multiplier effect tourism essay

10 Economic impacts of tourism + explanations + examples

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There are many economic impacts of tourism, and it is important that we understand what they are and how we can maximise the positive economic impacts of tourism and minimise the negative economic impacts of tourism.

Many argue that the tourism industry is the largest industry in the world. While its actual value is difficult to accurately determine, the economic potential of the tourism industry is indisputable. In fact, it is because of the positive economic impacts that most destinations embark on their tourism journey.

There is, however, more than meets the eye in most cases. The positive economic impacts of tourism are often not as significant as anticipated. Furthermore, tourism activity tends to bring with it unwanted and often unexpected negative economic impacts of tourism.

In this article I will discuss the importance of understanding the economic impacts of tourism and what the economic impacts of tourism might be. A range of positive and negative impacts are discussed and case studies are provided.

At the end of the post I have provided some additional reading on the economic impacts of tourism for tourism stakeholders , students and those who are interested in learning more.

 Foreign exchange earnings

Contribution to government revenues, employment generation, contribution to local economies, development of the private sector, infrastructure cost, increase in prices, economic dependence of the local community on tourism, foreign ownership and management, economic impacts of tourism: conclusion, further reading on the economic impacts of tourism, the economic impacts of tourism: why governments invest.

Tourism brings with it huge economic potential for a destination that wishes to develop their tourism industry. Employment, currency exchange, imports and taxes are just a few of the ways that tourism can bring money into a destination.

In recent years, tourism numbers have increased globally at exponential rates, as shown in the World Tourism Organisation data below.

There are a number of reasons for this growth including improvements in technology, increases in disposable income, the growth of budget airlines and consumer desires to travel further, to new destinations and more often.

Here are a few facts about the economic importance of the tourism industry globally:

• The tourism economy represents 5 percent of world GDP
• Tourism contributes to 6-7 percent of total employment
• International tourism ranks fourth (after fuels, chemicals and automotive products) in global exports
• The tourism industry is valued at US$1trillion a year
• Tourism accounts for 30 percent of the world’s exports of commercial services
• Tourism accounts for 6 percent of total exports
• 1.4billion international tourists were recorded in 2018 (UNWTO)
• In over 150 countries, tourism is one of five top export earners
• Tourism is the main source of foreign exchange for one-third of developing countries and one-half of less economically developed countries (LEDCs)

There is a wealth of data about the economic value of tourism worldwide, with lots of handy graphs and charts in the United Nations Economic Impact Report .

In short, tourism is an example of an economic policy pursued by governments because:

•      it brings in foreign exchange
•      it generates employment
•      it creates economic activity

Building and developing a tourism industry, however, involves a lot of initial and ongoing expenditure. The airport may need expanding. The beaches need to be regularly cleaned. New roads may need to be built. All of this takes money, which is usually a financial outlay required by the Government.

For governments, decisions have to be made regarding their expenditure. They must ask questions such as:

How much money should be spent on the provision of social services such as health, education, housing?

How much should be spent on building new tourism facilities or maintaining existing ones?

If financial investment and resources are provided for tourism, the issue of opportunity costs arises.

By opportunity costs, I mean that by spending money on tourism, money will not be spent somewhere else. Think of it like this- we all have a specified amount of money and when it runs out, it runs out. If we decide to buy the new shoes instead of going out for dinner than we might look great, but have nowhere to go…!

In tourism, this means that the money and resources that are used for one purpose may not then be available to be used for other purposes. Some destinations have been known to spend more money on tourism than on providing education or healthcare for the people who live there, for example.

This can be said for other stakeholders of the tourism industry too.

There are a number of independent, franchised or multinational investors who play an important role in the industry. They may own hotels, roads or land amongst other aspects that are important players in the overall success of the tourism industry. Many businesses and individuals will take out loans to help fund their initial ventures.

So investing in tourism is big business, that much is clear. What what are the positive and negative impacts of this?

Positive economic impacts of tourism

So what are the positive economic impacts of tourism? As I explained, most destinations choose to invest their time and money into tourism because of the positive economic impacts that they hope to achieve. There are a range of possible positive economic impacts. I will explain the most common economic benefits of tourism below.

One of the biggest benefits of tourism is the ability to make money through foreign exchange earnings.

Tourism expenditures generate income to the host economy. The money that the country makes from tourism can then be reinvested in the economy. How a destination manages their finances differs around the world; some destinations may spend this money on growing their tourism industry further, some may spend this money on public services such as education or healthcare and some destinations suffer extreme corruption so nobody really knows where the money ends up!

Some currencies are worth more than others and so some countries will target tourists from particular areas. I remember when I visited Goa and somebody helped to carry my luggage at the airport. I wanted to give them a small tip and handed them some Rupees only to be told that the young man would prefer a British Pound!

Currencies that are strong are generally the most desirable currencies. This typically includes the British Pound, American, Australian and Singapore Dollar and the Euro .

Tourism is one of the top five export categories for as many as 83% of countries and is a main source of foreign exchange earnings for at least 38% of countries.

Tourism can help to raise money that it then invested elsewhere by the Government. There are two main ways that this money is accumulated.

Direct contributions are generated by taxes on incomes from tourism employment and tourism businesses and things such as departure taxes.

Taxes differ considerably between destinations. I will never forget the first time that I was asked to pay a departure tax (I had never heard of it before then), because I was on my way home from a six month backpacking trip and I was almost out of money!

Japan is known for its high departure taxes. Here is a video by a travel blogger explaining how it works.

According to the World Tourism Organisation, the direct contribution of Travel & Tourism to GDP in 2018 was $2,750.7billion (3.2% of GDP). This is forecast to rise by 3.6% to $2,849.2billion in 2019.

Indirect contributions come from goods and services supplied to tourists which are not directly related to the tourism industry.

Take food, for example. A tourist may buy food at a local supermarket. The supermarket is not directly associated with tourism, but if it wasn’t for tourism its revenues wouldn’t be as high because the tourists would not shop there.

There is also the income that is generated through induced contributions . This accounts for money spent by the people who are employed in the tourism industry. This might include costs for housing, food, clothing and leisure Activities amongst others. This will all contribute to an increase in economic activity in the area where tourism is being developed.

The rapid expansion of international tourism has led to significant employment creation. From hotel managers to theme park operatives to cleaners, tourism creates many employment opportunities. Tourism supports some 7% of the world’s workers.

There are two types of employment in the tourism industry: direct and indirect.

Direct employment includes jobs that are immediately associated with the tourism industry. This might include hotel staff, restaurant staff or taxi drivers, to name a few.

Indirect employment includes jobs which are not technically based in the tourism industry, but are related to the tourism industry. Take a fisherman, for example. He does not have any contact of dealings with tourists. BUT he does sell his fish to the hotel which serves tourists. So he is indirectly employed by the tourism industry, because without the tourists he would not be supplying the fish to the hotel.

It is because of these indirect relationships, that it is very difficult to accurately measure the economic value of tourism.

It is also difficult to say how many people are employed, directly and indirectly, within the tourism industry.

Furthermore, many informal employments may not be officially accounted for. Think tut tut driver in Cambodia or street seller in The Gambia – these people are not likely to be registered by the state and therefore their earnings are not declared.

It is for this reason that some suggest that the actual economic benefits of tourism may be as high as double that of the recorded figures!

All of the money raised, whether through formal or informal means, has the potential to contribute to the local economy.

If sustainable tourism is demonstrated, money will be directed to areas that will benefit the local community most.

There may be pro-poor tourism initiatives (tourism which is intended to help the poor) or volunteer tourism projects.

The government may reinvest money towards public services and money earned by tourism employees will be spent in the local community. This is known as the multiplier effect.

The multiplier effect relates to spending in one place creating economic benefits elsewhere. Tourism can do wonders for a destination in areas that may seem to be completely unrelated to tourism, but which are actually connected somewhere in the economic system.

Let me give you an example.

A tourist buys an omelet and a glass of orange juice for their breakfast in the restaurant of their hotel. This simple transaction actually has a significant multiplier effect. Below I have listed just a few of the effects of the tourist buying this breakfast.

The waiter is paid a salary- he spends his salary on schooling for his kids- the school has more money to spend on equipment- the standard of education at the school increases- the kids graduate with better qualifications- as adults, they secure better paying jobs- they can then spend more money in the local community…

The restaurant purchases eggs from a local farmer- the farmer uses that money to buy some more chickens- the chicken breeder uses that money to improve the standards of their cages, meaning that the chickens are healthier, live longer and lay more eggs- they can now sell the chickens for a higher price- the increased money made means that they can hire an extra employee- the employee spends his income in the local community…

The restaurant purchase the oranges from a local supplier- the supplier uses this money to pay the lorry driver who transports the oranges- the lorry driver pays road tax- the Government uses said road tax income to fix pot holes in the road- the improved roads make journeys quicker for the local community…

So as you can see, that breakfast that the tourist probably gave not another thought to after taking his last mouthful of egg, actually had the potential to have a significant economic impact on the local community!

The private sector has continuously developed within the tourism industry and owning a business within the private sector can be extremely profitable; making this a positive economic impact of tourism.

Whilst many businesses that you will come across are multinational, internationally-owned organisations (which contribute towards economic leakage ).

Many are also owned by the local community. This is the case even more so in recent years due to the rise in the popularity of the sharing economy and the likes of Airbnb and Uber, which encourage the growth of businesses within the local community.

Every destination is different with regards to how they manage the development of the private sector in tourism.

Some destinations do not allow multinational organisations for fear that they will steal business and thus profits away from local people. I have seen this myself in Italy when I was in search of a Starbucks mug for my collection , only to find that Italy has not allowed the company to open up any shops in their country because they are very proud of their individually-owned coffee shops.

Negative economic impacts of tourism

Unfortunately, the tourism industry doesn’t always smell of roses and there are also several negative economic impacts of tourism.

There are many hidden costs to tourism, which can have unfavourable economic effects on the host community.

Whilst such negative impacts are well documented in the tourism literature, many tourists are unaware of the negative effects that their actions may cause. Likewise, many destinations who are inexperienced or uneducated in tourism and economics may not be aware of the problems that can occur if tourism is not management properly.

Below, I will outline the most prominent negative economic impacts of tourism.

Economic leakage in tourism is one of the major negative economic impacts of tourism. This is when money spent does not remain in the country but ends up elsewhere; therefore limiting the economic benefits of tourism to the host destination.

The biggest culprits of economic leakage are multinational and internationally-owned corporations, all-inclusive holidays and enclave tourism.

I have written a detailed post on the concept of economic leakage in tourism, you can take a look here- Economic leakage in tourism explained .

Another one of the negative economic impacts of tourism is the cost of infrastructure. Tourism development can cost the local government and local taxpayers a great deal of money.

Tourism may require the government to improve the airport, roads and other infrastructure, which are costly. The development of the third runway at London Heathrow, for example, is estimated to cost £18.6billion!

Money spent in these areas may reduce government money needed in other critical areas such as education and health, as I outlined previously in my discussion on opportunity costs.

One of the most obvious economic impacts of tourism is that the very presence of tourism increases prices in the local area.

Have you ever tried to buy a can of Coke in the supermarket in your hotel? Or the bar on the beachfront? Walk five minutes down the road and try buying that same can in a local shop- I promise you, in the majority of cases you will see a BIG difference In cost! (For more travel hacks like this subscribe to my newsletter – I send out lots of tips, tricks and coupons!)

Increasing demand for basic services and goods from tourists will often cause price hikes that negatively impact local residents whose income does not increase proportionately.

Tourism development and the related rise in real estate demand may dramatically increase building costs and land values. This often means that local people will be forced to move away from the area that tourism is located, known as gentrification.

Taking measures to ensure that tourism is managed sustainably can help to mitigate this negative economic impact of tourism. Techniques such as employing only local people, limiting the number of all-inclusive hotels and encouraging the purchasing of local products and services can all help.

Another one of the major economic impacts of tourism is dependency. Many countries run the risk of becoming too dependant on tourism. The country sees $ signs and places all of its efforts in tourism. Whilst this can work out well, it is also risky business!

If for some reason tourism begins to lack in a destination, then it is important that the destination has alternative methods of making money. If they don’t, then they run the risk of being in severe financial difficulty if there is a decline in their tourism industry.

In The Gambia, for instance, 30% of the workforce depends directly or indirectly on tourism. In small island developing states, percentages can range from 83% in the Maldives to 21% in the Seychelles and 34% in Jamaica.

There are a number of reasons that tourism could decline in a destination.

The Gambia has experienced this just recently when they had a double hit on their tourism industry. The first hit was due to political instability in the country, which has put many tourists off visiting, and the second was when airline Monarch went bust, as they had a large market share in flights to The Gambia.

Other issues that could result in a decline in tourism includes economic recession, natural disasters and changing tourism patterns. Over-reliance on tourism carries risks to tourism-dependent economies, which can have devastating consequences.

The last of the negative economic impacts of tourism that I will discuss is that of foreign ownership and management.

As enterprise in the developed world becomes increasingly expensive, many businesses choose to go abroad. Whilst this may save the business money, it is usually not so beneficial for the economy of the host destination.

Foreign companies often bring with them their own staff, thus limiting the economic impact of increased employment. They will usually also export a large proportion of their income to the country where they are based. You can read more on this in my post on economic leakage in tourism .

As I have demonstrated in this post, tourism is a significant economic driver the world over. However, not all economic impacts of tourism are positive. In order to ensure that the economic impacts of tourism are maximised, careful management of the tourism industry is required.

If you enjoyed this article on the economic impacts of tourism I am sure that you will love these too-

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• Open access
• Published: 05 January 2021

The relationship between tourism and economic growth among BRICS countries: a panel cointegration analysis

• Haroon Rasool   ORCID: orcid.org/0000-0002-0083-4553 1 ,
• Shafat Maqbool 2 &
• Md. Tarique 1  

Future Business Journal volume  7 , Article number:  1 ( 2021 ) Cite this article

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Tourism has become the world’s third-largest export industry after fuels and chemicals, and ahead of food and automotive products. From last few years, there has been a great surge in international tourism, culminates to 7% share of World’s total exports in 2016. To this end, the study attempts to examine the relationship between inbound tourism, financial development and economic growth by using the panel data over the period 1995–2015 for five BRICS (Brazil, Russia, India, China and South Africa) countries. The results of panel ARDL cointegration test indicate that tourism, financial development and economic growth are cointegrated in the long run. Further, the Granger causality analysis demonstrates that the causality between inbound tourism and economic growth is bi-directional, thus validates the ‘feedback-hypothesis’ in BRICS countries. The study suggests that BRICS countries should promote favorable tourism policies to push up the economic growth and in turn economic growth will positively contribute to international tourism.

Introduction

World Tourism Day 2015 was celebrated around the theme ‘One Billion Tourists; One Billion Opportunities’ highlighting the transformative potential of one billion tourists. With more than one billion tourists traveling to an international destination every year, tourism has become a leading economic sector, contributing 9.8% of global GDP and represents 7% of the world’s total exports [ 59 ]. According to the World Tourism Organization, the year 2013 saw more than 1.087 billion Foreign Tourist Arrivals and US $1075 billion foreign tourism receipts. The contribution of travel and tourism to gross domestic product (GDP) is expected to reach 10.8% at the end of 2026 [ 61 ]. Representing more than just economic strength, these figures exemplify the vast potential of tourism, to address some of the world´s most pressing challenges, including socio-economic growth and inclusive development.

Developing countries are emerging as the important players, and increasingly aware of their economic potential. Once essentially excluded from the tourism industry, the developing world has now become its major growth area. These countries majorly rely on tourism for their foreign exchange reserves. For the world’s forty poorest countries, tourism is the second-most important source of foreign exchange after oil [ 37 ].

The BRICS (Brazil, Russia, India, China and South Africa) countries have emerged as a potential bloc in the developing countries which caters the major tourists from developed countries. Tourism becomes major focus at BRICS Xiamen Summit 2017 held in China. These countries have robust growth rate, and are focal destinations for global tourists. During 1990 to 2014, these countries stride from 11% of the world’s GDP to almost 30% [ 17 ]. Among BRICS countries, China is ranked as an important destination followed by Brazil, Russia, India and South Africa [ 60 ].

The importance of inbound tourism has grown exponentially, because of its growing contribution to the economic growth in the long run. It enhances economic growth by augmenting the foreign exchange reserves [ 38 ], stimulating investments in new infrastructure, human capital and increases competition [ 9 ], promoting industrial development [ 34 ], creates jobs and hence to increase income [ 34 ], inbound tourism also generates positive externalities [ 1 , 14 ] and finally, as economy grows, one can argue that growth in GDP could lead to further increase in international tourism [ 11 ].

The tourism-led growth hypothesis (TLGH) proposed by Balaguer and Cantavella-Jorda [ 3 ], states that expansion of international tourism activities exerts economic growth, hence offering a theoretical and empirical link between inbound tourism and economic growth. Theoretically, the TLGH was directly derived from the export-led growth hypothesis (ELGH) that postulates that economic growth can be generated not only by increasing the amount of labor and capital within the economy, but also by expanding exports.

The ‘new growth theory,’ developed by Balassa [ 4 ], suggests that export expansion can trigger economic growth, because it promotes specialization and raises factors productivity by increasing competition, creating positive externalities by advancing the dispersal of specialized information and abilities. Exports also enhance economic growth by increasing the level of investment. International tourism is considered as a non-standard type of export, as it indicates a source of receipts and consumption in situ. Given the difficulties in measuring tourism activity, the economic literature tends to focus on primary and manufactured product exports, hence neglecting this economic sector. Analogous to the ELGH, the TLGH analyses the possible temporal relationship between tourism and economic growth, both in the short and long run. The question is whether tourism activity leads to economic growth or, alternatively, economic expansion drives tourism growth, or indeed a bi-directional relationship exists between the two variables.

To further substantiate the nexus, the study will investigate the plausible linkages between economic growth and international tourism while considering the relative importance of financial development in the context of BRICS nations. Financial markets are considered a key factor in producing strong economic growth, because they contribute to economic efficiency by diverting financial funds from unproductive to productive uses. The origin of this role of financial development may is traced back to the seminal work of Schumpeter [ 50 ]. In his study, Schumpeter points out that the banking system is the crucial factor for economic growth due to its role in the allocation of savings, the encouragement of innovation, and the funding of productive investments. Early works, such as Goldsmith [ 18 ], McKinnon [ 39 ] and Shaw [ 51 ] put forward considerable evidence that financial development enhances growth performance of countries. The importance of financial development in BRICS economies is reflected by the establishment of the ‘New Development Bank’ aimed at financing infrastructure and sustainable development projects in these and other developing countries. To the best of the authors’ knowledge, no attempt has been made so far to investigate the long-run relationship Footnote 1 between tourism, financial development and economic growth in case of BRICS countries. Hence, the present study is an attempt to fill the gap in the existing literature.

Review of past studies

From last few decades there has been a surge in the research related to tourism-growth nexus. The importance of growth and development and its determinants has been studied extensively both in developed and developing countries. Extant literature has recognized tourism as an important determinant of economic growth. The importance of tourism has grown exponentially, courtesy to its manifold advantages in form of employment, foreign exchange production household income and government revenues through multiplier effects, improvements in the balance of payments and growth in the number of tourism-promoted government policies [ 21 , 41 , 53 ]. Empirical findings on tourism and economic development have produced mixed finding and sometimes conflicting results despite the common choice of time series techniques as a research methodology. On empirical grounds, four hypotheses have been explored to determine the link between tourism and economic growth [ 12 ]. The first two hypotheses present an account on the unidirectional causality between the two variables, either from tourism to economic growth (Tourism-led economic growth hypothesis-TLGH) or its reserve (economic-driven tourism growth hypothesis-EDTH). The other two hypotheses support the existence of bi-directional hypothesis, (bi-directional causality hypothesis-BC) or that there is no relationship at all (no causality hypothesis-NC), respectively. According to TLEG hypothesis, tourism creates an array of benefits which spillover though multiple routes to promote the economic growth [ 55 ]. In particular, it is believed that tourism (1) increases foreign exchange earnings, which in turn can be used to finance imports [ 38 ], (2) it encourages investment and drives local firms toward greater efficiency due to the increased competition [ 3 , 31 ], (3) it alleviates unemployment, since tourism activities are heavily based on human capital [ 10 ] and (4) it leads to positive economies of scale thus, decreasing production costs for local businesses [ 1 , 14 ]. Other recent studies which find evidence in favor of the TLGH hypothesis include [ 44 , 52 ]. Even though literature is dominated by TLGH, few studies produce a result in support of EDTH [ 40 , 41 , 45 ]. Payne and Mervar [ 45 ] posit that tourism growth of a country is mobilized by the stability of well-designed economic policies, governance structures and investments in both physical and human capital. This positive and vibrant environment creates a series of development activities which proliferate and flourish the tourism. Pertaining to the readily available information, bi-directional causality could also exist between tourism income and economic growth [ 34 , 49 ]. From a policy view, a reciprocal tourism–economic growth relationship implies that government agendas should cater for promoting both areas simultaneously. Finally, there are some studies that do not offer support to any of the aforementioned hypotheses, suggesting that the impact between tourism and economic growth is insignificant [ 25 , 47 , 57 ]. There is a vast literature examining the relationship between tourism and growth as a result, only a selective literature review will be presented here.

Banday and Ismail [ 5 ] used ARDL cointegration model to test the relationship between tourism revenue and economic growth in BRICS countries from the time period of (1995–2013). The study validates the tourism-led growth hypothesis for BRICS countries, which evinces that tourism has positive influence on economic growth.

Savaş et al. [ 54 ] evaluated the tourism-led growth hypothesis in the context of Turkey. The study employed gross domestic product, real exchange rate, real total expenditure and international tourism arrivals to sketch out the causality among variables. The result reveals a unidirectional relationship between tourism and real exchange rate. The findings suggest that tourism is the driving force for economic growth, which in turn helps turkey to culminate its current account deficit.

Dhungel [ 15 ] made an effort to investigate causality between tourism and economic growth, In Nepal for the period of (1974–2012), by using Johansen’s cointegration and Error correction model. The result states that unidirectional causality exists in the long run, while in short run no causality exists between two constructs. The study emphasized that strategies should be devised to attain causality running from tourism to economic growth.

Mallick et al. [ 36 ] analyzed the nexus between economic growth and tourism in 23 Indian states over a period of 14 years (1997–2011). Using panel autoregressive distributed lag model based on three alternative estimators such as mean group estimator, pooled mean group and dynamic fixed effects, Research found that tourism exerts positive influence on economic growth in the long run.

Belloumi [ 8 ] examines the causal relationship between international tourism receipts and economic growth in Tunisia by using annual time series data for the period 1970–2007. The study uses the Johansen’s cointegration methodology to analyze the long-run relationship among the concerned variables. Granger causality based Vector error correction mechanism approach indicates that the revenues generated from tourism have a positive impact on economic growth of Tunisia. Thus, the study supports the hypothesis of tourism-driven economic growth, which is specific to developing countries that base their foreign exchange earnings on the existence of a comparative advantage in certain sectors of the economy.

Tang et al. [ 58 ] explored the dynamic Inter-relationships among tourism, economic growth and energy consumption in India for the period 1971–2012. The study employed Bounds testing approach to cointegration and generalized variance decomposition methods to analyze the relationship. The bounds testing and the Gregory-Hansen test for cointegration with structural breaks consistently reveals that energy consumption, tourism and economic growth in India are cointegrated. The study demonstrated that tourism and economic growth have positive impact on energy consumption, while tourism and economic growth are interrelated; with tourism exert significant influence on economic growth. Consequently, this study validates the tourism-led growth hypothesis in the Indian context.

Kadir and Karim [ 24 ]) examined the causal nexus between tourism and economic growth in Malaysia by applying panel time series approach for the period 1998–2005. By applying Padroni’s panel cointegration test and panel Granger causality test, the result indicated both short and long-run relationship. Further, the panel causality shows unidirectional causality directing from tourism receipts to economic growth. The result provides evidence of the significant contribution of tourism industry to Malaysia’s economic growth, thereby justifying the necessity of public intervention in providing tourism infrastructure and facilities.

Antonakakis et al. [ 2 ] test the linkage between tourism and economic growth in Europe by using a newly introduced spillover index approach. Based on monthly data for 10 European countries over the period 1995–2012, the findings suggested that the tourism–economic growth relationship is not stable over time in terms of both magnitude and direction, indicating that the tourism-led economic growth (TLEG) and the economic-driven tourism growth (EDTG) hypotheses are time-dependent. Thus, the findings of the study suggest that the same country can experience tourism-led economic growth or economic-driven tourism growth at different economic events.

Oh [ 41 ] verifies the contribution of tourism development to economic growth in the Korean economy by applying Engle and Granger two-stage approach and a bivariate Vector Autoregression model. He claimed that economic expansion lures tourists in the short run only, while there is no such long-run stable relationship between international tourism and economic development in Korea.

Empirical studies have pronouncedly focused on the literature that tourism promotes economic growth. To further substantiate the nexus, the study will investigate the plausible linkages between economic growth and international tourism while considering the relative importance of financial development in the context of BRICS nations. The inclusion of financial development in the examination of tourism-growth nexus is a unique feature of this study, which have an influencing role in economic growth as financial development has been theoretically and empirically recognized as source of comparative advantage [ 22 ].

This study employs panel ARDL cointegration approach to verify the existence of long-run association among the variables. Further, study estimated the long-run and short-run coefficients of the ARDL model. Subsequently, Dumitrescu and Hurlin [ 16 ] panel Granger causality test has been employed to check the direction of causality between tourism, financial development and economic growth among BRICS countries.

Database and methodology

Data and variables.

The study is analytical and empirical in nature, which intends to establish the relationship between economic growth and inbound tourism in BRICS countries. For the BRICS countries, limited studies have been conducted depicting the present scenario. Therefore, present study tries to verify the relevance of tourism in economic growth to further enhance the understanding of economic dynamics in BRICS countries. The data used in the study are annual figures for the period stretching from 1995 to 2015, consisting of one endogenous variable (GDP per capita, a proxy for economic growth) and two exogenous variables (international tourism receipts per capita and financial development). The variables employed in the study are based on the economic growth theory, proposed by Balassa [ 4 ], which states that export expansion has a relevant contribution in economic growth. Further, this study incorporates financial development in the model to reduce model misspecification as it is considered to have an influencing role in economic growth both theoretically and empirically [ 22 , 33 ].

The annual data for all the variables have been collected from the World Development Indicators (WDI, 2016) database. The variables used in the study includes gross domestic product per capita (GDP) in constant ($US2010) used as a proxy for economic growth (EG), international tourism receipts per capita (TR) in current US$ as it is widely accepted that the most adequate proxy of inbound tourism in a country is tourism expenditure normally expressed in terms of tourism receipts [ 32 ] and financial development (FD). In line with a recent study on the relationship between financial development and economic growth by Hassan et al. [ 19 ], financial development is surrogated by the ratio of the broad money (M3) to real GDP for all BRICS countries. Here we use the broadest definition of money (M3) as a proportion of GDP– to measure the liquid liabilities of the banking system in the economy. We use M3 as a financial depth indicator, because monetary aggregates, such as M2 or M1, may be a poor proxy in economies with underdeveloped financial systems, because they ‘are more related to the ability of the financial system to provide transaction services than to the ability to channel funds from savers to borrowers’ [ 26 ]. A higher liquidity ratio means higher intensity in the banking system. The assumption here is that the size of the financial sector is positively associated with financial services [ 29 ]. All the variables have been taken into log form.

Unit root test

To verify the long-run relationship between tourism and economic growth through Bounds testing approach, it is necessary to test for stationarity of the variables. The stationarity of all the variables can be assessed by different unit root tests. The study utilizes panel unit root test proposed by Levin et al. [ 35 ] henceforth LLC and Im et al. [ 23 ] henceforth IPS based on traditional augmented Dickey–Fuller (ADF) test. The LLC allows for heterogeneity of the intercepts across members of the panel under the null hypothesis of presence of unit root, while IPS allows for heterogeneity in intercepts as well as in the slope coefficients [ 48 ].

Panel ARDL approach to Cointegration

After checking the stationarity of the variables the study employs panel ARDL technique for Cointegration developed by Pesaran et al. [ 23 ]. Pesaran et al. [ 23 ] have introduced the pooled mean group (PMG) approach in the panel ARDL framework. According to Pesaran et al. [ 23 ], the homogeneity in the long-run relationship can be attributed to several factors such as arbitration condition, common technologies, or the institutional development which was covered by all groups. The panel ARDL bounds test [ 46 ] is more appropriate by comparing other cointegration techniques, because it is flexible regarding unit root properties of variables. This technique is more suitable when variables are integrated at different orders but not I (2). Haug [ 20 ] has argued that panel ARDL approach to cointegration provides better results for small sample data set such as in our case. The ARDL approach to cointegration estimates both long and short-run parameters and can be applied independently of variable order integration (independent of whether repressors are purely I (0), purely I(1) or combination of both. The ARDL bounds test approach used in this study is specified as follows:

where Δ is the first-difference operator, \(\alpha_{0}\) stands for constant, t is time element, \(\omega_{1} , \omega_{2} \;\;{\text{and}}\;\; \omega_{3}\) represent the short-run parameters of the model, \(\emptyset_{1} , \emptyset_{2} ,and \emptyset_{3}\) are long-run coefficients, while \(V_{it}\) is white noise error term and lastly, it represents country at a particular time period. In the ARDL model, the bounds test is applied to determine whether the variables are cointegrated or not.

This test is based on the joint significance of F -statistic and the χ 2 statistic of the Wald test. The null hypothesis of no cointegration among the variables under study is examined by testing the joint significance of the F -statistic of \(\omega_{1} , \omega_{2} ,\omega_{3}\) .

In case series variables are cointegrated, an error correction mechanism (ECM) can be developed as Eq. ( 2 ), to assess the short-run influence of international tourism and financial development on economic growth.

where ECT is the error correction term, and \(\varPhi\) is its coefficient which shows how fast the variables attain long-term equilibrium if there is any deviation in the short run. The error correction term further confirms the existence of a stable long-run relationship among the variables.

Panel granger causality test

To examine the direction of causality Dumitrescu and Hurlin [ 16 ] test is employed. Instead of pooled causality, Dumitrescu and Hurlin [ 16 ] proposed a causality based on the individual Wald statistic of Granger non-causality averaged across the cross section units. Dumitrescu and Hurlin [ 16 ] assert that traditional test allows for homogeneous analysis across all panel sets, thereby neglecting the specific causality across different units.

This approach allows heterogeneity in coefficients across cross section panels. The two statistics Wbar-statistics and Zbar-statistics provides standardized version of the statistics and is easier to compute. Wbar-statistic, takes an average of the test statistics, while the Zbar-statistic shows a standard (asymptotic) normal distribution.

They proposed an average Wald statistic that tests the null hypothesis of no causality in a panel subgroup against an alternative hypothesis of causality in at least one panel. Following equations will be used to check the direction of causality between the variables.

Estimation, results and Discussion

Descriptive statistics.

Table  1 presents descriptive statistics of variables selected for the period 1995–2015. The variable set includes GDP, FD and TR for all BRICS countries. Brazil tops the list with GDP per capita of 4.18, while India lagging behind all BRICS nations. In the recent economic survey by International Monetary Fund (IMF report 2016), India was ranked 126 for its per capita GDP. India’s GDP per capita went up to $7170 against all other BRICS countries which were placed in the above $10,000 bracket. China has the highest tourism receipts in comparison to other BRICS countries. China is a very popular country for foreign tourists, which ranks third after France and USA. In 2014, China invested $136.8 billion into its tourist infrastructure, a figure second only to the United States ($144.3 billion). Tourism, based on direct, indirect, and induced impact, accounted for near 10% in the GDP of China (WTTC report 2017).

Stationarity results

Primarily, we employed LLC and IPS unit root test to assess the integrated properties of the series. The results of IPS and PP tests are presented in Table  2 . Panel unit root test result evinces that FD and TR are stationary at level, while GDP per capita is integrated variable of order 1. The result exemplifies that GDP per capita, Tourism receipts and Financial Development are integrated at 1(0) and 1(1). Consequently, the panel ARDL approach to cointegration can be applied.

Cointegration test results

In view of the above results with a mixture of order integration, the panel ARDL approach to cointegration is the most appropriate technique to investigate whether there exists a long-run relationship among the variables [ 42 ]. Table  3 illustrates that the estimated value of F-statistics, which is higher than the lower and upper limit of the bound value, when InEG is used as a dependent variable. Hence, we reject the null hypothesis of no cointegration \(H_{0 } : \emptyset_{1} = \emptyset_{2} = \emptyset_{3} = 0\) of Eq. ( 1 ). Therefore, the result asserts that international tourism, financial development and economic growth are significantly cointegrated over the period (1995–2015).

Subsequently, the study investigates the long-run and short-run impact of international tourism and financial development on economic growth. Lag length is selected on the principle of minimum Bayesian information criterion (SBC) value, which is 2 in our case. The long-run coefficients of financial development and tourism receipts with respect to economic growth in Table  4 indicate that tourism growth and financial development exerts positive influence on economic growth in the long run. In other words, an increase in volume of tourism receipts per capita and financial depth spurs economic growth and both the coefficients are statistically significant in case of BRICS nations in the long run. The results are interpreted in detail as below:

The elasticity coefficient of economic growth with respect to tourism shows that 1% rise in international tourism receipts per capita would imply an estimated increase of almost 0.31% domestic real income in the long run, all else remaining the same. Thus, the earnings in the form of foreign exchange from international tourism affect growth performance of BRICS nations positively. This finding of our study is in consonance with the empirical results of Kreishan for Jordan [ 30 ], Balaguer and Cantavella-Jordá [ 3 ] for Spain and Ohlan [ 43 ] for India.

Further our finding lend support to the wide applicability of the new growth theory proposed by Balassa which states that export expansion promote growth performance of nations. Thus, validates TLGH coined by Balaguer and Cantavell-Jorda [ 3 ] which states that inbound tourism acts a long-run economic growth factor. The so called tourism-led growth hypothesis suggests that the development of a country’s tourism industry will eventually lead to higher economic growth and, by extension, further economic development via spillovers and other multiplier effects.

Likewise, financial development as expected is found to be positively associated with economic growth. The coefficient of financial development states that 1% improvement in financial development will push up economic growth by 0.22% in the long run, keeping all other variables constant. The empirical results are consistent with the finding of Hassan et al. [ 19 ] for a panel of South Asian countries. Well-regulated and properly functioning financial development enhances domestic production through savings, borrowings & investment activities and boosts economic growth. Further, it promotes economic growth by increasing efficiency [ 7 ]. Levine [ 33 ] believes that financial intermediaries enhance economic efficiency, and ultimately growth, by helping allocation of capital to its best use. Modern growth theory identifies two specific channels through which the financial sector might affect long-run growth; through its impact on capital accumulation and through its impact on the rate of technological progress. The sub-prime crisis which depressed the economic growth worldwide in 2007 further substantiates the growth-financial development nexus.

In the third and final step of the bounds testing procedure, we estimate short-run dynamics of variables by estimating an error correction model associated with long-run estimates. The empirical finding indicates that the coefficient of error correction term (ECT) with one period lag is negative as well as statistically significant. This finding further substantiates the earlier cointegration results between tourism, financial development and economic growth, and indicates the speed of adjustment from the short-run toward long-run equilibrium path. The coefficient of ECT reveals that the short-run divergences in economic growth from long-run equilibrium are adjusted by 43% every year following a short-run shock.

The short-run parameters in Table  5 demonstrates that tourism and financial development acts as an engine of economic growth in the short run as well. The coefficient of both tourism receipts per capita and financial development with one period lag is also found to be progressive and significant in the short run. These results highlight the role of earnings from international tourism and financial stability as an important driving force of economic growth in BRICS nations in the short run as well.

Further, a comparison between short-run and long-run elasticity coefficients evince that long-run responsiveness of economic growth with respect to tourism and financial development is higher than that of short run. It exemplifies that over time higher international tourism receipts and well-regulated financial system in BRICS nations give more boost to economic growth.

Analysis of causality

At this stage, we investigate the causality between tourism, financial development and economic growth presented in Table  6 . The result shows bi-directional causal relationship between tourism and economic growth, thereby validates ‘feedback hypothesis’ and consequently supported both the tourism-led growth hypothesis (TLGH) and its reciprocal, the economic-driven tourism growth hypothesis (EDTH). The bi-directional causality between inbound tourism and GDP, which directs the level of economic activity and tourism growth, mutually influences each other in that a high volume of tourism growth leads to a high level of economic development and reverse also holds true. These results replicate the findings of Banday and Ismail [ 5 ] in the context of BRICS countries, Yazdi et al. [ 27 ] for Iran and Kim et al. [ 28 ] for Taiwan. One of the channels through which tourism spurs economic growth is through the use of receipts earned in the form of foreign currency. Thus, growth in foreign earnings may allow the import of technologically advances goods that will favor economic growth and vice versa. Thus, results demonstrate that international tourism promotes growth and in turn economic expansion is necessary for tourism development in case of BRICS countries. With respect to policy context, this finding suggests that the BRICS nations should focus on economic policies to promote tourism as a potential source of economic growth which in turn will further promote tourism growth.

Similarly, in case of economic growth and financial development, the findings demonstrate the presence of bi-directional causality between two constructs. The findings validate thus both ‘demand following’ and supply leading’ hypothesis. The findings suggests that indeed financial development plays a crucial role in promoting economic activity and thus generating economic growth for these countries and reverse also holds. Our findings are in line with Pradhan [ 48 ] in case of BRICS countries and Hassan et al. [ 19 ] for low and middle-income countries. This suggests that finance development can be used as a policy variable to foster economic growth in the five BRICS countries and vice versa. The study emphasizes that the current economic policies should recognize the finance-growth nexus in BRICS in order to maintain sustainable economic development in the economy. The empirical results in this paper are in line with expectations, confirming that the emerging economies of the BRICS are benefiting from their finance sectors.

Finally, two-sided causal relationship is found between tourism receipts and financial development. That is, tourism might contribute to financial development and, in return, financial development may positively contribute to tourism. This means that financial depth and tourism in BRICS have a reinforcing interaction. The positive impact of tourism on financial development can be attributed to the fact that inflows of foreign exchange via international tourism not only increases income levels but also leads to rise in official reserves of central banks. This in turn enables central banks to adapt expansionary monetary policy. The positive contribution of financial sector to tourism is further characterized by supply leading hypothesis. Further, better financial and market conditions will attract tourism entrepreneurship, because firms will be able to use more capital instead of being forced to use leveraging [ 13 ]. Hence, any shocks in money supply could adversely affect tourism industry in these countries. Song and Lin [ 56 ] found that global financial crisis had a negative impact on both inbound and outbound tourism in Asia. This result is in consistent with Başarir and Çakir [ 6 ] for Turkey and four European countries.

Stability tests

In addition, to test the stability of parameters estimated and any structural break in the model CUSUM and CUSUMSQ tests are employed. Figs.  1 and 2 show blue line does not transcend red lines in both the tests, thus provides strong evidence that our estimated model is fit and valid policy implications can be drawn from the results.

Plot of CUSUM

Plot of CUSUMQ

Summary and concluding remarks

A rigorous study of the relationship between tourism and economic growth, through the tourism-led growth hypothesis (TLGH) perspective has remained a debatable issue in the economic growth literature. This study aims to empirically investigate the relationship between inbound tourism, financial development and economic growth in BRICS countries by utilizing the panel data over the period 1995–2015. The study employs the panel ARDL approach to cointegration and Dumitrescu-Hurlin panel Granger causality test to detect the direction of causation.

To the best of authors’ knowledge, this is the first study which explored the relationship between economic growth and tourism while considering the relative importance of financial development in the context of BRICS nations. The empirical results of ARDL model posits that in BRICS countries inbound tourism, financial development and economic growth are significantly cointegrated, i.e., variables have stable long-run relationship. This methodology has allowed obtaining elasticities of economic growth with respect to tourism and financial development both in the long run and short run. The result reveals that international tourism growth and financial development positively affects economic growth both in the long run and short run. The coefficient of tourism indicates that with a 1% rise in tourism receipts per capita, GDP per capita of BRICS economies will go up by 0.31% in the long run. This finding lends support to TLGH coined by Balaguer and Cantavell-Jorda [ 3 ] which states that inbound tourism acts a long-run economic growth factor. The so called tourism-led growth hypothesis suggests that the development of a country’s tourism industry will eventually lead to higher economic growth and, by extension, further economic development via spillovers and other multiplier effects.

Likewise, 1% improvement in financial development, on average, will increase economic growth in BRICS countries by 0.22% in the long run. The result seems logical as modern growth theory identifies two channels through which the financial sector might affect long-run growth: first, through its impact on capital accumulation and secondly, through its impact on the rate of technological progress. The sub-prime crisis which hit the economic growth Worldwide in 2007 further substantiates the growth-financial development nexus.

The negative and statistically significant coefficient of lagged error correction term (ECT) further substantiates the long-run equilibrium relationship among variables. The negative coefficient of ECT also shows the speed of adjustment toward long-run equilibrium is 43% per annum if there is any short-run deviation. The estimates of parameters are found to be stable by applying CUSUM and CUSUMQ for the time period under consideration. Therefore, inbound tourism earnings and financial institutions can be used as a channel to increase economic growth in BRICS economies.

Further, Granger causality test result indicates the bi-directional causation in all cases. Hence, the causal relationship between international tourism and economic growth is bi-directional. And, consequently this empirical finding lends support to both the tourism-led growth hypothesis (TLGH) and its reciprocal, the economic-driven tourism growth hypothesis (EDTH). This means that tourism is not only an engine for economic growth, but the economic outcome on itself can play an important role in providing growth potential to tourism sector.

The Granger causality findings provide useful information to governments to examine their economic policy, to adjust priorities regarding economic investment, and boost their economic growth with the given limited resources. Thus, it is suggested that more resources should be allocated to tourism industry and tourism-related industries if the tourism-led growth hypothesis holds true. On the other side, if economic-driven tourism growth is supported then more resources should be diverted to leading industries rather than the travel and tourism sector, and the tourism industry will in turn benefit from the resulting overall economic growth. And, when bi-directional causality is detected, a balanced allocation of economic resources for the travel and tourism sector and other industries is important and necessary. The policy implication is that resource allocation supporting both the tourism and tourism-related industries could benefit both tourism development and economic growth.

To sum up, the major finding of this study lends support to wide applicability of the tourism-led growth hypothesis in case of BRICS countries. Thus, in the Policy context, significant impact of tourism on BRICS economy rationalizes the need of encouraging tourism. Tourism can spur economic prosperity in these countries and for this reason; policymakers should give serious consideration toward encouraging tourism industry or inbound tourism. BRICS countries should focus more on tourism infrastructure, such as, convenient transportation, alluring destinations, suitable tax incentives, viable hostels and proper security arrangements to attract the potential tourists. Most of these countries are devoid of rich facilities and popular tourist incentives, to get promoted as important destination and in the long-run promotes economic growth. Further, they need a staunch support from all sections of authorities, non-government organizations (NGOs), and private and allied industries, in the endeavor to attain sustainable growth in tourism. Both state and non-state actors must recognize this growing industry and its positive implication on economy.

For future research, we suggest that researchers should consider the nonlinear factor in the dynamic relationship of tourism and economic growth in case of BRICS countries. Further one can go for comparative study to examine the TLGH in BRICS countries.

Availability of data and materials

Data used in the study can be provided by the corresponding author on request.

There are no fixed definitions of short, medium and long run and generally in macroeconomics, short run can be viewed as 1 to 2 or 3 years, medium up to 5 years and long run from 5 years to 20 or 25 years.

Abbreviations

autoregressive distributed lag model

Brazil, Russia, India, China and South-Africa

United Nations World Tourism Organization

World Travel & Tourism Council

gross domestic product

world development indicators

tourism-led growth hypothesis

export-led growth hypothesis

economic-driven tourism hypothesis

augmented Dickey–Fuller test

error correction model

error correction term

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Haroon Rasool & Md. Tarique

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Rasool, H., Maqbool, S. & Tarique, M. The relationship between tourism and economic growth among BRICS countries: a panel cointegration analysis. Futur Bus J 7 , 1 (2021). https://doi.org/10.1186/s43093-020-00048-3

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• Economic growth
• Inbound tourism
• Financial development
• Cointegration
• Panel granger causality

JEL Classification

Tourism multiplier effect

The concept of tourism multiplier effect has been gaining traction in recent years. Certainly, the tourism industry has a multiplier effect that extends beyond the direct spending by tourists. This multiplier effect creates jobs, stimulates economic growth, and promotes community development.

What is the tourism multiplier effect?

The tourism multiplier effect refers to how many times the money spent by a tourist circulates in the country’s economy (Byju’s, 2023). Broadly, it refers to the economic impact of tourism that extends beyond the initial spending by visitors.

When tourists spend money, it creates a ripple effect that stimulates economic activity in various sectors. This multiplier effect can be quantified by measuring the direct and indirect effects of tourism on the economy.

The multiplier effect occurs because the money spent by tourists does not only benefit the businesses that directly serve tourists, but also spreads throughout the local economy. This effect can be seen in a wide range of industries, including transportation, accommodation, food and beverage, and retail.

The tourism multiplier effect is especially important for countries that rely heavily on tourism as a source of revenue. For example, tourism accounts for more than 28% of the GDP of Maldives (Michigan State University, 2023).

Likewise, tourism and related services contribute approximately 70 percent to the GDP of Bahamas and employs over half of the workforce (ITA, 2022). Therefore, understanding the tourism multiplier effect is essential for policymakers and stakeholders in the tourism industry.

Types of tourism multipliers

There are two types of tourism multipliers: direct and indirect. Direct multipliers refer to the initial spending by visitors, such as accommodation, food, and transportation. Indirect multipliers refer to the subsequent spending by businesses that supply goods and services to the tourism industry.

For example, a hotel that purchases food from a local supplier creates indirect economic activity for the supplier. The local suppliers that provide food to hotels and restaurants may experience an increase in sales during peak tourism season, which can lead to the hiring of additional staff and a boost in tax revenue for the local government.

The tourism multiplier effect also creates induced multipliers, which refer to the spending by employees and business owners who benefit from the direct and indirect effects of tourism. For example, a hotel employee who earns a salary spends money on goods and services, which creates additional economic activities.

The economic effects of tourism on local businesses

The tourism industry can have a significant impact on local businesses. When tourists spend money on goods and services, it creates income for local businesses. This income can be reinvested in the local economy, creating a multiplier effect that stimulates economic growth.

However, the tourism industry can also have negative effects on local businesses. For example, if a large hotel chain opens in a small town, it can put small local hotels out of business. Therefore, policymakers must balance the benefits and costs of tourism to ensure that local businesses are not negatively impacted.

Jobs created by the tourism industry

The tourism industry is a significant source of employment for many countries. In some countries, such as Maldives and Bahamas, it is indeed the primary source of employment.

The jobs created by the tourism industry can vary from low-skilled to high-skilled positions, such as tour guides, hotel managers, and chefs. These jobs provide opportunities for people with different levels of education and skills.

The number of jobs created by tourism depends on the level and type of activities. For example, a large-scale resort may create thousands of jobs, while a small bed and breakfast may only create a few jobs.

The total number of tourism employees in the USA is around 6 million (IBISWorld, 2023). Tourism supports around 3.8 million jobs in the UK. Just imagine the impact of the spending of all these people on the economy!

Community development from tourism

Tourism can promote community development by generating income and creating jobs. This income can be used to improve infrastructure, support local businesses, and invest in community projects.

For example, a city that attracts a large number of tourists may use the tax revenue generated by tourism to improve public transportation or build new community facilities.

Tourism can also have a cultural impact on local communities. It can promote cultural exchange and understanding, as tourists learn about local customs and traditions. This can help to preserve and promote local culture, which can have a positive impact on the community.

Environmental impact of tourism

Tourism can have a positive environmental impact. It can promote conservation and the protection of natural resources. For example, a national park that attracts tourists may receive funding for conservation efforts, which can help to preserve the park’s ecosystem.

However, tourism can also have a negative impact on the environment. The construction of new hotels and resorts can lead to deforestation, habitat destruction, and pollution. Tourists can also contribute to environmental degradation by generating waste and consuming natural resources.

Therefore, the tourism industry must adopt sustainable practices to minimize its impact on the environment. This includes reducing waste, conserving energy, and protecting natural habitats.

How to measure the tourism multiplier effect?

Measuring the tourism multiplier effect can be challenging because it involves the analysis of multiple factors. However, there are several methods that can be used to measure the effect, including input-output analysis, employment multipliers, and value-added multipliers.

Input-output analysis involves examining the flow of money through the local economy. This analysis can be used to determine the direct and indirect impacts of tourism spending on local businesses.

Employment multipliers measure the number of jobs created by a given level of tourism spending. This method can be used to estimate the employment impact of tourism in a particular area.

Value-added multipliers measure the additional income generated by a given level of tourism spending. This method can be used to estimate the overall economic impact of tourism in a particular area.

Examples of successful tourism multiplier effect in different countries

Many countries and regions have successfully harnessed the power of the tourism multiplier effect to stimulate economic growth and promote community development. For example, tourism and the night-time economy contribute £36 billion a year to London’s economy overall and employ 700,000 people (Greater London Authority, 2023).

The tourism industry has been a significant contributor to the economic growth of the USA. It has created jobs and stimulated economic activities in various sectors, such as agriculture, transportation, and retail. It has contributed nearly $1.3 trillion to the GDP (Statista, 2022). It indeed supports millions of American jobs.

The tourism industry contributes around19.96 billion Canadian dollars to Canada’s GDP. Likewise, Australia’s direct tourism gross domestic product reached around 35.14 billion Australian dollars in 2022.

Costa Rica has developed a sustainable tourism industry that promotes conservation and community development. Its tourism industry generates significant income and employment opportunities, while also protecting its natural resources.

Similarly, Iceland has developed a tourism industry that promotes its unique natural features, such as geysers, glaciers, and hot springs. Its tourism industry has created jobs and generated income, while also promoting sustainable tourism practices.

Limitations of the tourism multipliers

One of the key challenges concerning tourism is economic leakage. It occurs when international companies provide hotel, flight, car hire, food, and excursions at a destination and a lot of money generated from these activities goes out of the destination to the country whether their headquarters are located.

Faith (2023) reports that 80% of the revenue generated from tourism activities go away from the local communities to foreign countries. This shows how the local communities that are supposed to benefit from the tourism multiplier effects are not benefiting optimally.

Conclusion: Tourism multiplier effect

In conclusion, the tourism multiplier effect is a powerful force that can drive economic growth and promote community development. By understanding its various components and adopting sustainable practices, the tourism industry can unlock its full potential and create a better future for all. However, it is also important to recognise the potential negative impacts of tourism and explore steps to mitigate them.

To harness the power of the tourism multiplier effect, the tourism industry must adopt sustainable practices that minimize its impact on the environment. The industry must also promote cultural exchange and preserve local traditions and heritage.

Hope you like this article? Please share the article link on social media to support our work. You may also like the following articles:

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Last update: 03 April 2023

References:

Byju’s, (2023) What is the tourism multiplier effect? Available at: https://byjus.com/ias-questions/what-is-the-tourism-multiplier-effect/ (accessed 02 April 2023)

Faith, S. (2023) Tourism’s dirty secret, available at: https://www.euronews.com/travel/2023/02/26/tourisms-dirty-secret-what-is-tourism-leakage-and-how-can-you-avoid-contributing-to-it (accessed 01 April 2023)

Greater London Authority (2023) Supporting the tourism sector, available at: https://www.london.gov.uk/programmes-strategies/business-and-economy/supporting-londons-sectors/supporting-tourism-sector (accessed 02 April 2023)

IBISWorld (2023) Tourism in the USA, https://www.ibisworld.com/industry-statistics/employment/tourism-united-states/ (accessed 02 April 2023)

ITA (2022) Bahamas- the country economic guide, available at: https://www.trade.gov/country-commercial-guides/bahamas-market-overview# (accessed 03 April 2023)

Michigan State University (2023) Maldives economy, available at: https://globaledge.msu.edu/countries/maldives/economy (accessed 03 April 2023)

Statista (2022) Total contribution of travel and tourism to the gross domestic product in the United States, available at: https://www.statista.com/statistics/292518/contribution-of-travel-and-tourism-to-gdp-in-us-time-series/ (accessed 03 April 2023)

Photo credit: Research Gate/Travel and Tourism

Author: M Rahman

M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.

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Meet the Multiplier Effect

If you had three apples and two hungry children, what would you do?

You might split the extra one and dole out the fruit equally. Or maybe take a hands-off approach and let the kiddos work it out.

That’s not what Paulina Restrepo-Echavarria would do. As a senior St. Louis Fed economist who has studied everything from sovereign debt to the legacy of Bretton Woods, she’s interested in the decision that maximizes output.

She also has two curious kids with tons of energy.

So when her daughter recently asked her, what do you do at work? , she used the apple example to explain her livelihood—as well as the impact people can make by considering how one’s choices to consume, invest or even give can be magnified.

I had the pleasure of sitting down with her to learn how. Here’s an excerpt of our conversation.

The apple quandary: what’s a parent to do?

Christine: Paulina, I know that you have two young children. Your daughter recently asked you, “What does an economist do?”

How do you explain to a young child what an economist does?

Paulina: Yes, it’s very hard to explain because she knows that I work for a “bank.” So in her mind, it’s like being a bank teller.

She did come up with that question the other day. What I tried to explain to her is, we think about the ultimate allocation of resources. That’s what we want to do. We want to do our best so that growth is as high as possible.

St. Louis Fed Senior Economist Paulina Restrepo-Echavarria pictured with her two children and their furry friend.

But for her, obviously, that’s very hard to grasp. So I said to her:

Imagine that I have three apples, and I want to distribute three apples between two kids. I know that there’s one kid who is definitely going to eat as many apples as I give them.  Then, I know that there’s another kid who will eat only one of the apples—and if I give him or her any extra apples, they will plant them so that the seeds produce another apple tree … and then more apples grow out of that tree.  So, what is the optimal thing for me to do as an economist?

She said, “Well, I don’t know. Give the apple to the kid that is going to eat them because he’s hungry, probably?”

Like, yeah, you’re right, but you know one apple is enough to calm your hunger.

What I would do is actually give only one apple to the kid who would eat all the apples. Then, I would give the other two apples to the kid who would eat one and plant the other one.

Because that means that in a while from now, when the kid plants the seeds of the apple and the tree grows, we’re going to have more apples than we had before.

If I give the apples to the kid who eats them all, then in the future, we’ll have no apples. He will just eat them. They won’t multiply.

So, that’s a very clear example of what we try to do as economists. We try to allocate resources in such a way that we maximize overall output. That was my explanation to her.

In a nation’s economy, decisions can be magnified

Speaking of maximizing output, the term “multiplier” is commonly referenced in relation to gross domestic product . GDP factors in consumer spending on goods and services; private investment; government purchases; and net exports (that is, exports minus imports).

Say the federal government wants to stimulate the economy. It might try to do so with an increase in spending — a stimulus package .

In theory, it works like this: The initial increase in government spending has a direct effect on GDP. But it also sets off a chain of additional spending throughout the economy:

• dollars spent in one place are received as income elsewhere
• some of that income gets spent and received as income elsewhere
• then some of that income gets spent and … you get the idea

While this flow diminishes with successive rounds, the impact of the initial increase in government spending has been magnified. The “multiplier effect” describes this dynamic.

Paulina explained how you might observe this at a high level.

Christine: The multiplier effect: I did want to ask a follow-up on that. Tell me how you see that exhibited when it comes to a nation’s economy or a regional economy. How does the multiplier effect manifest itself in a way that an adult would notice?

Paulina: So, that’s the difference between consumption and investment.

We think about a closed economy, and the GDP of that closed economy is going to be distributed between:

• Consumption
• Government spending

Those are the three components.

If we’re thinking about an open economy, we know that GDP is equal to consumption plus investment plus government spending — plus net exports.

When you’re deciding what to do with GDP in your country, you can either consume it or you can save it and invest it and produce more next period. So, savings in an economy would reflect that.

Of course, it’s way trickier; that doesn’t mean I’m saying that the optimal thing is to save.

But we do see economies that are a great example of that. China is a great example of that. China is a country that is a big saver, and we know they’re growing very fast.

However, it’s not the only way to grow. Because the real economy is much more complicated than just eating apples and planting apples.

But that’s the analogy when you put it in the real-world context: consume or invest.

How donors and nonprofits can maximize their impact

The multiplier effect doesn’t just apply to government spending.

For instance, if businesses invest in more equipment, or people buy more houses (both of which fall under the “private investment” bucket of GDP), that also triggers a chain reaction.

Same with a change in consumer spending. An increase in our spending can ripple throughout an economy.

But what about dollars we donate? Might there be ways to multiply or magnify the impact they make?

Christine: There’s another related question. As I look at my limited dollars and my limited time, and I’m feeling particularly charitable, I want to allocate a certain amount of that to organizations that I believe are doing good work around the world.

In your own life, you’ve done a lot of charitable work, including with an organization in Uganda that strives to lift children out of poverty.

How can nonprofits exhibit the multiplier effect, so that donor dollars or donor time can have a bigger impact?

Paulina: It’s exactly in the same way. There are two dimensions to this question:

• One is, how do I decide how to allocate the extra resources that I have when it comes to choosing an organization to give?
• And then, what should an organization do in terms of multiplying that?

In my case, as you mentioned, I help a foundation called Fields of Dreams Uganda . This foundation is to help out orphaned children in Uganda through the vehicles of soccer and education.

Kids are particularly fond of soccer in Uganda. If they know that they can play soccer at school, it’s more likely for them to stay in school. They are going to be happier, and so on.

Restrepo-Echavarria traveled to Uganda in 2019 to help the nonprofit Fields of Dreams Uganda, which provides hope to orphaned and vulnerable children through the vehicles of soccer and education.

I like soccer very much, so clearly that was one of the reasons why I chose this foundation. But there was another reason: It is, when you think about where to put your money, you want to know that it’s being put to good use. And something that I dislike about many foundations or organizations is that a lot of the money goes to cover administrative costs.

So the multiplier, as you pointed out, is going to be smaller.

This organization that I help out, to give you an example, there’s only one person in the U.S. who has a salary that is paid out of the foundation. The rest of the staff of the foundation are local people in Uganda who get a salary.

But there, the multiplier is much more important because these are people that, if it wasn’t for the foundation, maybe they wouldn’t have a job. The fact that the foundation is paying for them—local people—means they can then go out and consume.

Because they go out and consume, then the people they buy groceries from , for example, are going to be able to buy their own food. So, the multiplier goes through there. That’s an important thing.

Part of the campus managed by Fields of Dreams Uganda, which cites the importance of education for lifting children out of poverty.

Now, the other thing that is very important about the foundation, or that really drove me to them, is that they think about the multiplier also in terms of what they do with the resources that they’re using.

To give you an idea, there’s a feeding program. There are kids that, unfortunately, have no food when they go to school.

Families are meant to bring an endowment of, let’s say, beans at the beginning of the school year.

Imagine that they have to bring to school 5 kilos of beans. And if they don’t have the resources to bring those 5 kilos of beans at the beginning of the school year, then they’re not going to be fed on a daily basis. They’re going to have classmates, other kids, who are given their portion of food at lunch. Some kids are going to have to sit there with them, starving.

The foundation gives food for these kids who don’t have the means to bring the endowment at the beginning of the year.

The multiplier part — or the sustainable part — that they’re doing is this: At the same time that they’re setting that feeding program, they are planting gardens in the schools so that the parents of the kids can harvest them.

At some point, those plantations become “self-sustainable” in the sense that they’re producing enough money to feed all the kids in school, such that there’s no inequality in terms of the kids who can bring the 5 kilos of beans versus those who cannot bring them.

In the long run, that makes a feeding program sustainable.

It’s exactly the same thing with the apple. You are, instead of just giving them food to consume, solving that issue — which is hunger, which is immediate, and you have to solve it. But they're also planting these gardens in the schools to make them sustainable in the long run, such that no one has to bring food to school from their homes.

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Tourism Multiplier Effect

Tourism not only creates jobs in the tertiary sector, it also encourages growth in the primary and secondary sectors of industry. This is known as the multiplier effect which in its simplest form is how many times money spent by a tourist circulates through a country's economy.

Money spent in a hotel helps to create jobs directly in the hotel, but it also creates jobs indirectly elsewhere in the economy. The hotel, for example, has to buy food from local farmers, who may spend some of this money on fertiliser or clothes. The demand for local products increases as tourists often buy souvenirs, which increases secondary employment.

The multiplier effect continues until the money eventually 'leaks' from the economy through imports - the purchase of goods from other countries.

Multiplier effect

• Reference work entry
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An important component of research is to estimate the economic impacts of tourism. Input–output (I-O) models have been widely used to estimate tourism’s contributions to an economy (Crompton et al. 2001 ; Lee and Taylor 2005 ). The intent is to estimate the increase in an economy by directly calculating the increase in output and also by considering the growth in related industries, such as suppliers of other goods and services (Kim et al. 2003 ). A key concept in understanding I-O models is the multiplier effect.

A multiplier in economics is a ratio that measures how much a dependent variable changes in response to a change in the independent variable. Tourism multiplier effect, in simple terms, refers to how many times money spent by a tourist can circulate in a country’s economy. Tourism can directly contribute to the development of the economy by bringing in income and generating new employment opportunities (Khan et al. 1990 ). More importantly, it can contribute to economy through...

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Crompton, J., S. Lee, and T. Shuster 2001 A Guide for Undertaking Economic Impact Studies: The Springfest Example. Journal of Travel Research 40:79-87.

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Khan, H., C. Seng, and W. Cheong 1990 Tourism Multiplier Effects on Singapore. Annals of Tourism Research 17:408-418.

Kim, S., K. Chon, and K. Chung 2003 Convention Industry in South Korea: An Economic Impact Analysis. Tourism Management 24:533-541.

Lee, C., and T. Taylor 2005 Critical Reflections on the Economic Impact Assessment of a Mega-event: The Case of 2002 FIFA World Cup. Tourism Management 26:595-603.

Vanhove, N. 2005 The Economics of Tourism Destinations. Burlington: Elsevier.

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Ma, E. (2016). Multiplier effect. In: Jafari, J., Xiao, H. (eds) Encyclopedia of Tourism. Springer, Cham. https://doi.org/10.1007/978-3-319-01384-8_454

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Follow our news, recent searches, commentary: visa-free policies alone will not revive china’s inbound tourism, advertisement.

To revitalise inbound tourism, China must enhance travel convenience for foreign visitors, says an Edith Cowan University academic.

JOONDALUP, Australia: China’s tourism industry has faced significant challenges since the onset of the COVID-19 pandemic. In 2019, China welcomed 97.7 million foreign visitors. But in 2023, this plummeted to 35.5 million, representing less than 40 per cent of pre-pandemic levels.

The sluggish recovery of China’s inbound tourism has prompted widespread concern across government, industry, academia and the media. Leading tourism research journals in China have published dedicated articles discussing the factors influencing China’s inbound tourism recovery.

To address this trend, the Chinese government has implemented several policy measures. In July 2023, China reinstated its 15-day visa-free travel policy for visitors from Singapore and Brunei.

In November 2023, this policy was extended to ordinary passport holders from France, Germany, Italy, the Netherlands, Spain and Malaysia.

On Mar 7, China expanded its 15-day visa-free policy to include six additional European countries - Switzerland, Ireland, Hungary, Austria, Belgium and Luxembourg.

IMPORTANCE OF INBOUND TOURISM FOR CHINA

Inbound tourism holds significant importance for China, particularly amid slowing economic growth. Tourism was prioritised during the early stages of China’s reform and opening up era, valued for its potential to generate much-needed foreign exchange.

But as China amassed substantial foreign exchange reserves through rapid development and entry into the World Trade Organization, the reliance on inbound tourism for foreign exchange earnings diminished over time.

Amid the challenges confronting China’s economy in 2024, inbound tourism has emerged as an avenue for bolstering economic growth. Drawing international tourists to spend in China translates to a net export of services, injecting added value into the nation’s economic ecosystem.

Compared to ordinary goods exports, inbound tourism holds the potential for greater benefits due to its multiplier effect. When international tourists spend money, their consumption creates a chain reaction, stimulating job creation and further expenditure.

Visa-free policies are a practical tool for facilitating tourist flows and trade exchanges between nations. China’s current visa-free policies are anticipated to incentivise more business and leisure travellers to visit China. Still, further efforts are necessary to rejuvenate China’s inbound tourism sector.

Commentary: Visa waiver deal puts Singapore in good stead to attract the coveted Chinese tourist

Singapore's visa-free agreement with China may push inbound travel closer to pre-pandemic levels

Eliminating barriers for foreign tourists in china.

Enhancing travel convenience is imperative to address the needs of foreign tourists. While China has made significant strides in developing advanced technologies and transportation infrastructure for domestic travel, foreign visitors often encounter obstacles while navigating in the country.

For instance, booking high-speed train tickets or entry tickets to popular tourist attractions necessitates the use of WeChat’s embedded program. Many establishments exclusively accept WeChat Pay or AliPay, leaving foreign tourists in a predicament if they rely solely on cash or credit cards. Many hotels in China are also not allowed to accommodate foreign tourists.

Eliminating barriers for foreign tourists to travel in China presents enhanced business opportunities for Chinese tourism-related enterprises. While Chinese consumers remain the primary market for most of these businesses, delivering seamless services to foreign clientele could further strengthen their competitive edge.

A case in point is the Chinese online travel company Ctrip - which initially emulated Travelocity’s business model but has since expanded its operations globally - establishing itself as a prominent international online travel business.

Technological advancements have the potential to mitigate technical barriers to foreigners’ travel in China without incurring substantial costs.

Yet, addressing structural and entrenched ideological barriers may be more challenging. The COVID-19 pandemic may have prompted the Chinese government and tourism operators in China to adopt a more inward-looking approach, prioritising the needs of their citizens.

The shifting geopolitical landscape globally also plays a role in the challenges facing China’s inbound tourism. According to a 2023 survey by the Pew Research Centre, most individuals in Western nations hold unfavourable views towards China. The Chinese government’s tightening grip on societal regulations could potentially cause discomfort for foreign travellers in China.

This increased control may lead to unnecessary disruptions in international events like academic conferences and exchanges, due to the formalities and documentation mandated by the government.

Commentary: Why China’s real estate crisis should make the global travel industry nervous

Commentary: Resurgent Chinese travel would reset the country’s global image

Look beyond national borders.

The time has come to look beyond national borders when contemplating tourism. The world has reopened, albeit with a transformed landscape compared to before the COVID-19-pandemic.

The Chinese government’s implementation of visa-free policies should be applauded - but to meaningfully revitalise its inbound tourism, concerted efforts are required to enhance convenience for foreign visitors before, during and after their travels to China.

To attract more foreign visitors, Chinese businesses must meet the needs of both domestic and international tourists. While transitioning to a cashless society is desirable, it should not exacerbate the digital divide among Chinese citizens or alienate international visitors.

It is imperative to implement more user-friendly alternative payment methods that cater to the preferences of foreign travellers, such as accepting major credit cards or other preferred payment options.

The process of passing through transport entry or exit points using passport scanning should be as seamless as tapping a Chinese identification card. Leveraging advancements in AI technology and multiple language mobile apps should also be developed to facilitate international tourists’ travel bookings in China.

China has demonstrated innovation across various technological fronts. This ingenuity should be harnessed to address the needs of international tourists, ultimately reversing the current decline in inbound tourism and bolstering the country’s tourism sector.

Sam Huang is Professor of Tourism and Services Marketing and Head of the Centre for Tourism Research in the School of Business and Law at Edith Cowan University, Australia. This commentary first appeared on East Asia Forum.

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Tourism can lead to a multiplier effect. What is meant by the term multiplier effect?

Will Yates        Human Geography        27/01/03

Question Sheet 2

(i) Tourism can lead to a multiplier effect. What is meant by the term multiplier effect ? (4)

The term multiplier effect refers to the resulting effect of a service or amenity creating further wealth or positive effects in an area. For example, tourism in an area will create jobs in an area, therefore the employees of the tourism industry will have some extra money to spend on other services, and therefore improving these other services in that area, allowing further employment in the area.

(ii) Explain with examples how tourism can lead to a variety of employment types, at the point of origin or destination. (9)

In any area, tourism will require people to create the tourism experience and enhance the visitor’s enjoyment of the location. Firstly, the origin of the traveller, for example, the UK, will create its own employment opportunities even before reaching the destination. The travel agent which books the holiday is only the first step. The bank or finance service with which the individual obtains the money from in order to fund the holiday will also play a major role in the process, whilst also creating jobs at home. For the security and safety of the passenger, medical services and insurance will also be required to make sure the trip is not disrupted to a great extent should illness or theft, for example, be an occurrence on their excursion. Secondly, the employees of the destination’s airport or sea port allowing the transition from transport to forwarding destination goes as smoothly as possible. After this the hoteliers, caterers, porters and cleaners at the hotel will be needed to encourage a further visit to the area, as if the stay in the hotel is favourable, many people will be enticed to return on future holidays, therefore generating further revenue for the hotel and local services.

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During their stay the tourists will require entertainment, an opportunity to sample the local food and possibly see the sights the area has to offer by taking a guided tour or coach tour of the surroundings, all of which require people (hopefully local to avoid leakage of revenue back to MEDCs) to man the activities and therefore will create employment in the local area. The need for personal service, such as being waited upon, or having a personal tour guide means that the tourism industry is likely to employ many people during the course of the high season. This means that the people involved with tourism for the most part will have to seek employment elsewhere, as the tourist season is concentrated in the peak season (mostly summer for areas such as Southern Spain, however for skiing or winter activities in areas such as Switzerland or Austria, this may differ).

The tourist work is also likely to be temporary from year to year, low paid and informal, with payment cash in hand. This would indicate a transient industry and would suggest that the host country would benefit from a diversified industry away from tourism, such as exporting oranges, wine and Seat cars in Spain, however their most prolific industry is tourism, with many Europeans seeking ‘winter sun’ in the Costa’s.

The economic benefits of tourism almost always outweigh the environmental costs. Discuss (20)

Firstly, we should consider the economic benefits of tourism for a country. As an example of this, I shall use Spain, a key destination for many Europeans. Indeed, revenue from tourism in May 2000 reached $2654 million (€3158 million), an increase of 22% over May 1999. The first five months of 2000 saw a revenue increase of 9% over the same period in 1999, totalling $9.6 billion (€11.5 billion). This is obviously a huge figure, and is Spain’s key industry, as is true of the rest of the world, as can be seen in China, a country not renowned for it’s tourist industry, however “China earned 28.8 billion Yuan ($3.5 billion) in tourism revenue over the week-long Labour Day holiday as nearly 74 million people took to the road” – (LatelineNews: 5.9.01), however much of China’s tourism appears to be from within the country, unlike Spain where much of the tourists come from the surrounding countries and much of northern Europe, for example Germany, France and England.

The destination country gains huge benefits from the influx of tourists onto its ‘shores’. Not only does the country’s revenue increase by a large amount, but there is a greater employment rate as the tourism industry is so labour intensive, creating a multiplier effect in the region, allowing economic growth and other services to develop to serve both the locals and the tourists alike. An improved infrastructure is developed which the locals can benefit from, for example airports and better roads, as can be seen in destinations such as Fuerteventura, an island in the Canary Islands, which has experienced tourism only over the last ten years or so. Even now, there is rapid and continual growth, with new tarmac covered roads being created everyday, as a pose to the original dirt tracks still in evidence today, however, work continues.

However, it is important that the heritage and traditional culture of the area is not lost altogether. In some areas, such as Majorca, its main city, Palma has disappeared amongst ‘Irish’ pubs, clubs and a concrete jungle of high rise apartments for a mass tourism experience. In this case, the real culture of the region has disappeared altogether, at least along the sea front. In the main part of the city there is a beautiful cathedral, which has been there since the first Spanish settlers. This type of culture, the language of the people and the local traditions, such as the siesta need to be retained, before the experience of a holiday becomes a home from home experience; in other words, a warmer version of the origin country, such as the UK. This is why eco-tourism and other types of ‘alternative’ tourism such as Antarctica and quiet city breaks have become more popular.

There are other downsides to tourism for a host country apart from the loss of heritage. Firstly, the amount of people tourism attracts is vast, up to 59million in Spain alone in 2000. (Source: Ministerio de Economía y Hacienda). This may sound good, however if each tourist rented a car or took a bus to their destination hotel or villa, then the less developed infrastructure of the country will not necessarily be able to cope with the massive influx of traffic, normally in a very limited space and time frame (i.e. – peak season, and near the popular destination in the host country, such as the coast). This will have an inevitable result of creating air pollution in the immediate area.

The local resources will also be stretched to the limit as the population capacity (both physical and perceptual capacity) is reached. In many of the destination countries, the water supplies are short being in a warmer region than most. Therefore the water supplies are put in jeopardy as the tourists take up much of the population’s water supply, leaving the local population to survive on very little. Obviously this is not an issue in some of the cooler climates, such as Austria where skiing is the main attraction, and the area itself is much more lush than some of the areas I am generalising, such as Spain or Greece. Another key problem is the way in which the tourism industry attracts people from outside of the cities and tourist resorts, such as farmers and rural communities, whom are attracted to the money being generated in the highly density tourist attractions. This will also increase pollution, population and pressure on the area.

With the mass of people being attracted to an area, the more housing and other buildings are required to facilitate these employees, tourists and other groups. The environment is therefore detrimentally affected as the buildings destroy habitats, which along the coastlines of many countries can prove to be areas of natural beauty, which are covered by tourist resorts, in a matter of a few years from the start of tourism in a country aimed at this type of mass tourism. These mass resorts need an outlet for the waste they produce as much as three times  as much waste as is produced by the country in low season, an indication of the environmental impact that the tourists have on an area.

Therefore, it is evident that there are both positive and negative economic (in the form of economic carrying capacity being too low in low season) effects, which appear to outweigh the highly negative effects on the environment in the host country. Indeed, there is a need for a review on how to create a sustainable solution to the difference between the two aspects of a country’s development. If a satisfactory conclusion is not met in relation to sustaining the environment in a given area, it is unlikely that the tourism industry will survive as the tourists will be repelled by the poor environmental quality. Sustainable ecotourism or simply a reinvention of the processes involved in transport, waste disposal and the impact the tourist has on the environment need to be implemented in order to create a tourist destination which will last the host country long enough to become established and diversified in many industries.  

http://www.life.sustainable-tourism.org/b/testi/b_2.htm

http://www.global-review.com/on-line/Spain/BodySector07.shtml

http://www.nottingham.ac.uk/ttri/2000%202.pdf

Document Details

• Word Count 1613
• Page Count 4
• Level AS and A Level
• Subject Geography

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