Tourism and Hospitality Economy PDF

Chapter 3 The Economy of Tourism and Hospitality Presented by Group 1  Chapter 3 The role of Tourism and Hospitality in Economic Development Several developing countries have used tourism and hospitality development as an alternative to help economic gr...

Chapter 3 The Economy of Tourism and Hospitality Presented by Group 1  Chapter 3 The role of Tourism and Hospitality in Economic Development Several developing countries have used tourism and hospitality development as an alternative to help economic growth. The reasons for this are: There is a continuous demand for international travel in developed countries. As income in developed countries increase the demand for tourism and hospitality also increases as faster rate Developing countries need foreign exchange to aid their economic development.  Chapter 3 Organization for Economic Cooperation and Development (OECD) The consumer collects the product from the exporting country, thereby eliminating the freight costs. Non-economic factors heavily influence travel demand. This means that changes in price and income will influence the demand for leisure travel. Exporting can manipulate exchange rates through the use of specific fiscal measures Tourism and hospitality is a multifaceted industry that directly affects severe sectors in the economy.  Chapter 3 Economic Impact Since the tourism and hospitality sector s provide revenue, jobs, and foreign exchange, they can have a significant economic impact on a destination/ location.  Chapter 3 Direct and Secondary Effects Direct Effects This refers to the income that businesses receive directly from tourist spending.  Chapter 3 Direct and Secondary Effects Indirect or Secondary Effects The money tourists spend with businesses is then used by those businesses to pay for supplies, wages of workers, and other related costs. These payments, in turn, circulate within the local economy. For example, a restaurant may use part of its income from tourists to pay its employees or buy ingredients from local suppliers, creating further economic activity.  Chapter 3 Tourism Multiplier The term "multiplier-" refers to the whole impact, both primary and secondary, of an outside revenue source that gets introduced into the economy. A country's economy can be estimated to be directly and indirectly impacted by tourist spending through the use of the tourism multiplier, also known as the multiplier effect.  Chapter 3 Cost Benefit Ratio Benefits divide costs equal the cost-benefit ratio. This can be derived by using the following procedures: 1. Determine where tourist dollar is spent; 2. Determine percentage of each expenditure leaves the local economy; 3. Derive a "multiplier effect," a ratio applied to income that reflects multiple spending within aneconomy; 4. Apply the multiplier effect to the tourist expenditures to arrive at the total benefits of tourist expenditures in dollars; 5. Derive a cost-benefit ratio expressed as dollars received/dollars spent; 6. Apply the cost-benefit ratios to tourist expenditures to provide estimates of income and costs oftourist business to a community, for both the private and public sectors.  Chapter 3 Undesirable Economic Aspects of Tourism Increased costs and unstable economies are two negative economic effects of tourism and hospitality. Prices in a destination area may rise as a result of tourist purchases due to increasing demand and/or imports. This would result in higher prices for products and services for local consumers as well. Travel for pleasure is a voluntary purchase, therefore price and income changes may affect it. These fluctuations could lead to unstable economies.  Chapter 3 How to Maximize 1. Growth Theories the Economic Growth Theories Hospitality: in Tourism and Effect of Tourism Balanced Growth Theory: Tourism and and Hospitality hospitality should be integrated into a broad-based economy, relying on support from other industries. The objective is to produce tourism and hospitality goods 1. GROWTH THEORIES and services locally for maximum economic benefit. 2. ECONOMIC STRATEGIES Unbalanced Growth Theory: Tourism and hospitality are seen as the drivers of 3. IMPORT SUBSTITUTION economic growth by expanding demand. As demand grows through tourism 4. INCENTIVES development, other industries will follow, offering local products and services to 5. FOREIGN EXCHANGE meet that demand.  Chapter 3 2. Economic Strategies 3. Import Institution The key to economic effects of It imposes quotas or tariffs on the tourism and hospitality is to importation of goods which can be maximize the amount of revenue developed locally, it also grants and jobs developed with the region. subsidies, grants, or loans to local industries to encourage the use of To attain this objective, some local materials. Its objective is to economic strategies have been minimize the leakage of money. adapted, such as import substitution, incentive, and foreign exchange. 4. Incentives 5. Foreign r wise use of incentives can encourage the influx of capital, both local and foreign, necessary to develop tourism and hospitality Exchange supply. Many countries have placed restrictions on spending in The most common forms of incentives are: order to maximize foreign exchange earnings. They 1.) Tax redemptions/reductions on imported machinery, materials, have limited the amount of and the like; their own currency that 2.) Guarantee of stabilization of tax conditions (for up to years); 3.) Subsidies (guaranteeing minimum level of profit, occupancy, tourists can bring in and etc.); take out of the destination 4.) Loans at low rates of interest; to ensure that foreign 5.) Free and unrestricted repatriation of all or part of invested currency is used to pay bills capital profits, dividends, and interest subject to tax provision; and in the host region. Tourists 6.) Guarantees against nationalizations or appropriation may be required to show that they have enough money for their stay before they are permitted to enter the country or they may even e required to enter with a specified amount of foreign currency for the duration of their visit.  Chapter 3 Thank You Presented by Group 1