Tourism Economics

Chapter 1

TRM 490
 Tourism
 Two important organizations for Information on world
tourism
◦ World Tourism Organization (WTO)—An UN Agency that oversees
Tourism worldwide.
◦ The World Travel and Tourism Council (WTTC)---A Brussels-Based
Private Organization of chief executive officers of major companies
representing all sectors of the global tourism businesses.

 Tourism is the world’s largest industry according to the

WTO
◦ 9% of the GDP (direct, indirect, and induced impact), accounts for 1 in
11 jobs, accounts for 1.4 Trillion USD in exports, 1087 million
international tourists, 5-6 Billion domestic tourists.
◦ The past 6 decades have shown continued expansion and growth,
becoming one of the largest and fastest growing economic sectors in
the world according to the 2014 UNWTO Tourism Highlights.
 Tourism
 Estimates of tourism’s economic impact vary widely according
to the definition of tourism used
◦ Tourism, an umbrella concept (The world except US) dates back to 1811,
or before , and continues to change in definition
 A traveler is variously defined as someone making a trip for a
specified distance (25m, 50m or 100mi) and for some specified
purpose (leisure, business, for example) away from home
◦ The book states that the term encompasses travelers away from home
and the businesses and people who serve them by expediting or
otherwise making the travel easier and more entertaining
 Another definition is the commercial organization and
operation of vacations and visits to places of interest.
◦ Knowing the definition of a region is important when accurately assessing
effects of tourism on an economy
 An interrelated group of businesses who serves the needs and
wants of the travelers.
 Tourism Economics
 Tourism economic impact measures the amount of travel and its
economic consequences, direct, indirect, and induced.
◦ The measurement of economic impact varies according to various
methods of collecting and defining travel information.
◦ Technology has made the study of analytics more accessible to the
industry as well as students studying the topic.
 Tourism has dimensions other than economic, among them the
complex of interactions and their consequences that occur before,
during, and after a tourist trip. They include:
◦ Psychological
◦ Sociological
◦ Ecological
◦ Political impacts
 Tourism as an industry
 Tourism includes many parts to it:
Restaurants, accommodations, transportation, destination development,
travel research, government offices, travel expenditures, tourist
attractions, recreational facilities, and the miscellaneous that includes
service stations, grocery stores, etc.
 Perspectives on tourism:
◦ As an activity in which people are engaged in travel away from home
for business or pleasure.
◦ As a business it provides goods and services to the travelers, involving
any expenditure incurred by of for a visitor to his/her trip.
◦ As an industry it is comprised of hundreds of component businesses,
some huge, most of them are small.
◦ As an economic development tool in which money collected through
taxation is then compounded and redistributed back into the
community and infrastructure.
◦ As an institution with a history, body of knowledge, and social aspect
◦ As an economic activity with billions of dollars exchanged each month,
a social science to be analyzed, trends to be identified, and
costs/benefits to be computed.
 Tourist Definitions
 Various definitions of traveler/tourist:
◦ US Government: both mean the same---anyone who stays more than 24
hours, or make an overnight stay, away from home. (Exceptions: military
travel, resident students, resident student immigrants, diplomats, and
people working away from home).
◦ The US Census Bureau: travel at least 100 miles away from home and
returns (overnight stay is not a requirement in the definition).
◦ Statistics Canada: a tourist is one who travel away from home for a
distance of at least 50 miles beyond the boundary of the home
community.
◦ Persons who make border crossings are counted as tourists by some
national governments.
 Tourism Definitions (cont.)
 WTO’s view on inbound tourism/tourist/traveler/visitor:
◦ In most circumstances, the precision of the definitions is not a
special concern, and all sorts of travelers might be included in
the statistics of visitors. This also concerns their expenditure.
Nationals residing outside the country are unevenly treated
(some exclude them from their statistics of inbound visitors)
and many countries are mostly worried by foreigners residing
outside the country (confusion between the concept of
nationality and of residence).
◦ Same-day visitors are usually excluded from the theoretical
definition (although their expenditure might be included), and it
is also the case of transit visitors (specifically excluded in
previous international definitions).
◦ Business travels were always considered of special interest, and
in many cases were identified separately. Some countries also
identified separately other purposes of the visit.
The Changing Definition of Tourism
 Issues in studying tourism economics
◦ Definition of tourism will continue to be imprecise because so many
businesses, governments and the researchers are involved, and because
rapid changes are taking place in the travel world.
◦ The reliability and validity of the numbers developed by primary
research (collected privately or by government)
◦ Sources or estimates of errors are rarely given in reporting tourism
statistics.
◦ Tourism statistics are fraught with problems of definition partly because
tourism is a composite industry, made up of several other industries.
◦ Food store spending is hard to identify and tabulate.
 Magnitude of Tourism Economics
 Tourism in the US:
◦ The third largest retail industry, following food and automobile industries
◦ The largest private employer
◦ The largest export industry
◦ The largest recipient of tourist travel income
◦ The US spends the most tourist dollars abroad (see Figure 1-6, p13)

 According to the US Office of Tourism and Travel Industries (OTTI)

for 2015 Q4:
◦ Tourism supplied the US with 8.1 million American jobs
◦ Total Tourism-Related Output was $1.6 trillion in the fourth quarter of
2015.
◦ It consisted of $919.4 billion (58 percent) of direct tourism spending and
$668.9 billion (42 percent) of indirect tourism related spending.
Tourism Income and Impact Studies
 Typically, the higher the Gross National Product (GNP) of a
country, the more money tourists from that country are
spending per capita
 Top 5 International Markets to the US in 2014:

Origin of visitor Millions of visitors % of Change

Canada 23.0 (-2)%
Mexico 17.07 17%
United Kingdom 4.15 8%
Japan 3.62 (-3)%
Brazil 2.26 10%

According to: Travel.trade.gov/pdf/2014-Top-10-Markets.pdf

 Domestic Tourism Income
 The US does not have a Department of Tourism, tourism is strictly the
responsibility of each state.
 Every states annual economic impact study is on spending type (either
business or traveler) is categorized differently.
 Sources drawn from local hotel occupancy tax, estimates reported in a
number of visitor studies, local visitor surveys, US Dept. of Census, consumer
price index, etc.
 Every state has its own tourism impact study, we’ll use California as an
example.
 Examples of Spending Categories in California
◦ Retail shopping Restaurants
◦ Lodging Recreation
◦ Ground transport Food stores
◦ Air transport Travel arrangement
 Travelers are categorized into five groups: hotel/motel guests, day visitors,
private home guests, vacation home guests, and campers.
 Tourism in Developing Countries
 Tourism has recently became a major factor in places like China, India,
South America, and Southeast Asia.
 The less developed countries in these areas rely heavily on loans or
grants from world funds to develop tourism facilities and for foreign
expertise to develop and manage tourist enterprises such as hotels
and tour operations.
 International visitor spending to the US (2014)
◦ Brazil – Spending equaled13.4B
◦ South Korea – Spending equaled 7.8B
◦ India – Spending equaled 9.8B
◦ China – Spending equaled a massive 24.0B!

According to travel.trade.gov/pdf/2014-Top-10-Markets.pdf