Chapter 8-1 Tourism Economic Impacts

1. Chapter 8-1 Tourism Economic Impacts

2. Learning Objectives • Explain the major economic impacts of tourism on destination areas and how these impacts are measured • Describe the strategies to maximize the economic impact of tourism and how tourism’s role in economic development can be analyzed.

3. Economic Impacts of Tourism • Increasing foreign exchange earnings • Increasing income • Increasing employment

4. Invisible Export Differences With Other International Trade Freight Costs More-than-proportional Changes Non-monetary Benefits Affection Exchange Rates & Prices

5. Increasing foreign exchange earnings • Many countries have embraced tourism as a way to increase foreign exchange earnings. • However, there is danger of overstating the foreign exchange earnings generated by tourism unless the import factor is known • The money spent leaks destination’s economy and must be subtracted from foreign exchange earnings to determine the true impact.

6. Leakage Definition: The value of goods and services that must be imported to service the needs of tourism. • Occurs from at least 6 factors: • Cost of goods and services that must be purchased to satisfy the needs of visitors • Importing goods and materials for infrastructure and buildings required for tourism development

7. 3. Payment to foreign factors of production 4. The expenditure for promotion public relations/publicity, and similar service abroad 5. Some ways of transfer pricing 6. Host government exempt duties or taxes for foreign-owned companies or offer financial inducements to attract investment It’s critical to determine the net foreign exchange earnings from different types of visitors and types of tourism purchases within the destination.

8. Increasing income The Ad Hoc or Simple Multiplier • Visitors make an initial round of expenditures in the destination area • In the second round, the tourism businesses use some of the money to purchase and expenses • The income in third round may be spent or save This process continues until the additional income generates by a new round of transactions become zero.

9. Income impact of tourism = + Indirect + Direct Induced Income impact of tourism • Direct : The first round of spending by visitors in the destination area. • Indirect: The second round of expenditures by businesses who receive the first round of visitor spending. • Induced: The subsequent rounds of expenditures after the second round.

10. Input-output Analysis • A method of looking at interactions among different economic sectors and determining the effects of any possible changes • A means analyzing inter-industry relationships in the production process in a destination area’s economy • A inpu-output table shows how transactions flow through an economy in a given time period

11. Economic Impact Models • TEIM (Travel Economic Impact Model) • TEAM (Tourism Economic Assessment Model) Direct employment —— lodging, restaurants, attractions, transportation and sightseeing operations Increasing Employment Indirect employment /secondary employment — construction ,agriculture and manufacturing

12. Economic Considerations & Analysis

13. Cost/Benefit Analysis Structural Analysis • Accumulation processes • Resource allocation processes • Demographic & distribution processes Cost/benefit analysis is used to determine which economic sector produces the most benefit in terms of foreign exchange, employment, taxes, or income generated relative to the costs of development

14. Modifying the Host Destination’s Socioeconomic Structure • Change the economic structure of a destination area • Encourage workface migration • Cause profound changes within a society in terms of economic power • Change the value & land ownership patterns

15. Satellite National Accounting In 1993, the United Nations Statistics Division produced a publication called the UN System of National Accounts that recommended the creation of a satellite accounting system for complex service sectors such as tourism

16. Maximizing Tourism Positive Economic Impacts

17. Encouraging import substitution • Implementing incentive programs • Dealing with multinational tourism companies

18. Encouraging Import Substitution • Supporting the promising industries through specific subsidies, grants or loans. • Placing quotas or tariffs on the import goods

19. Implementing Incentive Programs • Types of Incentives • Tax holidays or deferrals • Remission of tariffs • Tax reductions • Nonrefundable grants • Low-interest loan • Interest rebates • Forgivable loans • Loan guarantees • Working capital loans • Equity participation • Training grants • Infrastructure assistance • Leasebacks • Land donations Categories of Incentives Fiscal Incentives Direct and Indirect Incentives

20. Implementing Incentive Programs • Before implementing an incentive strategy, a destination should: • Examine the performance of other countries’ incentive programs in light of their resources and development objectives. • Research the actual needs of investors. • Design codes of investment concessions related to specific development objectives, with precise requirements of the investors. • Establish targets of achievement and periodically monitor and assess the level of realization of such targets.

21. Dealing with Multinational Tourism Companies Hotels

23. Tour Operators

24. The Economic Impact of Tourism in China and Hong Kong

25. What is “TSA” ? • Tourism Satellite Accounts • The Canadian Tourism Commission defines a TSA as following: A statistical tool that measures the total economic ad employment impact of tourism, allowing researchers to directly compare the impacts of tourism with those of other industries and from country to country.

26. WTTC TSA economic impact model Three element: 1）Travel and Tourism Consumption: 1.personal travel and tourism. 2.business travel. 3.government expenditure-individual. 4.visitor exports.

27. WTTC TSA economic impact model • 2)Travel and Tourism Demands: 1.goverment expenditure-collective. 2.capital investment. 3.exports-non-visitor . 3)Employment: 1.travel and tourism industry employment. 2.travel and tourism economy employment.

28. TSA and economic forecast • The Impact of Travel and Tourism on Jobs and the Economy: China and China Hong Kong SAR.( including two simulated TSA and economic forecast for China and Hong Kong) • WTTC forecast the baseline forecast for China are staggering ,over the next ten years (the following table ):

31. The Challenge The tables suggest that China’s most difficult challenge will be to manage the project growth as China is predicted to become the world’s tourism superpower, leading all destination in international tourism arrivals and in in outbound tourists by the year of 2020.

32. The End !