total costs incurred. Signup and view all the answers

Name two negative economic effects of tourism.

Increased costs of living and unstable economies are two negative economic effects of tourism. Signup and view all the answers

What does Balanced Growth Theory in tourism emphasize?

Balanced Growth Theory emphasizes integrating tourism and hospitality into a broad-based economy to maximize economic benefits. Signup and view all the answers

Describe Unbalanced Growth Theory in the context of tourism.

Unbalanced Growth Theory views tourism and hospitality as primary drivers of economic growth by stimulating demand. Signup and view all the answers

What challenges can arise from increased prices due to tourism?

Challenges include higher costs for local consumers and potential displacement of local markets. Signup and view all the answers

What role does the percentage of expenditure leaving the local economy play in tourism's economic impact?

It helps determine how much of the tourist dollar remains within the local economy, affecting the multiplier effect. Signup and view all the answers

How can applying cost-benefit ratios help communities in terms of tourism?

Applying cost-benefit ratios helps communities estimate the income generated and costs incurred from tourism activities. Signup and view all the answers

Study Notes

The Economy of Tourism and Hospitality

Tourism and hospitality are important for economic growth in developing countries
Demand for international travel is high in developed countries, and as incomes rise, demand for tourism increases
Developing nations rely on foreign exchange to support economic development

Role of Tourism and Hospitality in Economic Development

Several developing countries utilize tourism and hospitality to stimulate economic growth
Reasons include:
- Consistent demand for international travel exists in developed countries
- Income growth in developed nations leads to increased tourist demand
- Developing countries need foreign exchange to bolster their economies

Organization for Economic Cooperation and Development (OECD)

Tourists collect products from the exporting nation. This eliminates freight costs.
Non-economic factors greatly influence travel demand. This means changes in price and income affect leisure travel demand.
Exporters can influence exchange rates through fiscal measures.
Tourism and hospitality are diverse industries impacting multiple economic sectors.

Economic Impact

The tourism and hospitality sector generates revenue, jobs, and foreign exchange
This leads to significant economic impacts on destination locations.
This sector impacts various related areas such as transportation, entertainment, and accommodations.

Direct and Secondary Effects

Direct Effects: Direct income from tourist spending in businesses
Indirect/Secondary Effects: The money spent by tourists is used by businesses to purchase supplies, pay wages, etc. This further circulates money in the local economy

Tourism Multiplier

The tourism multiplier represents the total effect (primary and secondary) of an external revenue source introduced into an economy.
A country's economy is impacted directly and indirectly by tourist spending, through the tourism multiplier (also called multiplier effect).

Cost-Benefit Ratio

The cost-benefit ratio is derived by dividing benefits by costs.
Procedures for calculating the ratio:
- Determine where tourist dollars are spent
- Establish the percentage of each expenditure that stays within the local economy
- Calculate the multiplier, a ratio showing spending effects within the economy
- Apply the multiplier to tourist spending to get total benefits in dollars
- Calculate a cost-benefit ratio in dollars received per dollar spent
- Estimate income and expenses of tourist businesses for the community (private and public sectors)

Undesirable Economic Aspects of Tourism

Increased costs and unstable economies are negative aspects of tourism
Prices in tourist destinations may rise due to increased demand and/or imports
This impacts local consumers and can lead to unstable economies. Prices and income changes affect voluntary purchases like travel

How to Maximize the Economic Effect of Tourism and Hospitality

Growth Theories:
- Balanced Growth Theory: Tourism and hospitality are integrated into a broader economic system, benefiting from other industries
- Unbalanced Growth Theory: Tourism drives economic growth by increasing demand, leading to further industry growth

Economic Strategies, Import Substitution, Incentives, and Foreign Exchange

Economic Strategies: Strategies to maximize tourism benefits (e.g., import substitution)
Import Substitution: Policies that encourage local production of goods previously imported, reducing the leakage of money out of the country
Incentives: Measures (e.g., tax breaks, loans) to attract investment and foster growth
Foreign Exchange: Procedures and policies to control or maximize the amount of foreign exchange earned

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Description

Explore how tourism and hospitality impact economic growth, particularly in developing countries. Understand the demand dynamics between developed and developing nations and the role of foreign exchange. This quiz delves into the essential contributions of these sectors to overall economic development.