MODULE SUSTAINABLE TOURISM & HOSPITALITY ASSESSMENT & DEVELOPMENT

Chapter 4

Tourism Impact on the Economy

Introduction

The importance of tourism on the economy cannot be over emphasized. It is one of very
few industries that has been identified as a cornerstone of the Philippine economy
Learning Outcome

1. Differentiate the difference among, direct, indirect, induced and dynamic impact
of tourism on the economy.
2. Explain the concept of tourism satellite account, and the reason for its adoption
3. Explain the role of tourism in the economy at the global, Asean and national level
4. Provide examples of industry that benefit from tourism
5. Identify the positive and negative impact of tourism on the economy
6. Discuss the factors that determine the direction and degree impact
7. Suggest ways to maximise the economic benefits from tourism and minimize
Direct, Indirect and dynamic Impact

According to the United Kingdom’s Overseas Development Institution (2007),

tourism contributes to the economy along three “pathway”. These are direct, indirect
and dynamic effects. For the World Travel and Tourism Council (WTTC), besides direct
and indirect effect, travel & tourism also produce effect.

Visitor export refer to spending by international tourist in a country such spending is

considered as export because the visitor who are from other countries.

Indirect contribution of tourism to the economy comes in the forms of investment in

tourism, government speeding in tourism and the effect of purchase from suppliers
(WTTC 2015).non-tourism supplies could be farmer for food products, utilities
companies for water and electricity.

Dynamic effect refer to the longer-term macro level effects, such as general
enhancement of skill within the economy, provision of better social service.

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As far as indirect effect are concerned, ODI discovered that they tend to be the biggest
where the linkages strongest such as in big, rich, diversified economy. Hummel in ODD
(2007) outline key finding form Value-chain analysis study.

1. Revenue of semi-skilled and unskilled worker constitute 27% of total tourist

expenditure
2. Up to half of earning of the poor come from the food supply chain
3. Income from craft is important for minority group
4. Aside from the supply chain, most benefits from tourism are concentrated around
capital cities.
Tourism Satellite account

Measuring the economic contribution of tourism is

difficult because national accounting systems do not
readily reflect the value of tourism’s share in the
economy.

The Philippine Statistical Authority’ the main

economic division listed is agriculture hunting,
forestry and fishing industry and services.

Elements of the tourism industry such as hotel and restaurant; recreation and sporting
activities and transportation are embedded within the services sector.

The concept of tourism satellite accounting system (TSA) has been introduced and

adopted in many countries, including the Philippines. The World Travel & Tourism
Council (WTTC) is the main advocates of the TSA system

Tourism Satellite Account extract from national account the share of tourism the
different sector of the economy, by doing so, it permit the measurement of direct
economic impact of tourism to the Gross Domestic Product(GDP) and other indicators ,
such as jobs, investment, and export earning US$7.6 Trillion.

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The contribution of travel and tourism to the world economy is shown on the table
below.

USD Billion % share

Direct contribution to GDP 2,364.8 3.1
Total contribution of GDP 7, 580.9 9.8
Direct contribution to employment 105,408 3.6
Total contribution to employment 276,845 9.4
Visitor export 1,383.8 5.7
Domestic spending 3,642.1 4.7
Leisure spending 3,850.2 2.3
Business spending 1,175.7 .7
Capital investment 814.4 43
Tourism’s Impact on the ASEAN Economics

Tourism’s makes significant contribution to the economies of the member countries of

the Association of Southeast Asian Nation. Travel and tourism direct contributes more
than 5% to the Gross Domestic Product of the ASEAN Economies, which amount to
USD 11 billion.

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Country DGP % Share GDP total % Total Job Direct Job total % of Employment Visitor Visitor Inv. USD % Share
Direct to GDP USD Share (1100s) (1000s) export Export % Billion Capital Inv.
USD Billion USD to USD Share of
Billion GDP Billion the Export

Brunei 0.3 1.5 1.1 6.8 5 15.7 7.6 .4 3.6 .4 16.6

Cambodia 2.3 13.5 5.1 29.9 985.4 2221.5 26.4 3.2 32.7 .40 15.6
Indonesia 27.5 3.2 79.8 9.3 3325.8 9813.9 8.4 11.2 5.6 14.1 5.3
Laos 0.6 5 1.7 14.7 129.7 396.1 12.8 .7 26.9 0.3 9.3
Malaysia 18.6 5.7 79.8 14.9 724.3 1769.9 13. 22.6 8.6 5.9 6.8
Myanmar 1.4 2.2 1.7 4.8 505.2 1134.4 4 1.2 9.5 0.1 .7
Philippines 12 4.2 49.2 11.2 1259.8 4231.9 11.1 5.8 6.9 2.1 3.6
Singapore 14.8 4.9 30.4 10.1 152.7 302.9 8.5 18.9 3.3 13.8 18.1
Thailand 31.9 8.6 72.2 19.3 2210.2 5382.9 14.1 40.3 14.4 7.2 7.4
Vietnam 8.6 4.6 17.3 9.3 1963.5 4088.6 7.7 7.8 4.8 4.6 10
Average 5.3 13.3 11.36 11.63 9.34

Travel and tourism contributes about a third of the total economy of Cambodia and about the one –fifth of Thailand’s.
Myanmar and Brunei are the least dependent on tourism, with travel and tourism contributing only 4.8% and 6.8%
respective.

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Tourism and the Philippine Economy

Based on the Philippine Tourist Satellite Account, as measured by the share of tourism
direct gross value added (TDGVA) to total gross domestic product (GDP), the
contribution of tourism to economy was estimated at 7.8 in 2014.

The WTTC (20015) estimate is higher at 11.2%, TDGVA serves as the indicator to
measure the value added of different industries in relation to tourism activities of both
inbound and domestic visitor in country. The TDGVA amounted to 982.4 billion in 2014,
higher by 14% compared to previous year’s P861.7 billion.

In terms of share to the TDGVA, accommodation services contributes 32.6%, shopping

of tourism goods at 15.3%, miscellaneous at 15.2%, transport services at 12.6%,
entertainment and recreation at 10.9%, travel agencies and other reservation
services 8.6% and food and beverages services at 19.2%.

Inbound tourism expenditure- the expenditure of non-resident visitor within the

Philippines amounted to 274.6 billion (pesos) in 2014 compared to 225.3 Billion (pesos)
in 2013.

Domestic tourism expenditure of residents visitor within the country either as

domestic trip or part of an international trip.

Employment in tourism was estimated at 4.8 in 2014, slightly higher by 1.0% compared
to 4.7 million in 2013.

Visitor export generated 221Billion or 6.9% of the total export in 2013. Refer to spending
by in tourist in the Philippines.

Travel & tourism constituted 81.3 billion worth of investment in 2013. This was about
3.6%.

Beneficial of impact of the Economy

According to Swarbrooke (1999), the main beneficial impact tourism on the economy
are job creation, livelihood, tax revenue and economic regeneration.

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Jobs

Tourism generates jobs, with most optimistic being one job created for every tourist
received by the country. These are several jobs available in the tourism industry “front
desk clerk, porter, concierges, room attendants, waiters or waitresses and kitchen staff”

Employment generated throughout the tourist value chain, refer to the supplier of need
inputs for tourism industry.

Livelihood Generation

A livelihood is a means of making a living. It encompasses people’s capabilities, assets,

income and activities required to secure the necessities of life. A livelihood is
sustainable when it enables people to cope with and recover from shocks and stresses
(such as natural disasters and economic or social upheavals) and enhance their well-
being and that of future generations without undermining the natural environment or
resource base. https://www.ifrc.org/en/what-we-do/disaster-management/from-crisis-to-recovery/what-is-a-livelihood/

Tourism provides economic opportunities for other industries, farming communities can
venture agritourism, offering farm-related experiences to tourist.

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Hometown’s Share of Tourism Income

Tourism’s economics impact is not restricted to the destination alone, the tourists;
places of origin and transit routes, which include area used as pit stops by travelers,
take sizeable chuck of travel and tourism-related expenditure.

Taxes and fees

Negative impact of Tourism on the Economy

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Tourism look for product low in leakages, opportunity cost, port quality of job
overdependence on tourism and inflation of price of food, land houses, and services.

Leakages

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Tourists look for product that they have been accustomed to consuming or using. Many
such product and services cannot be sources locally

Poor quality of Jobs

Tourism create job, ratio has been out as high as 1:1 by the measure, and there should
be about 4.8 million workers in the tourism industry. Assuming that is true, critics of
tourism argue that workers in tourism suffer from low wage, unpaid overtime pay, lack of
security.

Price increase

Tourism, because of its attraction as business venture, tends to encourage investment-

related business, sometimes causing a shift profitable, the local economy monolithic or
reliant on a single increase the vulnerability of the local population to natural as well as
man-made shock.

Overdependence

Tourism, because of its attraction as business venture, tend to encourage investment in

tourism-related business, sometimes causing a shift from livelihood activates. Over
time, because tourism is highly profitable, the local economy becomes monolithic or
reliant on a single economy, one which is dependent on tourism.

Opportunity of Cost

Another dark side to tourism is that investing in tourism development requires billions of
pesos for infrastructure alone, such as airport, roads and terminal. “Bacolod-Silay
International Airport which has inaugurated in 2007 had a prices tag of 4.3Billions.

Determinant of Economic impact

The extent and intensity of tourism’s impact on the economy hinge on a number of
factor. According to Messerli (2011) these are the economic diversification, the strength
of backward and forward linkages, seasonality, and quality of human resources.

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Chapter 4 pp 65-78, Tourism Impact and Tourism Sustainability-Cruz, 1st edition, Rex Store published
2016
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https://www.youtube.com/watch?v=QSFq19v8PWc

https://www.youtube.com/watch?v=pD2oQDFnUaw

https://www.youtube.com/watch?v=JTIOeU6a3Pk

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