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Economic Impacts of Tourism

Businesses and public organizations are increasingly interested in the economic impacts of tourism at national, state, and local levels. One regularly hears claims that tourism supports X jobs in an area or that a festival or special event generated Y million dollars in sales or income in a community. “Multiplier effects” are often cited to capture secondary effects of tourism spending and show the wide range of sectors in a community that may benefit from tourism.

Tourism’s economic benefits are touted by the industry for a variety of reasons. Claims of tourism’s economic significance give the industry greater respect among the business community, public officials, and the public in general. This often translates into decisions or public policies that are favorable to tourism. Community support is important for tourism, as it is an activity that affects the entire community. Tourism businesses depend extensively on each other as well as on other businesses, government and residents of the local community.
Economic benefits and costs of tourism reach virtually everyone in the region in one way or another. Economic impact analyses provide tangible estimates of these economic interdependencies and a better understanding of the role and importance of tourism in a region’s economy.

Tourism activity also involves economic costs, including the direct costs incurred by tourism businesses, government costs for infrastructure to better serve tourists, as well as congestion and related costs borne by individuals in the community. Community decisions over tourism often involve debates between industry proponents touting tourism’s economic impacts (benefits) and detractors emphasizing tourism’s costs. Sound decisions rest on a balanced and objective assessment of both benefits and costs and an understanding of who benefits from tourism and who pays for it.

Tourism’s economic impacts are therefore an important consideration in state, regional and community planning and economic development. Economic impacts are also important factors in marketing and management decisions. Communities therefore need to understand the relative importance of tourism to their region, including tourism’s contribution to economic activity in the area.

A variety of methods, ranging from pure guesswork to complex mathematical models, are used to estimate tourism’s economic impacts. Studies vary extensively in quality and accuracy, as well as which aspects of tourism are included. Technical reports often are filled with economic terms and methods that non-economists do not understand. On the other hand, media coverage of these studies tend to oversimplify and frequently misinterpret the results, leaving decision makers and the general public with a sometimes distorted and incomplete understanding of tourism’s economic effects.

How can the average person understand these studies sufficiently to separate good studies from bad ones and make informed choices? The purpose of this bulletin is to present a systematic introduction to economic impact concepts and methods. The presentation is written for tourism industry analysts and public officials, who would like to better understand, evaluate, or possibly conduct an economic impact assessment. The bulletin is organized around ten basic questions that either are asked or should be asked about the economic impacts of tourism.

Ten Questions About the Economic Impacts of Tourism
1. What is an economic impact analysis?
2. What questions does an economic impact assessment answer?
3. What economic impacts does tourism have?
4. What are multiplier effects?
5. How are tourism’s economic impacts measured?
6. What are the typical approaches for an economic impact assessment?
7. What are some examples of economic impact assessment approaches in tourism?
8. What are the steps for conducting a tourism economic impact study?
9. What are some questions to ask when evaluating or interpreting a tourism economic impact study?
10. What will an economic impact study cost?

Download the full report here .

This article by Daniel J. Stynes is quoted from the Tourism ROI Newsletter published on 2010-03.30.

This article is uploaded by Majbritt Thomsen, administrator on ‘Views On Tourism’.

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Posted in Development, Market knowledge, Performance and management, Sale and marketing.


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