Economic benefits of tourism

Tourism comprises an extensive range of economic
activities and can be considered the largest industry in
the world.5 International tourism is one of the fastest
growing sectors of the global economy. During the
1990s, when the globalization of tourism reached
unprecedented proportions, international tourism receipts
had a much higher average annual growth rate (7.3%)
than that of gross world product.
By 1999, international
tourism receipts accounted for more than 8% of the
worldwide export value of goods and services, overtaking
the export value of other leading world industries
such as automotive products, chemicals, and computer
and office equipment.
A significant proportion of world tourism expenditure
takes place within industrialized countries:
Europe alone accounts for around half of annual international
tourism receipt.
Tourism, however,
is the only major service sector in which developing countries have consistently recorded trade surpluses
relative to the rest of the world. Between 1980 and
1996, for instance, their travel account surplus
increased from $4.6 billion to $65.9 billion, due primarily
to the impressive growth of inbound tourism to
countries in Africa, the Caribbean, and the Asia and
Pacific regions (UN, 1999a). The 1990s also experienced
a significant growth of international tourism
receipts in the 49 least developed countries: total
tourism receipts in these countries more than doubled
from US$ 1 billion in 1992 to over US$ 2.2 billion in
1998.
Tourism is now the second largest source of foreign
exchange earnings in the least developed countries
(LDCs) as a whole.
Tourism has also become the main source of
income for an increasing number of Small Island
Developing States (SIDS). Foreign exchange earnings
can, however, vary significantly among these tourismdriven
economies because of ‘leakages’ arising from
imports of equipment for construction and consumer
goods required by tourists, repatriation of profits earned
by foreign investors and amortization of foreign debt
incurred in tourist development.
Besides export earnings, international tourism also
generates an increasingly significant share of government
(national and local) tax revenues throughout the
world. In addition, the development of tourism as a
whole is usually accompanied by considerable investments
in infrastructure, such as airports, roads, water and
sewerage facilities, telecommunications and other public
utilities. Such infrastructural improvements not only generate
benefits to tourists but can also contribute to
improving the living conditions of local populations.
This increase in social overhead capital can also help
attract other industries to a disadvantaged area and thus
be a stimulus to regional economic development.
The tourism sector is an increasingly important
source of employment—including in tourism-related sectors,
such as construction and agriculture—primarily for
unskilled labour, migrants from poor rural areas, people
who prefer to work part-time, and notably women.
Because the sector is relatively labour-intensive, investments
in tourism tend to generate a larger and more rapid
increase in employment than equal investment in other
economic activities.
Furthermore, given that the sector
provides a considerable amount of jobs for women and
unskilled workers, tourism can significantly contribute to
empowering women and alleviating poverty.
At the same time, available data suggest that most
workers in the tourism sector, notably in hotels and catering,
tend to earn less than workers in socially comparable
occupations in both developed and developing countries
(ILO, 2001). In addition, the differential tends to be larger
in less developed countries and regions, particularly those
with high rates of unemployment amongst unskilled labour.
Informal employment relations in small and medium-sized
enterprises, which employ about half of the labour force in
the hotel and catering sub-sectors worldwide, also contribute
to a relatively high proportion of child labour and
non-remunerated employment and other unacceptable
forms of social exploitation in many countries.
The increasing reliance of less diversified
economies on tourism also increases their vulnerability
to seasonal aspects of tourism and to shocks, such as, natural
disasters, regional wars and other unexpected events.
The recent crisis generated by fear of international terrorism
and regional conflict, for example, caused devastating
immediate effects on tourism-dependent economies.12
In addition, sudden changes in consumer tastes and sharp
economic downturns pose significant risks to such
economies, given that demand for mass tourism tends to
be relatively income-elastic and can produce drastic negative
responses to economic recession in source markets.
Nonetheless, it is now generally recognized that
tourism can make a vital contribution to employment,
export receipts and national income in most countries
and regions. Furthermore, tourism is often identified as
the most promising driving force for the economic development
of less developed countries and regions endowed
with areas of natural beauty—including Small Island
Developing States—because it offers them a valuable
opportunity for economic diversification.