does tourism help the economy

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• Published: 05 January 2021

The relationship between tourism and economic growth among BRICS countries: a panel cointegration analysis

• Haroon Rasool   ORCID: orcid.org/0000-0002-0083-4553 1 ,
• Shafat Maqbool 2 &
• Md. Tarique 1  

Future Business Journal volume  7 , Article number:  1 ( 2021 ) Cite this article

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Tourism has become the world’s third-largest export industry after fuels and chemicals, and ahead of food and automotive products. From last few years, there has been a great surge in international tourism, culminates to 7% share of World’s total exports in 2016. To this end, the study attempts to examine the relationship between inbound tourism, financial development and economic growth by using the panel data over the period 1995–2015 for five BRICS (Brazil, Russia, India, China and South Africa) countries. The results of panel ARDL cointegration test indicate that tourism, financial development and economic growth are cointegrated in the long run. Further, the Granger causality analysis demonstrates that the causality between inbound tourism and economic growth is bi-directional, thus validates the ‘feedback-hypothesis’ in BRICS countries. The study suggests that BRICS countries should promote favorable tourism policies to push up the economic growth and in turn economic growth will positively contribute to international tourism.

Introduction

World Tourism Day 2015 was celebrated around the theme ‘One Billion Tourists; One Billion Opportunities’ highlighting the transformative potential of one billion tourists. With more than one billion tourists traveling to an international destination every year, tourism has become a leading economic sector, contributing 9.8% of global GDP and represents 7% of the world’s total exports [ 59 ]. According to the World Tourism Organization, the year 2013 saw more than 1.087 billion Foreign Tourist Arrivals and US $1075 billion foreign tourism receipts. The contribution of travel and tourism to gross domestic product (GDP) is expected to reach 10.8% at the end of 2026 [ 61 ]. Representing more than just economic strength, these figures exemplify the vast potential of tourism, to address some of the world´s most pressing challenges, including socio-economic growth and inclusive development.

Developing countries are emerging as the important players, and increasingly aware of their economic potential. Once essentially excluded from the tourism industry, the developing world has now become its major growth area. These countries majorly rely on tourism for their foreign exchange reserves. For the world’s forty poorest countries, tourism is the second-most important source of foreign exchange after oil [ 37 ].

The BRICS (Brazil, Russia, India, China and South Africa) countries have emerged as a potential bloc in the developing countries which caters the major tourists from developed countries. Tourism becomes major focus at BRICS Xiamen Summit 2017 held in China. These countries have robust growth rate, and are focal destinations for global tourists. During 1990 to 2014, these countries stride from 11% of the world’s GDP to almost 30% [ 17 ]. Among BRICS countries, China is ranked as an important destination followed by Brazil, Russia, India and South Africa [ 60 ].

The importance of inbound tourism has grown exponentially, because of its growing contribution to the economic growth in the long run. It enhances economic growth by augmenting the foreign exchange reserves [ 38 ], stimulating investments in new infrastructure, human capital and increases competition [ 9 ], promoting industrial development [ 34 ], creates jobs and hence to increase income [ 34 ], inbound tourism also generates positive externalities [ 1 , 14 ] and finally, as economy grows, one can argue that growth in GDP could lead to further increase in international tourism [ 11 ].

The tourism-led growth hypothesis (TLGH) proposed by Balaguer and Cantavella-Jorda [ 3 ], states that expansion of international tourism activities exerts economic growth, hence offering a theoretical and empirical link between inbound tourism and economic growth. Theoretically, the TLGH was directly derived from the export-led growth hypothesis (ELGH) that postulates that economic growth can be generated not only by increasing the amount of labor and capital within the economy, but also by expanding exports.

The ‘new growth theory,’ developed by Balassa [ 4 ], suggests that export expansion can trigger economic growth, because it promotes specialization and raises factors productivity by increasing competition, creating positive externalities by advancing the dispersal of specialized information and abilities. Exports also enhance economic growth by increasing the level of investment. International tourism is considered as a non-standard type of export, as it indicates a source of receipts and consumption in situ. Given the difficulties in measuring tourism activity, the economic literature tends to focus on primary and manufactured product exports, hence neglecting this economic sector. Analogous to the ELGH, the TLGH analyses the possible temporal relationship between tourism and economic growth, both in the short and long run. The question is whether tourism activity leads to economic growth or, alternatively, economic expansion drives tourism growth, or indeed a bi-directional relationship exists between the two variables.

To further substantiate the nexus, the study will investigate the plausible linkages between economic growth and international tourism while considering the relative importance of financial development in the context of BRICS nations. Financial markets are considered a key factor in producing strong economic growth, because they contribute to economic efficiency by diverting financial funds from unproductive to productive uses. The origin of this role of financial development may is traced back to the seminal work of Schumpeter [ 50 ]. In his study, Schumpeter points out that the banking system is the crucial factor for economic growth due to its role in the allocation of savings, the encouragement of innovation, and the funding of productive investments. Early works, such as Goldsmith [ 18 ], McKinnon [ 39 ] and Shaw [ 51 ] put forward considerable evidence that financial development enhances growth performance of countries. The importance of financial development in BRICS economies is reflected by the establishment of the ‘New Development Bank’ aimed at financing infrastructure and sustainable development projects in these and other developing countries. To the best of the authors’ knowledge, no attempt has been made so far to investigate the long-run relationship Footnote 1 between tourism, financial development and economic growth in case of BRICS countries. Hence, the present study is an attempt to fill the gap in the existing literature.

Review of past studies

From last few decades there has been a surge in the research related to tourism-growth nexus. The importance of growth and development and its determinants has been studied extensively both in developed and developing countries. Extant literature has recognized tourism as an important determinant of economic growth. The importance of tourism has grown exponentially, courtesy to its manifold advantages in form of employment, foreign exchange production household income and government revenues through multiplier effects, improvements in the balance of payments and growth in the number of tourism-promoted government policies [ 21 , 41 , 53 ]. Empirical findings on tourism and economic development have produced mixed finding and sometimes conflicting results despite the common choice of time series techniques as a research methodology. On empirical grounds, four hypotheses have been explored to determine the link between tourism and economic growth [ 12 ]. The first two hypotheses present an account on the unidirectional causality between the two variables, either from tourism to economic growth (Tourism-led economic growth hypothesis-TLGH) or its reserve (economic-driven tourism growth hypothesis-EDTH). The other two hypotheses support the existence of bi-directional hypothesis, (bi-directional causality hypothesis-BC) or that there is no relationship at all (no causality hypothesis-NC), respectively. According to TLEG hypothesis, tourism creates an array of benefits which spillover though multiple routes to promote the economic growth [ 55 ]. In particular, it is believed that tourism (1) increases foreign exchange earnings, which in turn can be used to finance imports [ 38 ], (2) it encourages investment and drives local firms toward greater efficiency due to the increased competition [ 3 , 31 ], (3) it alleviates unemployment, since tourism activities are heavily based on human capital [ 10 ] and (4) it leads to positive economies of scale thus, decreasing production costs for local businesses [ 1 , 14 ]. Other recent studies which find evidence in favor of the TLGH hypothesis include [ 44 , 52 ]. Even though literature is dominated by TLGH, few studies produce a result in support of EDTH [ 40 , 41 , 45 ]. Payne and Mervar [ 45 ] posit that tourism growth of a country is mobilized by the stability of well-designed economic policies, governance structures and investments in both physical and human capital. This positive and vibrant environment creates a series of development activities which proliferate and flourish the tourism. Pertaining to the readily available information, bi-directional causality could also exist between tourism income and economic growth [ 34 , 49 ]. From a policy view, a reciprocal tourism–economic growth relationship implies that government agendas should cater for promoting both areas simultaneously. Finally, there are some studies that do not offer support to any of the aforementioned hypotheses, suggesting that the impact between tourism and economic growth is insignificant [ 25 , 47 , 57 ]. There is a vast literature examining the relationship between tourism and growth as a result, only a selective literature review will be presented here.

Banday and Ismail [ 5 ] used ARDL cointegration model to test the relationship between tourism revenue and economic growth in BRICS countries from the time period of (1995–2013). The study validates the tourism-led growth hypothesis for BRICS countries, which evinces that tourism has positive influence on economic growth.

Savaş et al. [ 54 ] evaluated the tourism-led growth hypothesis in the context of Turkey. The study employed gross domestic product, real exchange rate, real total expenditure and international tourism arrivals to sketch out the causality among variables. The result reveals a unidirectional relationship between tourism and real exchange rate. The findings suggest that tourism is the driving force for economic growth, which in turn helps turkey to culminate its current account deficit.

Dhungel [ 15 ] made an effort to investigate causality between tourism and economic growth, In Nepal for the period of (1974–2012), by using Johansen’s cointegration and Error correction model. The result states that unidirectional causality exists in the long run, while in short run no causality exists between two constructs. The study emphasized that strategies should be devised to attain causality running from tourism to economic growth.

Mallick et al. [ 36 ] analyzed the nexus between economic growth and tourism in 23 Indian states over a period of 14 years (1997–2011). Using panel autoregressive distributed lag model based on three alternative estimators such as mean group estimator, pooled mean group and dynamic fixed effects, Research found that tourism exerts positive influence on economic growth in the long run.

Belloumi [ 8 ] examines the causal relationship between international tourism receipts and economic growth in Tunisia by using annual time series data for the period 1970–2007. The study uses the Johansen’s cointegration methodology to analyze the long-run relationship among the concerned variables. Granger causality based Vector error correction mechanism approach indicates that the revenues generated from tourism have a positive impact on economic growth of Tunisia. Thus, the study supports the hypothesis of tourism-driven economic growth, which is specific to developing countries that base their foreign exchange earnings on the existence of a comparative advantage in certain sectors of the economy.

Tang et al. [ 58 ] explored the dynamic Inter-relationships among tourism, economic growth and energy consumption in India for the period 1971–2012. The study employed Bounds testing approach to cointegration and generalized variance decomposition methods to analyze the relationship. The bounds testing and the Gregory-Hansen test for cointegration with structural breaks consistently reveals that energy consumption, tourism and economic growth in India are cointegrated. The study demonstrated that tourism and economic growth have positive impact on energy consumption, while tourism and economic growth are interrelated; with tourism exert significant influence on economic growth. Consequently, this study validates the tourism-led growth hypothesis in the Indian context.

Kadir and Karim [ 24 ]) examined the causal nexus between tourism and economic growth in Malaysia by applying panel time series approach for the period 1998–2005. By applying Padroni’s panel cointegration test and panel Granger causality test, the result indicated both short and long-run relationship. Further, the panel causality shows unidirectional causality directing from tourism receipts to economic growth. The result provides evidence of the significant contribution of tourism industry to Malaysia’s economic growth, thereby justifying the necessity of public intervention in providing tourism infrastructure and facilities.

Antonakakis et al. [ 2 ] test the linkage between tourism and economic growth in Europe by using a newly introduced spillover index approach. Based on monthly data for 10 European countries over the period 1995–2012, the findings suggested that the tourism–economic growth relationship is not stable over time in terms of both magnitude and direction, indicating that the tourism-led economic growth (TLEG) and the economic-driven tourism growth (EDTG) hypotheses are time-dependent. Thus, the findings of the study suggest that the same country can experience tourism-led economic growth or economic-driven tourism growth at different economic events.

Oh [ 41 ] verifies the contribution of tourism development to economic growth in the Korean economy by applying Engle and Granger two-stage approach and a bivariate Vector Autoregression model. He claimed that economic expansion lures tourists in the short run only, while there is no such long-run stable relationship between international tourism and economic development in Korea.

Empirical studies have pronouncedly focused on the literature that tourism promotes economic growth. To further substantiate the nexus, the study will investigate the plausible linkages between economic growth and international tourism while considering the relative importance of financial development in the context of BRICS nations. The inclusion of financial development in the examination of tourism-growth nexus is a unique feature of this study, which have an influencing role in economic growth as financial development has been theoretically and empirically recognized as source of comparative advantage [ 22 ].

This study employs panel ARDL cointegration approach to verify the existence of long-run association among the variables. Further, study estimated the long-run and short-run coefficients of the ARDL model. Subsequently, Dumitrescu and Hurlin [ 16 ] panel Granger causality test has been employed to check the direction of causality between tourism, financial development and economic growth among BRICS countries.

Database and methodology

Data and variables.

The study is analytical and empirical in nature, which intends to establish the relationship between economic growth and inbound tourism in BRICS countries. For the BRICS countries, limited studies have been conducted depicting the present scenario. Therefore, present study tries to verify the relevance of tourism in economic growth to further enhance the understanding of economic dynamics in BRICS countries. The data used in the study are annual figures for the period stretching from 1995 to 2015, consisting of one endogenous variable (GDP per capita, a proxy for economic growth) and two exogenous variables (international tourism receipts per capita and financial development). The variables employed in the study are based on the economic growth theory, proposed by Balassa [ 4 ], which states that export expansion has a relevant contribution in economic growth. Further, this study incorporates financial development in the model to reduce model misspecification as it is considered to have an influencing role in economic growth both theoretically and empirically [ 22 , 33 ].

The annual data for all the variables have been collected from the World Development Indicators (WDI, 2016) database. The variables used in the study includes gross domestic product per capita (GDP) in constant ($US2010) used as a proxy for economic growth (EG), international tourism receipts per capita (TR) in current US$ as it is widely accepted that the most adequate proxy of inbound tourism in a country is tourism expenditure normally expressed in terms of tourism receipts [ 32 ] and financial development (FD). In line with a recent study on the relationship between financial development and economic growth by Hassan et al. [ 19 ], financial development is surrogated by the ratio of the broad money (M3) to real GDP for all BRICS countries. Here we use the broadest definition of money (M3) as a proportion of GDP– to measure the liquid liabilities of the banking system in the economy. We use M3 as a financial depth indicator, because monetary aggregates, such as M2 or M1, may be a poor proxy in economies with underdeveloped financial systems, because they ‘are more related to the ability of the financial system to provide transaction services than to the ability to channel funds from savers to borrowers’ [ 26 ]. A higher liquidity ratio means higher intensity in the banking system. The assumption here is that the size of the financial sector is positively associated with financial services [ 29 ]. All the variables have been taken into log form.

Unit root test

To verify the long-run relationship between tourism and economic growth through Bounds testing approach, it is necessary to test for stationarity of the variables. The stationarity of all the variables can be assessed by different unit root tests. The study utilizes panel unit root test proposed by Levin et al. [ 35 ] henceforth LLC and Im et al. [ 23 ] henceforth IPS based on traditional augmented Dickey–Fuller (ADF) test. The LLC allows for heterogeneity of the intercepts across members of the panel under the null hypothesis of presence of unit root, while IPS allows for heterogeneity in intercepts as well as in the slope coefficients [ 48 ].

Panel ARDL approach to Cointegration

After checking the stationarity of the variables the study employs panel ARDL technique for Cointegration developed by Pesaran et al. [ 23 ]. Pesaran et al. [ 23 ] have introduced the pooled mean group (PMG) approach in the panel ARDL framework. According to Pesaran et al. [ 23 ], the homogeneity in the long-run relationship can be attributed to several factors such as arbitration condition, common technologies, or the institutional development which was covered by all groups. The panel ARDL bounds test [ 46 ] is more appropriate by comparing other cointegration techniques, because it is flexible regarding unit root properties of variables. This technique is more suitable when variables are integrated at different orders but not I (2). Haug [ 20 ] has argued that panel ARDL approach to cointegration provides better results for small sample data set such as in our case. The ARDL approach to cointegration estimates both long and short-run parameters and can be applied independently of variable order integration (independent of whether repressors are purely I (0), purely I(1) or combination of both. The ARDL bounds test approach used in this study is specified as follows:

where Δ is the first-difference operator, \(\alpha_{0}\) stands for constant, t is time element, \(\omega_{1} , \omega_{2} \;\;{\text{and}}\;\; \omega_{3}\) represent the short-run parameters of the model, \(\emptyset_{1} , \emptyset_{2} ,and \emptyset_{3}\) are long-run coefficients, while \(V_{it}\) is white noise error term and lastly, it represents country at a particular time period. In the ARDL model, the bounds test is applied to determine whether the variables are cointegrated or not.

This test is based on the joint significance of F -statistic and the χ 2 statistic of the Wald test. The null hypothesis of no cointegration among the variables under study is examined by testing the joint significance of the F -statistic of \(\omega_{1} , \omega_{2} ,\omega_{3}\) .

In case series variables are cointegrated, an error correction mechanism (ECM) can be developed as Eq. ( 2 ), to assess the short-run influence of international tourism and financial development on economic growth.

where ECT is the error correction term, and \(\varPhi\) is its coefficient which shows how fast the variables attain long-term equilibrium if there is any deviation in the short run. The error correction term further confirms the existence of a stable long-run relationship among the variables.

Panel granger causality test

To examine the direction of causality Dumitrescu and Hurlin [ 16 ] test is employed. Instead of pooled causality, Dumitrescu and Hurlin [ 16 ] proposed a causality based on the individual Wald statistic of Granger non-causality averaged across the cross section units. Dumitrescu and Hurlin [ 16 ] assert that traditional test allows for homogeneous analysis across all panel sets, thereby neglecting the specific causality across different units.

This approach allows heterogeneity in coefficients across cross section panels. The two statistics Wbar-statistics and Zbar-statistics provides standardized version of the statistics and is easier to compute. Wbar-statistic, takes an average of the test statistics, while the Zbar-statistic shows a standard (asymptotic) normal distribution.

They proposed an average Wald statistic that tests the null hypothesis of no causality in a panel subgroup against an alternative hypothesis of causality in at least one panel. Following equations will be used to check the direction of causality between the variables.

Estimation, results and Discussion

Descriptive statistics.

Table  1 presents descriptive statistics of variables selected for the period 1995–2015. The variable set includes GDP, FD and TR for all BRICS countries. Brazil tops the list with GDP per capita of 4.18, while India lagging behind all BRICS nations. In the recent economic survey by International Monetary Fund (IMF report 2016), India was ranked 126 for its per capita GDP. India’s GDP per capita went up to $7170 against all other BRICS countries which were placed in the above $10,000 bracket. China has the highest tourism receipts in comparison to other BRICS countries. China is a very popular country for foreign tourists, which ranks third after France and USA. In 2014, China invested $136.8 billion into its tourist infrastructure, a figure second only to the United States ($144.3 billion). Tourism, based on direct, indirect, and induced impact, accounted for near 10% in the GDP of China (WTTC report 2017).

Stationarity results

Primarily, we employed LLC and IPS unit root test to assess the integrated properties of the series. The results of IPS and PP tests are presented in Table  2 . Panel unit root test result evinces that FD and TR are stationary at level, while GDP per capita is integrated variable of order 1. The result exemplifies that GDP per capita, Tourism receipts and Financial Development are integrated at 1(0) and 1(1). Consequently, the panel ARDL approach to cointegration can be applied.

Cointegration test results

In view of the above results with a mixture of order integration, the panel ARDL approach to cointegration is the most appropriate technique to investigate whether there exists a long-run relationship among the variables [ 42 ]. Table  3 illustrates that the estimated value of F-statistics, which is higher than the lower and upper limit of the bound value, when InEG is used as a dependent variable. Hence, we reject the null hypothesis of no cointegration \(H_{0 } : \emptyset_{1} = \emptyset_{2} = \emptyset_{3} = 0\) of Eq. ( 1 ). Therefore, the result asserts that international tourism, financial development and economic growth are significantly cointegrated over the period (1995–2015).

Subsequently, the study investigates the long-run and short-run impact of international tourism and financial development on economic growth. Lag length is selected on the principle of minimum Bayesian information criterion (SBC) value, which is 2 in our case. The long-run coefficients of financial development and tourism receipts with respect to economic growth in Table  4 indicate that tourism growth and financial development exerts positive influence on economic growth in the long run. In other words, an increase in volume of tourism receipts per capita and financial depth spurs economic growth and both the coefficients are statistically significant in case of BRICS nations in the long run. The results are interpreted in detail as below:

The elasticity coefficient of economic growth with respect to tourism shows that 1% rise in international tourism receipts per capita would imply an estimated increase of almost 0.31% domestic real income in the long run, all else remaining the same. Thus, the earnings in the form of foreign exchange from international tourism affect growth performance of BRICS nations positively. This finding of our study is in consonance with the empirical results of Kreishan for Jordan [ 30 ], Balaguer and Cantavella-Jordá [ 3 ] for Spain and Ohlan [ 43 ] for India.

Further our finding lend support to the wide applicability of the new growth theory proposed by Balassa which states that export expansion promote growth performance of nations. Thus, validates TLGH coined by Balaguer and Cantavell-Jorda [ 3 ] which states that inbound tourism acts a long-run economic growth factor. The so called tourism-led growth hypothesis suggests that the development of a country’s tourism industry will eventually lead to higher economic growth and, by extension, further economic development via spillovers and other multiplier effects.

Likewise, financial development as expected is found to be positively associated with economic growth. The coefficient of financial development states that 1% improvement in financial development will push up economic growth by 0.22% in the long run, keeping all other variables constant. The empirical results are consistent with the finding of Hassan et al. [ 19 ] for a panel of South Asian countries. Well-regulated and properly functioning financial development enhances domestic production through savings, borrowings & investment activities and boosts economic growth. Further, it promotes economic growth by increasing efficiency [ 7 ]. Levine [ 33 ] believes that financial intermediaries enhance economic efficiency, and ultimately growth, by helping allocation of capital to its best use. Modern growth theory identifies two specific channels through which the financial sector might affect long-run growth; through its impact on capital accumulation and through its impact on the rate of technological progress. The sub-prime crisis which depressed the economic growth worldwide in 2007 further substantiates the growth-financial development nexus.

In the third and final step of the bounds testing procedure, we estimate short-run dynamics of variables by estimating an error correction model associated with long-run estimates. The empirical finding indicates that the coefficient of error correction term (ECT) with one period lag is negative as well as statistically significant. This finding further substantiates the earlier cointegration results between tourism, financial development and economic growth, and indicates the speed of adjustment from the short-run toward long-run equilibrium path. The coefficient of ECT reveals that the short-run divergences in economic growth from long-run equilibrium are adjusted by 43% every year following a short-run shock.

The short-run parameters in Table  5 demonstrates that tourism and financial development acts as an engine of economic growth in the short run as well. The coefficient of both tourism receipts per capita and financial development with one period lag is also found to be progressive and significant in the short run. These results highlight the role of earnings from international tourism and financial stability as an important driving force of economic growth in BRICS nations in the short run as well.

Further, a comparison between short-run and long-run elasticity coefficients evince that long-run responsiveness of economic growth with respect to tourism and financial development is higher than that of short run. It exemplifies that over time higher international tourism receipts and well-regulated financial system in BRICS nations give more boost to economic growth.

Analysis of causality

At this stage, we investigate the causality between tourism, financial development and economic growth presented in Table  6 . The result shows bi-directional causal relationship between tourism and economic growth, thereby validates ‘feedback hypothesis’ and consequently supported both the tourism-led growth hypothesis (TLGH) and its reciprocal, the economic-driven tourism growth hypothesis (EDTH). The bi-directional causality between inbound tourism and GDP, which directs the level of economic activity and tourism growth, mutually influences each other in that a high volume of tourism growth leads to a high level of economic development and reverse also holds true. These results replicate the findings of Banday and Ismail [ 5 ] in the context of BRICS countries, Yazdi et al. [ 27 ] for Iran and Kim et al. [ 28 ] for Taiwan. One of the channels through which tourism spurs economic growth is through the use of receipts earned in the form of foreign currency. Thus, growth in foreign earnings may allow the import of technologically advances goods that will favor economic growth and vice versa. Thus, results demonstrate that international tourism promotes growth and in turn economic expansion is necessary for tourism development in case of BRICS countries. With respect to policy context, this finding suggests that the BRICS nations should focus on economic policies to promote tourism as a potential source of economic growth which in turn will further promote tourism growth.

Similarly, in case of economic growth and financial development, the findings demonstrate the presence of bi-directional causality between two constructs. The findings validate thus both ‘demand following’ and supply leading’ hypothesis. The findings suggests that indeed financial development plays a crucial role in promoting economic activity and thus generating economic growth for these countries and reverse also holds. Our findings are in line with Pradhan [ 48 ] in case of BRICS countries and Hassan et al. [ 19 ] for low and middle-income countries. This suggests that finance development can be used as a policy variable to foster economic growth in the five BRICS countries and vice versa. The study emphasizes that the current economic policies should recognize the finance-growth nexus in BRICS in order to maintain sustainable economic development in the economy. The empirical results in this paper are in line with expectations, confirming that the emerging economies of the BRICS are benefiting from their finance sectors.

Finally, two-sided causal relationship is found between tourism receipts and financial development. That is, tourism might contribute to financial development and, in return, financial development may positively contribute to tourism. This means that financial depth and tourism in BRICS have a reinforcing interaction. The positive impact of tourism on financial development can be attributed to the fact that inflows of foreign exchange via international tourism not only increases income levels but also leads to rise in official reserves of central banks. This in turn enables central banks to adapt expansionary monetary policy. The positive contribution of financial sector to tourism is further characterized by supply leading hypothesis. Further, better financial and market conditions will attract tourism entrepreneurship, because firms will be able to use more capital instead of being forced to use leveraging [ 13 ]. Hence, any shocks in money supply could adversely affect tourism industry in these countries. Song and Lin [ 56 ] found that global financial crisis had a negative impact on both inbound and outbound tourism in Asia. This result is in consistent with Başarir and Çakir [ 6 ] for Turkey and four European countries.

Stability tests

In addition, to test the stability of parameters estimated and any structural break in the model CUSUM and CUSUMSQ tests are employed. Figs.  1 and 2 show blue line does not transcend red lines in both the tests, thus provides strong evidence that our estimated model is fit and valid policy implications can be drawn from the results.

Plot of CUSUM

Plot of CUSUMQ

Summary and concluding remarks

A rigorous study of the relationship between tourism and economic growth, through the tourism-led growth hypothesis (TLGH) perspective has remained a debatable issue in the economic growth literature. This study aims to empirically investigate the relationship between inbound tourism, financial development and economic growth in BRICS countries by utilizing the panel data over the period 1995–2015. The study employs the panel ARDL approach to cointegration and Dumitrescu-Hurlin panel Granger causality test to detect the direction of causation.

To the best of authors’ knowledge, this is the first study which explored the relationship between economic growth and tourism while considering the relative importance of financial development in the context of BRICS nations. The empirical results of ARDL model posits that in BRICS countries inbound tourism, financial development and economic growth are significantly cointegrated, i.e., variables have stable long-run relationship. This methodology has allowed obtaining elasticities of economic growth with respect to tourism and financial development both in the long run and short run. The result reveals that international tourism growth and financial development positively affects economic growth both in the long run and short run. The coefficient of tourism indicates that with a 1% rise in tourism receipts per capita, GDP per capita of BRICS economies will go up by 0.31% in the long run. This finding lends support to TLGH coined by Balaguer and Cantavell-Jorda [ 3 ] which states that inbound tourism acts a long-run economic growth factor. The so called tourism-led growth hypothesis suggests that the development of a country’s tourism industry will eventually lead to higher economic growth and, by extension, further economic development via spillovers and other multiplier effects.

Likewise, 1% improvement in financial development, on average, will increase economic growth in BRICS countries by 0.22% in the long run. The result seems logical as modern growth theory identifies two channels through which the financial sector might affect long-run growth: first, through its impact on capital accumulation and secondly, through its impact on the rate of technological progress. The sub-prime crisis which hit the economic growth Worldwide in 2007 further substantiates the growth-financial development nexus.

The negative and statistically significant coefficient of lagged error correction term (ECT) further substantiates the long-run equilibrium relationship among variables. The negative coefficient of ECT also shows the speed of adjustment toward long-run equilibrium is 43% per annum if there is any short-run deviation. The estimates of parameters are found to be stable by applying CUSUM and CUSUMQ for the time period under consideration. Therefore, inbound tourism earnings and financial institutions can be used as a channel to increase economic growth in BRICS economies.

Further, Granger causality test result indicates the bi-directional causation in all cases. Hence, the causal relationship between international tourism and economic growth is bi-directional. And, consequently this empirical finding lends support to both the tourism-led growth hypothesis (TLGH) and its reciprocal, the economic-driven tourism growth hypothesis (EDTH). This means that tourism is not only an engine for economic growth, but the economic outcome on itself can play an important role in providing growth potential to tourism sector.

The Granger causality findings provide useful information to governments to examine their economic policy, to adjust priorities regarding economic investment, and boost their economic growth with the given limited resources. Thus, it is suggested that more resources should be allocated to tourism industry and tourism-related industries if the tourism-led growth hypothesis holds true. On the other side, if economic-driven tourism growth is supported then more resources should be diverted to leading industries rather than the travel and tourism sector, and the tourism industry will in turn benefit from the resulting overall economic growth. And, when bi-directional causality is detected, a balanced allocation of economic resources for the travel and tourism sector and other industries is important and necessary. The policy implication is that resource allocation supporting both the tourism and tourism-related industries could benefit both tourism development and economic growth.

To sum up, the major finding of this study lends support to wide applicability of the tourism-led growth hypothesis in case of BRICS countries. Thus, in the Policy context, significant impact of tourism on BRICS economy rationalizes the need of encouraging tourism. Tourism can spur economic prosperity in these countries and for this reason; policymakers should give serious consideration toward encouraging tourism industry or inbound tourism. BRICS countries should focus more on tourism infrastructure, such as, convenient transportation, alluring destinations, suitable tax incentives, viable hostels and proper security arrangements to attract the potential tourists. Most of these countries are devoid of rich facilities and popular tourist incentives, to get promoted as important destination and in the long-run promotes economic growth. Further, they need a staunch support from all sections of authorities, non-government organizations (NGOs), and private and allied industries, in the endeavor to attain sustainable growth in tourism. Both state and non-state actors must recognize this growing industry and its positive implication on economy.

For future research, we suggest that researchers should consider the nonlinear factor in the dynamic relationship of tourism and economic growth in case of BRICS countries. Further one can go for comparative study to examine the TLGH in BRICS countries.

Availability of data and materials

Data used in the study can be provided by the corresponding author on request.

There are no fixed definitions of short, medium and long run and generally in macroeconomics, short run can be viewed as 1 to 2 or 3 years, medium up to 5 years and long run from 5 years to 20 or 25 years.

Abbreviations

autoregressive distributed lag model

Brazil, Russia, India, China and South-Africa

United Nations World Tourism Organization

World Travel & Tourism Council

gross domestic product

world development indicators

tourism-led growth hypothesis

export-led growth hypothesis

economic-driven tourism hypothesis

augmented Dickey–Fuller test

error correction model

error correction term

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Rasool, H., Maqbool, S. & Tarique, M. The relationship between tourism and economic growth among BRICS countries: a panel cointegration analysis. Futur Bus J 7 , 1 (2021). https://doi.org/10.1186/s43093-020-00048-3

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• Economic growth
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• Cointegration
• Panel granger causality

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10 Economic impacts of tourism + explanations + examples

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There are many economic impacts of tourism, and it is important that we understand what they are and how we can maximise the positive economic impacts of tourism and minimise the negative economic impacts of tourism.

Many argue that the tourism industry is the largest industry in the world. While its actual value is difficult to accurately determine, the economic potential of the tourism industry is indisputable. In fact, it is because of the positive economic impacts that most destinations embark on their tourism journey.

There is, however, more than meets the eye in most cases. The positive economic impacts of tourism are often not as significant as anticipated. Furthermore, tourism activity tends to bring with it unwanted and often unexpected negative economic impacts of tourism.

In this article I will discuss the importance of understanding the economic impacts of tourism and what the economic impacts of tourism might be. A range of positive and negative impacts are discussed and case studies are provided.

At the end of the post I have provided some additional reading on the economic impacts of tourism for tourism stakeholders , students and those who are interested in learning more.

 Foreign exchange earnings

Contribution to government revenues, employment generation, contribution to local economies, development of the private sector, infrastructure cost, increase in prices, economic dependence of the local community on tourism, foreign ownership and management, economic impacts of tourism: conclusion, further reading on the economic impacts of tourism, the economic impacts of tourism: why governments invest.

Tourism brings with it huge economic potential for a destination that wishes to develop their tourism industry. Employment, currency exchange, imports and taxes are just a few of the ways that tourism can bring money into a destination.

In recent years, tourism numbers have increased globally at exponential rates, as shown in the World Tourism Organisation data below.

There are a number of reasons for this growth including improvements in technology, increases in disposable income, the growth of budget airlines and consumer desires to travel further, to new destinations and more often.

Here are a few facts about the economic importance of the tourism industry globally:

• The tourism economy represents 5 percent of world GDP
• Tourism contributes to 6-7 percent of total employment
• International tourism ranks fourth (after fuels, chemicals and automotive products) in global exports
• The tourism industry is valued at US$1trillion a year
• Tourism accounts for 30 percent of the world’s exports of commercial services
• Tourism accounts for 6 percent of total exports
• 1.4billion international tourists were recorded in 2018 (UNWTO)
• In over 150 countries, tourism is one of five top export earners
• Tourism is the main source of foreign exchange for one-third of developing countries and one-half of less economically developed countries (LEDCs)

There is a wealth of data about the economic value of tourism worldwide, with lots of handy graphs and charts in the United Nations Economic Impact Report .

In short, tourism is an example of an economic policy pursued by governments because:

•      it brings in foreign exchange
•      it generates employment
•      it creates economic activity

Building and developing a tourism industry, however, involves a lot of initial and ongoing expenditure. The airport may need expanding. The beaches need to be regularly cleaned. New roads may need to be built. All of this takes money, which is usually a financial outlay required by the Government.

For governments, decisions have to be made regarding their expenditure. They must ask questions such as:

How much money should be spent on the provision of social services such as health, education, housing?

How much should be spent on building new tourism facilities or maintaining existing ones?

If financial investment and resources are provided for tourism, the issue of opportunity costs arises.

By opportunity costs, I mean that by spending money on tourism, money will not be spent somewhere else. Think of it like this- we all have a specified amount of money and when it runs out, it runs out. If we decide to buy the new shoes instead of going out for dinner than we might look great, but have nowhere to go…!

In tourism, this means that the money and resources that are used for one purpose may not then be available to be used for other purposes. Some destinations have been known to spend more money on tourism than on providing education or healthcare for the people who live there, for example.

This can be said for other stakeholders of the tourism industry too.

There are a number of independent, franchised or multinational investors who play an important role in the industry. They may own hotels, roads or land amongst other aspects that are important players in the overall success of the tourism industry. Many businesses and individuals will take out loans to help fund their initial ventures.

So investing in tourism is big business, that much is clear. What what are the positive and negative impacts of this?

Positive economic impacts of tourism

So what are the positive economic impacts of tourism? As I explained, most destinations choose to invest their time and money into tourism because of the positive economic impacts that they hope to achieve. There are a range of possible positive economic impacts. I will explain the most common economic benefits of tourism below.

One of the biggest benefits of tourism is the ability to make money through foreign exchange earnings.

Tourism expenditures generate income to the host economy. The money that the country makes from tourism can then be reinvested in the economy. How a destination manages their finances differs around the world; some destinations may spend this money on growing their tourism industry further, some may spend this money on public services such as education or healthcare and some destinations suffer extreme corruption so nobody really knows where the money ends up!

Some currencies are worth more than others and so some countries will target tourists from particular areas. I remember when I visited Goa and somebody helped to carry my luggage at the airport. I wanted to give them a small tip and handed them some Rupees only to be told that the young man would prefer a British Pound!

Currencies that are strong are generally the most desirable currencies. This typically includes the British Pound, American, Australian and Singapore Dollar and the Euro .

Tourism is one of the top five export categories for as many as 83% of countries and is a main source of foreign exchange earnings for at least 38% of countries.

Tourism can help to raise money that it then invested elsewhere by the Government. There are two main ways that this money is accumulated.

Direct contributions are generated by taxes on incomes from tourism employment and tourism businesses and things such as departure taxes.

Taxes differ considerably between destinations. I will never forget the first time that I was asked to pay a departure tax (I had never heard of it before then), because I was on my way home from a six month backpacking trip and I was almost out of money!

Japan is known for its high departure taxes. Here is a video by a travel blogger explaining how it works.

According to the World Tourism Organisation, the direct contribution of Travel & Tourism to GDP in 2018 was $2,750.7billion (3.2% of GDP). This is forecast to rise by 3.6% to $2,849.2billion in 2019.

Indirect contributions come from goods and services supplied to tourists which are not directly related to the tourism industry.

Take food, for example. A tourist may buy food at a local supermarket. The supermarket is not directly associated with tourism, but if it wasn’t for tourism its revenues wouldn’t be as high because the tourists would not shop there.

There is also the income that is generated through induced contributions . This accounts for money spent by the people who are employed in the tourism industry. This might include costs for housing, food, clothing and leisure Activities amongst others. This will all contribute to an increase in economic activity in the area where tourism is being developed.

The rapid expansion of international tourism has led to significant employment creation. From hotel managers to theme park operatives to cleaners, tourism creates many employment opportunities. Tourism supports some 7% of the world’s workers.

There are two types of employment in the tourism industry: direct and indirect.

Direct employment includes jobs that are immediately associated with the tourism industry. This might include hotel staff, restaurant staff or taxi drivers, to name a few.

Indirect employment includes jobs which are not technically based in the tourism industry, but are related to the tourism industry. Take a fisherman, for example. He does not have any contact of dealings with tourists. BUT he does sell his fish to the hotel which serves tourists. So he is indirectly employed by the tourism industry, because without the tourists he would not be supplying the fish to the hotel.

It is because of these indirect relationships, that it is very difficult to accurately measure the economic value of tourism.

It is also difficult to say how many people are employed, directly and indirectly, within the tourism industry.

Furthermore, many informal employments may not be officially accounted for. Think tut tut driver in Cambodia or street seller in The Gambia – these people are not likely to be registered by the state and therefore their earnings are not declared.

It is for this reason that some suggest that the actual economic benefits of tourism may be as high as double that of the recorded figures!

All of the money raised, whether through formal or informal means, has the potential to contribute to the local economy.

If sustainable tourism is demonstrated, money will be directed to areas that will benefit the local community most.

There may be pro-poor tourism initiatives (tourism which is intended to help the poor) or volunteer tourism projects.

The government may reinvest money towards public services and money earned by tourism employees will be spent in the local community. This is known as the multiplier effect.

The multiplier effect relates to spending in one place creating economic benefits elsewhere. Tourism can do wonders for a destination in areas that may seem to be completely unrelated to tourism, but which are actually connected somewhere in the economic system.

Let me give you an example.

A tourist buys an omelet and a glass of orange juice for their breakfast in the restaurant of their hotel. This simple transaction actually has a significant multiplier effect. Below I have listed just a few of the effects of the tourist buying this breakfast.

The waiter is paid a salary- he spends his salary on schooling for his kids- the school has more money to spend on equipment- the standard of education at the school increases- the kids graduate with better qualifications- as adults, they secure better paying jobs- they can then spend more money in the local community…

The restaurant purchases eggs from a local farmer- the farmer uses that money to buy some more chickens- the chicken breeder uses that money to improve the standards of their cages, meaning that the chickens are healthier, live longer and lay more eggs- they can now sell the chickens for a higher price- the increased money made means that they can hire an extra employee- the employee spends his income in the local community…

The restaurant purchase the oranges from a local supplier- the supplier uses this money to pay the lorry driver who transports the oranges- the lorry driver pays road tax- the Government uses said road tax income to fix pot holes in the road- the improved roads make journeys quicker for the local community…

So as you can see, that breakfast that the tourist probably gave not another thought to after taking his last mouthful of egg, actually had the potential to have a significant economic impact on the local community!

The private sector has continuously developed within the tourism industry and owning a business within the private sector can be extremely profitable; making this a positive economic impact of tourism.

Whilst many businesses that you will come across are multinational, internationally-owned organisations (which contribute towards economic leakage ).

Many are also owned by the local community. This is the case even more so in recent years due to the rise in the popularity of the sharing economy and the likes of Airbnb and Uber, which encourage the growth of businesses within the local community.

Every destination is different with regards to how they manage the development of the private sector in tourism.

Some destinations do not allow multinational organisations for fear that they will steal business and thus profits away from local people. I have seen this myself in Italy when I was in search of a Starbucks mug for my collection , only to find that Italy has not allowed the company to open up any shops in their country because they are very proud of their individually-owned coffee shops.

Negative economic impacts of tourism

Unfortunately, the tourism industry doesn’t always smell of roses and there are also several negative economic impacts of tourism.

There are many hidden costs to tourism, which can have unfavourable economic effects on the host community.

Whilst such negative impacts are well documented in the tourism literature, many tourists are unaware of the negative effects that their actions may cause. Likewise, many destinations who are inexperienced or uneducated in tourism and economics may not be aware of the problems that can occur if tourism is not management properly.

Below, I will outline the most prominent negative economic impacts of tourism.

Economic leakage in tourism is one of the major negative economic impacts of tourism. This is when money spent does not remain in the country but ends up elsewhere; therefore limiting the economic benefits of tourism to the host destination.

The biggest culprits of economic leakage are multinational and internationally-owned corporations, all-inclusive holidays and enclave tourism.

I have written a detailed post on the concept of economic leakage in tourism, you can take a look here- Economic leakage in tourism explained .

Another one of the negative economic impacts of tourism is the cost of infrastructure. Tourism development can cost the local government and local taxpayers a great deal of money.

Tourism may require the government to improve the airport, roads and other infrastructure, which are costly. The development of the third runway at London Heathrow, for example, is estimated to cost £18.6billion!

Money spent in these areas may reduce government money needed in other critical areas such as education and health, as I outlined previously in my discussion on opportunity costs.

One of the most obvious economic impacts of tourism is that the very presence of tourism increases prices in the local area.

Have you ever tried to buy a can of Coke in the supermarket in your hotel? Or the bar on the beachfront? Walk five minutes down the road and try buying that same can in a local shop- I promise you, in the majority of cases you will see a BIG difference In cost! (For more travel hacks like this subscribe to my newsletter – I send out lots of tips, tricks and coupons!)

Increasing demand for basic services and goods from tourists will often cause price hikes that negatively impact local residents whose income does not increase proportionately.

Tourism development and the related rise in real estate demand may dramatically increase building costs and land values. This often means that local people will be forced to move away from the area that tourism is located, known as gentrification.

Taking measures to ensure that tourism is managed sustainably can help to mitigate this negative economic impact of tourism. Techniques such as employing only local people, limiting the number of all-inclusive hotels and encouraging the purchasing of local products and services can all help.

Another one of the major economic impacts of tourism is dependency. Many countries run the risk of becoming too dependant on tourism. The country sees $ signs and places all of its efforts in tourism. Whilst this can work out well, it is also risky business!

If for some reason tourism begins to lack in a destination, then it is important that the destination has alternative methods of making money. If they don’t, then they run the risk of being in severe financial difficulty if there is a decline in their tourism industry.

In The Gambia, for instance, 30% of the workforce depends directly or indirectly on tourism. In small island developing states, percentages can range from 83% in the Maldives to 21% in the Seychelles and 34% in Jamaica.

There are a number of reasons that tourism could decline in a destination.

The Gambia has experienced this just recently when they had a double hit on their tourism industry. The first hit was due to political instability in the country, which has put many tourists off visiting, and the second was when airline Monarch went bust, as they had a large market share in flights to The Gambia.

Other issues that could result in a decline in tourism includes economic recession, natural disasters and changing tourism patterns. Over-reliance on tourism carries risks to tourism-dependent economies, which can have devastating consequences.

The last of the negative economic impacts of tourism that I will discuss is that of foreign ownership and management.

As enterprise in the developed world becomes increasingly expensive, many businesses choose to go abroad. Whilst this may save the business money, it is usually not so beneficial for the economy of the host destination.

Foreign companies often bring with them their own staff, thus limiting the economic impact of increased employment. They will usually also export a large proportion of their income to the country where they are based. You can read more on this in my post on economic leakage in tourism .

As I have demonstrated in this post, tourism is a significant economic driver the world over. However, not all economic impacts of tourism are positive. In order to ensure that the economic impacts of tourism are maximised, careful management of the tourism industry is required.

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• Published: 24 February 2024

Modeling the link between tourism and economic development: evidence from homogeneous panels of countries

• Pablo Juan Cárdenas-García   ORCID: orcid.org/0000-0002-1779-392X 1 ,
• Juan Gabriel Brida 2 &
• Verónica Segarra 2  

Humanities and Social Sciences Communications volume  11 , Article number:  308 ( 2024 ) Cite this article

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• Development studies

Having previously analyzed the relationship between tourism and economic growth from distinct perspectives, this paper attempts to fill the void existing in scientific research on the relationship between tourism and economic development, by analyzing the relationship between these variables using a sample of 123 countries between 1995 and 2019. The Dumistrescu and Hurlin adaptation of the Granger causality test was used. This study takes a critical look at causal analysis with heterogeneous panels, given the substantial differences found between the results of the causal analysis with the complete panel as compared to the analysis of homogeneous country groups, in terms of their dynamics of tourism specialization and economic development. On the one hand, a one-way causal relationship exists from tourism to development in countries having low levels of tourism specialization and development. On the other hand, a one-way causal relationship exists by which development contributes to tourism in countries with high levels of development and tourism specialization.

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Introduction

Across the world, tourism is one of the most important sectors. It has undergone exponential growth since the mid-1900s and is currently experiencing growth rates that exceed those of other economic sectors (Yazdi, 2019 ).

Today, tourism is a major source of income for countries that specialize in this sector, generating 5.8% of the global GDP (5.8 billion US$) in 2021 (UNWTO, 2022 ) and providing 5.4% of all jobs (289 million) worldwide. Although its relevance is clear, tourism data have declined dramatically due to the recent impact of the Covid-19 health crisis. In 2019, prior to the pandemic (UNWTO, 2020 ), tourism represented 10.3% of the worldwide GDP (9.6 billion US$), with the number of tourism-related jobs reaching 10.2% of the global total (333 million). With the evolution of the pandemic and the regained trust of tourists across the globe, it is estimated that by 2022, approximately 80% of the pre-pandemic figures will be attained, with a full recovery being expected by 2024 (UNWTO, 2022 ).

Given the importance of this economic activity, many countries consider tourism to be a tool enabling economic growth (Corbet et al., 2019 ; Ohlan, 2017 ; Xia et al., 2021 ). Numerous works have analyzed the relationship between increased tourism and economic growth; and some systematic reviews have been carried out on this relationship (Brida et al., 2016 ; Ahmad et al., 2020 ), examining the main contributions over the first two decades of this century. These reviews have revealed evidence in this area: in some cases, it has been found that tourism contributes to economic growth while, in other cases, the economic cycle influences tourism expansion. Moreover, other works offer evidence of a bi-directional relationship between these variables.

Distinct international organizations (OECD, 2010 ; UNCTAD, 2011 ) have suggested that not only does tourism promote economic growth, it also contributes to socio-economic advances in the host regions. This may be the real importance of tourism, since the ultimate objective of any government is to improve a country’s socio-economic development (UNDP, 1990 ).

The development of economic and other policies related to the economic scope of tourism, in addition to promoting economic growth, are also intended to improve other non-economic factors such as education, safety, and health. Improvements in these factors lead to a better life for the host population (Lee, 2017 ; Todaro and Smith, 2020 ).

Given tourism’s capacity as an instrument of economic development (Cárdenas-García et al., 2015 ), distinct institutions such as the United Nations Conference on Trade and Development, the United Nations Economic Commission for Africa, the United Nations World Tourism Organization and the World Bank, have begun funding projects that consider tourism to be a tool for improved socio-economic development, especially in less advanced countries (Carrillo and Pulido, 2019 ).

This new trend within the scientific literature establishes, firstly, that tourism drives economic growth and, secondly, that thanks to this economic growth, the population’s economic conditions may be improved (Croes et al., 2021 ; Kubickova et al., 2017 ). However, to take advantage of the economic growth generated by tourism activity to boost economic development, specific policies should be developed. These policies should determine the initial conditions to be met by host countries committed to tourism as an instrument of economic development. These conditions include regulation, tax system, and infrastructure provision (Cárdenas-García and Pulido-Fernández, 2019 ; Lejárraga and Walkenhorst, 2013 ; Meyer and Meyer, 2016 ).

Therefore, it is necessary to differentiate between the analysis of the relationship between tourism and economic growth, whereby tourism boosts the economy of countries committed to tourism, traditionally measured through an increase in the Gross Domestic Product (Alcalá-Ordóñez et al., 2023 ; Brida et al., 2016 ), and the analysis of the relationship between tourism and economic development, which measures the effect of tourism on other factors (not only economic content but also inequality, education, and health) which, together with economic criteria, serve as the foundation to measure a population’s development (Todaro and Smith, 2020 ).

However, unlike the analysis of the relationship between tourism and economic growth, few empirical studies have examined tourism’s capacity as a tool for development (Bojanic and Lo, 2016 ; Cárdenas-García and Pulido-Fernández, 2019 ; Croes, 2012 ).

To help fill this gap in the literature analyzing the relationship between tourism and economic development, this work examines the contribution of tourism to economic development, given that the relationship between tourism and economic growth has been widely analyzed by the scientific literature. Moreover, given that the literature has demonstrated that tourism contributes to economic growth, this work aims to analyze whether it also contributes to economic development, considering development in the broadest possible sense by including economic and socioeconomic variables in the multi-dimensional concept (Wahyuningsih et al., 2020 ).

Therefore, based on the results of this work, it is possible to determine whether the commitment made by many international organizations and institutions in financing tourism projects designed to improve the host population’s socioeconomic conditions, especially in countries with lower development levels, has, in fact, resulted in improved development levels.

It also presents a critical view of causal analyses that rely on heterogeneous panels, examining whether the conclusions reached for a complete panel differ from those obtained when analyzing homogeneous groups within the panel. As seen in the literature review analyzing the relationship between tourism and economic development, empirical works using panel data from several countries tend to generalize the results obtained to the entire panel, without verifying whether, in fact, they are relevant for all of the analyzed countries or only some of the same. Therefore, this study takes an innovative approach by examining the panel countries separately, analyzing the homogeneous groups distinctly.

Therefore, this article presents an empirical analysis examining whether a causal relationship exists between tourism and economic development, with development being considered to be a multi-dimensional variable including a variety of factors, distinct from economic ones. Panel data from 123 countries during the 1995–2019 period was considered to examine the causal relationship between tourism and economic development. For this, the Granger causality test was performed, applying the adaptation of this test made by Dumistrescu and Hurlin. First, a causal analysis was performed collectively for all of the countries of the panel. Then, a specific analysis was performed for each of the homogeneous groups of countries identified within the panel, formed according to levels of tourism specialization and development.

This article provides information on tourism’s capacity to serve as an instrument of development, helping to fill the gap in scientific research in this area. It critically examines the use of causal analyses based on heterogeneous samples of countries. This work offers the following main novelties as compared to prior works on the same topic: firstly, it examines the relationship between tourism and economic development, while the majority of the existing works only analyze the relationship between tourism and economic growth; secondly, it analyzes a large sample of countries, representing all of the global geographic areas, whereas the literature has only considered works from specific countries or a limited number of nations linked to a specific country in a specific geographical area, and; thirdly, it analyzes the panel both individually and collectively, for each of the homogenous groups of countries identified, permitting the adoption of specific policies for each group of countries according to the identified relationship, as compared to the majority of works that only analyze the complete panel, generalizing these results for all countries in the sample.

Overall, the results suggest that a relationship exists between tourism and development in all of the analyzed countries from the sample. A specific analysis was performed for homogeneous country groups, only finding a causal relationship between tourism and development in certain country groups. This suggests that the use of heterogeneous country samples in causal analyses may give rise to inappropriate conclusions. This may be the case, for example, when finding causality for a broad panel of countries, although, in fact, only a limited number of panel units actually explain this causal relationship.

The remainder of the document is organized as follows: the next section offers a review of the few existing scientific works on the relationship between tourism and economic development; section three describes the data used and briefly explains the methodology carried out; section four details the results obtained from the empirical analysis; and finally, the conclusions section discusses the main implications of the work, also providing some recommendations for economic policy.

Tourism and economic development

Numerous organizations currently recognize the importance of tourism as an instrument of economic development. It was not until the late 20th century, however, when the United Nations World Tourism Organization (UNWTO), in its Manila Declaration, established that the development of international tourism may “help to eliminate the widening economic gap between developed and developing countries and ensure the steady acceleration of economic and social development and progress, in particular of the developing countries” (UNWTO, 1980 ).

From a theoretical point of view, tourism may be considered an effective activity for economic development. In fact, the theoretical foundations of many works are based on the relationship between tourism and development (Ashley et al., 2007 ; Bolwell and Weinz, 2011 ; Dieke, 2000 ; Sharpley and Telfer, 2015 ; Sindiga, 1999 ).

The link between tourism and economic development may arise from the increase in tourist activity, which promotes economic growth. As a result of this economic growth, policies may be developed to improve the resident population’s level of development (Alcalá-Ordóñez and Segarra, 2023 ).

Therefore, it is essential to identify the key variables permitting the measurement of the level of economic development and, therefore, those variables that serve as a basis for analyzing whether tourism results in improved the socioeconomic conditions of the host population (Croes et al., 2021 ). Since economic development refers not only to economic-based variables, but also to others such as inequality, education, or health (Todaro and Smith, 2020 ), when analyzing the economic development concept, it has been frequently linked to human development (Pulido-Fernández and Cárdenas-García, 2021 ). Thus, we wish to highlight the major advances resulting from the publication of the Human Development Index (HDI) when measuring economic development, since it defines development as a multidimensional variable that combines three dimensions: health, education, and income level (UNDP, 2023 ).

However, despite the importance that many organizations have given to tourism as an instrument of economic development, basing their work on the relationship between these variables, a wide gap continues to exist in the scientific literature for empirical studies that examine the existence of a relationship between tourism and economic development, with very few empirical analyses analyzing this relationship.

First, a group of studies has examined the causal relationship between tourism and economic development, using heterogeneous samples, and without previously grouping the subjects based on homogeneous characteristics. Croes ( 2012 ) analyzed the relationship between tourism and economic development, measured through the HDI, finding that a bidirectional relationship exists for the cases of Nicaragua and Costa Rica. Using annual data from 2001 to 2014, Meyer and Meyer ( 2016 ) performed a collective analysis of South African regions, determining that tourism contributes to economic development. For a panel of 63 countries worldwide, and once again relying on the HDI to define economic development, it was determined that tourism contributes to economic development. Kubickova et al. ( 2017 ), using annual data for the 1995–2007 period, analyzed Central America and Caribbean nations, determining the existence of this relationship by which tourism influences the level of economic development and that the level of development conditions the expansion of tourism. Another work examined nine micro-states of America, Europe, and Africa (Fahimi et al., 2018 ); and 21 European countries in which human capital was measured, as well as population density and tourism income, analyzing panel data and determining that tourism results in improved economic development. Finally, within this first group of works, Chattopadhyay et al. ( 2022 ), using a broad panel of destinations, (133 countries from all geographic areas of the globe) determined that there is no relationship between tourism and economic development.

Studies performed with large country samples that attempt to determine the causal relationship between tourism and economic development by analyzing countries that do not necessarily share homogeneous characteristics, may lead to erroneous conclusions, establishing causality (or not) for panel sets even when this situation is actually explained by a small number of panel units.

Second, another group of studies have analyzed the causal relationship between tourism and economic development, considering the previous limitation, and has grouped the subjects based on their homogeneous characteristics. Cárdenas-García et al. ( 2015 ) used annual data from 1990–2010, in a collective analysis of 144 countries, making a joint panel analysis and then examining two homogeneous groups of countries based on their level of economic development. They determined that tourism contributes to economic development, but only in the most developed group of countries. They determined that tourism contributes to economic development, both for the total sample and for the homogeneous groups analyzed. Pulido-Fernández and Cárdenas-García ( 2021 ), using annual data for the 1993–2017 period, performed a joint analysis of 143 countries, followed by a specific analysis for three groups of countries sharing homogeneous characteristics in terms of tourism growth and development level. They determined that tourism contributes to economic development and that development level conditions tourism growth in the most developed countries.

Finally, another group of studies has analyzed the causal relationship between tourism and economic development in specific cases examined on an individual basis. In a specific analysis by Aruba et al. ( 2016 ), it was determined that tourism contributes to human development. Analyzing Malaysia, Tan et al. ( 2019 ) determined that tourism contributes to development, but only over the short term, and that level of development does not influence tourism growth. Similar results were obtained by Boonyasana and Chinnakum ( 2020 ) in an analysis carried out in Thailand. In this case of Thailand (Boonyasana and Chinnakum, 2020 ), which relied on the HDI, the relationship with economic growth was also analyzed, finding that an increase in tourism resulted in improved economic development. Finally, Croes et al. ( 2021 ), in a specific analysis of Poland, determined that tourism does not contribute to development.

As seen from the analysis of the most relevant publications detailed in Table 1 , few empirical works have considered the relationship between tourism and economic development, in contrast to the numerous works from the scientific literature that have examined the relationship between tourism and economic growth. Most of the works that have empirically analyzed the relationship between tourism and economic development have determined that tourism positively influences the improved economic development in host destinations. To a lesser extent, some studies have found a bidirectional relationship between these variables (Croes, 2012 ; Kubickova et al., 2017 ; Pulido-Fernández and Cárdenas-García, 2021 ) while others have found no relationship between tourism and economic development (Chattopadhyay et al., 2022 ; Croes et al., 2021 ).

Furthermore, in empirical works relying on panel data, the results have tended to be generalized to the entire panel, suggesting that tourism improves economic development in all countries that are part of the panel. This has been the case in all of the examined works, with the exception of two studies that analyzed the panel separately (Cárdenas-García et al., 2015 ; Pulido-Fernández and Cárdenas-García, 2021 ).

Thus, it may be suggested that the use of very large country panels and, therefore, including very heterogeneous destinations, as was the case in the works of Biagi et al. ( 2017 ) using a panel of 63 countries, as well as that of Chattopadhyay et al. ( 2022 ) working with a panel of 133 countries, may lead to error, given that this relationship may only arise in certain destinations of the panel, although it is generalized to the entire panel.

This work serves to fill this gap in the literature by analyzing the panel both collectively and separately, for each of the homogenous groups of countries that have been previously identified.

The lack of relevant works on the relationship between tourism and development, and of studies using causal analyses to examine these variables based on heterogeneous panels, may lead to the creation of rash generalizations regarding the entirety of the analyzed countries. Thus, conclusions may be reached that are actually based on only specific panel units. Therefore, we believe that this study is justified.

Methodological approach

Given the objective of this study, to determine whether a causal relationship exists between tourism and socio-economic development, it is first necessary to identify the variables necessary to measure tourism activity and development level. Thus, the indicators are highly relevant, given that the choice of indicator may result in distinct results (Rosselló-Nadal and He, 2020 ; Song and Wu, 2021 ).

Table 2 details the measurement variables used in this work. Specifically, the following indicators have been used in this paper to measure tourism and economic development:

Measurement of tourist activity. In this work, we decided to consider tourism specialization, examining the number of international tourists received by a country with regard to its population size as the measurement variable.

This information on international tourists at a national level has been provided annually by the United Nations World Tourism Organization since 1995 (UNWTO, 2023 ). This variable has been relativized based on the country’s population, according to information provided by the World Bank on the residents of each country (WB, 2023 ).

Tourism specialization is considered to be the level of tourism activity, specifically, the arrival of tourists, relativized based on the resident population, which allows for comparisons to be made between countries. It accurately measures whether or not a country is specialized in this economic activity. If the variable is used in absolute values, for example, the United States receives more tourists than Malta, so based on this variable it may be that the first country is more touristic than the second. However, in reality, just the opposite happens, Malta is a country in which tourist activity is more important for its economy than it is in the United States, so the use of tourist specialization as a measurement variable classifies, correctly, both Malta as a country with high tourism specialization and to the United States as a country with low tourism specialization.

Therefore, most of the scientific literature establishes the need to use the total number of tourists relativized per capita, given that this allows for the determination of the level of tourism specialization of a tourism destination (Dritsakis, 2012 ; Tang and Abosedra, 2016 ); furthermore, this indicator has been used in works analyzing the relationship between tourism and economic development (for example, Biagi et al., 2017 ; Boonyasana and Chinnakum; 2020 ; Croes et al., 2021 ; Fahimi et al., 2018 ).

Although some works have used other variables to measure tourism, such as tourism income, exports, or tourist spending, these variables are not available for all of the countries making up the panel, so the sample would have been significantly reduced. Furthermore, the data available for these alternative variables do not come from homogeneous databases, and therefore cannot be compared.

Measurement of economic development. In this work, the Human Development Index has been used to measure development.

This information is provided by the United Nations Development Program, which has been publishing it annually at the country level since 1990 (UNDP, 2023 ).

The selection of this indicator to measure economic development is in line with other works that have defended its use to measure the impact on development level (for example, Jalil and Kamaruddin, 2018 ; Sajith and Malathi, 2020 ); this indicator has also been used in works analyzing the relationship between tourism and economic development (for example, Meyer and Meyer, 2016 ; Kubickova et al., 2017 ; Pulido-Fernández and Cárdenas-García, 2021 ).

Although some works have used other variables, such as poverty or inequality, to measure development, these variables are not available for all of the countries forming the panel. Therefore the sample would have been considerably reduced and the data available for these alternative variables do not come from homogenous databases, and therefore comparisons cannot be made.

These indicators are available for a total of 123 countries, across the globe. Thus, these countries form part of the sample analyzed in this study.

As for the time frame considered in this work, two main issues were relevant when determining this period: on the one hand, there is an initial time restriction for the analyzed series, given that information on the arrival of international tourists is only available as of 1995, the first year when this information was provided by the UNWTO. On the other hand, it was necessary to consider the effect of the Covid-19 pandemic and the resulting tourism sector crisis, which also affected the global economy as a whole. Therefore, our time series ended as of 2019, with the overall time frame including data from 1995 to 2019, a 25-year period.

Previous considerations

Caution should be taken when considering causality tests to determine the relationships between two variables, especially in cases in which large heterogeneous samples are used. This is due to the fact that generalized conclusions may be reached when, in fact, the causality is only produced by some of the subjects of the analyzed sample. This study is based on this premise. While heterogeneity in a sample is clearly a very relevant aspect, in some cases, it may lead to conclusions that are less than appropriate.

In this work, a collective causal analysis has been performed on all of the countries of the panel, which consists of 123 countries. However, given that it is a broad sample including countries having major differences in terms of size, region, development level, or tourism performance, the conclusions obtained from this analysis may lead to the generalization of certain conclusions for the entire sample set, when in fact, these relationships may only be the case for a very small portion of the sample. This has been the case in other works that have made generalized conclusions from relatively large samples in which the sample’s homogeneity regarding certain patterns was not previously verified (Badulescu et al., 2021 ; Ömer et al., 2018 ; Gedikli et al., 2022 ; Meyer and Meyer, 2016 ; Xia et al., 2021 ).

Therefore, after performing a collective analysis of the entire panel, the causal relationship between tourism and development was then determined for homogeneous groups of countries that share common patterns of tourism performance and economic development level, to analyze whether the generalized conclusions obtained in the previous section differ from those made for the individual groups. This was in line with strategies that have been used in other works that have grouped countries based on tourism performance (Min et al., 2016 ) or economic development level (Cárdenas-García et al., 2015 ), prior to engaging in causal analyses. To classify the countries into homogeneous groups based on tourism performance and development level, a previous work was used (Brida et al., 2023 ) which considered the same sample of 123 countries, relying on the same data to measure tourism and development level and the same time frame. This guarantees the coherence of the results obtained in this work.

From the entire panel of 123 countries, a total of six country groups were identified as having a similar dynamic of tourism and development, based on qualitative dynamic behavior. In addition, an “outlier” group of countries was found. These outlier countries do not fit into any of the groups (Brida et al., 2023 ). The three main groups of countries were considered, discarding three other groups due to their small size. Table 3 presents the group of countries sharing similar dynamics in terms of tourism performance and economic development level.

Applied methodology

As indicated above, this work uses the Tourist Specialization Rate (TIR) and the Human Development Index (HDI) to measure tourism and economic development, respectively. In both cases, we work with the natural logarithm (l.TIR and l.HDI) as well as the first differences between the variables (d.l.TIR and d.l.HDI), which measure the growth of these variables.

A complete panel of countries is used, consisting of 123 countries. The three main groups indicated in the previous section are also considered (the first of the groups contains 36 countries, the second contains 29 and the last group contains 43).

The Granger causality test ( 1969 ) is used to analyze the relationships between tourism specialization and development level; this test shows if one variable predicts the other, but this should not be confused with a cause-effect relationship.

In the context of panel data, different tests may be used to analyze causality. Most of these tests differ with regard to the assumptions of homogeneity of the panel unit coefficients. While the standard form of the Granger causality test for panels assumes that all of the coefficients are equal between the countries forming part of the panel, the Dumitrescu and Hurlin test (2012) considers that the coefficients are different between the countries forming part of the panel. Therefore, in this work, Granger’s causality is analyzed using the Dumitrescu and Hurlin test (2012). In this test, the null hypothesis is of no homogeneous causality; in other words, according to the null hypothesis, causality does not exist for any of the countries of the analyzed sample whereas, according to the alternative hypothesis, in which the regression model may be different in the distinct countries, causality is verified for at least some countries. The approach used by Dumitrescu and Hurlin ( 2012 ) is more flexible in its assumptions since although the coefficients of the regressions proposed in the tests are constant over time, the possibility that they may differ for each of the panel elements is accepted. This approach has more realistic assumptions, given that countries exhibit different behaviors. One relevant aspect of this type of tests is that they offer no information on which countries lead to the rejection of the lack of causality.

Given the specific characteristics of this type of tests, the presence of very heterogeneous samples may lead to inappropriate conclusions. For example, causality may be assumed for a panel of countries, when only a few of the panel’s units actually explain this relationship. Therefore, this analysis attempts to offer novel information on this issue, revealing that the conclusions obtained for the complete set of 123 countries are not necessarily the same as those obtained for each homogeneous group of countries when analyzed individually.

Given the nature of the variables considered in this work, specifically, regarding tourism, it is expected that a shock taking place in one country may be transmitted to other countries. Therefore, we first analyze the dependency between countries, since this may lead to biases (Pesaran, 2006 ). The Pesaran cross-sectional dependence test (2004) is used for the total sample and for each of the three groups individually.

First, a dependence analysis is performed for the countries of the sample, verifying the existence of dependence between the panel subjects. A cross-sectional dependence test (Pesaran, 2004 ) is used, first for the overall set of countries in the sample and second, for each of the groups of countries sharing homogeneous characteristics.

The results are presented in Table 4 , indicating that the test is statistically significant for the two variables, both for all of the countries in the sample and for each of the homogeneous country clusters, for the variables taken in logarithms as well as their first differences.

Upon rejecting the null hypothesis of non-cross-sectional dependence, it is assumed that a shock occurs in a country that may be transmitted to other countries in the sample. In fact, the lack of dependence between the variables, both tourism and development, is natural in this type of variables, given the economic cycle through the globalization of the economic activity, common regions visited by tourists, the spillover effect, etc.

Second, the stationary nature of the series is tested, given that cross-sectional dependence has been detected between the variables. First-generation tests may present certain biases in the rejection of the null hypothesis since first-generation unit root tests do not permit the inclusion of dependence between countries (Pesaran, 2007 ). On the other hand, second-generation tests permit the inclusion of dependence and heterogeneity. Therefore, for this analysis, the augmented IPS test (CIPS) proposed by Pesaran ( 2007 ) is used. This second-generation unit root test is the most appropriate for this case, given the cross-sectional dependence.

The results are presented in Table 5 , showing the statistics of the CIPS test for both the overall set of countries in the sample and in each of the homogeneous clusters of countries. The results are presented for models with 1, 2, and 3 delays, considering both the variables in the logarithm and their first differences.

As observed, the null hypothesis of unit root is not rejected for the variables in levels, but it is rejected for the first differences. This result is found in all of the cases, for both the total sample and for each of the homogeneous groups, with a significance of 1%. Therefore, the variables are stationary in their first differences, that is, the variables are integrated at order 1. Given that the causality test requires stationary variables, in this work it is used with the variation or growth rate of the variables, that is, the variable at t minus the variable at t−1.

Finally, to analyze Granger’s causality, the test by Dumitrescu and Hurlin ( 2012 ) is used. This test is used to analyze the causal relationship in both directions; that is, whether tourism contributes to economic development and whether the economic development level conditions tourism specialization. Statistics are calculated considering models with 1, 2, and 3 delays. Considering that cross-sectional dependence exists, the p-values are corrected using bootstrap techniques (making 500 replications). Given that the test requires stationary variables, primary differences of both variables were considered.

Table 6 presents the result of the Granger causality analysis using the Dumitrescu and Hurlin test (2012), considering the null hypothesis that tourism does not condition development level, either for all of the countries or for each homogeneous country cluster.

For the entire sample of countries, the results suggest that the null hypothesis of no causality from tourism to development was rejected when considering 3 delays (in other works analyzing the relationship between tourism and development, the null hypothesis was rejected with a similar level of delay: Rivera ( 2017 ) when considering 3–4 delays or Ulrich et al. ( 2018 ) when considering 3 delays). This suggests that for the entire panel, one-way causality exists whereby tourism influences economic development, demonstrating that tourism specialization contributes positively to improving the economic development of countries opting for tourism development. This is in line with the results of Meyer and Meyer ( 2016 ), Ridderstaat et al. ( 2016 ); Biagi et al. ( 2017 ); Fahimi et al. ( 2018 ); Tan et al. ( 2019 ), or Boonyasana and Chinnakum ( 2020 ).

However, the previous conclusion is very general, given that it is based on a very large sample of countries. Therefore, it may be erroneous to generalize that tourism is a tool for development. In fact, the results indicate that, when analyzing causality by homogeneous groups of countries, sharing similar dynamics in both tourism and development, the null hypothesis of no causality from tourism to development is only rejected for the group C countries, when considering three delays. Therefore, the development of generalized policies to expand tourism in order to improve the socioeconomic conditions of any destination type should consider that this relationship between tourism and economic development does not occur in all cases. Thus, it should first be determined if the countries opting for this activity have certain characteristics that will permit a positive relationship between said variables.

In other words, it may be a mistake to generalize that tourism contributes to economic development for all countries, even though a causal relationship exists for the entire panel. Instead, it should be understood that tourism permits an improvement in the level of development only in certain countries, in line with the results of Cárdenas-García et al. ( 2015 ) or Pulido-Fernández and Cárdenas-García ( 2021 ). In this specific work, this positive relationship between tourism and development only occurs in countries from group C, which are characterized by a low level of tourism specialization and a low level of development. Some works have found similar results for countries from group C. For example, Sharma et al. ( 2020 ) found the same relationship for India, while Nonthapot ( 2014 ) had similar findings for certain countries in Asia and the Pacific, which also made up group C. Some recent works have analyzed the relationship between tourism specialization and economic growth, finding similar results. This has been the case with Albaladejo et al. ( 2023 ), who found a relationship from tourism to economic growth only for countries where income is low, and the tourism sector is not yet developed.

These countries have certain limitations since even when tourism contributes to improved economic development, their low levels of tourism specialization do not allow them to reach adequate host population socioeconomic conditions. Therefore, investments in tourism are necessary there in order to increase tourism specialization levels. This increase in tourism may allow these countries to achieve development levels that are similar to other countries having better population conditions.

Therefore, in this group, consisting of 43 countries, a causal relationship exists, given that these countries are characterized by a low level of tourism specialization. However, the weakness of this activity, due to its low relevance in the country, prevents it from increasing the level of economic development. In these countries (details of these countries can be found in Table 3 , specifically, the countries included in Group C), policymakers have to develop policies to improve tourism infrastructure as a prior step to improving their levels of development.

On the other hand, in Table 7 , the results of Granger’s causal analysis based on the Dumitrescu and Hurlin test (2012) are presented, considering the null hypothesis that development level does not condition an increase in tourism, both in the overall sample set and in each of the homogeneous country clusters.

The results indicate that, for the entire country sample, the null hypothesis of no causality from development to tourism is not rejected, for any type of delay. This suggests that, for the entire panel, one-way causality does not exist, with level of development influencing the level of tourism specialization. This is in line with the results of Croes et al. ( 2021 ) in a specific analysis in Poland.

Once again, this conclusion is quite general, given that it has been based on a very broad sample of countries. Therefore, it may be erroneous to generalize that the development level does not condition tourism specialization. Past studies using a large panel of countries, such as the work of Chattopadhyay et al. ( 2022 ) analyzing panel data from 133 countries, have been generalized to all of the analyzed countries, suggesting that economic development level does not condition the arrival of tourists to the destination, although, in fact, this relationship may only exist in specific countries within the analyzed panel.

In fact, the results indicate that, when analyzing causality by homogeneous country groups sharing a similar dynamic, for both tourism and development, the null hypothesis of no causality from development to tourism is only rejected for country group A when considering 2–3 delays. Although the statistics of the test differ, when the sample’s time frame is small, as in this case, the Z-bar tilde statistic is more appropriate.

Thus, development level influences tourism growth in Group A countries, which are characterized by a high level of development and tourism specialization, in accordance with the prior results of Pulido-Fernández and Cárdenas-García ( 2021 ).

These results, suggesting that tourism is affected by economic development level, but only in the most developed countries, imply that the existence of better socioeconomic conditions in these countries, which tend to have better healthcare systems, infrastructures, levels of human resource training, and security, results in an increase in tourist arrivals to these countries. In fact, when traveling to a specific tourist destination, if this destination offers attractive factors and a higher level of economic development, an increase in tourist flows was fully expected.

In this group, consisting of 36 countries, the high development level, that is, the proper provision of socio-economic factors in their economic foundations (training, infrastructures, safety, health, etc.) has led to the attraction of a large number of tourists to their region, making their countries having high tourism specialization.

Although international organizations have recognized the importance of tourism as an instrument of economic development, based on the theoretical relationship between these two variables, few empirical studies have considered the consequences of the relationship between tourism and development.

Furthermore, some hasty generalizations have been made regarding the analysis of this relationship and the analysis of the relationship of tourism with other economic variables. Oftentimes, conclusions have been based on heterogeneous panels containing large numbers of subjects. This may lead to erroneous results interpretation, basing these results on the entire panel when, in fact, they only result from specific panel units.

Given this gap in the scientific literature, this work attempts to analyze the relationship between tourism and economic development, considering the panel data in a complete and separate manner for each of the previously identified country groups.

The results highlight the need to adopt economic policies that consider the uniqueness of each of the countries that use tourism as an instrument to improve their socioeconomic conditions, given that the results differ according to the specific characteristics of the analyzed country groups.

This work provides precise results regarding the need for policymakers to develop public policies to ensure that tourism contributes to the improvement of economic development, based on the category of the country using this economic activity to achieve greater levels of economic development.

Specifically, this work has determined that tourism contributes to economic development, but only in countries that previously had a lower level of tourism specialization and were less developed. This highlights the need to invest in tourism to attract more tourists to these countries to increase their economic development levels. Countries having major natural attraction resources or factors, such as the Dominican Republic, Egypt, India, Morocco, and Vietnam, need to improve their positioning in the international markets in order to attain a higher level of tourism specialization, which will lead to improved development levels.

Furthermore, the results of this study suggest that a greater past economic development level of a country will help attract more tourists to these countries, highlighting the need to invest in security, infrastructures, and health in order for these destinations to be considered attractive and increase tourist arrival. In fact, given their increased levels of development, countries such as Spain, Greece, Italy, Qatar, and Uruguay have become attractive to tourists, with soaring numbers of visitors and high levels of tourism specialization.

Therefore, the analysis of the relationship between tourism and economic development should focus on the differentiated treatment of countries in terms of their specific characteristics, since working with panel data with large samples and heterogenous characteristics may lead to incorrect results generalizations to all of the analyzed destinations, even though the obtained relationship in fact only takes place in certain countries of the sample.

Conclusions and policy implications

Within this context, the objective of this study is twofold: on the one hand, it aims to contribute to the lack of empirical works analyzing the causal relationship between tourism and economic development using Granger’s causality analysis for a broad sample of countries from across the globe. On the other hand, it critically examines the use of causality analysis in heterogeneous samples, by verifying that the results for the panel set differ from the results obtained when analyzing homogeneous groups in terms of tourism specialization and development level.

In fact, upon analyzing the causal relationship from tourism to development, and the causal relationship from development to tourism, the results from the entire panel, consisting of 123 countries, differ from those obtained when analyzing causality by homogeneous country groups, in terms of tourism specialization and economic development dynamics of these countries.

On the one hand, a one-way causality relationship is found to exist, whereby tourism influences economic development for the entire sample of countries, although this conclusion cannot be generalized, since this relationship is only explained by countries belonging to Group C (countries with low levels of tourism specialization and low development levels). This indicates that, although a causal relationship exists by which tourism contributes to economic development in these countries, the low level of tourism specialization does not permit growth to appropriate development levels.

The existence of a causal relationship whereby the increase in tourism precedes the improvement of economic development in this group of countries having a low level of tourism specialization and economic development, suggests the appropriateness of the focus by distinct international organizations, such as the United Nations Conference on Trade and Development or the United Nations Economic Commission for Africa, on funding tourism projects (through the provision of tourism infrastructure, the stimulation of tourism supply, or positioning in international markets) in countries with low economic development levels. This work has demonstrated that investment in tourism results in the attracting of a greater flow of tourists, which will contribute to improved economic development levels.

Therefore, both international organizations financing projects and public administrations in these countries should increase the funding of projects linked to tourism development, in order to increase the flow of tourism to these destinations. This, given that an increase in tourism specialization suggests an increased level of development due to the demonstrated existence of a one-way causal relationship from tourism to development in these countries, many of which form part of the group of so-called “least developed” countries. However, according to the results obtained in this work, this relationship is not instantaneous, but rather, a certain delay exists in order for economic development to improve as a result of the increase in tourism. Therefore, public managers must adopt a medium and long-term vision of tourism activity as an instrument of development, moving away from short-term policies seeking immediate results, since this link only occurs over a broad time horizon.

On the other hand, this study reveals that a one-way causal relationship does not exist, by which the level of development influences tourism specialization level for the entire sample of countries. However, this conclusion, once again, cannot be generalized given that in countries belonging to Group A (countries with a high development level and a high tourism specialization level), a high level of economic development determines a higher level of tourism specialization. This is because the socio-economic structure of these countries (infrastructures, training or education, health, safety, etc.) permits their shaping as attractive tourist destinations, thereby increasing the number of tourists visiting them.

Therefore, investments made by public administrations to improve these factors in other countries that currently do not display this causal relationship implies the creation of the necessary foundations to increase their tourism specialization and, therefore, as shown in other works, tourism growth will permit economic growth, with all of the associated benefits for these countries.

Therefore, to attract tourist flows, it is not only important for a country to have attractive factors or resources, but also to have an adequate level of prior development. In other words, the tourists should perceive an adequate level of security in the destination; they should be able to use different infrastructures such as roads, airports, or the Internet; and they should receive suitable services at the destination from personnel having an appropriate level of training. The most developed countries, which are the destinations having the greatest endowment of these resources, are the ones that currently receive the most tourist flows thanks to the existence of these factors.

Therefore, less developed countries that are committed to tourism as an instrument to improve economic development should first commit to the provision of these resources if they hope to increase tourist flows. If this increase in tourism takes place in these countries, their economic development levels have been demonstrated to improve. However, since these countries are characterized by low levels of resources, cooperation by organizations financing the necessary investments is key to providing them with these resources.

Thus, a critical perspective is necessary when considering the relationship between tourism and economic development based on global causal analysis using heterogeneous samples with numerous subjects. As in this case, carrying out analyses on homogeneous groups may offer interesting results for policymakers attempting to suitably manage population development improvements due to tourism growth and tourism increases resulting from higher development levels.

One limitation of this work is its national scope since evidence suggests that tourism is a regional and local activity. Therefore, it may be interesting to apply this same approach on a regional level, using previously identified homogeneous groups.

And given that the existence of a causal relationship (in either direction) between tourism and development has only been determined for a specific set of countries, future works could consider other country-specific factors that may determine this causal relationship, in addition to the dynamics of tourism specialization and development level.

Data availability

The datasets generated during and/or analyzed during the current study are available from the corresponding author upon reasonable request.

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Cárdenas-García, P.J., Brida, J.G. & Segarra, V. Modeling the link between tourism and economic development: evidence from homogeneous panels of countries. Humanit Soc Sci Commun 11 , 308 (2024). https://doi.org/10.1057/s41599-024-02826-8

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As UN custodian, the UNWTO Department of Statistics compiles data on the Sustainable Development Goals indicators 8.9.1 and 12.b.1, included in the Global Indicator Framework . Data collection started in 2019 and provides data from 2008 onwards, the latest update took place on 29 August 2023.   

Tourism direct GDP as a proportion of total GDP (indicator 8.9.1) 

Indicator 8.9.1 on Tourism Direct GDP helps to monitor Target 8.9 which calls on countries “to promote sustainable tourism” under Goal 8 on decent Work and Economic Growth.

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Indicator 12.b.1 shows the preparedness of countries to “develop and implement tools to monitor sustainable development impacts for sustainable tourism” called for in target 12.b under Goal 12 on Sustainable Consumption and Production. More specifically, it tracks the implementation of the most relevant Tourism Satellite Account (TSA) and System of Environmental Economic Accounting (SEEA) tables.

In the past, the UNWTO has conducted studies on the implementation of the TSA:RMF 2008, the latest being available here .

Reimagining the $9 trillion tourism economy—what will it take?

Tourism made up 10 percent of global GDP in 2019 and was worth almost $9 trillion, 1 See “Economic impact reports,” World Travel & Tourism Council (WTTC), wttc.org. making the sector nearly three times larger than agriculture. However, the tourism value chain of suppliers and intermediaries has always been fragmented, with limited coordination among the small and medium-size enterprises (SMEs) that make up a large portion of the sector. Governments have generally played a limited role in the industry, with partial oversight and light-touch management.

COVID-19 has caused an unprecedented crisis for the tourism industry. International tourist arrivals are projected to plunge by 60 to 80 percent in 2020, and tourism spending is not likely to return to precrisis levels until 2024. This puts as many as 120 million jobs at risk. 2 “International tourist numbers could fall 60-80% in 2020, UNWTO reports,” World Tourism Organization, May 7, 2020, unwto.org.

Reopening tourism-related businesses and managing their recovery in a way that is safe, attractive for tourists, and economically viable will require coordination at a level not seen before. The public sector may be best placed to oversee this process in the context of the fragmented SME ecosystem, large state-owned enterprises controlling entry points, and the increasing impact of health-related agencies. As borders start reopening and interest in leisure rebounds in some regions , governments could take the opportunity to rethink their role within tourism, thereby potentially both assisting in the sector’s recovery and strengthening it in the long term.

In this article, we suggest four ways in which governments can reimagine their role in the tourism sector in the context of COVID-19.

1. Streamlining public–private interfaces through a tourism nerve center

Before COVID-19, most tourism ministries and authorities focused on destination marketing, industry promotions, and research. Many are now dealing with a raft of new regulations, stimulus programs, and protocols. They are also dealing with uncertainty around demand forecasting, and the decisions they make around which assets—such as airports—to reopen will have a major impact on the safety of tourists and sector employees.

Coordination between the public and private sectors in tourism was already complex prior to COVID-19. In the United Kingdom, for example, tourism falls within the remit of two departments—the Department for Business, Energy, and Industrial Strategy (BEIS) and the Department for Digital, Culture, Media & Sport (DCMS)—which interact with other government agencies and the private sector at several points. Complex coordination structures often make clarity and consistency difficult. These issues are exacerbated by the degree of coordination that will be required by the tourism sector in the aftermath of the crisis, both across government agencies (for example, between the ministries responsible for transport, tourism, and health), and between the government and private-sector players (such as for implementing protocols, syncing financial aid, and reopening assets).

Concentrating crucial leadership into a central nerve center  is a crisis management response many organizations have deployed in similar situations. Tourism nerve centers, which bring together public, private, and semi-private players into project teams to address five themes, could provide an active collaboration framework that is particularly suited to the diverse stakeholders within the tourism sector (Exhibit 1).

We analyzed stimulus packages across 24 economies, 3 Australia, Bahrain, Belgium, Canada, Egypt, Finland, France, Germany, Hong Kong, Indonesia, Israel, Italy, Kenya, Malaysia, New Zealand, Peru, Philippines, Singapore, South Africa, South Korea, Spain, Switzerland, Thailand, and the United Kingdom. which totaled nearly $100 billion in funds dedicated directly to the tourism sector, and close to $300 billion including cross-sector packages with a heavy tourism footprint. This stimulus was generally provided by multiple entities and government departments, and few countries had a single integrated view on beneficiaries and losers. We conducted surveys on how effective the public-sector response has been and found that two-thirds of tourism players were either unaware of the measures taken by government or felt they did not have sufficient impact. Given uncertainty about the timing and speed of the tourism recovery, obtaining quick feedback and redeploying funds will be critical to ensuring that stimulus packages have maximum impact.

2. Experimenting with new financing mechanisms

Most of the $100 billion stimulus that we analyzed was structured as grants, debt relief, and aid to SMEs and airlines. New Zealand has offered an NZ $15,000 (US $10,000) grant per SME to cover wages, for example, while Singapore has instituted an 8 percent cash grant on the gross monthly wages of local employees. Japan has waived the debt of small companies where income dropped more than 20 percent. In Germany, companies can use state-sponsored work-sharing schemes for up to six months, and the government provides an income replacement rate of 60 percent.

Our forecasts indicate that it will take four to seven years for tourism demand to return to 2019 levels, which means that overcapacity will be the new normal in the medium term. This prolonged period of low demand means that the way tourism is financed needs to change. The aforementioned types of policies are expensive and will be difficult for governments to sustain over multiple years. They also might not go far enough. A recent Organisation for Economic Co-operation and Development (OECD) survey of SMEs in the tourism sector suggested more than half would not survive the next few months, and the failure of businesses on anything like this scale would put the recovery far behind even the most conservative forecasts. 4 See Tourism policy responses to the coronavirus (COVID-19), OECD, June 2020, oecd.org. Governments and the private sector should be investigating new, innovative financing measures.

Revenue-pooling structures for hotels

One option would be the creation of revenue-pooling structures, which could help asset owners and operators, especially SMEs, to manage variable costs and losses moving forward. Hotels competing for the same segment in the same district, such as a beach strip, could have an incentive to pool revenues and losses while operating at reduced capacity. Instead of having all hotels operating at 20 to 40 percent occupancy, a subset of hotels could operate at a higher occupancy rate and share the revenue with the remainder. This would allow hotels to optimize variable costs and reduce the need for government stimulus. Non-operating hotels could channel stimulus funds into refurbishments or other investment, which would boost the destination’s attractiveness. Governments will need to be the intermediary between businesses through auditing or escrow accounts in this model.

Joint equity funds for small and medium-size enterprises

Government-backed equity funds could also be used to deploy private capital to help ensure that tourism-related SMEs survive the crisis (Exhibit 2). This principle underpins the European Commission’s temporary framework for recapitalization of state-aided enterprises, which provided an estimated €1.9 trillion in aid to the EU economy between March and May 2020. 5 See “State aid: Commission expands temporary framework to recapitalisation and subordinated debt measures to further support the economy in the context of the coronavirus outbreak,” European Commission, May 8, 2020, ec.europa.eu. Applying such a mechanism to SMEs would require creating an appropriate equity-holding structure, or securitizing equity stakes in multiple SMEs at once, reducing the overall risk profile for the investor. In addition, developing a standardized valuation methodology would avoid lengthy due diligence processes on each asset. Governments that do not have the resources to co-invest could limit their role to setting up those structures and opening them to potential private investors.

3. Ensuring transparent, consistent communication on protocols

The return of tourism demand requires that travelers and tourism-sector employees feel—and are—safe. Although international organizations such as the International Air Transport Association (IATA), and the World Travel & Tourism Council (WTTC) have developed a set of guidelines to serve as a baseline, local regulators are layering additional measures on top. This leads to low levels of harmonization regarding regulations imposed by local governments.

Our surveys of traveler confidence in the United States  suggests anxiety remains high, and authorities and destination managers must work to ensure travelers know about, and feel reassured by, protocols put in place for their protection. Our latest survey of traveler sentiment in China  suggests a significant gap between how confident travelers would like to feel and how confident they actually feel; actual confidence in safety is much lower than the expected level asked a month before.

One reason for this low level of confidence is confusion over the safety measures that are currently in place. Communication is therefore key to bolstering demand. Experience in Europe indicates that prompt, transparent, consistent communications from public agencies have had a similar impact on traveler demand as CEO announcements have on stock prices. Clear, credible announcements regarding the removal of travel restrictions have already led to increased air-travel searches and bookings. In the week that governments announced the removal of travel bans to a number of European summer destinations, for example, outbound air travel web search volumes recently exceeded precrisis levels by more than 20 percent in some countries.

The case of Greece helps illustrate the importance of clear and consistent communication. Greece was one of the first EU countries to announce the date of, and conditions and protocols for, border reopening. Since that announcement, Greece’s disease incidence has remained steady and there have been no changes to the announced protocols. The result: our joint research with trivago shows that Greece is now among the top five summer destinations for German travelers for the first time. In July and August, Greece will reach inbound airline ticketing levels that are approximately 50 percent of that achieved in the same period last year. This exceeds the rate in most other European summer destinations, including Croatia (35 percent), Portugal (around 30 percent), and Spain (around 40 percent). 6 Based on IATA Air Travel Pulse by McKinsey. In contrast, some destinations that have had inconsistent communications around the time frame of reopening have shown net cancellations of flights for June and July. Even for the high seasons toward the end of the year, inbound air travel ticketing barely reaches 30 percent of 2019 volumes.

Digital solutions can be an effective tool to bridge communication and to create consistency on protocols between governments and the private sector. In China, the health QR code system, which reflects past travel history and contact with infected people, is being widely used during the reopening stage. Travelers have to show their green, government-issued QR code before entering airports, hotels, and attractions. The code is also required for preflight check-in and, at certain destination airports, after landing.

4. Enabling a digital and analytics transformation within the tourism sector

Data sources and forecasts have shifted, and proliferated, in the crisis. Last year’s demand prediction models are no longer relevant, leaving many destinations struggling to understand how demand will evolve, and therefore how to manage supply. Uncertainty over the speed and shape of the recovery means that segmentation and marketing budgets, historically reassessed every few years, now need to be updated every few months. The tourism sector needs to undergo an analytics transformation to enable the coordination of marketing budgets, sector promotions, and calendars of events, and to ensure that products are marketed to the right population segment at the right time.

Governments have an opportunity to reimagine their roles in providing data infrastructure and capabilities to the tourism sector, and to investigate new and innovative operating models. This was already underway in some destinations before COVID-19. Singapore, for example, made heavy investments in its data and analytics stack over the past decade through the Singapore Tourism Analytics Network (STAN), which provided tourism players with visitor arrival statistics, passenger profiling, spending data, revenue data, and extensive customer-experience surveys. During the COVID-19 pandemic, real-time data on leading travel indicators and “nowcasts” (forecasts for the coming weeks and months) could be invaluable to inform the decisions of both public-sector and private-sector entities.

This analytics transformation will also help to address the digital gap that was evident in tourism even before the crisis. Digital services are vital for travelers: in 2019, more than 40 percent of US travelers used mobile devices to book their trips. 7 Global Digital Traveler Research 2019, Travelport, marketing.cloud.travelport.com; “Mobile travel trends 2019 in the words of industry experts,” blog entry by David MacHale, December 11, 2018, blog.digital.travelport.com. In Europe and the United States, as many as 60 percent of travel bookings are digital, and online travel agents can have a market share as high as 50 percent, particularly for smaller independent hotels. 8 Sean O’Neill, “Coronavirus upheaval prompts independent hotels to look at management company startups,” Skift, May 11, 2020, skift.com. COVID-19 is likely to accelerate the shift to digital as travelers look for flexibility and booking lead times shorten: more than 90 percent of recent trips in China  were booked within seven days of the trip itself. Many tourism businesses have struggled to keep pace with changing consumer preferences around digital. In particular, many tourism SMEs have not been fully able to integrate new digital capabilities in the way that larger businesses have, with barriers including language issues, and low levels of digital fluency. The commission rates on existing platforms, which range from 10 percent for larger hotel brands to 25 percent for independent hotels, also make it difficult for SMEs to compete in the digital space.

Governments are well-positioned to overcome the digital gap within the sector and to level the playing field for SMEs. The Tourism Exchange Australia (TXA) platform, which was created by the Australian government, is an example of enabling at scale. It acts as a matchmaker, connecting suppliers with distributors and intermediaries to create packages attractive to a specific segment of tourists, then uses tourist engagement to provide further analytical insights to travel intermediaries (Exhibit 3). This mechanism allows online travel agents to diversify their offerings by providing more experiences away from the beaten track, which both adds to Australia’s destination attractiveness, and gives small suppliers better access to customers.

Governments that seize the opportunity to reimagine tourism operations and oversight will be well positioned to steer their national tourism industries safely into—and set them up to thrive within—the next normal.

Download the article in Arabic  (513KB)

Margaux Constantin is an associate partner in McKinsey’s Dubai office, Steve Saxon is a partner in the Shanghai office, and Jackey Yu  is an associate partner in the Hong Kong office.

The authors wish to thank Hugo Espirito Santo, Urs Binggeli, Jonathan Steinbach, Yassir Zouaoui, Rebecca Stone, and Ninan Chacko for their contributions to this article.

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2020 Travel and Tourism Industry Impact on the U.S. Economy

Total economic output generated by travel and tourism in the united states decreased 50% in 2020 from 2019, decline in travel and tourism gdp accounted for more than half of the decline in u.s. gdp in 2020, decline in total tourism-related employment accounted for more than a third of the total employment decline in the united states in 2020 .

The National Travel and Tourism Office’s (NTTO) Travel & Tourism Satellite Account, produced annually by the Bureau of Economic Analysis, is the official U.S. Government estimate of the economic impact of the travel and tourism industry in the United States. The latest TTSA shows that in Calendar Year 2020:

Total economic output generated by travel and tourism fell $982.5 billion (-50.1%) from 2019 ($1.96 trillion) to 2020 ($978.4 billion). 

• Among those sectors hardest hit, passenger air transportation services output declined by nearly $214.7 billion in 2020, followed by food services and drinking places/restaurants (down $131.1 billion), traveler accommodations (down $124.6 billion), and tourism-related shopping (down $123.5 billion).
• These four sectors accounted for 60.4% of the decline in total tourism-related output in 2020.

Total tourism-related employment declined from 9.5 million in 2019 to 6.3 million in 2020. This decline of 3.2 million in total tourism-related employment accounted for 34.2% of the overall 9.3 million employment decline in the United States from 2019 to 2020. 

•  Among those sectors hardest hit, employment supported by food services and drinking places declined by 972,000 in 2020, followed by traveler accommodations (down 685,000), air transportation services (down 338,000), and participant sports (down 262,000).
• These four sectors accounted for 70.8% of the decline in total tourism-related employment in 2020.

Travel and tourism value added, or GDP, (in nominal terms, not inflation adjusted) declined from $624.7 billion (2.9% of GDP) in 2019 to $356.8 billion (a historic low of 1.7% of GDP) in 2020 .This $267.9 billion decline in travel and tourism GDP accounted for more than half (56.0%) of the overall $478.8 billion decline in U.S. GDP from 2019 to 2020.

Domestic travel demand by resident households declined by 53.2% from 2019 to 2020. At the same time, domestic business travel demand declined by 40.9%; domestic government travel demand declined by 33.6%; and travel demand by nonresidents (international visitors in the United States) declined 82.4% — accounting for a fifth (20.7%) of the overall decline in total travel demand from 2019 to 2020.

Learn more on NTTO’s Travel and Tourism Satellite Account (TTSA) Program Page .  

Travel and Tourism Satellite Accounts (TTSAs) allow the United States to measure the relative size and importance of the travel and tourism industry, along with its contribution to gross domestic product (GDP). Approved by the United Nations in March 2002 and endorsed by the U.N. Statistical Commission, TTSAs have become the international standard by which travel and tourism is measured. In fact, more than 50 countries around the world use travel and tourism satellite accounting. 

View BEA’s Travel and Tourism Satellite Account .  

Why is tourism so important to the economy?

Recently updated on July 31st, 2023 at 04:03 pm

Tourism isn’t just about holidays and new adventures on distant shores. This incredible industry, quite literally, makes the world go round. From supporting local businesses to making up trillions of dollars of the global GDP, the importance of tourism on the economy is simply massive. And with the COVID-19 pandemic crushing the tourism industry this year, the damage has been felt across the world. In celebration of World Tourism Day on 27 September, we take a look at why tourism is so important to the economy and why it’s crucial this industry makes a comeback. 

What is the importance of travel and tourism?

In 2019 alone, the tourism industry contributed 10.3% of the global GDP – that’s US$8.9 trillion! It also provided 330 million jobs, or one in 10 jobs around the world, while over the past five years the tourism industry created one in four new jobs. The sector also experienced a 3.5% growth in 2019, exceeding the global economic growth of 2.5% for the ninth year in a row. 

Those are some impressive stats, painting a stark picture of the importance of tourism to the economy. So what happens when there is no tourism? 

2020 was the year that travel really did stop, with COVID-19 bringing the tourism industry to a devastating halt. By April 2020, at least 7.1 billion people, or 91% of the global population , were living with COVID-19 related travel restrictions.

Six months later, many countries are beginning to emerge from local lockdowns and re-open borders. But the tourism industry has been dealt a heavy blow.

Countless businesses have been forced to close, from local family stores to multinational companies. Millions of people have lost their jobs and livelihoods. However, a loss of jobs and income is just the beginning of the losses the world would face without tourism.

RELATED CONTENT: 6 ways your travels directly impact the lives of others for the better

What are the impacts of tourism?

The advantages of tourism go beyond creating billions of dollars and hundreds of millions of jobs and business opportunities. A booming tourism industry helps to build infrastructure such as roads, parks, hospitals, schools and community areas.

It also helps to preserve heritage sites, natural wonders, and precious cultures, by creating space for people to showcase their cultural traditions and protect sacred areas. Your travels can have a direct positive impact when you stay in locally-owned accommodation, shop in artisan markets, take part in traditional festivals, and tour with local guides. 

The tourism industry also helps to protect the environment and its wildlife, with many tourism businesses offering eco-friendly services and encouraging tourists to respect the lands and communities they visit.

Dozens of natural areas are gaining protection because of their importance to the tourism industry. There are also many inspiring cases of change, such as former poachers turning into safari guides or gamekeepers, as the income from tourists wanting to see wildlife means that protecting the animals is a far more valuable venture. Your trip can have a direct positive impact when you pay entry fees for national parks to ensure ongoing preservation. You should also always make sure you leave only footprints and take only photos from the natural areas you visit.

These positive impacts of the tourism industry are all part of a move towards responsible tourism. It’s all about having a beneficial effect on the communities we visit, protecting our wildlife, and caring for our planet. 

RELATED CONTENT: Travelling in today’s world: Your COVID-19 travel questions and concerns, answered

Why is responsible tourism important?

Without responsible tourism, many communities, cultures, animals and lands will suffer. Since tourism income provides a huge incentive to preserve areas of natural and cultural importance, removing this incentive puts these precious places at a higher risk of extinction. They’re more likely to be destroyed to make way for more profitable, and often harmful, developments such as mass agriculture .

RELATED CONTENT: Never again shall we take for granted how truly interconnected we all are

Responsible tourism also means more tourism businesses are using sustainable practices and promoting eco-friendly and culturally sensitive trips. This leaves less space for unethical businesses using tourism to damage the environment and exploit people and wildlife.

Responsible tourism is the way to go

The good news is, responsible tourism – and its big impact on the economy – is on the rise. As the tourism industry gradually makes a comeback in the wake of COVID-19, we’re likely to see changes in the way we travel. Travel trends like domestic travel, getting out into nature, and small group travel will all become more popular in 2021. 

RELATED CONTENT: From domestic travel to nature getaways, these are the 2021 travel trends we are seeing right now

After experiencing this global crisis together, we’re also feeling more interconnected than ever, and we’re more conscious of our impact on the environment. As a result, we’re more likely to take responsible holidays that celebrate our beautiful planet and connect with real people.

You can travel responsibly with Trafalgar with our JoinTrafalgar initiative, powered by the not-for-profit TreadRight Foundation . It was launched over a decade ago with a mission to use the positive power of travel to make a difference on our trips.

RELATED CONTENT: Now is the time to explore your own country, for you and the economy

How can my next trip help the economy?

So we’ve talked about the advantages of tourism to the economy and millions of people around the world… But how can we help the tourism industry make a comeback?

Since domestic travel will drive the recovery of tourism, the best place to travel first is your own backyard. Take it as a golden opportunity to explore some hidden gems in your own country!

You’ll get to reconnect with your local culture, history and nature, all while helping local businesses closer to home. When you spend money in small businesses like restaurants, hotels, shops and farms, you’re doing your part to support local families, revive the economy and bring travel back.

RELATED CONTENT: Aussies, here’s how your travels can directly boost the local economy

The wonders of local travel

You can embrace domestic travel with Trafalgar’s new ‘Near Not Far’ trips. They’re offering amazing local adventures in countries like the USA , Canada , Australia and New Zealand . 

You can choose from local experiences like visiting a real working sheep farm in southern New Zealand , or staying in a seaside eco-tent on the stunning Rottnest Island. Take part in a special Navajo cookout in Monument Valley , or sleep like royalty in the gorgeous châteaux of Quebec and Ontario.

While we don’t know how long it will take for the economy to recover, we do know that tourism is a crucial part of its revival. So once travel restrictions ease and borders reopen, why not think about taking a trip? It will do wonders for the world. 

What is the importance of tourism to you? Let us know in the comments below…

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Tourism Can Help Lead the World to Recovery

About the author, zurab pololikashvili.

Zurab Pololikashvili is Secretary-General of the United Nations World Tourism Organization.

26 September 2020 T he COVID-19 pandemic has hit global tourism harder than any other major economic sector. In an effort to contain the spread of the virus and keep their citizens safe, countries around the world introduced restrictions on international travel, bringing tourism to a standstill almost overnight. Indeed, at the peak of this lockdown, the United Nations World Tourism Organization (UNWTO) found that 100 per cent of global destinations had either closed their borders to tourists completely or introduced strict measures such as compulsory quarantine for new arrivals.

The sudden and unexpected fall in tourist arrivals also placed on hold the many social and economic benefits that tourism delivers. Globally, tourism supports one in ten jobs, and 80 per cent of the sector is made up of small businesses, including family operations. At the start of the crisis, UNWTO set out three possible scenarios for tourism in 2020, depending on when and how widely travel restrictions would be lifted. While it looks like we will avoid the worst-case scenario, we nevertheless expect global tourist arrivals to be down by as much as 70 per cent this year compared to 2019.

The knock-on effect will be significant. The United Nations Conference on Trade and Development (UNCTAD) estimates that tourism’s woes will cause global GDP to decline by as much as 1.5 per cent to 2.8 per cent . Furthermore, the fall in tourist numbers will likely translate into as many as 120 million lost jobs. And, as always, the most vulnerable will suffer the most, including women and youth, for whom tourism is a leading source of opportunity, as well as those working in the informal economy.

Developing countries at greatest risk

No country has been left unscathed by the pandemic, including with regard to tourism. The effects, however, will be most profoundly felt in those destinations that are most reliant on tourism for livelihoods and economic well-being. For the majority of the world’s Small Island Developing States (SIDS), as well as the least developed countries, most notably within Africa, tourism is a lifeline. On average, tourism accounts for 30 per cent of export revenues for SIDS , and in some cases this is much higher. Indeed, in Palau—the newest UNWTO member State, having officially joined in 2019— tourism generates 90 per cent of all exports .

As the United Nations Secretary-General’s Policy Brief on “ COVID-19 and Transforming Tourism ” makes clear, the true cost of the pandemic’s impact on tourism cannot be measured in GDP or employment figures alone. Due to its unique cross-cutting nature, touching upon nearly every part of modern society, tourism is an essential contributor to the wider mission of the United Nations, including achievement of the Sustainable Development Goals. Again, as a leading employer of women, tourism leads the way in the journey towards gender equality. At the same time, tourism is a leading contributor to the promotion and protection of cultural and natural heritage, which is in jeopardy, including the ecosystems and wildlife that draw visitors to developing countries.

Building cooperation and a united response

Before the World Health Organization (WHO) officially declared COVID-19 to be a pandemic, UNWTO recognized both the unique vulnerability of tourism and also the sector’s unique potential to drive wider societal recovery once the health crisis had been tackled. The visit of a UNWTO delegation to WHO headquarters in Geneva laid the foundations for the international, multi-organizational cooperation that has defined tourism’s response to an unprecedented challenge.

This, in turn, came on the back of heightened advocacy for tourism at the very highest political level, most notably at the European Commission at the start of the year, to make sure the sector is at the centre of the planned European New Green Deal, as well as at the most recent meetings of the G20 nations. This has allowed UNWTO to become an increasingly prominent voice within the United Nations. When the crisis hit, we were able to make sure that tourism was part of the conversation at both the governmental and United Nations levels.

The Global Tourism Crisis Committee, convened virtually in March and then meeting five times as the crisis evolved, brought together leading voices from member States and from the private sector. Only UNWTO was in a position to unite such a diverse sector. This Crisis Committee channelled these diverse voices and concerns into a clear plan of action, the UNWTO Recommendations for Recovery . These Recommendations have been embraced across the public and private sectors and now inform recovery plans in every global region.

Sustainability takes centre stage

Central to the Recommendations is the principle that sustainability and inclusivity are at the heart of both the recovery process and the tourism sector that emerges out of this crisis. The pause in global tourism presents the global community with a chance to reassess its priorities. It also allows us to put the principles that are central to the work of UNWTO—namely that tourism works for people and planet, and should be open to all and benefit all—front and centre of everything we do.

The number one priority, however, is to build trust and confidence. Only by making people feel safe and encouraging them to travel again will the benefits that tourism offers start to return. UNWTO, as the specialized United Nations agency for tourism, must lead by example. To this end, as soon as it was safely possible, in-person visits to member States resumed: to the Canary Islands and Ibiza in Spain, to Italy, and to Saudi Arabia. The decision was also made to hold a hybrid Executive Council meeting, the first in-person meeting of the tourism sector and the United Nations to be held since the start of the pandemic. This brought together 170 delegates from 24 countries, sending a clear message that safe international travel is now possible in many parts of the world, thus providing a vital confidence boost for the sector.

As tourism restarts in many parts of the world, with growing numbers of countries easing travel restrictions, the sector’s position within the work of the United Nations has never been more relevant. UNWTO leads the restart guided by the principles of the Tbilisi Declaration , signed by our member States in Georgia at the close of the UNWTO Executive Council (15–17 September 2020). The Declaration recognizes the importance of tourism to livelihoods, to economic prosperity and opportunity, and to preserving our shared and unique culture. Signatories also committed to building back better, prioritizing sustainability and equality, and ensuring that, as tourism builds a brighter future, nobody is left behind.

The UN Chronicle  is not an official record. It is privileged to host senior United Nations officials as well as distinguished contributors from outside the United Nations system whose views are not necessarily those of the United Nations. Similarly, the boundaries and names shown, and the designations used, in maps or articles do not necessarily imply endorsement or acceptance by the United Nations.

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The Importance of Tourism on Economies and Businesses

Published: 3/26/2019 12:21:08 PM

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Tourism is vital for the success of many economies around the world. There are several benefits of tourism on host destinations.  Tourism boosts the revenue of the economy, creates thousands of jobs, develops the infrastructures of a country, and plants a sense of cultural exchange between foreigners and citizens.

The number of jobs created by tourism in many different areas is significant. These jobs are not only a part of the tourism sector but may also include the agricultural sector, communication sector, health sector, and the educational sector. Many tourists travel to experience the hosting destination’s culture, different traditions, and gastronomy. This is very profitable to local restaurants, shopping centers, and stores. Melbourne, Australia ’s population is greatly affected by tourism. It has a population of around 4 million people and around 22,000 citizens are employed by the tourism sector only.

Governments that rely on tourism for a big percentage of their revenue invest a lot in the infrastructure of the country . They want more and more tourists to visit their country which means that safe and advanced facilities are necessary. This leads to new roads and highways, developed parks, improved public spaces, new airports, and possibly better schools and hospitals. Safe and innovative infrastructures allow for a smooth flow of goods and services. Moreover, local people experience an opportunity for economic and educational growth.

Tourism creates a cultural exchange between tourists and local citizens. Exhibitions, conferences, and events usually attract foreigners. Organizing authorities usually gain profits from registration fees, gift sales, exhibition spaces, and sales of media copyright. Furthermore, foreign tourists bring diversity and cultural enrichment to the hosting country.

Tourism is a great opportunity for foreigners to learn about a new culture, but it also creates many opportunities for local citizens . It allows young entrepreneurs to establish new products and services that would not be sustainable on the local population of residents alone. Moreover, residents experience the benefits that come with tourism occurring in their own country.

To learn about the countries earning the most from international tourist arrivals, click on the link below!

Countries Earning the Most from International Tourism

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Does Tourism Help or Harm? A Look at Economics, Ecology, and Neocolonialism

12/05/2021 by Kristin Addis 11 Comments

Hey friends, this has been a long time coming.

I started writing this article several times, beginning four years ago. And each time I’ve asked myself:

“Who am I to talk about this?

It’s too controversial. It’s weird coming from someone who is very much part of the global privileged. How is this going to come off. Am I just inviting scrutiny?”

And yet here we are.

Because as I’ve traveled to over 60 countries, in many cases staying a while and moving slowly, I’ve come to notice things that put my past self to shame, that make me realize I didn’t see my privilege for most of my life (and in many ways still don’t), that make me question if widespread colonization has ended at all. Most of all, I wonder if tourism is really good for people or not.

With 1.5 billion recorded global arrivals in 2019, causing tourism to outpace the global economy, now more than ever, we have to talk about the impacts it has on our world. Because as we so painfully learned in 2020, what happens in one corner of the world will, eventually, affect everyone. 

This post is the product of years of research — of all the times I started and stopped writing this, trying to tackle the question,

Does tourism help or harm?

Table of Contents

The Good of Tourism

Throughout my research, I’ve found countless examples of the good tourism has done. When manta ray and diving tourism outearns practices like dynamite fishing in Komodo, this preserves essential reef systems. When climate change hits arid places like Ethiopia, tourism provides a way of earning and living that doesn’t degrade the environment further, at least not directly. Tourism creates an economy that doesn’t depend on exploiting natural resources and manufacturing — when done right.

Job creation and poverty alleviation

In many places, tourism has trumped international aid in terms of wealth transfer from the rich directly to the poor. And let’s be honest, it’s a lot more empowering than aid and handouts.

Tourism, at least in 2012, was “either the number one or number two export earnings for 20 of the 48 least developed countries, including Tanzania and Samoa.”

According to UNESCO, sustainable tourism, which it defines as respecting “both local people and the traveler, cultural heritage and the environment” provides these benefits:

• Tourism can be directly taxed, creating the necessary funds for improving infrastructure, education, and health on the ground.
• Locally owned microenterprises run by the poor serve as a benefit, as tourists buy a wide variety of goods and services.
• Sustainable tourism leads to employment diversification on a local level, which reduces the vulnerability of the poor.
• The tourism industry employs a high proportion of individuals under 25. As a result, youth gain access to higher earnings and better opportunities through sustainable tourism.
• And tourism provides jobs to people with little to no formal training (via The Borgen Project ).

Wildlife preservation

In 2013 I sat in a small room on the island of Flores, Indonesia, while a proud dive master from my liveaboard shared that Komodo Island had been named a manta sanctuary. This followed the establishment of the first shark and ray sanctuary in the Coral Triangle the year prior by the government of Raja Ampat , another popular diving area in Indonesia.

Each year, the illegal wildlife trade is worth at least $23 billion. Many of these illegally harvested animal parts, both from mantas and African wildlife, are used in “medicinal” products abroad. 

The group Manta Watch and local dive operators were able to prove that a live manta ray is worth 2,000 times more than its value as a dead “medicinal product.” 

Wildlife tourism outpaces these earnings in many places around the world, providing good jobs for locals who would otherwise have fewer earning opportunities.

According to the World Travel and Tourism Council , “while the travel tourism sector accounts for 10.4% of global GDP, wildlife tourism represents 3.9% of this figure, or $343.6 billion, a figure equivalent to the entire GDP of South Africa or Hong Kong. Of equal significance is the fact that around the world, 21.8 million jobs, or 6.8% of total jobs sustained by global travel and tourism in 2018, can be attributed to wildlife.”

For example, in Tanzania — home to the great wildebeest migration, Mount Kilimanjaro, the beaches of Zanzibar, and the ecologically rich and diverse Ngorongoro Crater — tourism accounts for over 11% of its GDP and employs roughly 2.3 million people. Protected areas equate to one-third of the country’s total area. Roughly 46% of international tourists to Tanzania experience a wildlife activity, and 26% enjoy a beach holiday.

We could fill the pages of book after book with examples like this, where tourism has helped preserve land, animals, and areas of historical significance for the enjoyment of present and future generations.

The rise of ecotourism

Wildlife-related tourism isn’t the only means of protecting the environment while providing jobs. The ecotourism sector is growing, and rapidly — at an estimated 5% year over year — driven mostly by millennial travelers.

But ecotourism is not just about washing fewer towels. It’s about providing experiences that complement the local community and ecology; providing opportunities that do not take money out of the community; keeping green practices in mind regarding energy, food sourcing, and tourism experiences; and empowering the local community to co-create tourism in ways that benefit them , not foreign interests.

According to Mandala Research , a women-run consultancy focused on corporate social responsibility, sustainability-minded tourists are more likely to stay in a destination longer, spend more money, and buy locally.

This type of travel experience isn’t always easy to find, but with a little extra research, they’re available all over the world (this is what we offer with our whale swim trip in French Polynesia).

Ecotourism is a way of providing travel experiences that have a minimal impact on the environment while empowering local people who may otherwise have to exploit natural resources to survive.

The question we always have to ask ourselves is, if not tourism, what else would these economies run on? The largest economic activities in the world are industrial manufacturing (32%) and chemical production (12%). By comparison, tourism is a much better alternative.

The advancement of women

Tourism provides one of the most essential opportunities for female empowerment, particularly in the developing world.

According to the United Nations World Tourism Organization , women make up the majority of the world’s tourism workforce.

That said, they’re often in the “lowest-paid and lowest-status jobs in tourism, and perform a large amount of unpaid work in family tourism businesses.”

But when women have choices, the birth rate goes down, putting less pressure on already diminishing natural resources. When women have more financial inclusion, more education, and more opportunities, society benefits.

According to the 2013-14 Education for All Global Monitoring Report , in Pakistan, working women with high levels of literacy skills earned 95% more than women with weak or no literacy skills, whereas the differential was only 33% among men. Educated women are empowered to take a greater economic role in their families and communities, and they tend to reinvest 90% of what they earn into their communities.

Tourism can empower women to step into leadership roles they deserve, like Maggie Duncan Simbeye, the first Tanzanian woman to own and operate her own tour company. Or like Natajia Miller, who runs the hotel and tour company I worked with in the Bahamas that her mother founded.

When we combine education, job opportunities in tourism, and making women the priority, we have a greater chance of positively impacting the communities we travel in, when done right.

But it’s not always done right, and we often have the good mixed in with the bad.

The Ugly of Tourism

For every example of the good the tourism does, we can often find a more crushing, visceral example of where it has done irreparable harm. We can’t only focus on the good, we have to confront the bad parts of tourism as well, the ugly parts that disenfranchise locals, degrade the environment, and perpetuate colonial norms, beginning with the crushing reality that most of the time, the money leaves.

Economic leakage

Continuing with my Indonesia examples, a few years ago I joined a liveaboard diving ship in Raja Ampat, West Papua, Indonesia. This is regularly regarded as one of the best places to dive in the world, and I still remember it as one of my most amazing trips to date.

But the boat was foreign-owned, and the staff on the boat were not from Raja Ampat, but rather from other parts of Indonesia. I even heard the Javanese driver refer to the locals as “curly heads”, and found out later that there’s a genocide happening in West Papua . How did I visit and not even know? How is this not international news?

Little by little I realized that while we did buy fish from the local fishermen, and I bought a coconut from a local woman, most of the money spent by the foreigners on the ship did not remain in the area, or even in Indonesia. It hurts me to realize this, but it did not benefit the locals much, if at all.

My experience was not unique. A 2013 report from the UNWTO noted that just $5 of every $100 spent in a developing country stayed in that destination – this is known as economic leakage.

We live in a world that is becoming more and more globalized. It’s easy to become a Marriott member and always stay in Marriott-owned hotels, or to favor the Hilton because it’s familiar, or to stay in an Airbnb that is rented out by a foreigner, effectively driving up rent prices for locals.

The problem? Most of the money leaves the country, doing very little to empower locals while taxing their ecology, using their limited water resources, generating trash in places that are often ill-equipped to handle it, and more.

All-inclusive horrors

All inclusive vacations sound pretty good. You get all of your food, drinks, entertainment, and accommodation included for one price. Your hand is held from landing to takeoff and you don’t have to think about anything. These are common all over the Caribbean, and I was even hired to promote a Spanish-owned one in Mexico’s Riviera Maya and (accidentally) stayed in one in Cabo San Lucas this past October.

What I found strange about both is that Mexican food was never on the menu. It made me wonder how much had to be shipped in when so much could have been sourced locally. The property in Cabo also offered a “Mexican night” with stalls selling Mexican souvenirs instead of encouraging guests to visit a local market to get the real experience for much cheaper and with more direct wealth transfer to locals.

But this is typical. Most all-inclusive guests never leave the resort or spend money locally.

In a 2014 survey of 500,000 tourists by Tourism Concern , fewer than 20% of respondents who had been on an all inclusive regularly left the resort to visit other bars, restaurants or excursions.

But what about jobs for locals? The study additionally found that wages were often lower and working conditions worse at all inclusives where they conducted studies in Tenerife, Kenya, and Barbados.

The other issue is the rampant waste and bigger-is-better mentality at large, all-inclusive resorts. These are often major users of the power grid, major plastic waste contributors, and since everything is ‘free’, people often waste food at all-inclusive resorts more than they would at a restaurant or at home.

And where does this food come from? If you stay at a resort in Jamaica or the Bahamas, you’re eating food from Florida. It’s worth looking at what’s in the gift shop, too, because it’s typically brands from home that tourists trust and prefer, rather than local options.

The power of all inclusive hotels makes it difficult to mitigate these issues. In the Gambia , all inclusive hotels wield so much power that when the government tried to ban them, tour operators threatened to take their business elsewhere, enforcing the cycle of leakage.

Locals get priced out of their homes

Look at any beach destination and you’re likely to see that most of the best real estate is taken up by vacation homes and beachfront hotels.

Without laws that keep generational property within the family, property taxes make it difficult for locals to hold onto beachfront real estate, because it is based on the value of the land, which goes up with the increase in tourism and foreign investment.

This can be seen all over the world, where locals can no longer afford to live where they grew up.

From Barcelona to New York, New Zealand to Italy, the “Airbnb Effect” doesn’t just impact the developing world, but the places many tourists call home as well.

This is a bitter pill to swallow, because many of us turned to Airbnb for a more local experience than a hotel can offer, hoping that we were supporting locals this way. And maybe in the beginning we were.

Many locals in the places we love to travel do not want any tourism because for many, it has just made life harder and degraded the environment.

Environmental degradation

In 2019, Boracay in the Philippines had just reopened to tourism after 6 months of closure to clean up and allow natural areas to recover, but with new regulations.

The year prior, 1.7 million people had visited Boracay, one of 7000 islands in the Philippines. Tourism grew so quickly and without regulation in the years leading up to the closure, that sewage was pumped directly back out to the sea, overfishing decimated 90% of the coral reefs, and the mangroves that once provided a buffer for tropical storms were drained and built upon. Like many similar stories, locals were undercut by outsiders and watched helplessly as their island became a nightmare.

As many places like Boracay become famous and more accessible, and as tourism numbers swell worldwide, natural areas are receiving the kind of visitor influx that pushes them to the brink.

In the US National Park system, the most visited national park, the Great Smoky Mountains, received 12.1 million visitors in 2020 and overall national park visits topped 327 million in 2019 , up from 281 million in 1986 and 6 million in 1960, a mere two generations prior. This increased tourism leads to land degradation, air and noise pollution, littering, trampling and the alteration of fragile ecosystems .

In Thailand, 77% of the total of 238.4 square kilometers of coral reefs in all of Thailand’s waters have been devastated, according to Thon Thamrongnawasawat , deputy dean of the Faculty of Fisheries at Kasetsart University in Bangkok, who blames beachfront hotels, anchoring, and plastic rubbish dumping as the main causes.

Like the positive instances of land and habitat preservation noted earlier, we could fill the pages of books with examples like these as well.

Tourism contributes to climate change

While tourism provides earning opportunities in areas where climate change has made the usual ways of life more difficult, it also contributes to climate change. 

Emissions from tourism-related activities are estimated to contribute 7% to global emissions. According to UNWTO/ITF’s latest research , CO 2 emissions from tourism are forecast to increase at least by 25% by 2030. However, to reduce emissions in accordance with the Paris Accord, global emissions need to decrease by at least 7% per year throughout the next decade, which, globally, we are not on track for.

Realistically, travel makes up a small amount of global emissions, and even if everyone were to stop traveling, it would not be enough. It would also harm some of the world’s most vulnerable people and places who have come to rely on tourism, as we’ve seen in 2020.

Travel also helps people to see the degradation of the planet. Personally, I didn’t truly understand the urgency until traveling the world, and being told by every single person I talked to that they once had abundance that now is dwindling, from the sushi fish of Japan, to the animals of Southeast Asia, to the reliable seasons of Patagonia. Everywhere I go, the story is always the same: things are changing — and it is not for the better.

In many ways, traveling helps educate people about the world and its cultures and helps us to care more about what happens to it, because we have seen beyond our own borders. But is it enough? Is it too little too late?

Perpetuating colonial norms

Traveling along what they call the ‘banana pancake’ trail in Southeast Asia in my 20s was a defining part of my life. I met people from all over the world, but now that I think about it, I met them from all over the “white” world. I met them from privileged countries like my own where young people can save up and travel long-term because these countries are so much cheaper than our own.

I did stay in a lot of locally owned hostels and I did mostly eat food that I bought directly from street vendors, but when it comes down to it, I rarely met local travelers or got to engage with and hang out with Thai or Cambodian people. It happened from time to time and I relished the opportunity, but for the most part, it was in a service-oriented situation where we both played a role – the server and the customer.

But I’ll be honest with you, I hardly even noticed this. I didn’t think about the places where local people lived. I didn’t seek them out or wonder if they were much different than the accommodation that I was in, which was the most basic I have ever stayed in my life. And yet most of theirs is even more basic, often without running water.

I didn’t think about if my presence was good or bad.

But it started to click when I traveled to southern Africa for the first time in 2015. It clicked when safari camps could run thousands of dollars per night while black locals slept in corrugated metal shacks. How could there be so much wealth and so much lack of it present at the same time? It started to click when the black clerk helping us push a cart out of the grocery store in Namibia got the full pat down while the guard barely glanced at me. It clicked when one of the “activities” offered by a backpackers in Zambia was an afternoon “volunteering” with local kids. What were they really doing? Pimping kids out for tourist photos? 

Tourism and Neo-Colonialism

This is the point in the article where I have frequently stopped writing. Where I have questioned who I am to talk about this, and have been certain I would say or do something wrong, or that something I did in the past would suddenly not age well.

But the truth is we all have to look at the way that privilege and tourism go hand-in-hand, and the ways that we may have perpetuated it, been complicit in it, and benefitted from it.

Colonialism is not over

For me the wake up point was in a taxi in Uganda. It’s a long drive from the airport to Kampala, so the driver and I had a while to chat. He wanted me to give him pointers on how to marry a muzungu (white) woman. I asked him why that’s what he wanted, and he shared it would be his way to come up in the world.

Why wouldn’t this be his misconception? Most of the white people he’s seen his whole life have money. Even backpackers traveling on a shoe-string budget are comparatively privileged just for the ability to afford a plane ticket and time that is not spent in a relentless pursuit of earning a livable wage. And, realistically, most of the hotels and big businesses are still owned and run by former colonizers, whose profits exit the country. Working in these establishments requires learning English and adapting to western norms. I can see how it would be easy to feel like the only way to ascend is to be a part of the western world. 

Meanwhile stories about ‘Africa’ are too often about the white messiah who comes in to ‘help’, perpetuating the myth that ‘Africa’ needs saving and little white girls and boys can come in and fix it during a volunteer trip. Colonization is not over, it’s just economic now.

The words of Reni Eddo-Lodge in Why I’m No Longer Talking to White People About Race , stand out: “Neutral is white. The default is white. Because we are born into an already written script that tells us what to expect from strangers due to their skin color, accents and social status, the whole of humanity is coded as white. Blackness, however, is considered the “other” and therefore to be suspected.” I see this play out in the way that I am treated as a white foreigner, in comparison to a local POC.

Much of the perpetual stereotypes of ‘Africa’ are that it is poor and dangerous, despite the fact that many countries on the continent are rich in both minerals and biodiversity.  Indeed, the kicker is that the current powerful status of the west could not have been built without Africa’s riches. 

Whether or not we participated in historical systems of colonialization, exploitation and apartheid, western tourists, interpreted as having money and power, benefit from the power structures that were built over centuries. 

The sexualization and exploitation of local women

If you travel much in Southeast Asia, particularly Chiang Mai in Thailand, you will start to notice a breed of tourist called the ‘sexpat’. Is it disgusting? Are they just lonely old men who fill a role? I don’t really know or care, I’m just disturbed that this is even a thing, aren’t you?

In the same way, imagery of grass skirts and coconut shells on smiling Hawaiian women beckoned visitors to the islands. ‘I’m here for your enjoyment, I’m here for the taking’ was the implication.

Bani Amor writes “POC bodies, cultures, and lands are the exotic dominion of the settler […] From the Black Mammy trope to that of the Singapore Girl, Spicy Latina, Pocahontas, and China Doll, women of color are deemed to exist to serve the whims of the white settler, whether that be sexual or domestic.”

She goes on to paraphrase Mary Fillmore, who wrote, ‘A tourist destination is where men of one class can enjoy the privileges of men of another class, and women can enjoy the privileges of men. Someone else will cook their meals, make their beds, clean their toilets,’

‘The tourist’s desire is usually to be indulged like a child…being free to indulge one’s appetite at will, to play all day’, adding, “and have someone else (spoiler alert: WOC) clean up the mess. These host communities end up playing the role of the Mother to the infantilized tourist. There’s nothing feminist about taking selfies with Maasai women struggling to hold onto their dignity in the face of exploitative tourist practices—that’s some colonial Mammy shit.”

Travel has often been a means of the west exploiting the rest, and we don’t have to look very far to see that little has changed over the last couple hundred years in that regard.

What Can Be Done?

I’m not on any kind of soapbox sharing this. I make mistakes all the time.

But awareness is half the battle.

When we travel, we vote with our dollars. There are many incredible people out there who are working to empower their own communities, and supporting them is, I think, our duty as travelers. 

Traveling independently or choosing tour operators who care about empowering locals and minimizing our environmental impact are important steps. It’s not to say that foreign owned companies can’t have a good impact, and the more pressure we put on them to be socially responsible, the more that they will have to comply.

But when I travel now, I actively look for options that are locally-owned, that are eco-conscious, and that are run by women. Even if I do stay in a fancy, foreign-owned resort, which I honestly love to do from time to time, I seek to balance it out with local options, too. 

It’s up to us how we really want the future of travel to be. Travel has the power to unite the world, to pull people out of poverty, and empower women to be entrepreneurs. Traveling also has the power to enforce colonial norms, “other”ize people, and take advantage of them and their homes.

We all have to be aware. We have to think about who benefits from the money we spend, and more importantly, who does not. Traveling responsibly can take an incredible amount of research, but it’s essential.

Because the thing about a globalized world that allows so many of us to travel, is that we are all interconnected. We share the same oceans, the same air, and the same planet. We all want to feel that we have a home, we all want to love, to feel safe, to be respected, to have access to clean water and food, to have enough for us and our families. The truth is that when one part of the chain is broken, the circle cannot be complete.

And as someone who encourages others to travel and whose life and livelihood have depended on travel for the better part of the last decade, I couldn’t pretend that these uncomfortable truths don’t exist anymore. Thanks for reading this far. I’d love to know your thoughts, too.

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About Kristin Addis

Kristin Addis is the founder and CEO of Be My Travel Muse, a resource for female travelers all around the world since 2012. She's traveled solo to over 65 countries and has brought over 150 women on her all-female adventure tours from Botswana to the Alaskan tundra.

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Sandra Candel says

12/06/2021 at 10:04 am

THANK YOU for starting this important conversation. As you write in your piece, raising awareness, and having awareness, is an enormous first step. Being inspired by this post, I will begin planning my future travels following your approach of looking for 3 key elements: locally-owned, eco-conscious, and run by women. Another excellent point is perpetuating colonial norms, neocolonialism, and the sexualization of women and children. I remember on a trip to an island in the Philippines, I witnessed in horror how an older man (that looked in his 60s-70s) was out and about buying things for a young boy (that looked no more than 7-8 y.o). I remember thinking “where is this boy’s mother and why is he allowed to venture alone and unsupervised with this older man?” (I mean this with no judgement to the mother, just out of genuine concern). I remember thinking that because it felt like “grooming” behavior. Of course, I don’t have proof that was the case but the whole scenario seemed “off” and I have learned to trust my gut instinct. I was horrified at the thought that indeed, something could be happening to this boy and I was just a bystander, unable to do anything. I still wonder to this day, “What can I do in a situation like that? Who do I contact? How do I make sure the vulnerable person in the situation is safe?”

All of this to say, thank you for writing this piece. It totally left an impression and a renewed desire to travel with more awareness of my impact on the places I visit.

Kristin says

12/06/2021 at 11:35 am

Seeing the sex tourism with minors in Southeast Asia disgusts me as well. It is a crime in most of those men’s home countries, but I think it’s hard to prove and to know what to do in order to bring it to the right people quickly enough to get something done. Would the police do anything? I wonder…

Lisa Tyerman says

12/06/2021 at 10:49 am

Thanks for doing the research and putting time and effort into this article Kristen. Well done. I would love tips on finding accommodations and even specific places to travel, activities, etc that would fall under “the good” of tourism.

12/06/2021 at 11:33 am

That’s something I’m still trying to figure out myself. In French Polynesia I could tell by people’s names. Sometimes a hotel will proudly display that they are locally owned or female owned, and I think that searching specifically for eco lodges are a good idea as well. Also booking tours with people who grew up in the area and mention that they are ecologically-minded. Sometimes, you don’t know until you show up, and I’d love to dig more into how to find these places as well.

12/06/2021 at 4:53 pm

This is an issue that has weighed upon me since I was an activist in college and kept me hesitant to travel. Kristin has for years inspired me and for sure others to travel the world in a way that benefits the area being traveled. These principles in this post are principles she has lived by to the best if her ability and it is hard to do so as it is not always cut and dry. I am so happy she has elucidated all these thoughts in this nice, straight to the point post. I am glad she had the courage to finish this because it needs to be said and she has the travel experience to back it up. Also, thanks for mentioning the genocide crisis in West Papua. The first step in addressing this is to raise awareness and with your large audience you have done a great service. That would be neat if there was a quick guide to women only, eco-conscious, locally owned businesses or accommodation around the world in each country. That was a great idea to strive for by the other commenter although sounds difficult although I would never underestimate BMTM.

Daniel Christianson says

12/12/2021 at 5:14 pm

And yet, here we are. Great article, nicely written. Many who approach this subject seem to heavily favor one side or the other, it’s nice to see it all laid out.

Even in my limited travels I have witnessed at least small examples of many of the points made here, and I’ve seen plenty of travelers who sadly, will never notice a single one of them. We do vote for the type of world we want with every choice of how we spend our money. This is especially true in the world of travel.

A week into my first trip out of the country I came to the conclusion that spending time in the small surf towns, staying in the private rooms at hostels and eating at the local shops was incredibly more appealing than anything resembling a big chain hotel or resort. At that time my decision had little to do being economically responsible and doing what was right for the local community, for me it was all about the class of people I was surrounding myself with. And I still make that choice today.

12/14/2021 at 12:41 pm

Yep I’m with you. Sometimes making the simpler, more chilled out choice is the choice that benefits people the most and gives you the best interactions. I love it when it can be easy!

Jessica says

12/26/2021 at 5:58 pm

Lots of food for thought here – thanks for taking the time and having the courage to write this!

12/28/2021 at 10:43 am

Thanks for reading!

05/03/2022 at 8:42 pm

BRAVE post. I just found your blog and I couldn’t agree more with what you’ve said here. It is really nice to find a travel blog that has some substance and goes beyond just pics of pretty white blondes in floppy hats in beautiful places.

05/04/2022 at 8:33 am

Thank you for reading! This post meant a lot to me and I hope more people see it <3

Winter is here! Check out the winter wonderlands at these 5 amazing winter destinations in Montana

• Travel Guide
• Sustainability

How Does Ecotourism Help The Economy?

Published: November 14, 2023

Modified: December 28, 2023

by Lusa Sherwood

Introduction

Ecotourism has gained significant attention in recent years as a sustainable form of travel that prioritizes the conservation of natural environments and the well-being of local communities. It is a responsible way of exploring natural areas and has the potential to bring various benefits to both the environment and the economy. In this article, we will delve into how ecotourism can contribute to the economy through direct and indirect economic benefits, the creation of employment opportunities, and its impact on local communities.

Ecotourism, also known as ecological tourism, focuses on promoting responsible travel to pristine natural areas. Its aim is to foster environmental education, conservation, and the well-being of local communities. Unlike traditional mass tourism, ecotourism aims to minimize negative impacts on the environment and maximize positive contributions to nature and society.

The economic benefits of ecotourism extend beyond the tourist’s experience. It plays a pivotal role in supporting local economies by generating revenue, creating job opportunities, and contributing to infrastructure development in the surrounding areas. Furthermore, ecotourism often promotes the preservation of cultural heritage and biodiversity, which can be valuable assets for a destination and its economy.

However, it is crucial to strike a balance between economic development and environmental conservation. Overexploitation or improper management of natural resources can lead to detrimental consequences. Therefore, it is essential to understand the various ways in which ecotourism can positively impact the economy while minimizing negative externalities.

In the following sections, we will explore the direct and indirect economic benefits of ecotourism, the employment opportunities it creates, its impact on local communities, and examine successful ecotourism initiatives through case studies. Additionally, we will discuss the challenges and potential risks associated with ecotourism and highlight the need for responsible practices to ensure the long-term sustainability of this growing industry.

Definition of Ecotourism

Ecotourism can be defined as a form of sustainable tourism that focuses on conserving and protecting natural environments and promoting the well-being of local communities. It is characterized by responsible travel and the engagement in activities that enhance the understanding and appreciation of the natural world.

Unlike conventional tourism, which may have negative impacts on the environment and local cultures, ecotourism strives to minimize these impacts and promote sustainable practices. It involves visiting natural areas, such as national parks, wildlife reserves, and ecosystems, with a focus on conservation and education.

One of the core principles of ecotourism is environmental conservation. The primary goal is to protect the integrity of the natural environment and its biodiversity. This involves preserving habitats, protecting endangered species, and promoting sustainable use of resources. By doing so, ecotourism aims to ensure that future generations can continue to enjoy and benefit from these natural areas.

Another fundamental aspect of ecotourism is community empowerment. It seeks to support and enhance the well-being of local communities by generating economic opportunities and fostering cultural preservation. Local communities are often involved in the planning and management of ecotourism activities, ensuring that they have a say in the development and benefits derived from tourism.

Furthermore, education and interpretation play a crucial role in ecotourism. Travelers are encouraged to learn about the natural and cultural heritage of the destination, promoting awareness and understanding of the importance of conservation. This educational component may include guided tours, nature walks, and interactive experiences that provide insights into the local ecosystem and indigenous cultures.

Overall, the essence of ecotourism lies in its commitment to sustainable practices and responsible tourism. It aims to strike a balance between environmental protection, socio-cultural empowerment, and economic benefits. By fostering a greater sense of responsibility and appreciation for the natural world, ecotourism offers an alternative way of exploring and experiencing the planet while ensuring its long-term viability.

Importance of Ecotourism for the Economy

Ecotourism plays a crucial role in supporting and diversifying economies, especially in regions rich in natural resources and cultural heritage. Its sustainable approach to tourism brings various economic benefits to destinations, contributing to local development and job creation. Here are some key reasons why ecotourism is important for the economy:

1. Revenue Generation:

Ecotourism generates revenue for destinations through activities such as park fees, nature tours, accommodation, and local products. This revenue provides a source of income for local communities and supports the development of infrastructure, such as roads and facilities, enhancing the overall tourism experience.

2. Economic Growth:

Ecotourism can stimulate economic growth in rural and remote areas that may have few alternative income-generating opportunities. By attracting visitors to these regions, ecotourism creates demand for local goods and services, such as handicrafts, organic produce, and traditional cuisine. This can lead to the growth and development of small businesses and entrepreneurship.

3. Preservation of Natural Resources:

Ecotourism incentivizes the preservation and protection of natural resources. When the value of natural areas is recognized through tourism, there is a greater impetus to maintain and conserve these ecosystems. This not only ensures the long-term viability of the tourism industry but also safeguards the ecosystem services that support human livelihoods, such as clean water, air, and fertile soil.

4. Cultural Heritage Preservation:

Many ecotourism destinations are also rich in cultural heritage. By promoting responsible travel, ecotourism helps preserve traditional practices, architecture, and indigenous knowledge. This cultural preservation not only maintains a sense of identity and pride among local communities but also attracts tourists interested in experiencing authentic cultural experiences.

5. Market Differentiation:

Ecotourism allows destinations to differentiate themselves in the global tourism market. In a world where travelers are becoming increasingly conscious of sustainable practices, destinations that prioritize ecological and social responsibility can attract a growing segment of environmentally conscious tourists. This helps diversify tourism offerings and create niche markets.

In summary, ecotourism offers significant economic benefits by generating revenue, stimulating economic growth, preserving natural and cultural resources, and creating unique market opportunities. However, it is important to employ sustainable practices and ensure that the economic benefits of ecotourism are shared equitably among local communities. Through responsible management and collaboration, ecotourism can continue to contribute to the economic well-being of destinations while promoting environmental and social sustainability.

Direct Economic Benefits of Ecotourism

Ecotourism brings direct economic benefits to destinations, contributing to local economies and providing a source of income for communities. These economic benefits arise from various aspects of ecotourism activities. Here are some key direct economic benefits of ecotourism:

1. Tourism Expenditure:

Visitors engaged in ecotourism activities spend money on accommodations, meals, transportation, and souvenirs. This infusion of tourism expenditure has a direct positive impact on local businesses, including hotels, restaurants, transportation providers, and local artisans. The money spent by tourists supports these businesses and reinforces the local economy.

2. Park and Nature Reserve Fees:

Many ecotourism destinations charge entry fees to parks and nature reserves. These fees contribute to the conservation and maintenance efforts of these protected areas. The revenue generated from park fees can be used for habitat restoration, species protection, and the establishment of visitor facilities, enhancing the overall visitor experience.

3. Eco-lodges and Accommodation:

Eco-lodges and sustainable accommodations are often popular choices for ecotourists. These establishments prioritize environmentally friendly practices, which can include using renewable energy, conserving water, and supporting local suppliers. The establishment and operation of eco-lodges provide employment opportunities and generate revenue for local communities.

4. Nature Tours and Sustainable Activities:

Guided nature tours and sustainable activities, such as wildlife watching, hiking, and snorkeling, are integral components of ecotourism. Tourism operators offering these experiences create employment and contribute to local economies. These activities not only provide revenue but also foster environmental education and conservation awareness among tourists.

5. Local Product Sales:

Ecotourism often promotes the sale of local products, such as handicrafts, organic produce, or specialty foods. These products reflect the culture, traditions, and natural resources of the destination. The sale of these products provides income to local artisans, farmers, and producers, contributing directly to the local economy.

The direct economic benefits of ecotourism help generate income, create employment opportunities, and support local businesses. However, it is essential for communities and governments to manage these benefits responsibly and ensure that they are reinvested in sustainable initiatives that benefit both the environment and the local community. By doing so, ecotourism can continue to play a significant role in promoting economic development and sustainability.

Indirect Economic Benefits of Ecotourism

Ecotourism not only brings direct economic benefits to destinations but also generates indirect economic benefits that have a ripple effect on local economies. These indirect benefits, often seen as secondary or multiplier effects, arise from the interdependencies and linkages created within the tourism sector. Here are some key indirect economic benefits of ecotourism:

1. Job Creation:

The growth of ecotourism leads to the creation of jobs in various sectors. Beyond the direct employment opportunities in accommodations, tour guiding, and hospitality, there is an indirect impact on other industries. Local producers and artisans who supply goods and services to the tourism sector, such as food and handicrafts, also benefit from increased demand, leading to job creation and income generation.

2. Infrastructure Development:

As the demand for ecotourism increases, there is a need for improved infrastructure, such as roads, utilities, and public facilities. The development and enhancement of infrastructure benefits not only the tourism sector but also the local community as a whole. This includes improved transportation networks, access to healthcare facilities, and upgraded public services.

3. Capacity Building and Skill Development:

The growth of ecotourism often drives the need for capacity building and skill development in the local workforce. As communities strive to meet the demands of ecotourism, training programs and initiatives are implemented to enhance skills in areas such as guiding, hospitality, conservation, and sustainable practices. This leads to the improvement and diversification of the local labor force, increasing employability and income potential.

4. Conservation and Restoration Initiatives:

Ecotourism generates funds that can be allocated to conservation initiatives and the restoration of natural habitats. These investments not only benefit the environment but also create employment opportunities for professionals in the field of environmental sciences, conservation biology, and ecosystem management. Conservation projects also attract researchers and scientists, further enhancing local expertise and knowledge.

5. Knowledge Transfer:

Ecotourism facilitates the exchange of knowledge between locals and tourists. Visitors often have a keen interest in learning about the local culture, traditions, and environment. This promotes cultural exchange and fosters a deeper understanding and appreciation of the destination. It also provides opportunities for locals to share their knowledge, stories, and experiences, thus preserving indigenous knowledge and traditions.

The indirect economic benefits of ecotourism are essential for long-term economic viability and community development. They contribute to the overall economic resilience of a destination, helping to diversify the local economy and create sustainable livelihoods. However, it is important to strike a balance between economic development and environmental preservation, ensuring that the indirect benefits of ecotourism are aligned with sustainable practices and local needs.

Employment Opportunities Created by Ecotourism

Ecotourism is a significant catalyst for job creation, providing employment opportunities that directly and indirectly support local communities. The diverse range of activities associated with ecotourism opens doors for various professions and skill sets. Here are some key employment opportunities created by ecotourism:

1. Tour Guides and Naturalists:

One of the primary employment opportunities in ecotourism is as a tour guide or naturalist. These individuals possess in-depth knowledge about the local ecosystem, wildlife, and cultural heritage. They lead visitors on guided tours, providing education, interpretation, and ensuring a safe and enjoyable experience for tourists.

2. Hospitality and Accommodation:

As ecotourism destinations grow in popularity, there is an increased demand for accommodation options that align with sustainable practices. This creates employment opportunities in eco-lodges, resorts, bed and breakfast establishments, and other hospitality sectors. From front desk staff to housekeeping and kitchen employees, these jobs support the tourism infrastructure.

3. Conservation Specialists:

Ecotourism often goes hand in hand with conservation efforts. Consequently, employment opportunities arise for conservation specialists, including wildlife biologists, ecologists, park rangers, and environmental scientists. These professionals work to protect and manage natural areas, monitor wildlife populations, conduct research, and implement conservation strategies.

4. Artisans and Craftsmen:

Ecotourism provides an economic incentive for local artisans and craftsmen to showcase their traditional skills and crafts. From handcrafted souvenirs to artwork and traditional textiles, these individuals contribute significantly to the local economy. By promoting their products to tourists, they can earn a sustainable income and preserve cultural heritage.

5. Agro-Tourism and Farming:

In agricultural regions, ecotourism creates opportunities for agro-tourism experiences and farm stays. Visitors can participate in traditional farming activities, learn about organic farming methods, and enjoy locally sourced food products. These activities support local farmers, promote sustainable agriculture, and create employment in farming-related sectors.

6. Service Industry:

With an increase in tourist arrivals, the service industry experiences growth, leading to employment opportunities in restaurants, cafes, and transportation services. From waitstaff and cooks to drivers and tour operators, these positions form a vital part of the tourism value chain and provide income opportunities for local residents.

By providing employment opportunities, ecotourism contributes to poverty reduction, social inclusion, and economic empowerment within local communities. These jobs often promote skill development, capacity building, and cultural preservation, fostering a sense of pride and identity among local residents. It is important, however, for these employment opportunities to prioritize fair wages, safe working conditions, and opportunities for professional growth.

Economic Impacts on Local Communities

Ecotourism has significant economic impacts on local communities, providing a range of benefits that contribute to their development and well-being. These impacts go beyond direct revenue generation and job creation. Here are some key economic impacts of ecotourism on local communities:

1. Income Diversification:

Ecotourism offers an opportunity for local communities to diversify their sources of income. It provides an alternative economic sector that can reduce reliance on traditional industries such as agriculture or mining. This diversification helps to build resilience against economic downturns and enhances the overall economic stability of the community.

2. Entrepreneurship and Small Business Development:

Ecotourism encourages entrepreneurship and small business development within communities. It enables locals to start their own eco-friendly businesses, such as eco-lodges, tour operators, or restaurants serving locally sourced and sustainable food. These entrepreneurial ventures create opportunities for local residents to become self-employed and retain economic benefits within the community.

3. Enhanced Community Infrastructure:

The presence of tourism leads to infrastructure improvements in local communities. This includes the development of roads, transportation networks, sanitation facilities, and utilities. These infrastructure enhancements not only benefit tourists but also improve the quality of life for local residents and stimulate further economic development.

4. Capacity Building and Skill Development:

Ecotourism promotes capacity building and skill development within local communities. Training programs and workshops are often conducted to enhance skills in areas such as hospitality, tour guiding, conservation practices, and sustainable business management. These trainings empower community members to take on new roles, improve their employability, and access higher-paying jobs.

5. Preservation of Cultural Heritage:

Ecotourism values and celebrates the cultural heritage of local communities. It creates a demand for authentic cultural experiences, encouraging the preservation and revitalization of traditional practices, crafts, and rituals. This preservation of cultural heritage not only fosters a sense of pride and identity within the community but also generates economic opportunities through the sale of handicrafts, traditional performances, and cultural tours.

6. Community Empowerment:

Ecotourism empowers local communities by involving them in decision-making processes and tourism planning. Engaging local residents in the development and management of ecotourism initiatives ensures that their voices are heard and that the benefits are shared equitably. This empowerment fosters a sense of ownership and encourages community involvement in sustainable development practices.

The economic impacts of ecotourism on local communities can be transformative, stimulating economic growth, empowering residents, and enhancing their quality of life. However, it is essential to strike a balance between economic development and the preservation of the community’s unique cultural and natural heritage. By adopting responsible and sustainable practices, ecotourism can continue to bring positive economic impacts while maintaining the authenticity and integrity of the local community.

Case Studies: Successful Ecotourism Initiatives

Across the globe, numerous successful ecotourism initiatives have showcased the potential of responsible tourism to drive economic development while promoting conservation and community empowerment. Here are a few notable case studies:

1. Costa Rica:

Costa Rica is widely regarded as a pioneer in ecotourism. The country has dedicated significant efforts to protect its rich biodiversity while simultaneously developing a thriving tourism industry. With over 25% of its land designated as protected areas, Costa Rica has successfully attracted eco-conscious travelers with its diverse range of eco-lodges, adventure tourism, and conservation-focused activities. The revenue generated from ecotourism has supported the country’s initiatives in environmental preservation, wildlife conservation, and sustainable development, contributing significantly to its economy.

2. NamibRand Nature Reserve, Namibia:

The NamibRand Nature Reserve in Namibia is a prime example of how ecotourism can benefit local communities and wildlife conservation. This privately owned reserve has developed sustainable tourism practices that minimize environmental impacts while providing economic opportunities for nearby rural communities. Through partnerships with local communities, the reserve offers employment, training, and business opportunities related to tourism. Visitors can enjoy guided nature walks, hot air balloon rides, and stargazing activities while contributing to the conservation of the unique desert ecosystem and supporting local livelihoods.

3. Grootbos Private Nature Reserve, South Africa:

The Grootbos Private Nature Reserve in South Africa showcases the success of ecotourism in the context of community development and conservation. The reserve focuses on promoting sustainable tourism practices while empowering local communities. It offers luxury accommodations and guided nature experiences, including whale watching, fynbos walks, and cultural tours. Grootbos actively involves the local communities in its operations by providing training, employment, and support for local enterprises. Through its commitment to social upliftment and conservation, the reserve has become an exemplary model for ecotourism in Africa.

4. Inkaterra, Peru:

Inkaterra in Peru is an eco-luxury hotel chain that has set the standard for sustainable tourism in the Peruvian Amazon and the Sacred Valley of the Incas. The company focuses on preserving biodiversity, promoting conservation initiatives, and supporting local communities. Inkaterra’s lodges offer immersive experiences, including wildlife encounters, nature hikes, and cultural immersion programs, all designed to foster an appreciation for the environment and local heritage. The company partners with local communities, providing employment, educational opportunities, and support for conservation projects, thereby ensuring that the benefits of tourism are shared with the communities in which they operate.

These case studies demonstrate that successful ecotourism initiatives can lead to economic prosperity, conservation of natural and cultural heritage, and community empowerment. They highlight the importance of a holistic approach that balances environmental sustainability, community involvement, and economic benefits. By learning from these examples, destinations worldwide can harness the power of ecotourism to drive positive change in their own communities while ensuring the long-term preservation of their natural and cultural treasures.

Challenges and Potential Risks of Ecotourism

While ecotourism holds tremendous potential for sustainable development, it also faces several challenges and potential risks that need to be addressed to ensure its long-term viability. These challenges include:

1. Overcrowding and Environmental Impact:

As the popularity of ecotourism destinations grows, overcrowding can strain fragile ecosystems and result in environmental degradation. Increased footfall and traffic can disrupt wildlife habitats, damage sensitive ecosystems, and put strain on water resources and waste management systems. Careful management and visitor capacity limits are necessary to mitigate these impacts and prevent the deterioration of natural areas.

2. Unregulated Development:

In some cases, unregulated development can occur in response to the popularity of ecotourism destinations. If not managed properly, this can lead to land encroachment, habitat destruction, and loss of biodiversity. It is crucial to have effective zoning regulations and land-use planning to ensure responsible and sustainable development.

3. Unsustainable Practices:

Despite the principles of sustainability, some ecotourism activities may still have negative environmental impacts. For example, poorly managed wildlife encounters, such as unregulated feeding or excessive human-wildlife interactions, can disrupt natural behaviors and lead to ecological imbalances. It is essential to promote and enforce responsible tourism practices to minimize these detrimental effects.

4. Socio-cultural Impacts:

Ecotourism can pose both positive and negative socio-cultural impacts on local communities. Increased tourism can lead to changes in traditional ways of life, loss of cultural authenticity, and commodification of cultural practices. Communities may also face social conflicts, inequality, and economic leakage if the benefits of tourism are not effectively distributed. Engaging with local communities, respecting cultural norms, and ensuring fair and equitable benefit-sharing are crucial to addressing these challenges.

5. Economic Dependency:

Overdependence on tourism revenues can create economic vulnerability for communities when faced with fluctuations in visitor numbers or external shocks such as natural disasters or changes in travel patterns. Diversification of the economy and the development of alternative livelihoods outside of tourism can help mitigate this risk.

Addressing these challenges and mitigating potential risks requires a collaborative effort between governments, local communities, tourism operators, and visitors. Sustainable tourism practices, comprehensive planning, community involvement, and ongoing monitoring and evaluation are essential to ensure that ecotourism remains a responsible and sustainable form of travel.

Ecotourism offers a sustainable and responsible approach to travel that can bring tremendous benefits to both the economy and the environment. Through its focus on conservation, education, and community empowerment, ecotourism has the potential to generate direct and indirect economic benefits, create employment opportunities, and contribute to the overall well-being of local communities.

By generating revenue through tourism expenditure, park fees, and the promotion of local products, ecotourism supports local businesses and stimulates economic growth. It also fosters income diversification, entrepreneurship, and small business development, empowering communities and reducing dependency on traditional industries.

Furthermore, ecotourism plays a vital role in infrastructure development, capacity building, and the preservation of cultural heritage. It raises awareness about environmental conservation and fosters a sense of pride and identity within local communities.

However, there are challenges and potential risks that need to be addressed to ensure the long-term sustainability of ecotourism. These challenges include overcrowding, unregulated development, unsustainable practices, socio-cultural impacts, and economic dependency. By implementing responsible tourism practices, effective planning, and community involvement, these challenges can be mitigated.

Overall, the success of ecotourism lies in finding the balance between economic development, environmental conservation, and community empowerment. By prioritizing sustainability in its practices, ecotourism can continue to contribute to the preservation of natural and cultural heritage, while also providing economic opportunities for local communities and fostering a deeper appreciation for the world’s diverse ecosystems.

As travelers, it is crucial for us to choose ecotourism options that align with these principles, supporting destinations and initiatives that prioritize environmental responsibility, respect for local cultures, and the well-being of communities. By doing so, we can play a role in promoting sustainable tourism practices and ensuring that ecotourism continues to be a driving force for positive change.

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How Does Ecotourism Help the Economy?

Traditional types of tourism are starting to give way to a more sustainable version. This new approach will significantly benefit local communities instead of large corporations.

The economic benefits of ecotourism are many, but perhaps its main focus is directed at the well-being of local communities.

Why is ecotourism important?

The world’s sustainability goals are to decrease poverty and promote economic growth, and sustainable tourism plays a big part.

It is through ecotourism that many goals can be achieved. As the world becomes more accustomed to their new way for tourists to travel and enjoy what the world offers, more and more offerings will be made available.

The vision and the benefits of ecotourism are many. But the economic impact is perhaps the one that most people are excited about. Nothing empowers a local community more than having a robust economy for its citizens to prosper in the future.

Economic benefits of ecotourism

What are the advantages of ecotourism ? In addition to knowing that your actions will contribute positively, there are some great benefits of sustainable tourism you should consider.

Ecotourism has a softer ecological Impact

You leave a substantial ecological footprint by the things you eat while on vacation. When on vacation, some people like to eat the foods they are accustomed to from home but think about what this means for your destination.

Eating local food and supporting local businesses are part of sustainable tourism . Economic and environmental costs are associated with the importation of food across national boundaries and oceans. Additionally, a big part of exploring a new place is trying the local food!

When you eat locally, you will not only reduce emissions, but you will also find that the food is usually better. As a result, the ingredients are fresher, the locals know how to prepare them, and you will probably get to try something brand new that will intrigue you.

Ecotourism lets wildlife stay in nature

It is essential to seek information about wildlife attractions before visiting them and staying away from those who do not consider the animals’ best interest when developing them. There comes a time when these places will no longer exist because of a decline in demand. Wild animals can remain wild.

Many volunteer programs work in the field of conservation if you’re interested in getting close to wildlife. By adding a volunteering period to your vacation, you can become a sustainable tourist and contribute to essential projects while having these amazing experiences.

Ecotourism keeps the environment cleaner

Make sure you choose accommodations that engage in sustainable practices to ensure that your stay in your destination does not have a negative impact on the environment. When researching, keep an eye out for red flags like problems with garbage or wastewater, and find out if the hotel is transparent about its efforts. Even better, check if they buy local produce for their restaurant, use eco-friendly materials for their guest rooms, and treat their employees well.

Your choice of sustainable accommodation may also align with spending your vacation in a more beautiful location. The wastewater from your resort won’t pollute the ocean in which you plan to swim.

In addition, you do not have to deal with plastic waste after leaving the gate. Your conscious choice about the places you visit can help keep communities cleaner.

Ecotourism supports local communities

In addition to supporting sustainable accommodations and businesses, you are also directly supporting local economies. As a result, financial benefits typically leave the destination with big operators, particularly in mass tourism.

Choosing a local provider boosts the economy where it is most needed, making a positive impact.

Ecotourism let travelers be more aware of their travel choices

Ecotourism can help you become more aware of your actions. To become a sustainable tourist, you need to educate yourself before you leave on vacation. It’s a great way to learn how companies operate and what your hard-earned money is used for.

You should also consider your mode of transportation and your carbon footprint. If you are limited to three days at your destination, is it really necessary to fly for 15 hours? Would you instead take the train to a place closer by?

The price of traveling abroad could even be less than you would have paid for it, and you may manage to spend more time at your destination. You can also consider purchasing carbon offsets, a method of making your trip more sustainable if you cannot avoid air travel.

Final thoughts

Each of the ecotourist benefits listed above carries with it an economic element. Collectively, they can significantly impact a local economy. And when a local community is thriving, it begins to affect its neighbors – and the growth gradually spreads from there.

While there are many economic benefits of ecotourism, those choices are not always black and white – as with life, there are countless shades of grey in between.

The first step to ensuring that your dream vacation does not negatively impact your destination is educating yourself and choosing ethical and sustainable service providers. Wouldn’t you enjoy it much more by doing this?

In the long run, ecotourism is a preferable alternative to traditional tourism methods. It integrates all of these elements, including direct financial contributions to the local community, which benefit the local community and encourage and motivate it.

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How Does Tourism Help The Economy

Tourism is one of the world’s largest and most important industries, and it plays a significant role in many economies around the world. Tourism can help to boost economic growth, create jobs, and generate revenue for local businesses and governments. In this article, we will explore how tourism helps to boost the economy and provide some examples of how it has had a positive impact.

Tourism is a massive industry that generates billions of dollars in revenue every year. In 2015, global tourism receipts totalled $1.2 trillion, and this is expected to grow to $1.8 trillion by 2020.1 Much of this revenue is generated by people travelling to and from different countries. In fact, international travel accounted for $1.1 trillion of the total tourism receipts in 2015.1

Tourism is an important source of revenue for many countries around the world. It can help to boost economic growth and create jobs.

One of the main benefits of tourism is that it can help to boost economic growth. When tourists spend money in a country, it stimulates the economy and helps to create jobs. For example, a study by the World Travel and Tourism Council found that in 2013, the travel and tourism industry contributed $7.6 trillion to the global economy and supported 284 million jobs.2 This accounted for 10.2% of global GDP and 9.8% of total employment.

Tourism can also help to generate revenue for local businesses and governments. For example, in the United States, tourism is the country’s third largest export industry. In 2015, it generated $244 billion in export revenue.3 This helped to support 1.8 million jobs in the United States.

Tourism can have a positive impact on the economy of a country, and it is an important source of revenue for many countries around the world.

• 1 How can tourism help the economy of a country?
• 2 How does tourism contribute to the economy essay?
• 3 How does tourism helps the economic growth?
• 4 Does tourism have impact to the economy?
• 5 What are 3 benefits of tourism?
• 6 What are the benefits and costs of tourism on the economy?
• 7 How does tourism help the economy of the Philippines?

How can tourism help the economy of a country?

Tourism is one of the key drivers of the global economy. It is a major source of employment, income and trade. It also helps to promote peace and understanding among people of different cultures. In this article, we will discuss how tourism can help the economy of a country.

Tourism is a major source of employment. It provides jobs for people in the tourism industry, such as hoteliers, restaurateurs, taxi drivers, etc. It also creates jobs in the service and retail sectors. Tourism generates income for the government in the form of taxes. It also helps to promote exports.

Tourism is a major source of foreign exchange earnings for a country. It helps to bring in foreign currency, which can be used to finance the country’s imports and development projects. Tourism helps to promote trade. It encourages people to buy local goods and services, which helps to boost the economy of the country.

Tourism also helps to promote peace and understanding among people of different cultures. It encourages people to visit new places and learn about different cultures. This leads to increased cultural exchange and understanding.

Overall, tourism is a very important sector of the global economy. It helps to generate employment, income and foreign exchange. It also helps to promote peace and understanding among people of different cultures.

How does tourism contribute to the economy essay?

Tourism is one of the world’s largest and most important industries, and it plays a vital role in many economies around the globe. In this essay, we will discuss how tourism contributes to the economy, and we will explore some of the benefits that tourism brings to local communities.

Tourism is a huge industry, and it is estimated that it contributes more than $7 trillion to the global economy every year. That’s more than the GDP of every country in the world except for the United States, China, and Japan. In fact, tourism is now the world’s largest industry, and it accounts for one-tenth of all global trade.

Tourism brings a lot of money into local economies, and it is often the main source of income for many communities. For example, in the United States, tourism accounts for more than $1 trillion in economic activity every year, and it employs more than 15 million people. In countries like Thailand and Spain, tourism accounts for more than one-third of the entire economy.

Tourism also brings a great deal of money into local communities in the form of taxes. For example, in the United States, tourism generates more than $100 billion in tax revenue every year. This money helps to pay for things like roads, schools, and hospitals.

Tourism also supports a great many jobs in the local community. For example, in the United States, tourism is responsible for more than 2.5 million jobs. These jobs range from hotel workers and restaurant servers, to tour guides and taxi drivers.

Tourism also helps to create a sense of community pride. When people come to visit your town or city, they often fall in love with the place and they want to come back. This creates a sense of community pride, and it can help to attract new residents and businesses to the area.

Overall, tourism is a tremendous source of economic activity, and it brings a great deal of money and jobs to local communities. It is responsible for billions of dollars in economic activity every year, and it helps to support a great many jobs. It also helps to create a sense of community pride, and it attracts new residents and businesses to the area.

How does tourism helps the economic growth?

Tourism is one of the world’s largest and most rapidly growing industries. It is a major source of employment and income, and a key contributor to economic growth and development.

Tourism can help to generate new economic activity in a region by creating demand for goods and services. It can also help to diversify economies, and promote the export of goods and services. Tourism can generate tax and other revenue for governments, and can help to stimulate the development of new businesses and industries.

Tourism can also play an important role in poverty reduction. It can create jobs, and can help to generate income and spur economic growth. Tourism can also help to promote social and cultural development, and can foster respect for cultural heritage.

By promoting understanding and respect for other cultures, tourism can help to build bridges between peoples and nations. It can also help to promote peace and understanding, and can support efforts to resolve conflicts.

Does tourism have impact to the economy?

Tourism has a long-standing and complex relationship with the global economy. Supporters argue that it is an engine for growth and a generator of jobs, while opponents contend that it is a source of environmental degradation and inequality.

A burgeoning field of research is aimed at understanding the impact of tourism on host countries and communities. Many studies confirm that tourism does indeed have a significant impact on economic growth, job creation, and export earnings. For example, a World Travel and Tourism Council report found that the global travel and tourism sector generated $7.6 trillion in economic activity in 2017, or 10.2% of global GDP. This supported 1 in 10 jobs worldwide and contributed $2.5 trillion in gross exports.

Tourism also has a significant impact on regional economies. For example, a study of the Thai tourism industry found that it generated over $63 billion in revenue in 2016, accounting for 12.5% of GDP. In addition, tourism generated over 2.5 million jobs, or 19% of total employment.

While tourism is a key driver of economic growth, it also has negative environmental impacts. For example, the aviation industry is a major contributor to climate change, accounting for about 2% of global emissions. Tourism also leads to increases in waste generation and can put pressure on water resources.

Opportunities and challenges abound in the tourism sector. Policymakers must carefully weigh the pros and cons of tourism development to ensure that it benefits host communities and economies.

What are 3 benefits of tourism?

There are many benefits to tourism, both for the tourists themselves and for the places they visit. Some of the benefits include economic growth, job creation, and cultural enrichment.

Tourism is a key driver of economic growth and job creation. When people travel to a new place, they spend money on transportation, accommodation, food, and sightseeing. This spending supports businesses and creates jobs in the tourism industry. For example, the tourism industry in Canada employs nearly 1.7 million people.

Tourism also helps to spread awareness of different cultures around the world. By experiencing other cultures firsthand, people are able to learn about them in a way that is unique and engaging. This can help to build bridges between different cultures and foster understanding and peace.

Finally, tourism can be a great way for people to learn about their own history and culture. By visiting historic sites and museums, people can gain a deeper understanding of their own heritage. This can be extremely valuable in helping to build a sense of identity and community.

In conclusion, there are many benefits to tourism. It can help to grow the economy, create jobs, and promote cultural understanding. It can also help people learn more about their own history and culture.

What are the benefits and costs of tourism on the economy?

Tourism is a booming industry that has a significant effect on the economy of the countries that embrace it. The benefits and costs of tourism must be carefully weighed to ensure that the industry grows in a sustainable way.

The benefits of tourism are numerous. It creates jobs, boosts the economy, and brings in revenue from abroad. In addition, tourism can help preserve cultural heritage and boost the tourism industry in other sectors such as hospitality, transportation, and retail.

However, tourism also has its costs. It can be damaging to the environment, put strains on infrastructure, and lead to increases in prices of goods and services. Additionally, tourism can lead to crime and social problems.

Thus, the benefits and costs of tourism must be carefully weighed to ensure that the industry grows in a sustainable way.

How does tourism help the economy of the Philippines?

Tourism is one of the most important sectors of the Philippines economy. It is among the top 10 sources of foreign exchange and one of the main generators of employment. In 2017, the Philippines welcomed 7.4 million tourists, with receipts totaling $10.9 billion. 

The importance of tourism to the Philippine economy can be seen in the number of jobs it generates. In 2017, the sector employed 1.9 million people, accounting for 10 percent of total employment. Of these, 1.3 million were in the services sector, while 588,000 were in the industry sector. 

Revenue from tourism also helps to boost government coffers. In 2017, tourism generated P1.1 trillion in revenue, or 8.5 percent of the country’s GDP. This was a significant increase from the P854.1 billion generated in 2016. 

There are a number of factors that have helped make the Philippines a popular tourist destination. These include its stunning natural scenery, a rich cultural heritage, and a diverse array of tourist attractions. The Philippines is also home to a number of world-class resorts and hotels. 

The government has been working to promote the country as a tourist destination. This has included the development of the Department of Tourism’s (DOT) “It’s more fun in the Philippines” campaign. The DOT has also been working to improve the country’s infrastructure, with a focus on airports and seaports. 

The Philippines is well-positioned to benefit from the growth of the global tourism market. The sector is expected to grow by around 4.5 percent per year through 2020. This presents a significant opportunity for the Philippines to further increase its share of the global tourism market.

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U.S. issues travel warning for Israel with Iran attack believed to be imminent and fear Gaza war could spread

By Debora Patta , Tucker Reals

Updated on: April 13, 2024 / 5:25 PM EDT / CBS News

Update: Iran launched drone attacks against Israel on Saturday. Read CBS News'  latest coverage here .

Tel Aviv  — Israel is bracing for a worst-case scenario that U.S. officials believe could materialize within just hours — the possibility of a direct attack on Israeli soil by Iran in retaliation for a strike almost two weeks ago that killed seven Iranian military officers. Iran has vowed to take revenge for Israel killing its commanders, who were hit by an April 1 strike on the Iranian embassy in Syria's capital.

Two U.S. officials told CBS News that a major Iranian attack against Israel was expected as soon as Friday, possibly to include more than 100 drones and dozens of missiles aimed at military targets inside the country. Sources have told CBS News the retaliation could include attacks carried out both by Iranian forces, and proxy groups around the region that it has been funneling additional arms to for weeks.  

The officials said it would be challenging for the Israelis to defend against an attack of that magnitude, and while they held out the possibility that the Iranians could opt for a smaller-scale attack to avoid a dramatic escalation, their retaliation was believed to be imminent. 

Asked Friday how imminent he believes an attack is, President Biden responded, "I don't want to get into secure information, but my expectation is sooner than later." The president urged Iran not to move forward, saying his message to Tehran was: "Don't."

Tehran has not indicated publicly how or when it will return fire, so it's unclear how far Iran's leaders will go. If they decide to carry out a direct attack on Israel, there's fear it could blow Israel's ongoing war against Iranian ally Hamas up into a much wider regional conflict.

With the Iranian retaliation expected at any time, the U.S. State Department on Thursday warned Americans in Israel not to travel outside major cities, which are better protected from incoming rocket fire by the country's Iron Dome missile defense system. The latest guidance noted that travel by U.S. government employees in Israel could be further restricted with little notice as things develop in the tinderbox region.

"Whoever harms us, we will harm them," Prime Minister Benjamin Netanyahu vowed Thursday as he visited troops at an Israel Defense Forces airbase. "We are prepared … both defensively and offensively."

On Saturday, all U.S. embassies in the Middle East were put on high alert and required to hold emergency action committee meetings. Diplomats in Lebanon and Israel were specifically told not to travel to certain areas within those countries.

Sima Shine, a security expert and former official with Israel's national intelligence agency Mossad, told CBS News it was a dangerous moment for the region, and the "most worried" she has been. She said anxiety over an all-out war was likely just as high "on both sides, in Israel and in Iran."

If Iran does choose to strike Israel directly, it could involve a complex missile and drone attack similar to the one Iranian forces launched against a Saudi oil facility in 2019 .

"They will try to do it on the military or some military asset," Shine predicted. "But the question will be the damage. If there would be many injured people, killed or injured … I think it has the potential for a huge escalation."

Shine stressed, however, that she still believes neither side actually wants a regional conflict.

U.S. "really trying to avoid war"

The U.S. sent a senior general to Israel this week to coordinate with the close American ally on any response it might make to an Iranian attack. Speaking Friday on "CBS Mornings," America's top military officer said, "we're really trying to avoid war."

"This is part of the dialogue that I have with my counterparts within the region, to include the Israeli chief of defense, who I talked to yesterday," said Joint Chiefs chairman Gen. Charles Q. Brown, Jr., adding that the U.S. military was "doing things not only to prevent a war, but at the same time, one of my primary things is to make sure all the forces in the region are protected."

"My role, as the chairman of the Joint Chiefs, is to plan and prepare," Brown said. "That's one thing we do very well."

Brown's Israeli counterpart, Chief of the General Staff Lt. Gen. Herzi Halevi, "completed a comprehensive situational assessment on the readiness of the IDF for all scenarios," Israel's military said Friday. 

"The IDF is very strongly prepared, both offensively and defensively, against any threat," Halevi was quoted as saying in the statement. "The IDF continues to monitor closely what is happening in Iran and different arenas, constantly preparing to deal with existing and potential threats in coordination with the United States Armed Forces." 

The IDF said the visiting U.S. general, Central Command chief Gen. Michael Erik Kurilla, was taking part in the IDF's situational assessment.

The dilemma for Iran, said Israeli expert Shine, is to figure out how to deliver its promised response to Israel's attack in Syria, but in a way that does not lead to further escalation. Likewise, Shine said Israel could choose to show restraint when it responds to whatever Iran eventually does.

If either side gets the balance wrong, the consequences for the region, and even the world, could be dire.

Weijia Jiang, David Martin, Margaret Brennan and Olivia Gazis contributed reporting.

• Middle East
• Benjamin Neta​nyahu

Debora Patta is a CBS News foreign correspondent based in Johannesburg. Since joining CBS News in 2013, she has reported on major stories across Africa, the Middle East and Europe. Edward R. Murrow and Scripps Howard awards are among the many accolades Patta has received for her work.

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