TOURISM AND DEMAND ON ECONOMICS

QUESTION

Assessment topic: Global Tourism and the Emerging Economies

Step 1: Go to the World Travel and Tourism Council website at www.wttc.org/research.

Step 2: Choose a country that you consider to be an “emerging economy” or a “developing economy” and download the

Economic Impact report for 2011.

Step 3: Answer the following questions:

1. What is the contribution of tourism and travel to the county’s gross domestic product? Has this been increasing or decreasing over the past ten years? How does this compare to the world average? ( 6 marks)

1. What percentage of the country’s GDP is expected to be made up of tourism activities in 2021? How does this compare to the present? (4 marks)

1. What percentage of employment in this country is due to tourism and travel activities? How does this compare to the world average? (4 marks)

1. How many tourists visited this country in 2011? How does thjs compare to the forecast for 2021? (4 marks)

1. What percentage of tourism and travel dollars spent in this country in 2011 were due to domestic tourism compared to international tourism? (2 marks)

1. If a widespread civil war broke out in this country how would it affect the amount of tourism in this country and the price of tourism products sold in the country? Demonstrate this using demand and supply graphs and explain which conditions of demand and supply would be affected. (10 marks)

SOLUTION

The below analysis and the inferences have been derived from the eports published by world travel and tourism council and the following questions have been answered based on that.

1. The direct contribution that has been made by the tourism and travel to the GDP of India in terms of Indian National Rupee is INR1,689.8 billion which is 1.9% of total GDP

The total contribution that has been made by the tourism and travel to the GDP of India in terms of Indian National Rupee is INR INR5,651.0 billion which is 6.4% of total GDP

According to the world travel and tourism council over the past few years show that the contribution of the travel and tourism to the GDP of the country has been increasing. This shows that the tourism industry has a huge impact on the economy of the country. The contribution in the year 2007 was INR 5000 billion which has rose to more than INR 6000 billion in the year 2012. In absolute terms the direct contribution in 2011 is $36.5 billion and the total contribution is $121 billion, ranking 11^th and 12^th in both the parameters respectively.

However in making the comparison with the world average it can be said it has been much low, as the world average for the direct contribution is 5.2% which is 1.9% in case of India. Also in case of total contribution the world average is 14% and that for India is just 6.4%. India ranks 146^th and 126^th  in both the cases respectively.

Another important aspect is that the of the total contribution the leisure spending is more than the tourism and travel as a result of business concerns. The discouraging factor of this the foreign visitors are just around 18% and the 72% contribution is of the domestic visitors.

1. It is forecasted that the direct contribution will be 1.9% and there will be marginal increase in the total contribution to 6.5% of GDP. In comparison to the current contribution it isn’t expected that there will be much growth. Thus it can be said that the tourism industry is not expected to be growing much in the coming ten years and thus the contribution has remained constant.

1. The direct contribution of travel and tourism is comparable to that of the world a the direct employment contribution in 2011 was 5.0% and that of the world was 5.3%. Thus it was just 30 basis points less than the world. However the total contribution of the travel and tourism to employment is much less. In 2011 the employment contribution was just 7.8% whereas that of the world was 13.6%. This implies the direct contribution to employment although was good enough, travel and tourism was not able to generate enough jobs in the country. Thus the contribution to the growth is not appreciable. This can be easily accessed as in the direct contribution employment ranking of India is 53 and that in the total contribution towards employment is 102. Thus India is lagging far behind in this section as well.

1. The total number of foreign visitors in the year 2011 was 6 million and the expected number of foreign visitors in the country in the year 2021 is expected to be around 10 million. Thus there is almost 80% increase in the foreign visitors. Thus this seems to be good for the country. However since the contribution of tourism to the employment the effect is not reflected in the GDP contribution. Thus efforts will have to be made to achieve this forecast and thus increase its effect in the contribution towards the GDP and employment generation.

1. The contribution of foreigners in the tourism in the country is just 17.8% and that of the domestic visitors is 82.8%. Also the travel dollars spent in the country can be attributed to the visitor exports which are in the range of INR 800 billion.

1. In case civil war broke in the country the tourism will be much impacted a there will be impact from both the foreign visitors as well as the domestic visitors. This can be seen from the fact that there isn’t much growth expected in the GDP contribution as the spending is on the lower side. India has been a very sensitive country which has been in a state of war due to the terror attacks and disturbances with the neighboring countries.

However it can be said that the country isn’t dependent much on the tourism. Thus the GDP of the country will not be impacted much due to reduced tourism in the country but by other factors due to state of civil war in the country.

The total number of domestic will certainly be reduced and thus will impact the direct employment in the country. Thus it s to say that the effect of tourism industry will be seen not much by the foreign visitors but more because of the reduction in domestic tourism.

This reduced tourism will result in less direct employment and thus the decreased demand of the tourism products and this will result in reduced prices of the tourism products.

This has been explained in the graph below

Quantity

D                                                                                             S

D1

N                                             M

O                     P

s

D1                                       D

Q                     R

As seen in the above graph the SS line shows the supply of the tourism products and DD is the demand line for these products. However since in the state of war the demand will come down the demand line will shift to D1D1 as shown in the above graph.

Thus at equilibrium point the in the initial condition the quantity demanded was N and the price was as shown by point R on the X axis which is the price of the product.

Thus with the shift of the demand line the quantity demanded will be reduced to O and thus the price will be reduced to Q a shown in the above graph.

Thus as stated above The total number of domestic will certainly be reduced and thus will impact the direct employment in the country. Thus it s to say that the effect of tourism industry will be seen not much by the foreign visitors but more because of the reduction in domestic tourism.

This reduced tourism will result in less direct employment and thus the decreased demand of the tourism products and this will result in reduced prices of the tourism products.

The country tourism will be much impacted a there will be impact from both the foreign visitors as well as the domestic visitors. This can be seen from the fact that there isn’t much growth expected in the GDP contribution as the spending is on the lower side. India has been a very sensitive country which has been in a state of war due to the terror attacks and disturbances with the neighboring countries.

Hence the above explanation shows the dependency of the country on the trade and the impact of trade on the GDP of the country and thus the ipact of civil war on the tourism of the country.

References:

World Travel and Tourism Council, Travel and Tourism economic impact 2011: India

LA05

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