The tourism industry has contributed to the economic growth of a country through factors like industrialization, education, advanced technology, a higher number of qualified professionals, opening up of foreign markets, liberal trade policies, and better advertising and strategic marketing. The income generated helps the national balance of payments, earning revenue through direct taxation, as well as from indirect taxes on goods and services purchased by the tourists.
This article considers the economics of tourism, taking into account the unique characteristics of the sector and both the positive and negative consequences of tourism for a destination. The chapter is designed to provide you with:
Tourism is often described as one of the world’s largest industries. It employs millions of people, has a turnover in billions of dollars, and encourages millions of people to travel. In other words, it is a substantial economic sector and economists bring a level of discipline to its analysis. There is no doubt that economics has made a fundamental contribution to the study and understanding of tourism, evidenced by the establishment of the journal Tourism Economics in the 1990s. Tourism and related activities collectively boost the economic reserves of the region thus leading to a rise in income and better disposable income. Tourism can also benefit economies at regional and local levels, as money comes into urban and rural areas which in turn stimulates new business enterprises, greater markets and promotes a more positive image of the area.
Economists remain in dispute as to whether tourism is really an industry and, if so, how to define and measure it. In part, these problems arise because many industries are involved in delivering the tourism product as a service or ‘experience’ and tourism has distinctive characteristics that we have to take into account. As a result, research on tourism supply has focused on individual sectors rather than the structure of the sector as a whole.
Tourism is in fact only partially an industry as governments, communities, and others are involved in delivering the tourism product. Tourism is therefore an industry that challenges conventional economic paradigms. Yet it is important that we understand how its complex system functions if we are to manage tourism effectively. Tourism is an increasingly important focus of policy intervention, and of development in many countries, as economic strategies focus on the revenue and employment generating potential of tourism.
Given below are some economic considerations of the Tourism Industry: