Tourism and Economic Development | tutor2u Economics
Study notes

Tourism and Economic Development

  • Levels: AS, A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

For many developing countries tourism is already a major part of their economy and a significant source of income and employment

For example, tourism accounts for about 10% of Thailand's GDP. But there is a fierce debate about the consequences of tourism - what role can tourism play in growth and development? Can travel to less developed countries do more harm than good?

Economic and Social Benefits from Tourism

  1. Employment creation: tourism is labour intensive industry. Employs a higher % of women. The growth of ethical tourism has been a key recent feature + volunteerism
  2. Export earnings: tourism is a service industry - generates important foreign exchange earnings. An important source of diversification for many smaller countries
  3. Boost to aggregate demand:  creating local and regional income-multiplier effects. Spillover benefits for suppliers of local foods/drinks; better informed tourists
  4. Accelerator effects from increased capital investment in tourism infrastructure and services such as airlines and telecommunications

Tourism as a threat to sustainable growth and development

  1. Exploitation of local labour by overseas transational tourist businesses, rapid growth of sex industry in many countries. Many workers in tourism are migrant workers suffering frm poor employment conditions
  2. Outflow of profits from foreign-owned tourist resorts, manyresorts have few locally-owned and run hotels. All-inclusive deals ignore the local economy. Passengers from cruise ships have little direct effect on the local economy.
  3. Externalities - from construction projects, congestion, waste, pressure on the natural environment. Rising property prices makes housing less affordable for local people.
  4. Deepening pressures on local cultures from westernisation, the doubtful benefits of slum-tourism

Background data on the global tourism industry:

  • Globally, tourism is a $3 billion a day industry
  • The income elasticity of demand for overseas travel and tourism is high
  • According to a recent United Nations Report, in over 150 countries, tourism is one of five top export earners, and in 60 it is the number one export
  • Developing countries account for 40% of world tourism arrivals and 30% of tourism receipts
  • South-South tourism is growing rapidly – i.e. from developing to other developing countries
  • Women make up 70 per cent of the labour force in the tourism sector, and half of all tourism workers are 25 or under
  • There is growing pressure for inclusive tourism and sustainable tourism investment

Tourism in Sub Saharan Africa

According to the 2014 edition of Africa Pulse, "International tourist arrivals in Sub-Saharan Africa grew by 5.2 percent in 2013, reaching a record 36 million, up from 34 million in 2012, contributing to government revenue, private incomes, and jobs."

This short revision video provides overview of some of the arguments for and against tourism as a key driver of growth and development especially in lower and middle income countries.

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