Effects of Tourism on GDP

Tourism is travel for business or pleasure; the both the planning and the process of welcoming, accommodating, entertaining, and attracting tourists. It can also refer to the revenue obtained through tourism, which is the result of the increased value gained from the tourist dollar spent. Tourism can take many forms and involve many interacting factors. They include:

The consumer durables produced by a country’s tourism industry consist of the goods and services made or delivered to and from a destination by domestic visitors. These include the movement and storage of people and their baggage, as well as the provision of facilities and entertainment to these consumers. These activities add value and increase the attractiveness of a destination, making it more attractive to tourists and contributing to the domestic economy. This type of consumer durable goods produced in a country increases the income of the domestic visitor to the level at least equal to the cost of production multiplied by the number of tourists visiting on an annual average. Some commonly consumed consumer durables produced by tourism are: food, beverages, fabrics, automobiles, electrical goods, mechanical supplies, and information technology.

Travel tourism refers to travel to places outside a country for tourism purposes, such as sightseeing, the experience of a sport, or recreation. Travel tourism does not include trips to hospitals and medical centers within a country. A traveler may be interested in traveling to a place outside the usual environment if he or she is unable to visit his or her country due to several reasons, including the inability to travel by land or sea, owing to health reasons, or because the travel route is too dangerous. A traveler may also be interested in traveling to such places outside the usual environment if he or she wants to interact with a different culture, partake in an adventurous activity, or experience a new natural environment.

The economic analysis of tourism shows that it has a positive impact on the Gross Domestic Product (GDP) of a country. An economic analysis of tourism based on the outputs and expenses associated with tourism, including visitors, shows that tourism generates a positive impact on GDP. The positive impact of tourism on GDP is primarily due to direct employment generated by the tourism industry. The number of tourists who spend money at establishments owned by tourists also adds to the level of output and employment generated by the tourism sector. Other direct effects of tourism on GDP include the purchase of goods and services produced by tourists, consumption of goods and services imported by tourists, and investment generated by tourists. On the other hand, indirect effects of tourism on GDP include revenue lost from tourism in regions adjacent to tourist destinations, income generated from rent and borrowing by establishments located in the vicinity of tourist destinations, value added tax (VAT) charged on items imported by tourists, depreciation of assets located in tourist destinations, and net change in foreign exchange rates.

Tourism can also lead to inter-bietal diversification. This is mainly brought about by tourism infrastructure and promotion activities promoting inter-bietal diversification. Some of these activities include provision of infrastructure for inbound tourism, encouragement of destination tourism, development of national tourism goals, and promotion of tourism in rural and remote areas. Other activities may include development of tourism in historical and cultural sites, establishment of inbound tourism desks, establishment of national tourism boards, training of tourism professionals, and creation of environment projects.

Finally, tourism can lead to social progress, especially economic development. Tourism generates jobs in the hospitality and tourism industry, employment in tourism-related industries such as air cargo handling, tour and travel, hotel and motel operations, restaurants and bars, and rehabilitation of former slums. Tourism can also generate a favorable effect on the country of reference, either as a source of revenue or as an indicator of the quality of the living standards of the residents. Whether the country of reference is in the Caribbean, in Africa, or in Europe, tourism is usually a key driver of development.