Economic Impact of Tourism

Economic Impact of Tourism Presentation E Economic Impact of Tourism (positive) Outline Economic Impact of Tourism (Negative) Economic Impact Measurement Economic Impact of Tourism (Positive) Outline Introduction Tourism can have a big impact on a region & of course a tourist destination (DTW). The worldwide dimension of tourism has economic, social, cultural and environmental effects on DTWs (Mathieson & Wall, 1982) & these effects can be positive or negative. Macro Economic Impact of Tourism • economic significance of tourism 🡺 dependence on tourism receipts relative to total export revenue and GNP • Tourism sector GDP share = 23% 🡺 IDR 347 trillion (2013). • The tourism sector also ranks fourth as a contributor to the country's foreign exchange in 2013. • Indonesia's competitiveness ranking in 2013 = 70 🡺 In 2012 it was 74th. THE REAL TOURISM EXTERNAL ACCOUNT Tourism external account according to Baretje & Defert TOURIST GENERATING / RECEIVING COUNTRIES close correlation between top tourist generating countries and top tourist expenditure recipients KEY ASPECTS OF ECONOMIC IMPACT 1 - Creating income 2 - Creating jobs 3 - Generates tax 4 - Effects on the balance of payments 5 - Improving the economic structure of a region 6 - Encourage entrepreneurial activity 7 - Economic loss FACTORS AFFECTING THE STRENGTH OF ECONOMIC IMPACT 1 - Condition of key facilities and attractions 2 - Volume & intensity of spending 3 - The level of economic development in a DTW 4 - A measure of the economic base of a DTW 5 6 - Rate of return on tourist expenditure at DTWs - DTW's level of adjustment to seasonal tourist demand EFFORTS TO INCREASE COMMUNITY ECONOMIC BENEFITS 1. Extended stay & traveler spending 2. Geographic spread of tourism development & its benefits Establish stronger cross-sectoral networks 3. 4. 5. 6. Maximization of local workforce Support local ownership (SMEs) Tax revenue optimization BENEFITS of Tourism EXTERNAL ECONOMY • Improvement of transportation network, water quality and While sanitation facilities are operated by the industrial sector, the benefits are also felt by other sectors. ACCESS TO OTHER REGIONS BENEFITS of Tourism ENTREPRENEURIAL ACTIVITY • tourism sector can increase linkages with local entrepreneurs (Mathieson and Wall, 1982): 1. Types of suppliers & manufacturers to which industry demand is attributed 2. Ability of local suppliers to cope with the demand 3. History of tourism development in the DTW 4. Types of tourism development Outline Economic Impact of Tourism (Negative) ECONOMIC LOSS there is no economic activity without cost Tourism and Inflation Tourism incidental expenses TOURISM AND INFLATION The link between tourism & inflation is complex, temporal & localized Peak season 🡪 tourist activity ↑ 🡪 P ↑, Durand et al (1994) study consequenc es • local communities have to pay more for the goods & services they need, • the seller will earn higher revenue. ECONOMIC LOSS : TOURISM AND INFLATION To what extent will this have an impact? mass tourism ↑ 🡪 land price ↑ Is the increase in land price a negative impact? ECONOMIC LOSSES: TOURISM AND INFLATION DEMAND INFLATION • Inquiry seasonal • Inelastic supply • Market reaction that insufficient INFLATION OFFER • Peak management • High taxes on some tourism products & services LOSS ECONOMY : TOUR ISM INCIDENTAL EXPENSES private costs & external diseconomies (incidental costs) private cost + incidental cost = social cost Research is limited to obvious costs (investment in facilities, promotion and advertising, transportation and other infrastructure). Some studies fail to account for indirect costs: imported goods, inflation, profit transfer, economic & OC dependency ECONOMIC LOSS: INCIDENTAL COSTS OF TOURISM Incidental costs give rise to environmental quality costs and public or fiscal costs. local residents - who are exposed to external economic losses - can negotiate with this in 3 ways: 1. Accept lower environmental quality than if there was tourism 2. Compensate for environmental degradation through public spending (taxes) 3. Directly levying monetary costs on tourists through taxes and tariffs ECONOMIC LOSS Table Direct incidental costs of tourism Life Quality Costs Congestion Criminality Fire Water pollution Air pollution Garbage Noise pollution Destruction of nature Destruction of beauty Destruction of cultural heritage Disease Traffic accidents Fiscal Costs R o a d construction, security, public transportation, port and terminal facilities Security and justice system Firefighting Water supply and sewage treatment Security, and public transportation Solid waste disposal and safety Security and zoning Security, garden and facilities recreation facilities, arrangement forest, law Parks, recreational facilities and security Arrangement of museums and historical sites, security Home Hospital, services health services other, health facilities, food regulation Security and justice system Outline Measurement of Economic Impact of Tourism ECONOMIC IMPACT MEASUREMENT Economic Impact of Tourism • Tourists expenditure (TE) : invisible exports • international vs domestic • TE counting at the local level is easier • TE precise estimation 🡪 customized survey • Economic impact analysis 🡪 IMPORTANT in tourism development strategy & planning • Share of Indonesia's Tourism Expenditure to Total World Tourism Expenditure in 2015 0.80 percent ECONOMIC IMPACT MEASUREMENT Economic Impact Measurement Input Output, CGEX MGM, MGM2 (Stynes, 2000) TEI, Ungated Event (Porges, 2005) Henderson Cousin (Vanhouve, 2005) Visitor Spending Flow (META, 2001) X X X Impact assessment macroeconomics √ Microeconomic impact assessment MEASURING ECONOMIC IMPACT AT THE LOCAL LEVEL Economic Benefits Economi c impact Economic Costs traveler spending Flow of tourist spending to the local economy Providers of goods and services for ecotourism activities (accommodation, restaurants, local transportation, equipment rental, etc.) supplier Labor investor MEASURING ECONOMIC IMPACT AT THE LOCAL LEVEL Traveler Expenses Direct impact Ecotourism Industry Import Input (leakage) Indirect impact Supporti ng sector Household Income Impact induced MEASURING ECONOMIC IMPACT AT THE LOCAL LEVEL Assessment of the economic impact of tourism activities at the local level. Data obtained through surveys to : tourists, business unit Local labor Investor Local community Government and Non-Government MEASURING ECONOMIC IMPACT AT THE LOCAL LEVEL 1) Survey of local business units providing goods and services indirect impact, resource costs, & future investment plans. 2) Survey of Workers in Local Business Units indirect impact, induced impact and displacement effect of employment 3) Survey of Employers or Other Decision Makers future investment plans, alternative investments, factors supporting or inhibiting investment activities 4) Survey of Local Communities benefits and costs perceived by the community from ecotourism activities MEASURING ECONOMIC IMPACT AT THE LOCAL LEVEL Economic Impact Measurement Keynesian Local Income Multiplier Ratio Income Multiplier, Type I Ratio Income Multiplier, Type II D+N+U = E D+N = D = D+N+U D Thank You!