ECONOMIC CONTRIBUTION OF TRAVEL AND TOURISM

Travel & Tourism relates to the activity of travellers on trips outside their usual environment with a duration of less than one year. Travel & Tourism is an important economic activity in most countries around the world. In Europe, Travel & Tourism GDP is twice the size of auto manufacturing. As well as its direct economic impact, the industry has significant indirect and induced impacts:

• Direct contribution to GDP: GDP generated by industries that deal directly with tourists, including hotels, travel agents, airlines and other passenger transport services, as well as the activities of restaurant and leisure industries that deal directly with tourists. It is equivalent to total internal Travel & Tourism spending within a country less the purchases made by those industries (including imports).
• Direct contribution to employment: the number of direct jobs within the Travel & Tourism industry.
• Total contribution to GDP: GDP generated directly by the Travel & Tourism sector plus its indirect and induced impacts .
• Total contribution to employment: the number of jobs generated directly in the Travel & Tourism sector plus the indirect and induced contributions.

 Direct Spending Impacts

• Visitor exports: Spending within the country by international tourists for both business and leisure trips, including spending on transport, but excluding international spending on education.
• Domestic Travel & Tourism spending: Spending within a country by that country’s residents for both business and leisure trips.
• Government individual spending: Spending by government on Travel & Tourism services directly linked to visitors, such as cultural (e.g. museums) or recreational (e.g. national parks).
• Internal tourism consumption: Total revenue generated within a country by industries that deal directly with tourists including visitor exports, domestic spending and government individual spending.
• Business Travel & Tourism spending: Spending on business travel within a country by residents and international visitors.
• Leisure Travel & Tourism spending: Spending on leisure travel within a country by residents and international visitors.

Indirect and Induced Impacts

Indirect contribution: the contribution to GDP and jobs of the following three factors:

• Capital investment: Capital investment spending by all sectors directly involved in Travel & Tourism. This also constitutes investment spending by other industries on specific tourism assets such as new visitor accommodation and passenger transport equipment, as well as restaurants and leisure facilities for specific tourism use.
• Government collective spending: General government spending in support of general tourism activity. This can include national as well as regional and local government spending. For example, it includes tourism promotion, visitor information services, administrative services and other public services.
• Supply-chain effects: Purchases of domestic goods and services directly by different sectors of the Travel & Tourism sector as inputs to their final tourism output.
• Induced contribution:  The broader contribution to GDP and employment of spending by those who are directly or indirectly employed by Travel & Tourism.

Other Indicators

• Outbound expenditure:  Spending outside the country by residents on all trips abroad.
• Foreign visitor arrivals: The number of arrivals of foreign visitors, including same-day and overnight visitors (tourists) to the country.

Economic Advantages of Travel & Tourism

• Travel & Tourism drives foreign trade: Given the cultural, language, and time differences that exist between countries, face-to-face meetings are integral to developing international business relationships and a key driver of world trade. While videoconferencing and other remote communication technologies have become much more popular in recent years, they tend to complement business travel rather than replace it. Countries with a larger outbound business travel market tend to enjoy higher exports, while faster growth in business travel is also linked to more rapid trade growth. Business travel is vital contributor to the economy of most countries, both developed and developing. Trade generates a number of wider economic benefits which accrue beyond the direct participants. Trade advances economic development by lowering prices, creating economies of scale, allowing countries to focus on areas of competitive advantage, spurring innovation and creating competition. Business travel also allows entrepreneurs to develop relationships with potential customers and suppliers in overseas locations. The economic prospects of many developed countries in the aftermath of the global finical crisis depend, in part, on exploiting opportunities in the emerging markets of Asia and Latin America. With half of global economic growth over the next 10 years predicted to occur in emerging markets, the connections provided by Travel & Tourism will be increasingly important to foster trade and investment links.
• Travel & Tourism encourages investment: Trade and investment follow each other. The benefits that business travel brings to international trade also foster investment by domestic firms and by foreign direct investors. Foreign direct investments (FDI) that result from business travel introduces capital, technology, skills, people, know-how, demand for local supplies to the domestic economy, and brings improvements in trade balances. It can also create new products and provide opportunities for local businesses further down the supply chain. The competition for foreign direct investment is intense, not only between countries but also between regions within countries. Without the connectivity provided by the Travel & Tourism sector in general, and the aviation sub-sector in particular, regions would find it more difficult to attract foreign direct investment. Access to airport hubs is critical t increase foreign investment.
• Travel & Tourism develops infrastructure and services: Demand for Travel & Tourism – both international and domestic – stimulates investment. Travel & Tourism also drives infrastructure improvements that collectively benefit tourists, local residents, and the wider economy. Growth in the Travel & Tourism sector typically leads to development of restaurants, bars, cafes, retail establishments, and other tourism related businesses. Not only are these businesses part of the direct impacts generated by Travel & Tourism, but also they help to improve the quality of life for local residents by expanding the choices available to them in their local community. Travel & Tourism drives the development of collective investments in public utilities and transportation infrastructure including roads, airports, harbours, electricity, sewage, potable water, and communication infrastructure. These investments are a necessary component for Travel & Tourism but provide broad benefits to other industries and to residents. Strengthening the urban-rural network through improvements in transportation infrastructure (air, water, rail, and road) increases the mobility of individuals (both tourists and residents), ensures the continued flow of goods (both into and out of the area), raises the competiveness of the local area, and increases public safety. Modern, efficient, reliable telecommunications including broadband access is crucial to the economic well-being of many business owners, including tourism operators. The communications infrastructure that is developed as an essential part of Travel & Tourism development not only improves the experience for visitors, but also creates new economic development opportunities for the local economy potentially leading to additional employment and income impacts beyond those generated by Travel & Tourism.
• Travel & Tourism spurs broader economic development: Travel & Tourism has strong linkages with many other industries within national economies. The industry is also highly geographically dispersed. These aspects of Travel & Tourism can make expansion of the industry an effective tool for broader economic development, particularly for rural and low income regional economies. Travel & Tourism-based businesses create jobs, bring new money into the region and also help diversify the local economic base. Economic diversity is critical to the success of most rural areas in both the developed and developing world. Travel & Tourism provides opportunities for residents to benefit from the cultural heritage of their local communities and develop goods and services, crafts, local foods, music dance, storytelling and guiding services which are sought by tourists. These activities provide additional livelihoods for households thereby helping to alleviate poverty. Travel & Tourism helps to promote the cultural heritage of local communities. For many countries, cultural tourism has become a core component of their tourism platform which has led many countries to actively invest in preservation activities. The promotion of their unique cultural heritage has also become a way for countries to differentiate themselves to compete for tourism spending. Travel & Tourism also benefits local economies by enhancing labour mobility. The Travel and Tourism sector makes it easier for migrants to stay in touch with family and friends and to also return home to visit. Both the host country and the country of origin benefit from the increased labour mobility. The remittances a migrant sends home to family members have become an increasingly important source of revenue for developing countries. Travel & Tourism also makes it easier for students to travel abroad to study. In particular there has been a large increase in the number of students from emerging economies that have been able to study at developed world universities. Their home countries benefit when the students take their education back home and add to the pool of highly educated talent that is crucial for increases in productivity and economic development. In addition, students are likely to make many contacts that will contribute to both global social cohesion and the development of trade.