What this lesson teaches
I can explain how tourism affects a place's economy: jobs, income, leakage and dependence.
Syllabus K329, Topic 2.2, Key Question 2. How does tourism affect the economies of places?
Make a guess
A tourist pays for a hotel room. Who earns from that payment?
- Hotel staff, suppliers and nearby local shops.
- The hotel itself, as the money stays inside it.
- The hotel owner, who keeps it as profit.
- The government, which takes it in taxes.
Show the answer
Hotel staff, suppliers and nearby local shops.
The payment becomes hotel revenue, which pays wages and suppliers. They in turn spend some income locally, so the effect spreads.
Tourist spending supports workers and suppliers in several places, but check the pay and security of those jobs, not just the number.
Tourist spending supports work at several points in a trip. Visitors pay for transport, accommodation, food and guides. Travel agents in the generating region earn income, as do businesses and suppliers at the destination. So the economies at both ends stay linked. But the effects are usually biggest at destinations, where most tourism facilities and jobs are.
Formal employment is registered and regulated, like a hotel job with a proper contract and social protection. Informal work lacks effective registration or legal protection; some unregistered guiding or street selling is informal. Tourism creates both kinds.
Business size does not tell you which it is. A small business can be formal, and a worker in a registered firm may still lack protection. Informal work is not just another word for low-skilled or illegal work.
A visitor's payment becomes business revenue. The business uses it to pay workers and suppliers, who may spend their income locally, raising household incomes. But revenue is not profit, because costs must be paid. And more jobs do not automatically mean better jobs. Pay, hours, seasonal demand and job security all affect how much households benefit. The International Labour Organization notes both tourism's job potential and ongoing problems with informal work and working conditions.
Put these in order
Follow one tourist's spending through a destination. Put the steps in order.
- Workers and the farmer spend part of their income in local shops.
- Household incomes rise across the destination, not just at the restaurant.
- The restaurant earns revenue from the meal.
- The restaurant pays its cooks and buys vegetables from a local farm.
- A tourist pays for a meal at a local restaurant.
Show the answer
- A tourist pays for a meal at a local restaurant. The payment becomes the restaurant's revenue, which it can use to cover its costs.
- The restaurant earns revenue from the meal. Out of that revenue, the restaurant must pay the people and firms that made the meal possible.
- The restaurant pays its cooks and buys vegetables from a local farm. Wages and payments become income for workers and suppliers, who now have money to spend.
- Workers and the farmer spend part of their income in local shops. That spending becomes income for other local businesses, so the benefit spreads further.
- Household incomes rise across the destination, not just at the restaurant.
- Formal work
- Registered, with a contract and protection.
- Informal work
- Unregistered, without legal protection.
- Destinations
- Usually feel the biggest economic effect.
Step by step
Direct spending
The tourist buys a meal, room or tour.
Workers and suppliers
Businesses pay staff and buy goods.
Check quality
Pay, security and who gets the jobs.
Real examples to use
Singapore's integrated resorts
Marina Bay Sands and Resorts World Sentosa opened in 2010. They created many jobs in hotels, shops and attractions and helped visitor arrivals reach 19.1 million in 2019.
Worked example: A meal has several links
A visitor buys a restaurant meal. The restaurant pays cooks, waiters and a vegetable supplier. The supplier benefits without meeting the visitor. Buying local food keeps more money in the destination.
Watch out for this
Every street seller is informal, and every hotel worker has a secure job.
Check how each job is registered and protected. Appearance or business size is not enough.
Check your understanding
A destination reports more tourism jobs. What extra evidence is most useful?
- The colour of workers' uniforms.
- An assumption that every job is permanent and well paid.
- Pay, hours, job security and who can get the jobs.
Show the answer
Pay, hours, job security and who can get the jobs.
Yes. Job quality matters as well as numbers.