Tourism

For the EU 27, GHK (2007) estimates direct and indirect employment multipliers for environment-related tourism at between 1.69 and 2.13. This means that for every 100 jobs directly created in the sector, 69 more are created elsewhere in the economy as a result of indirect effects and the figure increases to 113 when induced effects are taken into account. The authors define Environment- related tourism (ERT), as activities where the natural environment (not the built environment) is responsible for influencing the choice of destination for the tourism activity,

including visits to hills, mountains, coasts,

farmland, woods, forests, springs, lakes and wildlife and the activities of fishing (sea, game and coarse), walking, climbing, golfing, skiing, cycling, bathing/swimming, etc.

It is estimated that sustainable tourism in Nicaragua, a destination that focuses very prominently on its culture and natural environment, has an employment multiplier of 2. That is, for every job in the tourism sector, additional local employment is created, with higher wages than the national averages (Rainforest Alliance 2009).

3.3 Local economic development and poverty reduction

Local economic development Tourism is an important and effective driver of local economic development. Tourist spending enters the local economy to varying degrees depending principally on the structure of the tourism business and its supply chain at a destination. The economic contribution entering the economy is the local contribution and is typically measured as an average amount per tourist, and as a percentage of the total tourism spending that stays in the local economy. That which is not retained in the local economy is “leakage.” Multiplier effects are limited by leakages, which reduce the positive economic impacts of tourism. Wells (1997) reports values of leakage as a percentage of gross tourism receipts ranging from 11 per cent (Philippines) to 56 per cent (Fiji)

The income multiplier is used to describe the amount of the indirect economic activity resulting from the local contribution. The economic development potential of tourism is a direct function of the local contribution and multiplier – larger local contributions and larger multipliers each lead to greater economic activity in the local economy and there are important synergies between them. From a global perspective, Mill and Morrison

(2006) review the literature on income

multipliers and present a list of estimations from different countries and regions. Income multipliers can be relatively low for specific destinations such as the City of Winchester (0.19) and higher for a country such as Turkey (1.96). According to Cooper et al. (2008), tourism impacts income in different ways depending

Total employment per single job in the tourism sector

Jamaica

Mauritius Bermuda Gibraltar

Solomon Islands Malta

Western Samoa Republic of Palau Fiji

UK (Edinburgh)

multipliers Source: Cooper et al. (2008)

on the country or region where it develops. Every US dollar spent by overnight tourists impacts income in the economy between 1.12 to 3.40 times. This high variability indicates that local economic impact development will depend on particular characteristics of the tourism business model, in particular the quantity and type of products and services sourced from the local economy.

In destinations where a large percentage of tourist needs are locally supplied (beds and linens, food and beverage, equipment and supplies, labour, tour and transportation services, souvenirs, among others), local contribution and multipliers tend to be high, and the resulting economic impact correspondingly greater. In destinations where substantial income is not captured locally, economic impact from tourism is less. This effect can vary dramatically between destinations:

■ For Granada, Nicaragua, the Rainforest Alliance (2009) reports a case study of sustainable tourism where local purchases represent only 16 per cent of total purchases;

■ For the Canary Islands, Hernández (2004) finds that 43 per cent of total tourism expenditure is supplied from outside the local economy through direct, indirect and induced imports; and

■ In New Zealand, it is estimated that 24 per cent of tourism expenditure is for imports of goods and services sold directly to tourists by retailers (Hernández 2004).

Looking at a single destination illustrates how substantial tourism’s economic impact can be. For example, for Panama, Klytchnikova and Dorosh (2009) present a detailed evaluation of tourism’s impact in the local economy of three different regions. The income multiplier for the tourism industry (hotels and restaurants) is the largest of all economic sectors. An additional US$ 1 in

427

4.61 3.76 3.02 2.62 2.58 1.99 1.96 1.67

not available not available

Employment per US$ 10,000 tourist expenditure

1.28

not available 0.44

not available not available 1.59

not available not available 0.79 0.37

Table 1: Sample of tourism employment