How Does Tourism Affect Our Economy

Tourism is usually described as having three major types of impacts on many of the places which tourists visit These effects are economic, environmental, and socio-cultural in nature. However, some impacts have been attributed to tourism though they may in fact originate elsewhere. Instead, more appropriate sources may be the media, the advertising & fashion industries, new industrial development, urbanisation, modern agriculture, mining and forestry projects, and government and military activity.But while all these factors can be described as frequent features of modern societies, it is widely believed that travel and tourism do generate impacts, including economic ones. BENEFICIAL ECONOMIC IMPACTS Unlike some of its environmental and socio-cultural effects, tourisms economic impacts are mainly considered to be beneficial. These are: •the generation of foreign exchange, •the creation of new job and employment opportunities, the stimulation of trade, income and entrepreneurship – especially in the service and small business sectors, •the provision of new infrastructure which is available for non-tourism uses, •increased regional development – particularly in isolated areas, •greater tax revenues permitting greater government spending – or reduced taxes on other activities, and •the operation of what is called the multiplier effect. Price and Income ElasticityLeisure tourism is considered to be price and income elastic (Cooper et al, 1993), and therefore very responsive to economic conditions in both host and traveller-generating countries (eg USA & Japan). Price decreases and increases in destination countries (eg Thailand & Malaysia) are likely to, respectively, encourage or discourage some tourists from the traveller-generating countries (who would otherwise have visited) from coming. Similarly, income rises and income falls will have a parallel effect, respectively encouraging or discouraging overseas visiting by citizens of the traveller-generating nations.NEGATIVE ECONOMIC IMPACTS Although travel and tourism studies tend mainly to emphasise the beneficial features of tourisms economic impacts, there are some negative consequences also to consider. These are: •leakages of expenditure out of the local economy, •increased propensities (ie tendencies) to import, •opportunity costs, •displacement effects, •over-dependence on tourism, •inflation and higher land values, •seasonality issues, •over-reliance on expatriate labour, •creation of new or extra costs, and •problems over foreign capital investment.

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