Positive social and economic impacts of tourism

Overview

Multiplier effect in tourism, direct, indirect and induced employment in tourism and social benefits tourism can bring to a host community.

What you need to know

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Questions from this subtopic

Each one with the model answer underneath.

1. 1

   Demonstrate knowledge and understanding of the main economic benefits tourism brings to a destination.

   Model answer

   Foreign exchange earnings, which for many LEDCs are among the largest sources of hard currency; employment across accommodation, catering, transport, guiding, retail and construction; tax revenue from businesses, departures and visitor levies; investment in infrastructure such as airports, roads, water and power; diversification of an economy previously dependent on one crop, mineral or industry; and demand for local produce, crafts and services that supports incomes well beyond the tourism businesses themselves.

2. 2

   What is the multiplier effect in tourism, and how does it work?

   Model answer

   The multiplier effect is the process by which each unit of tourist spending generates further rounds of income in the local economy. A tourist pays a hotel, which pays wages, buys food from local farmers and hires local builders; those workers, farmers and builders then spend their earnings locally, generating income for others in turn. The total effect on local income therefore exceeds the original spending. The size of the multiplier depends on how much is spent locally at each round, so it is large where hotels source and recruit locally and small where goods and staff are imported.

3. 3

   Distinguish between direct, indirect and induced employment in tourism.

   Model answer

   Direct employment is work in businesses serving tourists face to face, such as hotel, restaurant, airline, guiding and attraction staff. Indirect employment is work in businesses supplying those firms, for example farmers, food processors, laundries, construction firms and equipment suppliers. Induced employment is work created when all those employees spend their wages in the wider local economy, in shops, schools, healthcare and housing. Counting only direct jobs substantially understates the employment effect of tourism, though it is also the most reliably measured category.

4. 4

   Why is tourism often promoted as a development strategy in LEDCs?

   Model answer

   Because it can use resources a country already possesses, such as climate, coast, wildlife and heritage, without needing to compete in manufacturing. It earns foreign currency, it is labour-intensive so it creates many jobs per unit of investment, it can absorb workers with limited formal qualifications while offering training, it brings infrastructure that other sectors can also use, and its demand comes from outside the domestic economy. It also spreads income to rural and coastal areas that industrial investment usually bypasses.

5. 5

   How can tourism support rural areas in particular?

   Model answer

   By providing an alternative or supplementary income where farming alone cannot sustain households, through bed-and-breakfast accommodation, farm diversification, guiding, crafts and food sales. This income can slow out-migration of young people and help retain the population that keeps schools, shops, post offices and bus services viable. It also creates a market for local produce and traditional skills that would otherwise disappear, and gives an economic reason to maintain footpaths, hedgerows and vernacular buildings.

6. 6

   Explain the social benefits tourism can bring to a host community.

   Model answer

   Improved infrastructure and services, since better roads, water supply, electricity, healthcare and airports built for visitors are also used by residents; retention of young people who would otherwise leave for work; funding and a purpose for conserving historic buildings, landscapes and wildlife; revival of crafts, music, dance and festivals for which a market now exists; wider employment opportunities for women in some societies; and improved language skills and educational aspiration among young people entering the industry.

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