Transcript 11 -Tourism`s G rowth and Natio nal Economy

TOURISM’S GROWTH and NATIONAL
ECONOMIES
1. The National Economy
2. Factors affecting tourism’s
contribution to GDP
3. Problems in measuring tourism’s
growth contribution to GDP
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TOURISM’S GROWTH and NATIONAL
ECONOMIES (cont.)
4. International comparisons of tourism in
GDP
5. Methods of measurement
6. Tourism’s growth and its effects on an
economy
7. Forecasting the value of tourism
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1. The national economy
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2.
The size and value of national economy is
usually expressed as the total value of all
goods and services produced by that
economy during a specified time period, such
as one year.
A country 's Gross Domestic Product, or
GDP
The two main elements of GDP are
goods and services produced for
consumption (C), or use in their own right,
and those produced for fixed capital formations
or investment (I) in capacity to produce further
goods and services.
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1. The national economy
 The
simple definition GDP = C + I assumes
that an economy is closed to foreign trade.
 As this is an unrealistic assumption for
almost all economies, we should include
the value of all exports (X), but exclude
that of all imports (M), of goods and
services during the chosen time period.
 The definition is thus improved a little, and
reads GDP = C + I + X - M
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1. The national economy
 GNP
excludes from GDP such factor
receipts as property income from overseas
since this money has really been generated
in the overseas, rather than the home
economy.
 National income can be defined as the net
amount earned by the economy's factors of
production which means deducting the
value of assets "used up" or capital
consumption from GDP.
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1. The national economy
Travel and tourism is likely to figure in all
aspects of GDP.
 Firstly, most expenditure by tourists would be
regarded as consumption spending ( C ), if for
domestic tourism or for the home-provided
elements of an international trip.
 Secondly, expenditure by businesses on
buildings, plant, equipment and so on to
provide tourism services is part of investment
(I), much of which is likely to be government
expenditure, especially on infrastructure.
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1. The national economy
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Thirdly, a tourist who is spending money in a
foreign country or travelling on transportation
services owned by other country or travelling on
transportation services owned by other countries
is in a sense "importing" services. This
expenditure is a leakage from the national
economy.
 Finally, the reverse situation provides an
"export" when a country can sell its
transportation or tourism services to
international tourists from elsewhere.
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2. Factors affecting tourism’s contribution to
GDP
 Some
of these factors are demand-side
ones (that is, the importance of tourism is
partly determined by the strength of
domestic and inbound demand for local
tourism)
 but the ability of a tourism sector to expend
within an economy to satisfy these
demands and create further ones depends
more frequently on supply-side factors.
 It is possible to identify five major factors,
which determines tourism's role in GDP.
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2. Factors affecting tourism’s contribution to
GDP
Factor 1: the stock of resources
 In traditional economic terms: land, labor,
capital, and enterprise.
 Most tourism involves some element of service,
which requires a component and willing labor
force. Whist many jobs in the industry may not
require a very high level of traditional skills or
qualifications, the presence or absence of a
pool of labour with a positive attitude towards
tourism and tourists are of vital importance.
 Equally, an economy's willingness and ability
to supply the capital investment required for a
tourism industry will influence the size to which
that industry can grow.
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2. Factors affecting tourism’s contribution to GDP
Factor 2: the state of technical knowledge
 Many LDCs have regarded tourism as an easy industry
to develop, because it demands relatively low
technology and skills which can be easily mastered.
 As tourism worldwide has become more sophisticated,
high-value contributions to GDP by tourism have
tended to become associated with higher technologies.
Examples: fleets of large cost-efficient aircraft, high
technology in reservations and passenger handling,
technical innovation in providing more interesting, allseason attractions.
 When technical advances are applied to existing inputs
of other resources, they enhance the productivity of the
industry concerned and hence its contribution to GDP.
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2. Factors affecting tourism’s contribution to GDP
Factor 3: social and political stability
 Since "consuming tourists" must go to the "factory"
to buy the product, social and political conditions
in that "factory" will directly influence the
acceptability of the product and therefore the
success of the industry.
 We may continue to buy goods imported from a
country in political turmoil (unrest) but are unlikely
to want to visit it.
 They are more likely to be responsible for shortterm fluctuations in the value of the tourism
sector.
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2. Factors affecting tourism’s contribution to GDP
Factor 4: attitudes and habits
 Another major non-economic determinant is that of
psychological values, both of suppliers and consuming
tourists.
 Firstly, the attitudes of a host population towards tourists,
and in particular those of workers within the tourism sector,
are an important facet of the tourism product and their
influence is similar in nature to that of social and political
stability.
 Secondly, on the demand side, tourism-consuming habits
are important. Two generating markets with similar levels of
income may have different propensities to travel. This may
be a function of cultural and traditional values, attitudes,
or the quality of climate and physical surroundings at
home.
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2. Factors affecting tourism’s contribution to GDP
Factors 5: investment
 The level of tourism investment or fixed capital
formation.
 Tourism has not traditionally required such substantial
investment in plant and equipment per dollar of output,
yet some areas of the industry are becoming more
demanding of fixed capital formation-notably
passenger carriage, accommodation and
infrastructure.
 However, an industry that is both heavily influenced by
fashion trends, and hosts its customers in its factory
must inevitably invest in new and expanded facilities as
part of its competitive strategy. An economy's ability
and willingness to provide finance for such investment
influences tourism's role in that economy.
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3. Problems in measuring tourism’s contribution to GDP
 Estimating
the value of a service sector is
more difficult than with goods, owing to the
non-tangible nature of products.
 Tourism is particularly difficult because of
the fuzzy(indefinite) definitions of
services included in it.
 Despite these difficulties, most countries still
attempt to provide an estimate of the value
of tourism for comparative and planning
purposes.
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3. Problems in measuring tourism’s
contribution to GDP
 Such
a value will be a summary of private
commercial transactions openly accounted
for.
 However, it will be inadequate to permit an
accurate assessment of the real value of
the sector, because it will omit some
positive and negative items, the most
important of which are:
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3. Problems in measuring tourism’s
contribution to GDP
(a) Unpaid services
(b) Non-accounted services
(c) Notional costs
(d) Public and private revenue distribution
(e) Balance of payments anomalies
(f) Social costs and benefits
(g) Public goods
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(a) Unpaid services
 Unpaid
services are those performed for no
payment, or a payment in kind or in
reciprocity (mutual action).
 If no payment of any kind is made, one can
argue that no economic activity has taken
place even though the service exists, but an
economy transaction certainly exists for a
reciprocal or barter payment.
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(b) Non-accounted services
 Non-accounted
services are those which
take place and for which payment is
received, usually in cash, but are not
accounted for formally.
 This may be to avoid taxation, wages
regulations or for simple convenience, and
the overall result is designated the black
economy.
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(c) Notional costs
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Notional costs are those, which relate in principle
to activity A, but are accounted for within activity
B.
 One example in tourism comes from second home
ownership. If a vacationer buys a second home,
which appears simply as once-and-for-all property
purchase, which home may be used for
vacations.
 Owners then pay no recurrent accommodation
costs, but may be considered to be paying a
notional rent to themselves equal to the
commercial rental value of their properties. This
is part of the "real value" of tourism.
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(d) Public and private revenue distribution
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Public and private revenue distribution concerns
the distinction between sourcing and using
revenues earned by the private sector in one area,
but spent by the public sector in another.
 For example, if a government collects a tourism tax
and uses this revenue in expenditure on
agricultural support, it must be decided whether
tourism includes the gross value of transactions,
while agriculture includes nothing, or whether
tourism includes the value net of tax, with the tax
being included under agriculture. Otherwise there
would be double counting.
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(e) Balance of payments anomalies
 Balance
of payments anomalies in areas
such as tourism investment, repatriation of
earnings, and foreign exchange values of
tourism revenues expressed in floating
currencies, cause measurement problems.
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(f) Social costs
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Social costs and benefits are the differences
between the value of private commercial
transactions and their value to an economy or
society as a whole, including third parties.
 Tourism & Travel bring benefits, but impose
costs, on third parties in many ways, in such a way
that the social net product of the sector may be
quite different from the private net product.
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Public goods
 Public
goods are in a sense part of social
benefits. Governments are increasingly aware
of the "value" to society of, for example
national parks, outstanding scenery or
heritage buildings for which no tourist
entrance price has hitherto (so far) been
charged.
 The "real value" of tourism might include the
national prices that users may be willing to
pay multiplied by the number of the users.
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