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Mini case study #1

Tourism Economic Impacts

Learning Outcomes:

Working on the case study will assist students in developing the following student learning outcomes.

Define tourism;

Explain the concept of the tourism economic multiplier effect;

Discuss the positive and negative economic impacts of tourism;

• Interpret data and appraise evidence;
• Distinguish, compare, or contrast diverse points of view and/or alternative conclusions;
• Articulate personal insights about complex issues or problems.
• Background Information:
• According to the United Nations World Tourism Organization (UNWTO), tourism is “a social, cultural and economic phenomenon which entails the movement of people to countries or places outside their usual environment for personal or business/professional purposes.” (World Tourism Organization, n.d., para. 1). These people are called visitors, which may be either tourists (if staying overnight, but no more than one year), or excursionists (one-day visitors).
• People travel for a variety of reasons, such as business, leisure, visiting friends and relatives, education, and many others. However, all these tourists will use the same infrastructure of transportation, lodging, dining, and attractions. No matter what kind of tourism there is, the main quality it all has in common is its various impacts on the tourist destination. Impact areas, which can be both positive and negative, include those related to the local culture, society, environment, and economy. The focus of this case study will be on how tourism impacts the local economy of a destination.

Economic Impacts of Tourism:

Many businesses benefit from tourism expenditures contributed by tourists to the local economy. Think for a moment what people spend their money on when they travel. Now think about the outreaching benefits of those tourism dollars. Money spent directly on tourism businesses will continue to have positive impacts on other business sectors as well. This is called the multiplier effect. Let’s imagine Mary works as a front desk agent at a hotel in Miami. When a family from Madrid visits the city, the money they spent on accommodation will contribute to Mary’s salary and the local economy. How is that? After the payday, Mary will cover all of her essential expenses, such as housing, utilities, and the cost of food. After that, she may also choose to get a haircut, dine out at a restaurant, or go to a movie theater, thus, causing the chain reaction of supporting other businesses in the area.

To analyze the various economic impacts of tourism, it is important to evaluate the various data that is available on it. The UNWTO is a specialized organization of the United Nations (UN) focused on global tourism. They are the leading international organization in the field. While the UNWTO collects a large variety of data, the data for this case analysis will be that of the top tourist destinations worldwide in terms of international tourist arrivals and those international destinations that are at the top tier in terms of tourism dollar earners. The following charts depict this data from 2018 (World Tourism Organization, 2019).

Evaluate the information on the chart. Look at which countries are at the top 10 destinations worldwide and then look at the top ten countries in terms of tourism receipts. Tourism receipts include all revenues earned by a country resulting from expenditures made by tourists on various tourism and hospitality products, for example, lodging, food and beverage, transportation, entertainment, and shopping. One might think that if a country has the most tourist arrivals that it would earn the most money, but that is not the case. Just because a country has the most arrivals, does not mean it will have the highest receipts.Take the time to think through these facts and answer the following questions about the data provided.

Questions:

First, please analyze the relationship between tourist arrivals and tourism receipts.

What are the top three countries in terms of tourist arrivals?

What are the top three countries in terms of tourism receipts?

Are there any countries that are included in one list but not in another one?

Please calculate the average spent by tourists visiting the United States, Spain, and France (hint: divide the number of tourism receipts by the number of tourist arrivals)

According to Statista’s Hotel industry worldwide report, in 2019, hotels in Europe generated on average 93.71 USD of revenue per available room (RevPAR), while RevPAR of the U.S. hotels was recorded at around 87 USD in 2018. What do these numbers contribute to your understanding of the patterns observed in 1a-d?

Additionally, Statista reported that the average number of nights spent by international tourists visiting Spain in 2018 was 7.45 nights (Diaz, 2020), while the same statistic for the U.S. was 9.8 nights (Lock, 2020). What do these numbers contribute to your understanding of the patterns observed in 1a-d?

What do you think contributes to the fact that the countries with the highest arrivals do not necessarily have the highest tourism receipts?

What other measures (besides international tourist arrivals and international tourism receipts) could you suggest for measuring the economic impact of tourism? Please suggest a measure and explain why it is important.

• Think of the multiplier effect. Provide some specific examples of how tourism receipts contribute to the economy.

What the statistics above mean for the countries and communities that depend on tourism for economic support?

• Now, let’s revisit the multiplier effect one more time. With international tourism at a standstill, how will the multiplier effect impact the local communities?
• Impact of COVID-19 on Tourism
• In 2020 the novel coronavirus disease (COVID-19) has drastically changed the world, and the tourism industry is one of those that suffered the most. Please read the following excerpt from UNWTO World Tourism Barometer (World Tourism Organization, 2020, p.1) and answer the following question.
• “International tourist arrivals (overnight visitors) saw a decrease of 44% in the first four months of 2020 over the same period of last year, according to data reported so far by destinations.
• International arrivals declined 97% in the month of April, reflecting travel restrictions in 100% of all destinations worldwide, amid measures to contain the spread of the COVID-19 pandemic.
• This represents a loss of 180 million international arrivals compared to the same period of 2019, which translates into US$195 billion in lost international tourism receipts (export revenues).
• By regions, Asia and the Pacific, the first region to suffer the impact of the pandemic, saw a 51% decrease in arrivals in January-April 2020. Europe recorded the second strongest decline with 44% fewer arrivals, followed by the Middle East (-40%), the Americas (-36%) and Africa (-35%).”