MICRO PERSPECTIVE IN TOURISM AND HOSPITALITY

1. Tourism and
the Economy
in General
MICROPERSPECTIVE

2. T H E M O S T I M P O RTA N T E C O N O M I C F E AT U R E O F
A C T I V I T I E S R E L AT E D TO T H E TO U R I S M S E C TO R I S
T H AT T H E Y C O N T R I B U T E TO T H R E E H I G H - P R I O R I T Y
G O A L S O F D E V E L O P I N G C O U N T R I E S : T H E
G E N E R AT I O N O F I N C O M E , E M P L O Y M E N T, A N D
F O R E I G N - E X C H A N G E E A R N I N G S . I N T H I S R E S P E C T,
T H E TO U R I S M S E C TO R C A N P L AY A N I M P O RTA N T R O L E
A S A D R I V I N G F O R C E O F E C O N O M I C D E V E L O P M E N T.
TOURISM ECONOMY IN GENERAL

3. T H R E E P R I M A RY FA C TO R S I N F L U E N C E T H E
L E V E L O F N AT U R E A N D H E R I TA G E TO U R I S M
D E M A N D :
1 . O V E R A L L TO U R I S M G R O W T H ,
2 . T H E G R O W T H I N S P E C I A LT Y T R AV E L ,
3 . A N D I N C R E A S I N G AWA R E N E S S O F A N D
C O N C E R N F O R T H E E N V I R O N M E N T. E A C H
O F T H E S E FA C TO R S I S I N T U R N
I N F L U E N C E D B Y A N U M B E R O F E L E M E N T S .
ELEMENTS OF SUPPLY AND
DEMAND

4. O V E R A L L TO U R I S M , F O R I N S TA N C E , I S E X P E C T E D TO
C O N T I N U E TO G R O W M O R E R A P I D LY T H A N W O R L D E C O N O M I C
O U T P U T A S A R E S U LT O F FA C TO R S S U C H A S P O P U L AT I O N
G R O W T H , R I S I N G I N C O M E S A N D E M P L O Y M E N T, S H O RT E R
W O R K W E E K S I N M A N Y PA RT S O F T H E W O R L D , A N D T H E
I N C R E A S I N G I N T E G R AT I O N O F T H E W O R L D ’ S E C O N O M I E S A N D
S O C I E T I E S . T H E R A P I D G R O W T H O F S P E C I A LT Y T R AV E L I S
F U E L E D B Y S O M E O F T H E S A M E FA C TO R S , B U T T H E R E A R E A
N U M B E R O F A D D I T I O N A L E X P L A N AT I O N S : T H E B O O M I N
O U T D O O R R E C R E AT I O N A N D T H E N E W I N T E R E S T I N H E A LT H
A N D F I T N E S S , F O R E X A M P L E . E N V I R O N M E N TA L I S M I S
A N O T H E R O F T H E E L E M E N T S T H AT H AV E C H A N G E D P E O P L E ’ S
AT T I T U D E S A B O U T H O W T H E Y S H O U L D S P E N D T H E I R
VA C AT I O N S .
ELEMENTS OF SUPPLY AND
DEMAND

5. T H E TO U R I S M S E C TO R I N T H E C O U N T R I E S
C O N T R I B U T E S S I G N I F I C A N T LY TO G D P
E A R N I N G S , T H O U G H T H I S C O N T R I B U T I O N I S
N O T R E F L E C T E D I N T H E D O M E S T I C I N C O M E
A N D P R O D U C T A C C O U N T S O F M O S T
C O U N T R I E S .
TOURISM AND GDP

6. W H AT I S C O N T R I B U T I O N O F T R AV E L A N D TO U R I S M TO G D P
( % O F G D P ) ? T H E S H A R E O F T R AV E L & TO U R I S M S P E N D I N G
O R E M P L O Y M E N T I N T H E E Q U I VA L E N T E C O N O M Y- W I D E
C O N C E P T I N T H E P U B L I S H E D N AT I O N A L I N C O M E A C C O U N T S
O R L A B O U R M A R K E T S TAT I S T I C S . V I S I TO R E X P O RT S A R E
C O M PA R E D W I T H E X P O RT S O F A L L G O O D S A N D S E RV I C E S
D O M E S T I C T R AV E L & TO U R I S M S P E N D I N G I S C O M PA R E D
W I T H G D P G O V E R N M E N T I N D I V I D U A L T R AV E L & TO U R I S M
S P E N D I N G I S C O M PA R E D W I T H TO TA L G O V E R N M E N T
S P E N D I N G I N T E R N A L T R AV E L & TO U R I S M C O N S U M P T I O N I S
C O M PA R E D W I T H TO TA L I N T E R N A L C O N S U M P T I O N ( I . E .
TO TA L D O M E S T I C S P E N D I N G P L U S TO TA L E XP O RT ) L E I S U R E
T R AV E L & TO U R I S M C O N T R I B U T I O N TO G D P I S C O M PA R E D
W I T H TO TA L G D P B U S I N E S S T R AV E L & TO U R I S M
C O N T R I B U T I O N TO G D P I S C O M PA R E D W I T H TO TA L G D P
T R AV E L & TO U R I S M C A P I TA L I N V E S T M E N T S P E N D I N G I S
C O M PA R E D W I T H A L L F I X E D I N V E S T M E N T S P E N D I N G .
TOURISM AND GDP

7. TOURIST INCOME MULTIPLIER
AND VALUE-ADDED

8. T H E VA L U E - A D D E D C O N C E P T I S PA RT I C U L A R LY
I M P O RTA N T W H E N C O N S I D E R I N G T H E I M PA C T O F
TO U R I S M I N T H E C O U N T RY. VA L U E I S A D D E D W H E N A
P R O D U C T I S D E V E L O P E D , P R O C E S S E D , R E F I N E D , O R
M A R K E T E D I N A M A N N E R T H AT A L L O W S I T TO B E S O L D
AT A H I G H E R P R I C E T H A N T H E P R I C E S O F T H E R AW
M AT E R I A L S , S E RV I C E S , A N D C O M P O N E N T S B O U G H T
F O R I T S P R O D U C T I O N . C O U N T R I E S W I T H L A R G E
D O M E S T I C A G R I C U LT U R A L S E C TO R S S U P P LY I N G
TO U R I S T C O N S U M P T I O N A R E W E L L P O S I T I O N E D TO
A C H I E V E H I G H E R L E V E L S O F VA L U E - A D D E D I N T H E
TO U R I S M S E C TO R
TOURIST INCOME MULTIPLIER
and Value-Added

9. I N C O M E D I S T R I B U T I O N E F F E C T ( I D E ) A N D E M P L O Y M E N T T H E
TO U R I S M S E C TO R , PA RT I C U L A R LY H O T E L S , C A N P L AY A N
I M P O RTA N T R O L E I N AT T R A C T I N G F O R E I G N I N V E S T M E N T A N D
P R O V I D I N G T R A I N I N G F O R N AT I O N A L S . M A N Y TO U R I S M V E N T U R E S
I N C L U D E F O R E I G N E Q U I T Y PA RT I C I PAT I O N A N D T E C H N I C A L
K N O W L E D G E A B O U T T H E C O N S T R U C T I O N A N D O P E R AT I O N O F
H O T E L S . T H E F O R M E R R E P R E S E N T S A M O B I L I Z AT I O N O F
I N T E R N AT I O N A L F I N A N C IA L R E S O U R C E S , W H I C H C A N B E R E G A R D E D
A S A D E S I R A B L E S U B S T I T U T E F O R F O R E I G N B O R R O W I N G . O U T S I D E
M A N A G E M E N T C A N B E U S E D TO T R A I N L A R G E N U M B E R S O F
N AT I O N A L S W H O W O U L D N O T O T H E RW I S E H AV E A C C E S S TO
T R A I N I N G . F U RT H E R M O R E , TO U R I S M P R O V I D E S A S T I M U L U S F O R
T H E D E V E L O P M E N T O F O T H E R A N C I L L A RY B U S I N E S S E S C AT E R I N G
TO TO U R I S T S . A N I L L U S T R AT I O N O F T H I S C A N B E F O U N D I N C A P I Z ,
A S Y O U C A N S E E , T H E R E A R E M O R E D E V E L O P M E N T S H A P P E N I N G .
T H E I N C O M E D I S T R I B U T IO N , F O R E X A M P L E , I N T H E M U N I C I PA L I T Y
O F C U A RT E R O , T H E R E I S C A P I Z E C O L O G I C A L PA R K T H E R E , T H E
P R O V I N C I A L TO U R I S M O F F I C E P R O V I D E S S A L A RY TO T H O S E W H O
A R E M A I N TA I N I N G T H E P L A C E .
INCOME DISTRIBUTION EFFECT (IDE) AND EMPLOYMEN

10. TO U R I S M C A N M A K E A N I M P O RTA N T C O N T R I B U T I O N TO A
C O U N T RY ’ S B A L A N C E O F PAY M E N T S . T H E TO U R I S M S E C TO R H A S
T H E C A PA C I T Y TO R E C O V E R F O R E I G N - C U R R E N C Y I N V E S T M E N T S I N
A V E RY S H O RT P E R I O D O F T I M E . T H E W O R L D TO U R I S M
O R G A N I Z AT I O N ( W TO ) E S T I M AT E S , F O R I N S TA N C E , T H AT A M E D I U M -
C L A S S B E A C H H O T E L I N A D E V E L O P I N G C O U N T RY W I L L E A R N B A C K
I N O N E Y E A R T H E E N T I R E F O R E I G N E X C H A N G E R E Q U I R E D TO B U I L D
A N D E Q U I P I T. I N T H E C A S E O F TO U R I S T V E H I C L E S , S U C H A S
B U S E S , T H I S P E R I O D I S E V E N S H O RT E R .
TOURISM AND BALANCE OF PAYMENTS

11. DEMAND FACTORS
a. Demand FACTORS
The Importance of Location. People with incomes high enough for foreign
travel are concentrated in a few countries. Most developing countries are far from key
points of origin. Travel between neighbouring regional countries is also expanding.
Example: Foreign-exchange receipts in Paraguay, which receives over 85 percent of its
visitors from Argentina and Brazil, increased eightfold between 1976 and 1986.
Income Elasticity. In several countries, travel receipts have been the fastest-growing
export item. The tourism sector represents over two thirds of the value of total
exports of goods and services from the Bahamas, three fifths of those from Barbados,
and over one third from the Dominican Republic and Jamaica.

12. DEMAND FACTORS
Decreasing Travel Costs. There is evidence that tourism demand is also price-elastic, particularly
below certain price levels. The two major costs of a trip abroad are transport charges and
expenditures in the destination country. For short-distance traffic, such as from the eastern United
States to the Bahamas, the Dominican Republic, or Jamaica, destination expenditures have the
greater weight in the total cost of a trip. In these particular countries, however, they are generally
lower than in other, competing Caribbean destination areas; the present study found empirically
that their cost structure in general also tended to be lower, probably because of the larger scale of
their tourist industries and the greater self-sufficiency of their economies. For long-distance traffic,
air transport is predominant, and average air transport costs have been declining. Where such
transport costs constitute a high proportion of the total cost of a trip, this decline is of great
significance for the potential for long-distance travel growth.

13. Supply Factors
b. Supply Factors
Public and Private Sector Involvement. Tourism is mainly a private-sector enterprise,
but the timely provision of hotel and other visitor services, such as entertainment,
food, and sport facilities, requires public-sector participation in the form of
infrastructure, promotional support, and fiscal and financial incentives, so as to attract
private investment to the sector.
Another important factor directly related to tourism facilities is the availability of
credit. As in any commercial activity, the availability of credit on suitable terms is an
essential catalyst for sound tourism investment. In a number of countries, when the
private financial system does not provide it, the public sector has established credit
lines for tourism investment.

14. Supply Factors
b. Supply Factors
Public and Private Sector Involvement. Tourism is mainly a private-sector
enterprise, but the timely provision of hotel and other visitor services, such
as entertainment, food, and sport facilities, requires public-sector
participation in the form of infrastructure, promotional support, and fiscal
and financial incentives, so as to attract private investment to the sector.

15. Supply Factors
Another important factor directly related to tourism facilities is the
availability of credit. As in any commercial activity, the availability of credit
on suitable terms is an essential catalyst for sound tourism investment. In a
number of countries, when the private financial system does not provide it,
the public sector has established credit lines for tourism investment.

16. Supply Factors
Tourist Destination Attributes. Tourist demand is spurred by innovation in
the type of holidays offered (new commodities) and by improvements in
transport, accommodations, and attractions (quality changes). The tourism
sector offers a multidimensional product that, if vigorously promoted, is
likely to lead to changes in the pattern of demand and generate new demand
for services.

17. Supply Factors
Tourist Destination Attributes. Yet, as in any other sector of economic
activity, a minimum set of parameters needs to be in place in order to make
an investment viable. In this sense, it is important to identify those attributes
of a destination area that are necessary to attract tourism projects and make
them viable. Such attributes relate to at least six different categories:
climate, natural resources, infrastructure, amenities, culture, and
socioeconomic and political factors.

18. The Importance of Tourism on Economies and Businesses
1. Tourism is vital for the success of many economies
around the world. There are several benefits of tourism on host
destinations. Tourism boosts the revenue of the economy, creates thousands
of jobs, develops the infrastructures of a country, and plants a sense of
cultural exchange between foreigners and citizens.

19. The Importance of Tourism on Economies and Businesses
2. Tourism creates employments.
The number of jobs created by tourism in many different areas is significant. These
jobs are not only a part of the tourism sector but may also include the agricultural
sector, communication sector, health sector, and the educational sector. Many tourists
travel to experience the hosting destination’s culture, different traditions, and
gastronomy. This is very profitable to local restaurants, shopping centers, and stores.
Melbourne, Australia’s population is greatly affected by tourism. It has a population of
around 4 million people and around 22,000 citizens are employed by the tourism
sector only.

20. The Importance of Tourism on Economies and Businesses
3. Governments that rely on tourism for a big percentage of their revenue
invest a lot in the infrastructure of the country. They want more and more
tourists to visit their country which means that safe and advanced facilities
are necessary. This leads to new roads and highways, developed parks,
improved public spaces, new airports, and possibly better schools and
hospitals. Safe and innovative infrastructures allow for a smooth flow of
goods and services. Moreover, local people experience an opportunity for
economic and educational growth.

21. The Importance of Tourism on Economies and Businesses
4. Tourism creates a cultural exchange between tourists and local citizens.
Exhibitions, conferences, and events usually attract foreigners. Organizing
authorities usually gain profits from registration fees, gift sales, exhibition
spaces, and sales of media copyright. Furthermore, foreign tourists bring
diversity and cultural enrichment to the hosting country.

22. The Importance of Tourism on Economies and Businesses
Tourism is a great opportunity for foreigners to learn about a new culture,
but it also creates many opportunities for local citizens. It allows young
entrepreneurs to establish new products and services that would not be
sustainable on the local population of residents alone. Moreover, residents
experience the benefits that come with tourism occurring in their own
country.