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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

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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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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

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