Economic Impacts Of Tourism

Economic Impacts Of Tourism

Economic Impacts Of Tourism

Tourism is the movement of people for one place to another and staying in places outside their usual environment for not less than twenty-four hours and not more than one consecutive year for leisure, business, and other purposes. Tourists therefore travel and stay in places and in the process get both the catering and accommodation services that they would have received while at their usual environments. Hospitality industry and tourism industry work hand in hand to ensure that the tourists are well cared for while they are at their proximity (Mak J. 2004)..

The hospitality industry incorporates the catering as well as the accommodation sectors. With the development of the hospitality industry, hotels have been improved. They now provide both catering as well as accommodation services. Tourism is an invisible export and a country with good scenic features is more advantaged because the attractions can lure more tourists into the country thereby increasing the size of her Gross Domestic Product. This is due to the payments they make at the various locations where hospitality services are provided (Mak J. 2004)..

In discussing the Tourism multiplier effects, we look at how the industry encourages the growth of the primary and the secondary sectors of the economy. The multiplier effects leads into a vicious circle. It further talks much of how much the money spent by a tourist circulates in an economy. The hotel therefore is a very crucial facility in the tourism destinations. This is because it generates income both directly and indirectly. With the establishment of the hotels, local businesses in the area supply products to the hotel facility (Mak J. 2004)..

These are used in the provision of services to the tourists who come to spend in the hotels. It thus forces the suppliers of the tourism products to therefore set-up their facilities closer to the hotels to ensure a regular supply and to avoid deficiency. This at the same time attracts other companies into the area to facilitate continuous flow in service provision. They are set up due to the interdisciplinary nature of the tourism industry. Security of the tourists is another important aspect but not just the money they spend. A hotel that cares for its customers is therefore visited frequently by the tourists making it to have booming sales .This is because the tourists are assured of their security (Mak J. 2004)..

After various entrepreneurs had seen this kind of impacts of tourism, they then decided to expand their hotels so that they maximize on the tourists spending at their hotels. They expanded their businesses and provided quality services to the clients. Quality service provision can as well be an attraction to the tourists so that they make another visit with an anticipation of receiving the same service. This therefore makes such hotels to generate more income directly to them and indirectly to other countries especially those that have their hotels situated at the various tourist destinations (Mak J. 2004)..

Another important aspect that should be put into writing is that some hotels also employ well trained and qualified who can handle different kinds of people. Tourism industry and hospitality industry are service industries that have a direct interaction between the customer and the service provider. It is therefore ideal and in order to have such kind of staff or employees so that the hotel keeps on making sales thereby generating income. Some hotels have customer care and personnel department that handles all the problems that affects the welfare of the tourists or the staff. This in effect has a greater impact on the sales of the hotel (Mak J. 2004)..

The hotel contributes directly, indirectly, and induced employment to the citizens. In its direct employment creation to the citizens, many are employed to help in various sectors within the hotel. The hotel has the front office staff, the accountant, the management staff, the employees working on the catering department, the ones who clean the hotel itself and the compound. These individuals earn income from this and the money is again spent in various sectors related to the hotel. The hotel and the tourism industries require security personnel to cater for the welfare and lives of the citizens. They therefore create employment to these individuals who provide security (Mak J. 2004)..

The hotel industry is again creating employment indirectly to the citizens. This is so because of the interdisciplinary nature of the industry. A good hotel has to be accessible. Accessibility is facilitated by well-developed road networks. During the construction of the road, there is casual employment to the locals when the construction company comes. With the roads being available, other sectors mainly, the transport industry must come in to provide vehicles to enhance movement of tourists in and out of the hotel. Still on the indirect form of the employment creation by the hotels, the drivers and even the cyclists who assists the tourism and hotel industries in commutation (Mak J. 2004)..

The hotel again induces employment to the people. This is can be seen in areas where other peripheral services are providers have come in to back up the hotel industry in areas where the hotel is located at a tourist destination far away from urban areas. Such auxiliary service providers are the insurance companies, banking, and entertainment or amusement companies. All these are service industries that require direct interaction between the customer and the service provider. This therefore means that there must be people employed in these sectors. They get an induced form of employment because of the tourism and hotel industries (Mak J. 2004)..

Another economic impact of tourism is on the infrastructural development in the country. Infrastructure is a very broad grouping and engulfs many social amenities, ranging from hospitals, transport, as well as communication networks. A major tourist destination that has the suitable hotels in question has better infrastructural facilities. This does not just benefit the tourists alone but also the locals and the economy at large (Mak J. 2004)..

Tourism industry improves the interrelationships among the stated among the locals and the foreigners and among the states too. Good interaction between the parties involved promotes the trade between the countries if incase it was there initially and can initiate some form of exchange if need be. To the local market, presence of tourists boosts their sales since. This earning circulates and is used in economy when the locals purchase among themselves. Tourism industry thereby shows much of the vicious circle (Mak J. 2004)..

Negative economic impacts of tourism

In as much as tourism provides income and creates employment, it has negative economic impacts to the countries affected. The negative economic impacts are discussed in depth below;


The direct income that an area earns from a tourist visit is the amount of tourist expenditure that remains locally. This is only determined after taxes have been deducted and paid, profits, and wages are paid outside the area. In most all-inclusive package tours, about 80% of tourists’ expenditures go to the airlines, hotels and other international companies. These companies in many cases have their headquarters at the travellers’ original countries, they are foreign owned and not locally owned. The money therefore does not benefit the locals. This is export leakage, thus a withdrawal reducing the G.D.P of the tourist destination. The money also leaves the country through import leakage. This in many cases occurs when tourists want standards of facilities and equipment that are not in the tourist destination forcing the country to purchase or hire (Mak J. 2004)..

Increase in prices

During the peak, period when tourists flock into the major tourist destinations, the locals suffer. This is due to the prices that are hiked by the traders who at such times want to maximize on profits. The locals therefore find the prices of basic essentials to be exorbitant. As a result they fail to buy the necessities and they do they must dig deep into their pockets to survive. This is so because the income of the locals does not increase proportionately to match the rapid inflation. Tourism development can lead to foreign dominance in the developing countries and even eradicate and erode the prevailing activities (Mak J. 2004)..

This could be so because of the increase in the cost of building and real estates that make it difficult for the locals to meet their daily basic needs. Foreign dominance in a country finally leads to leakages because of the repatriation that is always associated with It (Mak J. 2004).


Mak J. ( 2004), Tourism and the Economy: Understanding the Economics of Tourism of Hawaii Press,