Analyzing Tourism's Role in Economic Growth & Development (TL4033)

This essay critically examines the role of tourism in fostering economic growth and development in destination areas. It highlights that while tourism is considered a key driver of economic growth, particularly in developing countries, its effectiveness depends on factors like employment generation, infrastructure development, and the creation of financial services. The essay discusses the influence of various actors, including governments and private sector players, in shaping tourism development. It evaluates the global and national perspectives on tourism's economic impact, noting its contribution to foreign exchange and GDP, especially in small island developing states. The essay also addresses challenges such as seasonal employment, weak linkages between tourism and other sectors, and the need for sustainable tourism practices, emphasizing the importance of government policies in maximizing the benefits of tourism for local communities and economies. Desklib offers a variety of resources, including past papers and solved assignments, to aid students in their studies.

TL4033 – TOURISM AND SUSTAINABILITY
ROLE OF TOURISM IN ACHIEVING ECONOMIC GROWTH AND DEVELOPMENT
IN DESTINATION AREAS
INTRODUCTION
The role of tourism in fuelling economic growth and development in destination regions has
been a matter of much academic debate in the past several decades (Conrady, 2019).
Although many countries, primarily the developing countries, consider tourism one of the
key drivers of economic growth, the link between economic growth and tourism is not
automatic. The effectiveness and the role of tourism in fostering economic growth and
development in a region can only be assessed by the extent to which it generates
opportunities for employment among local people, stimulates the development of basic
infrastructure such as airport facilities, ports and construction of roads. According to (Page,
2016), the usefulness of tourism in driving economic growth in a destination region can be
better understood by its assessing its role in creation of financial services from which the
whole region can benefit economically. In the past few decades, countries are increasingly
formulating a national strategy towards tourism development that comprises of institutional
frameworks with adequate incentives, policy and regulations to fuel the development of
supply capacity (Leung et al, 2017). This essay is focused upon providing a critique about the
role of tourism in fostering economic growth and development in destination areas with an
emphasis also on benefits, implications, issues and challenges.
MAIN BODY
To understand the influence of tourism development of economic growth in destination
areas, it is important to understand the drivers behind it (Lockwood, 2015). Diverse actors,
ranging from governments to key players in the private sector play a critical role in
evaluating the extent to which the development of tourism takes place in a region and how
it enhances the growth of economy and contributes towards overall development. The
governments in the destination play a critical role in tourism development through
designing key regulations, policy intervention and emphasis on infrastructure development.
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Similarly, the key players in the private sector including small and large, regional and
multinational organisations operating in the private sectors such as transport, hotels, local
guides, restaurants, leisure and entertainment services (Brooks, 2016). As tourism helps
create a linkage across various sectors that contribute towards economic development in a
destination region, it is more likely results in economic diversification in that region.
However, at the same time it also presents several challenges in creating a sustainable
tourism sector which requires each activity to be sustainable in the long-term. To make all
tourism-related activities sustainable, it is imperative to design a range of regulations and
policies along with focus on investments and training regarding the same (Ritchie et al,
2005).
The relative importance of tourism industry in the growth of economy in a destination
region can be further understood by evaluating various perspectives. As per the global
perspective, the tourism industry has become one of the fastest growing industries around
the world due to increasing disposable incomes and rapid pace of globalisation (Gartner,
2016). As the household incomes in emerging economies are more likely to increase leisure
activities and contribute towards international trade in this industry, the business travel is
bolstered in the tourist destination areas. This will result in transformation and
diversification of economies and thus play a vital role in economic growth with sustained
demand. Since the past few decades there has been a constant surge in the number of the
international tourist arrivals in the major tourist destinations around the globe with
emerging economies experiencing a faster growth rate compared to that of the developed
and advanced economies. As per (Cruces, 2015), international tourism is considered to be a
key source of foreign exchange thus contributing towards macroeconomic stability by
becoming a contributor towards the balance of the payments, especially in the developing
countries. The overall income generated by inbound tourism is a key driver of overall
economic growth and development in the destination regions. However, issues pertaining
with global tourism including concerns about seasonal employment patterns in this industry
and poor employment conditions in many regions (Telfer et al, 2015).
The national perspective of the role of tourism in economic growth and development
highlights the heterogeneities that are hidden by the global perspective. The economic
impact of tourism is most felt in the countries such as France, Japan, United States of
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America, Spain, Italy and Brazil, which are large and diversified economies (Saarinen et al,
2013). As the travel rates have become less inexpensive compared to the earlier decades,
there has been a growth in tourist travel in the recent years. The increasing disposable
incomes of individuals belonging to developing countries has also significantly contributed in
the growth of tourism around the globe. With rest to the employment contribution and the
GDP (Gross Domestic Product), the role of tourism in fostering economic growth and
development is particularly effective in small island developing states (Webster, 2017). Thus,
as per the national perspective, the tourism is widely considered to be among the key
sources of economic growth and employment at global as well as the international level in
the past few decades. In places where the tourist attractions are remotely placed, the
development of transport facilities to the sites can have a beneficial impact on the rural
development. Keeping in this view, governments around the world are emphasizing on
developing infrastructural facilities and developing key regions in a bid to attract global
visitors and thus generate employment and strengthen their respective economies.
Countries, for example Singapore, emphasized the need for designing a national policy for
tourism development and successfully integrated tourism into its economic growth model
(Williams, 2011).
There are several factors that that play an influential role in the contribution of the tourism
sector to economic growth (Webster, 2017). The use of the forward and backward linkages
of tourism sector with other sectors is one of the important factors that decide the level of
integration of tourism into the national economy. Apart from this the integration of tourism
sector into the regional and global value chains also plays a critical role in determining the
extent it impacts the overall economic growth and development. As per (Lockwood, 2015),
the extent to which a government spends the revenue generated by tourism on
infrastructure development, supporting the small and medium scale organisations,
introducing skills development programmes determines the usefulness of tourism industry
in creating a vibrant local economy. Policies adapted by the local governments in areas such
as technology transfer, encouraging foreign investment in tourism sector, generating
employment opportunities in destination areas and promoting labour-intensive activities
play a significant role in fostering economic growth and development in these regions
through tourism sector. Apart from these, the efforts by the governments to meet the
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social, ecological and environmental objectives also play an influential role in promoting
sustainable tourism practices in their respective countries (Page, 2016).
The growth in the tourism industry in a particular country cannot be directly translated into
economic growth and development of that region. (Cruces, 2015) points out that the
tourism linkages remain under-exploited and weak in many regions around the world. The
foreign investors, foreign airline companies and international tour operators are among the
key players that capture the value added in the tourism sector, leaving behind little progress
and benefits for the poor in the region. It is important for the governments to play a
proactive role in improving linkages between tourism and other sectors such as agriculture
as it provides a strong backward linkage to the tourism sector (Ritchie et al, 2005). As the
demand for large supply of beverages and foods grows with the tourism development, it is
essential for the government to strong integrate local farmers and producers into the value
chain through contractual agreements between hotels and producers. It will thus result in
increased disposable income among the middle and lower middle-class population and will
thus help in strengthening the economy. Apart from the agricultural industry, the other
sectors such as transport, construction and manufacturing are also directly influenced by
the growth of tourist activities in a destination region. The construction of transport facilities
not only benefits tourism but also bolsters trade in the region resulting in economic growth
and development in the respective places (Saarinen, 2013).
CONCLUSION
Tourism brings together population with varied income levels, cultural disparities, values
and lifestyles together. While there are diverse benefits of tourism on economic growth and
development with increased foreign exchange, development of facilities, employment
generation and high spending by visitors, it is imperative for governments around the world
to assess the issues pertaining to over-tourism and preserve the established values and
cultures that are unique in nature (Telfer et al, 2015). Although tourism industry plays a
significant role in economic development, the impacts on the tourism development
activities on climate change, ecological balance and sustainability must not be overlooked
by the government authorities. By working towards adapting sustainable tourism practices
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and respecting the socio-cultural authenticity of host communities, governments around the
world must work towards creating socio-economic benefits to all the stakeholders.
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