Economic Impacts of Tourism

Positive economic impacts of tourism

• Employment opportunities in formal and informal tourism
  sectors.

• Income generation from tourists’ spending on consumer
  goods and services.

Negative economic impacts of tourism

• Economic leakages resulting in less tourism revenue. 

• Overdependence on tourism, which increases vulnerability to a sudden fall in tourist numbers

Source: SLS

Economic benefits

• • International tourism creates jobs, particularly in the service and transport sectors of the receiving country. The development of hotels, apartment blocks, restaurants, taxi and bus services may help to stimulate the local economy. The provision of temporary and permanent employment opportunities has a multiplier effect on other labour intensive sectors.  e.g. In the Tunisian resort of Tozeur each new hotel is estimated to created up to 100 new jobs for local people, while indirect employment is created by the demand for tour guides and drivers, souvenirs (rugs and carpets), restaurant and cafe staff and ancillary services such as banking. 

  • Consumption of local food and drink is often cited as one of the greatest attraction of a foreign holiday and this increased demand helps to stimulate local, regional and national agriculture.  e.g. The growth of ‘fermes auberges’ (farm restaurants) in France is a good example of French success in linking local produce to the tourist industry. 

  • Tourists spending power help to inject capital into the towns, shops and leisure outlets. This help to stimulate the local economy and becomes an important contribute to economic growth.  e.g. Tourism on the Indonesian island of Bali has been an important contributor to the national balance of payments, so much so that the government has now adopted tourism as an economic strategy throughout the country. 

  • Finally, the need to attract and accommodate tourists often stimulates the development and improvement of local infrastructure such as roads, ports, airports and services such as water supplies, sewage, electricity and domestic waste disposal.  e.g. The northern coast of Penang Island in Malaysia has been transformed by tourism. Where 25 years ago there were scattered villages without modern services, there is now a new highway and a highly developed infrastructure.

Negative Economic Impacts

• The economic benefits of tourism may only benefit very small areas of a country and only a very small proportion of local traders, hoteliers. This can deepen local or regional disparities in standard of living. 

• There may be leakage of revenue as only a very small proportion of the total spending of tourists may actually reach local people because hotels and holiday organisers, especially package tour organisers, may be in foreign ownership. 

• A high proportion of the total cost of a holiday may be transport related and this is usually paid for in the home country, bringing little benefit to the locals in the destination country.  

• Tour operators may also bring in their own non-local guides, managers and drivers etc. Many jobs may be only part-time or seasonal or temporary. Tourists may spend little money on local types of food and drink. e.g. In Antigua, although tourism brings in a sizeable amount of foreign exchange, this is leaked out again, paying for expatriate staff, for food and for consumer durables demanded by visitors.

• Develop infrastructure to meet the demands of tourists may cause enormous strains on both the local and national economy. This may mean that other areas of the economy, such as those on which local people depend are neglected.  e.g. In the Indian coastal state of Goa, there have been numerous protests about government policy giving priority for water supplies to hotels towards the end of the dry season, while local village wells run dry.

Geo Factsheet International Tourism Kevin Byrne.