Today, tourism is one of the largest and dynamically developing sectors of external economic activities. Its high growth and development rates, considerable volumes of foreign currency inflows, infrastructure development, and introduction of new management and educational experience actively affect various sectors of economy, which positively contribute to the social and economic development of the country as a whole.
Most highly developed western countries, such as Austria, Italy, and Switzerland have accumulated a big deal of their social and economic welfare on profits from tourism. According to recent statistics, tourism provides about 10% of the world’s income and employs almost one tenth of the world’s workforce. All considered, tourism’s actual and potential economic impact is astounding. Many people emphasize the positive aspects of tourism as a source of foreign exchange, a way to balance foreign trade, an “industry without chimney” – In short, manna from heaven.
But there are also a number of other positive and negative sides of tourism’s economic boom for local communities, which not always considered by advocates of tourism perspectives. Therefore in this paper I will consider the main social and environment impacts of tourism at the country level.
‘Travel and tourism’ does not necessarily involve travelling abroad. Much tourism takes place within people’s home country, on visits to attractions, city breaks, trips to business meetings, sports events or concerts, and visits to friends and relatives (abbreviated as VFR). There are three main types of tourism: domestic tourism, incoming or inbound tourism and outbound tourism.
According to World Tourism Organisation (WTO) – affiliated to the United Nations and recognised as the leading international body on global tourism – tourism is defined as:
‘The activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes.’
World Tourism Organisation, 1993
Domestic Tourism: This is when people take holidays, short breaks and day trips in their own country. Examples would be:
A couple taking a weekend break in their own country;
A family visiting relations in another part of the country, even if they live only a few miles away.
Incoming / Inbound Tourism: This describes people entering the country in question from their home country, so it is a type of international tourism. Examples could be:
A group of Chinese visitors coming to Egypt on a recreational trip;
Teams from different countries entering a country for an international event, such as the Olympic Games;
Outbound Tourism: This term applies when people travel away from their home country to visit other international countries for leisure or business. Examples of this could be:
Business people from the India travelling to Germany to visit a major exhibition;
A day tripper from southern Malaysia visiting Singapore.
It is possible to divide the components of the travel and tourism industry into six key areas, as represented in the Figure below,
IMPACTS OF TOURISM
Tourism has three major impacts namely, Socio-cultural, environmental and economic impacts.
SOCIO-CULTURAL IMPACT OF TOURISM
Tourism may have many different effects on the social and cultural aspects of life in a particular region or area, depending on the cultural and religious strengths of that region. The interaction between tourists and the host community can be one of the factors that may affect a community as tourist may not be sensitive to local customs, traditions and standards. The effect can be positive or negative on the host community.
Positive impacts on an area include benefits such as:
Local community can mix with people from diverse backgrounds with different lifestyles which through ‘demonstration effect’ may lead to the development of improved lifestyles and practices from the tourists’ examples.
There can be an improvement in local life through better local facilities and infrastructure (developed to sustain tourism) which could lead to better education, health care, employment opportunities and income.
More cultural and social events available for local people such as entertainment, exhibitions etc.
Conservation of local and cultural heritage of an area and rebirth of its crafts, architectural traditions and ancestral heritage;
Urban areas which may be in decline can be revived and the movement of people from rural areas to urban areas for employment may be reversed as jobs will be available in the tourism industry.
Dubai is an ideal example of a tourist destination which has reaped the benefits of the positive impact of development, on the socio-cultural aspects of in the country. As noticed, considerable financial investment by both public and private sectors has resulted in development of the existing infrastructure and to job creation. Archaeological and heritage sites have been preserved, and local traditions are maintained. The hospitable culture of the Arab world and acceptance of others’ lifestyles implying that tourists are welcomed but do not threaten existing ways of life.
However, tourism may have negative effects on an area, such as,
Existing infrastructure (roads, railways, health care provision) may not be able to cope with the greater stress created by influx of people by tourism.
Local population’s activities and lifestyles may suffer intrusion from tourists leading to resentment towards tourists.
The local population may copy lifestyles of tourists through the ‘demonstration effect’ and the result could be loss to local customs and traditions as well as standards of behaviour.
Increased crime could develop through decline in moral values, leading to greed and jealousy of wealthier visitors.
Traditional industries may be lost and local goods substituted by imported and mass-produced goods which lack authenticity but appeal to a mass market.
Tourists may act in an anti-social manner which could cause offence to the local population. Unless sufficient information is provided by the host nation and tourist providers on the standards of behaviour expected in that area, local populations come to resent tourists and act aggressively towards them.
Language barriers between the tourist and the host community which may create communication problems.
ENVIRONMENTAL IMPACT OF TOURISM
Negative impacts from tourism occur when the level of visitor use is greater than the environment’s ability to cope with this use within the acceptable limits of change. Uncontrolled conventional tourism poses potential threats to many natural areas around the world. It can put enormous pressure on an area and lead to impacts such as soil erosion, increased pollution, discharges into the sea, natural habitat loss, increased pressure on endangered species and heightened vulnerability to forest fires. It often puts a strain on water resources, and it can force local populations to compete for the use of critical resources.
The quality of the environment, both natural and man-made, is essential to tourism. However, tourism’s relationship with the environment is complex. It involves many activities that can have adverse environmental effects. The negative impacts of tourism development can gradually destroy the environmental resources on which it depends.
On the other hand, tourism has the potential to create beneficial effects on the environment by contributing to environmental protection and conservation. It is a way to raise awareness of environmental values and it can serve as a tool to finance protection of natural areas and increase their economic importance.
Direct impact on natural resources, both renewable and non-renewable, in the provision of tourist facilities can be caused by the use of land for accommodation and other infrastructure provision, and the use of building materials.
Water, and especially fresh water, is one of the most critical natural resources. The tourism industry generally overuses water resources for hotels, swimming pools, golf courses and personal use of water by tourists. This can result in water shortages and degradation of water supplies, as well as generating a greater volume of waste water.
Forests often suffer negative impacts of tourism in the form of deforestation caused by fuel wood collection and land clearing. For example, one trekking tourist in Nepal – and area already suffering the effects of deforestation – can use four to five kilograms of wood a day.
In areas with high concentrations of tourist activities and appealing natural attractions, waste disposal is a serious problem and improper disposal can be a major despoiler of the natural environment – rivers, scenic areas, and roadsides. Solid waste and littering can degrade the physical appearance of the water and shoreline and cause the death of marine animals.
Construction of ski resort accommodation and facilities frequently requires clearing forested land. Coastal wetlands are often drained and filled due to lack of more suitable sites for construction of tourism facilities and infrastructure. These activities can cause severe disturbance and erosion of the local ecosystem, even destruction in the long term.
Source: United Nations Environment Programme (UNEP), 2001
ECONOMIC IMPACTS OF TOURISM
Tourism’s economic benefits are touted by the industry for a variety of reasons. Claims of tourism’s economic significance give the industry greater respect among the business community, public officials, and the public in general. This often translates into decisions or public policies that are favourable to tourism. Community support is important for tourism, as it is an activity that affects the entire community. Tourism businesses depend extensively on each other as well as on other businesses, government and residents of the local community.
Economic benefits and costs of tourism reach virtually everyone in the region in one way or another. Economic impact analyses provide tangible estimates of these economic interdependencies and a better understanding of the role and importance of tourism in a region’s economy.
Tourism activity also involves economic costs, including the direct costs incurred by tourism businesses, government costs for infrastructure to better serve tourists, as well as congestion and related costs borne by individuals in the community. Community decisions over tourism often involve debates between industry proponents touting tourism’s economic impacts (benefits) and detractors emphasizing tourism’s costs. Sound decisions rest on a balanced and objective assessment of both benefits and costs and an understanding of who benefits from tourism and who pays for it.
Tourism’s economic impacts are therefore an important consideration in state, regional and community planning and economic development. Economic impacts are also important factors in marketing and management decisions. Communities therefore need to understand the relative importance of tourism to their region, including tourism’s contribution to economic activity in the area.
A variety of methods, ranging from pure guesswork to complex mathematical models, are used to estimate tourism’s economic impacts. Studies vary extensively in quality and accuracy, as well as which aspects of tourism are included. Technical reports often are filled with economic terms and methods that non-economists do not understand. On the other hand, media coverage of these studies tend to oversimplify and frequently misinterpret the results, leaving decision makers and the general public with a sometimes distorted and incomplete understanding of tourism’s economic effects.
Tourism has a variety of economic impacts. Tourists contribute to a destination’s sales, profits, jobs, tax revenues, and income. Primary tourism sectors, such as lodging, dining, transportation, amusements, and retail trade, are affected directly: most other sectors are impacted by secondary effects. An economic impact analysis of tourism activity usually focuses on regional tourism-related changes in sales, income, and employment.
A standard economic impact analysis traces the path that money takes once it leaves a tourist’s pocket: this is also referred to as the flows of money from tourism spending. The first flow, (direct effect), is to the businesses and government agencies to which the tourists pay money directly. The money then flows through the economy as:
Payments from these direct recipients to their suppliers,
Salaries and wages for households who provide labour for tourism or supporting industries,
Various government taxes and charges payable by tourists, businesses and households. Continuing the fluid analogy, a leakage occurs when money escapes the economy of a region because a local consumer, (household, business or government), has purchased a product from an outside supplier.
DIRECT AND SECONDARY ECONOMIC EFFECTS
Economists distinguish direct, indirect and induced economic effects. The total economic impact of tourism is the sum of direct, indirect and induced effects within a region. Indirect and induced effects are sometimes collectively called secondary effects. These impacts or effects may be measured in terms of gross output, sales, income, employment, or value added. Although they are often used somewhat loosely by non-economists, these terms have precise definitions that are important when interpreting economic impact study results.
Direct effects, are production changes associated with the immediate effects of changes in tourism expenditures. For example, an increase in the number of tourists staying overnight in hotels would directly increase room sales in the hotel sector. The additional hotel sales and associated changes in hotel payments for wages, salaries, taxes, supplies and services are direct effects of the tourist spending.
Indirect effects are the production changes resulting from various rounds of re-spending of the tourism industry’s receipts in backward-linked industries. For example, industries supplying products and services to hotels). Changes in sales, jobs and income in the linen supply industry, for example, represent indirect effects of changes in hotel sales. Businesses supplying products and services to the linen supply industry represent another round of indirect effects, eventually linking hotels by varying degrees to most other economic sectors in the region.
Induced effects are the changes in economic activity resulting from household spending of income earned directly or indirectly as a result of tourism spending. For example, hotel and linen supply employees supported directly or indirectly by tourism, spend their income in the local region for housing, food, transportation, and the usual array of household product and service needs. The sales, income, and jobs that result from household spending of added wage, salary, or proprietor’s income are induced effects.
Total Economic Impact
Total Economic Impact = Direct + Secondary Effects
= Direct + (Indirect + Induced Effects)
A change in tourist spending can affect virtually every sector of the economy by means of indirect and induced effects. The magnitude of these secondary effects is directly related to the propensity of local businesses and households to purchase from local suppliers. Induced effects are easily visible when a large regional plant closes: supporting industries are hurt by the indirect effects, but the entire local economy usually suffers due to the reduction in regional household income. Retail stores may close, thereby increasing leakages as local consumers turn to outside suppliers. Similar but reversed induced effects are observable when there is a significant increase in regional jobs and household income.
An input-output (I-O) model is a mathematical model that describes the flows of money between sectors within a region’s economy. Flows are predicted based on the inputs that each industry must buy from every other industry to produce a dollar’s worth of output. I-O models also determine the proportions of sales that go to wage and salary income, proprietor’s income, and taxes. Multipliers can be estimated from input-output models based on the estimated re-circulation of spending within the region. Exports and imports are determined based on estimates of the propensity of households and firms to purchase goods and services from local sources (often called RPC’s or regional purchase coefficients). The more self-sufficient a region is, the fewer the leakages, so that the multipliers are correspondingly higher.
Input-output models make a number of basic assumptions:
All firms in a given industry employ the same production technology and produce identical products.
There are no economies or diseconomies of scale in production or factor substitution. I-O models are essentially linear: double the level of tourism activity/production and you must double all of the inputs.
Analysts generally report the impact estimates as if they represent activity within a single year, although the model does not explicitly keep track of time. One must assume that the various model parameters are accurate and represent the current year.
I-O models are firmly grounded in the national system of accounts which relies on a standard industrial classification system (SIC codes), and on various federal government economic censuses in which individual firms report sales, wage and salary payments and employment. I-O models are generally at least a few years out-of-date: this is not usually a problem unless the region’s economy has changed significantly. An I-O model represents the region’s economy at a particular point in time: tourist spending estimates are generally price adjusted to the year of the model.
Multiplier computations for induced effects generally assume that jobs created by additional spending are new jobs involving the movement of new households to the area. Induced effects are computed assuming linear changes in household spending with changes in income. Estimates of induced effects are frequently inflated when these assumptions are not accurate, (for example, when new jobs are staffed by existing residents). As induced effects usually comprise the vast majority of secondary effects of tourism, they should be used with caution.
Measuring the Economic Impact of Tourism
The economic impacts of tourism are typically estimated by some variation of the simple formula:
Defining the Economic Impact of Tourism:
Economic Impact of Tourism = # of Tourists * Ave. Spending per Visitor * Multiplier
Where ‘# of tourists’ = numbers of tourists and ‘ave.’ = average
Estimate the change in the number and types of tourists to the region that will result from the proposed policy or action:
Estimates or projections of tourist activity generally come from a demand model or some system for measuring levels of tourism activity in an area: economic impact estimates rely on good estimates of the number and types of visitors, which come from carefully designed measurements of tourist activity, a good demand model, or good judgment. This step is usually the weakest link in most tourism impact studies, as few regions have accurate counts of tourists, let alone good models for predicting changes in tourism activity or separating local visitors from visitors who originate outside the region.
Estimate average levels of spending (often within specific market segments) of tourists in the local area:
Spending averages come from sample surveys or are adapted from other studies. Spending estimates must be based on a representative sample of the population of tourists, and should take into account variations across seasons, market segments or types of tourists, and locations within the study area. As spending can vary widely by type of tourist, we recommend estimating average spending for a set of key tourist segments based on samples of at least 50-100 visitors per tourism segment. Segments should be defined to capture differences in spending between local residents vs. tourists, day users vs. overnight visitors, type of accommodation (motel, campground, seasonal home, with friends and relatives), and type of transportation (car, RV, air, rail, etc.). In broadly-based tourism impact studies, it is useful to identify unique spending patterns of important activity segments such as downhill skiers, boaters, or convention & business travellers multiplying the number of tourists by the average spending per visitor, (making certain that units are consistent), gives an estimate of total tourist spending in the area. Estimates of tourist spending will generally be more accurate if distinct spending profiles and use estimates are made for key tourism segments. The use and spending estimates are the two most important parts of an economic impact assessment. When combined, they capture the amount of money brought into the region by tourists. Please note: multipliers are needed only if one is interested in the secondary effects of tourism spending.
Apply the change in spending to a regional economic model or set of multipliers to determine secondary effects:
Secondary effects of tourism are estimated using multipliers, or a model of the region’s economy. Multipliers generally come from an economic base or input-output model of the region’s economy. Often, multipliers are borrowed improperly or adjusted from published multipliers or other studies. Avoid taking a multiplier estimated for one region and applying it in a region with a quite different economic structure. As a general rule, multipliers are higher for larger regions with more diversified economies. A common error is to apply a state-wide multiplier (since these are more widely published) to a local region. This will yield inflated estimates of local multiplier effects.
Stynes, D., (1997). ‘Economic impacts of Tourism’. pp. 1-19 Urbana, IL: University of Illinois, Cooperative Extension Service bulletin.