Economy in Tourism Perspective PDF

TH1803 ECONOMY IN TOURISM PERSPECTIVE Economy is defined as “the state of a country or region in terms of the production and consumption of goods and services a...

TH1803 ECONOMY IN TOURISM PERSPECTIVE Economy is defined as “the state of a country or region in terms of the production and consumption of goods and services and the supply of money” (Oxford, n.d.). In some countries, tourism is considered as one of the industries that serves as the cornerstone of the country’s economy. In the Philippines, the Tourism Act of 2009 declares tourism as “an indispensable element of the national economy and an industry of national interest and importance, which must be harnessed as an engine of socio-economic growth and cultural affirmation to generate investment, foreign exchange, and employment.” Tourism can contribute to the economy through the tourism multiplier effect, or “the revenue generated by inbound tourism that flows into a country, region, or location which injects new resources into the economy” (Santos, 2017). Tourism multiplier effect has three (3) pathways: direct, indirect, and dynamic effects. Consequently, the World Travel and Tourism Council (WTTC) included another pathway, which is the induced effect (Cruz, 2016).  Direct effect – This effect is caused by tourist expenditures in commodities such as accommodation, transportation, food, and attractions. These spending activities are beneficial to industries that are directly involved with the said commodities. The main sources of tourism spending are domestic travel and visitor exports or international travel spending. (e.g., tourists booking flights and hotel accommodations and visitors purchasing tickets for transportation)  Indirect effect – This comes in the form of tourism investments, government spending for tourism development, and purchase made from suppliers of the commodities used for tourism. The examples of suppliers are farms for food and delicacy products, industrial and utility companies for electricity and water, and training centers for human resource needs. (e.g., restaurants buying fresh milk from farms for supply)  Dynamic effect – This refers to the long term and large scale effects of tourism such as skill enhancements for better chances of landing a job, availability of better social services (health, education, and security), and infrastructure development (airport, roads, and railways). (e.g., increase of job opportunities in hotels and airports and construction of public restrooms and sidewalks due to the increasing number of visitors)  Induced effect – It refers to the broader contribution of tourism through the expenditure of people who are directly and indirectly employed by the tourism industry such as food, beverage, clothing, and recreation. (e.g., hotel staff purchasing food from nearby restaurants for lunch and airline employees buying new clothes using money from their salaries) ECONOMIC IMPACTS OF TOURISM POSITIVE ECONOMIC IMPACTS Job creation – Tourism has a wide job market ranging from entry-level positions (e.g., hotel front desk staff, room attendants, servers, concierge, and airline ground staff) to more advanced positions (e.g., supervisory and managerial positions, executive chef, and flight purser). Other positions include administrative duties and back office positions such as auditors, clerks, and support systems staff. Jobs are created in tourism through its value chain. Value chain comprises the suppliers that provide and carry out the needed inputs for tourism operations including entities like construction and hardware companies for building tourism infrastructures (airports, railroads, and highways) that indirectly benefit from tourism development (Cruz, 2016). 03 Handout 1 *Property of STI  [email protected] Page 1 of 4  TH1803 Livelihood – Tourism creates opportunities for small-scale businesses, of which is beneficial to the economy. Their involvement in tourism ranges from selling handicrafts and souvenir items to other forms of tourism, such as agritourism where a farm offers farm-related education and experience (e.g., planting crops, milking the cows, and harvesting chicken eggs). Other travel-related sectors include vendors of local delicacies and small-scale transport services such as tricycles, motorbikes, and boats. Share of tourism income – This pertains to the economic impact of tourism in which the places of origin and transit routes going to the destination also take its share of tourism-generated income. Examples of this are food and beverage products purchased in stopover routes, toiletries brought from convenience stores along expressways, and fuel at gasoline stations. Taxes and fees – The government earns from tourism by imposing various fees in processing tourism-related documents such as passport fees, visa fees, and fees for using tourism infrastructures such as parking and airport fees. They also gain income from imposing taxes on tourism businesses. NEGATIVE ECONOMIC IMPACTS Leakage – This negative impact is mostly accustomed to supplies sourced outside a tourist destination. This happens when specific items needed for a tourism operation are not available within the area. Some examples may include raw food items needed for international cuisines served at restaurants and imported cloth and linen for hotel beds. Seasonality of jobs – Some argue that tourism employees are subject to low job security. This problem is mostly associated with the practice of outsourcing and contractualization in which an employee works with a tourism-related establishment on a limited time basis or depending on the season. Once the employee’s tenure ends, s/he will have to wait for another season or available opportunity to be employed. Overdependence – As tourism presents investment opportunities, local communities tend to rely on the industry as the main source of their income and economic improvement. This makes them vulnerable to the natural and man-made events that can disrupt tourism operations and its value chain. Opportunity cost – Tourism development, when prioritized by the government, can take a huge part of the national budget. In this case, other projects that may have been more beneficial to the citizens, such as social services, education, assistance to the poor, and health services, will suffer a huge budget cut. TOURISM AS A TOOL FOR ECONOMIC DEVELOPMENT Tourism is reported to be one of the largest economic sectors in the world over the past few decades. According to the Philippine Statistics Authority, in 2017, Philippine tourism’s contribution to the economy is at 12.2 percent (Php 1,929.3 billion). The contribution of the tourism industry in a destination’s economy may vary. The tourism’s contribution might be minimal to those who have an advanced economy; whereas for developing destinations, tourism might have a large contribution to its economy through shares of its gross domestic product and employment (Sharpley & Telfer, 2014). 03 Handout 1 *Property of STI  [email protected] Page 2 of 4  TH1803 TOOLS FOR ECONOMIC DEVELOPMENT THROUGH TOURISM Tourism Consumption It represents the “total consumption expenditure made by a visitor or on behalf of a visitor for and during his/her trip and stay at the destination” (United Nations World Tourism Organization [UNWTO], 2010). A visitor, in this sense, is defined as a person traveling for both leisure and business. S/He uses his/her own resources, such as cash coming from personal income or savings, for tourism consumption. There are different groups of tourism products where visitors spend their money on. First are the products created by tourism industries such as accommodation, food and beverage services, passenger transportation, and travel agencies services. Next are the tourism-connected products such as fuel or tobacco. There are also non-tourism-related consumption products such as cosmetics, shoes, or other goods (mostly pasalubong items especially for Filipino tourists). Emergence of New Destinations Tourism for the past few years has continued its progress through the emergence of new destinations. During early times, the majority of international tourism was concentrated in several well-known countries like the United States of America and the United Kingdom. Most countries nowadays, if not all, promote themselves as tourist destinations. It was reported that the well-known countries’ share of international tourist arrivals have dropped as emerging destinations took their share and continue to level up their competitiveness, as reflected on the higher spending of visitors within their territories. Filling the Economic Imbalance In the 1980 Manila Declaration, the World Tourism Organization (now United Nations World Tourism Organization) articulated that: World tourism can contribute to the establishment of a new international economic order that will help to eliminate the widening economic imbalance between developed and developing countries and ensure the steady acceleration of economic and social development and progress, in particular in developing countries. (UNWTO, 1980, p. 1) Many are convinced that throughout the world, tourism as a development strategy can contribute to the local or national economy. According to Schubert et al. (as cited in Sharpley & Telfer, 2014), “international tourism is recognized to have a positive effect on the increase of long-run economic growth through different channels.” These are some of the ways on how tourism contributes to economic growth:  Foreign exchange earnings – Tourism is considered as one of the principal sources of foreign exchange earnings that can contribute to the balance of payments, especially for developing countries. Balance of payments is the record of all international trade and financial transactions that a country’s residents make.  Source of income and employment – Tourism generates employment and livelihood opportunities, especially for local communities who are dependent on tourism as their main source of income.  Prompts local competition and investments in infrastructure – Tourism encourages infrastructure development of other economic sectors and human capital development which provides people, especially local communities, with programs that will help develop technical skills. 03 Handout 1 *Property of STI  [email protected] Page 3 of 4  TH1803 References: Cruz, R. G. (2016). Tourism impacts and sustainability. Manila: Rex Bookstore, Inc. Economy (n.d.). In Oxford English Dictionary. Retrieved from https://en.oxforddictionaries.com/definition/economy Lohmann, G. & Netto, A.P. (2017). Tourism theory: Concepts, models, and systems. UK: CABI. Philippine Statistics Authority. (2018). Contribution of tourism to the economy is 12.2 percent in 2017 [Press release]. Retrieved from PSA website: https://psa.gov.ph/tourism-satellite-accounts-press-releases Sharpley, R. & Telfer, D. (2014). Tourism and development: Concepts and issues. UK: Channel View Publications. United Nations World Tourism Organization (UNWTO). (1980). Manila Declaration on World Tourism. UNWTO Declarations, 1, 1. doi:10.18111/unwtodeclarations.1980.01.01 03 Handout 1 *Property of STI  [email protected] Page 4 of 4