Macro Perspective of Tourism and Hospitality Page 1 of 16

Multiplier Effect of Tourism Industry

Topic: Multiplier Effect of Tourism Industry

Welcome Notes:
WELCOME TO ALTERNATIVE DELIVERY MODE (ADM) ON MACRO PERSPECTIVE
OF TOURISM AND HOSPITALITY
Get ready to be challenged…
Learn something new every day by adapting the
‘New Normal’

I. INTRODUCTION:
This module focuses on the Multiplier Effect of Tourism
Industry. Challenge yourself to understand and explain the meaning of multiplier effect. You have also
the opportunity to interpret and appraise the many benefits of tourism it brings to the economy.

II. OBJECTIVES:

At the end of the lesson, you should be able to:

1. Define multiplier effect.
2. Interpret and examine the multiplier effects of tourism industry.
3. Appraise and value the many benefits of tourism it brings to the economy.

III. PRELIMINARY ACTIVITIES:

CHAIN REACTION Before you proceed to the main lesson, test yourself in this activity.
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Multiplier Effect of Tourism Industry

Directions: Think of an item which you will introduce and describe like a product in a TV commercial.
You will be given five minutes for the preparation and two minutes to present the commercial. You can
make a video of yourself or take a picture and submit the output via messenger, email or face to face.

Realization Questions:
1. How do you describe your experience during the activity?
-In today’s world, it is necessary to work hard and study hard because many students do not
Study now because of the pandemic.

2. What was your goal during the conceptualization of the product to be endorsed?
-My goal is to endorse the product, I will show them if it works and for them to buy more
products

EXCELLENT!!!

You may now proceed to the main lesson.

IV. LESSON PROPER:

LET’S BEGIN!

Based on the preliminary activities, what are the things did you consider in creating
your commercial?

THAT’S GREAT!
You may now proceed to the lesson.
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Tourists bring new money into the economy of the place they are visiting, and this has effects
beyond the original expenditures. When tourist spends money to travel, to stay in a hotel, or to eat in a
restaurant that money is recycled by those businesses to purchase more goods thereby, generating
further use of the money. In addition, employees of businesses who serve tourists spend a higher
proportion of their money locally on various goods and services. This chain reaction, called the
multiplier effect, continues until there is a leakage, meaning that money is used to purchase something
outside the area.
The term multiplier effect refers to the resulting effect of a service or amenity creating further wealth
or positive effects in an area. For example, tourism in an area will create jobs in an area, therefore the
employees of the tourism industry will have some extra money to spend on other services, and
therefore improving these other services in that area, allowing further employment in the area. The
below figure illustrates the multiplier effect.

Source: Pinterest.com
Multipliers or Ripple Effect
 Multiplier theory emerges from the work of Kahn and Keynes.
 Multipliers are a means of estimating how much extra income is produced in an economy as a
result of initial spending or injection of cash.
 Every time money changes hands, it provides new income and continuous series of
conversions of money spent by tourists from what economists termed “Multiplier Effect”.
 The more often a conversion occurs, the greater its beneficial effects on the economy of the
recipient country.

Types of Expenditures
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 Direct: In the case of tourism, this expenditure is made by the tourist, government or similar
agencies involved in tourism, providing goods and services, tourism generated exports or for
tourism related investment in an area.
 Indirect: Covers successive rounds of inter-business transactions resulting from direct
expenditure.
 Induced: This is the increased consumer spending resulting from the additional personal
income generated by direct expenditure.
 (Indirect + Induced = Secondary Expenditure)
The money generated by tourists spending multiplies as it passes through various sections of
the economy. It can be explained as follows:
 From an initial impulse such as investment and expenditure, one or more primary
effects such as income and expenditure will occur.
 These primary effects in the course of the second period and produce secondary
effects of the same type as the first.
 The process is repeated several times in the course of time.

Types of Multipliers in Tourism

Sales and Output

 Sales (Transaction) Multiplier - this measures the extra business turnover created (direct and
secondary) by an extra unit of tourist expenditure.
 Output Multiplier – this is similar to the Sales Multiplier but it also takes into account inventory
changes, such as the increase in stock levels by hotels, restaurants and shops because of
increased trading activity

Income
 Income Multiplier – this measures the income generated by an extra unit of tourist expenditure.
Income multipliers can be expressed in one of two ways: the ration method, which expresses
the direct and indirect incomes (or the direct and secondary incomes) generated per unit of
direct income; or the normal method, which expresses total income (direct and secondary)
generated in the study area per unit increase.

Employment
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 Employment Multiplier – this can be expressed in one or two ways: as a ration of the
combination of direct and secondary employment generated per additional unit of tourist
expenditure to direct employment generated, or as the employment created by tourism per unit
of tourist expenditure. Employment multiplier is associated with the name of Prof. R.F. Kahn.
The idea of multiplier had its origin in 1931 when Prof. Kahn was discussing the favorable
effects of public investment on aggregate employment.

Multiplier Models
 Base Model – It assumes that one can divide the economy under research into export activities
and local (non-export) activities, and that a stable relationship exists between the export and
local sectors, with these sectors linked by linear relationships.
 Keynesian Model – this is based on identifying streams of income and employment which are
generated in “rounds” which diminish in geometric progression because of leakages at each
round.
 Input-Output Model – the input-output concept analyzes the economy into its sectors and
expresses a relationship of these factors in matrix form, based on the results of research into
the effects of tourist expenditure.

HOSPITALITY AND TOURISM MANAGEMENT EMPLOYMENT OPPORTUNITIES

The tourism and hospitality industry is an umbrella covering a sea of fun and engaging careers.
In an industry that is constantly growing and evolving to new trends, why not jump on board and
explore the options? Hospitality and tourism career opportunities await!

HOTEL OPERATIONS

1. BANQUET AND CONFERENCES - It is a demanding, yet high energy career working in hotels,
resorts and conference centers setting up rooms and servicing events.
2. FOOD & BEVERAGE MANAGEMENT - Responsible for all things related to food and beverage from
ordering products to hiring staff and balancing profit and loss sheets.
3. FRONT OFFICE RECEPTION - From the very first moment of a guest’s arrival, the front office
serves as the face of the company and its standards of service.
4. RESORT MANAGEMENT - Responsible for the overall success of the facility, this is a very diverse
position that manages a wide variety of people.
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5. RESTAURANT MANAGEMENT - Responsible for the overall function of the operation, inventory,
ordering and budgeting often top the list of a manager’s to-do list.
6. SPA AND WELLNESS MANAGEMENT - A position responsible for the day-to-day operations of a
health or beauty spa.
7. CONCERTS, FESTIVALS & EXHIBITIONS - This role involves studying the brand, identifying the
target audience, devising the event concept and coordinating all the technical aspects before launching
or hosting an event.
8. WEDDING COORDINATION - It all comes down to the details and building relationships. Brides
want to have confidence in their wedding coordinator and in doing so, this individual needs to be
extremely organized and love executing special events with many moving components, balancing a
need for both structure and creativity in the workplace.
9. AIRLINES - Manage the in-flight services taking care of food and beverage, duty free and other
customer service requests.
10. AMUSEMENT PARKS - Manage the overall operations as a member of the leadership team or be
ready to welcome amusement park goers behind the desk selling tickets, supervising a food and
beverage outlet or controlling the rides themselves.
11. CASINOS - The gaming service industry is huge and jobs are typically found in casinos or at the
racetrack.
12. CATERING - It is a great position incorporating sales with event planning.
13. CRUISES - Very similar to a hotel, but you are floating from port to port.
14. CONSULTING - Work for a firm or start your own business, this career requires a base of
experience in order to advise your clients.
15. START YOUR OWN BUSINESS - With a little ingenuity, good business sense and creative genius
you can start a company of your own and scale to great magnitudes.

ECONOMIC IMPACTS OF TOURISM

Here are 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 USD 1trillion a year
 Tourism accounts for 30 percent the world’s exports of commercial services
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 Tourism accounts for 6 percent of total exports

 1.4 billion international tourists were recorded in 2018 (UNWTO)
 In over 150 countries, tourism is one of five top earners
 Tourism is the main source of foreign exchange countries and one-half of less economically
developed countries.

Positive economic impacts of tourism

 Foreign exchange earnings – One of the biggest benefits of tourism is the ability to make
money through foreign exchange earnings. The money that the country makes from tourism
can then be re-invested in the economy.
 Contribution to government revenues – 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 businesses and things such as
departure taxes. 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 revenue wouldn’t be as high because the tourists would not stop there. There is also
the income that is generated through induced contributions. These are accounted for money
spent by the people who are employed in 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.
 Employment generation – The rapid expansion of international tourism has led to significant
employment creation. 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 tour guide, to name a few. Indirect
employment includes jobs which are not technically based in the tourism industry. Take a
fisherman, for example. He does not have any contact of dealings with tourist. But he does sell
his fish to the hotel which serves tourists.
 Contributions to local economies – All of the money raised, whether through formal or informal
means, has the potential to contribute to the local economy.
 Development of the Private Sector – The private sector has continuously developed within the
tourism industry and owning a business within the private sector can be extremely profitable.
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Negative economic impacts of tourism

 Leakage - Economic leakage in tourism 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.
 Infrastructure cost - 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.
 Increase in prices - Increasing demand for basic services and goods from tourist will often
cause price hikes that negatively impact local residents whose income does not increase
proportionately.
 Gentrification - 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.

WHY THE ENVIRONMENT IS SO IMPORTANT TO TOURISM?

Positive environmental impacts of tourism

The most commonly noted positive environmental impact of tourism is raised awareness.
Many destinations promote ecotourism and sustainable tourism and this can help to educate people
about the environmental impacts of tourism. There are also many national parks, game reserves and
conservation areas around the world that help to promote positive environmental impacts of tourism.

Negative environmental impacts of tourism

Uncontrolled conventional tourism poses potential threats to many natural areas around the
world.
 Depletion of natural resources – Some of the most common noted examples include using up
water resources, land degradation and the depletion of other local resources.
 Overuse of water resources – The tourism industry generally overuses water resources for
hotels, swimming pools, golf courses and personal use of water by tourists.
 Land degradation – Increased construction of tourism facilities has increased the pressure on
these resources and on scenic landscapes.
 Great pressure on local resources - Tourism can create great pressure on local resources like
energy, food, and other raw materials that may already be in short supply. Greater extraction
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and transport of these resources exacerbates the physical impacts associated with their
exploitation.
 Pollution – Tourism can cause the same forms of pollution as any other industry: Air
emissions, noise pollution, solid waste and littering, sewage, oil and chemicals.
Air pollution and noise – Transport by air, road, and rail is continuously increasing in
response to the rising number of tourists and their greater mobility.
Noise pollution - Noise pollution from aircrafts, cars, buses, (+snowmobiles, jet skis, etc.)
can cause annoyance, stress, and even hearing loss for humans. It also causes distress to
wildlife and can cause animals to alter their natural activity patterns.
Solid waste and littering – Improper waste disposal can be a major despoiler of the natural
environment. Rivers, scenic areas, and roadsides are areas that are commonly found
littered with waste, ranging from plastic bottles to sewage.
Sewage – The construction of hotels, recreation and other facilities often leads to
increased sewage pollution.
Aesthetic Pollution – Often tourism fails to integrate its structures with the natural features
and indigenous architecture of the destination. Large, dominating resorts of disparate
design can look out of place in any natural environment and may clash with the
indigenous structural design.

Physical Impacts of Tourism Development - This includes the construction of buildings, marinas, roads,
etc.
Construction activities and infrastructure development - The development of tourism facilities can
involve sand mining, beach and sand dune erosion and loss of wildlife habitats.
Deforestation and intensified or unsustainable use of land - Construction of ski resort accommodation
and facilities frequently requires clearing forested land. Areas that would be home to a wide array of
flora and fauna are turned into hotels, car parks and swimming pools.
Marina development - Development of marinas and breakwaters can cause changes in currents and
coastlines. These changes can have vast impacts ranging from changes in temperature to erosion
spots to the wider ecosystem.
Coral reefs - Coral reefs are especially fragile marine ecosystem. They suffer worldwide from reef-
based tourism developments and from tourist activity.

Physical impacts from tourist activities

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The last point worth mentioning when discussing the environmental impacts of tourism is the
way in which physical impacts can occur as a result of tourist activities. This includes tramping,
anchoring, cruising and diving.
 Trampling – Tourists using the same trail over and over again trample the vegetation
and soil, eventually causing damage that can lead to loss of biodiversity and other
impacts. Such damage can be even more extensive when visitors frequently stray off
established trails.
 Anchoring and other marine activities – In marine areas many tourist activities occur in
or around fragile ecosystem. Anchoring, scuba diving, yachting and cruising are some
of the activities that can cause direct degradation of marine ecosystem such as coral
reefs.
 Alteration of ecosystem by tourist activities – Habitats can be degraded by tourism
leisure activities. For example, wildlife viewing can bring about stress for the animals
and alter their natural behavior when tourists come too close.

We had just finished the discussion on Multiplier Effect of Tourism Industry. Let’s now
move on to the next higher level of activities or exercises that demonstrate your
potential skills/knowledge of what you have learned.

V. ANALYSIS, APPLICATION AND EXPLORATION:

ACTIVITY 1

Name: GUILING, JENNILYN Year and Section: BSHM-1139

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Directions/Instructions: Using the Internet, there is a wealth of data about the economic value of handy
graphs and charts in the United Nations Economic Impact Report. Explore and explain with examples
how tourism can lead to a variety of employment types at the point of origin or destination.

-COVID-19 pandemic is not just a health issue. It is a profound shock to our societies and
Economies, and women are at the heart of care and responds e efforts under way. As front-
line Responders, health professionals, community volunteers, transport and logistics managers,
Scientists and more, women are making critical contributions to address the out break everyday.

Example: The majority of caregivers, at home and in our communities, are also
Women. Additionally, they are at increased risk of infection and loss of live lihood, and existing
Trends point to less access to sexual and reproductive health and rise in domestic violence
During crisis. UN Women is bringing up-to-date information and analysis on how and why gender
matters in COVID-19 response

Finally, let’s WRAP UP the lesson regarding what we had discussed today!
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VI. GENERALIZATION:

Name: GUILING, JENNILYN Year and Section: BSHM-1139

1. Describe the positive and negative economic impact of tourism?

Positive Impact of Tourism Negative Impact of Tourism

Tourism provides the economic stimulus to allow Although the economic impacts of tourism
for diversification of employment and income development are usually held to balance tourism
potential, and develop resources within the economic benefits, however, negative economic
community impacts are also apparent and significant which
cannot be ignored.

2. From the lesson on Multiplier Effect of Tourism Industry, I realized that…

- There are so many people that you need services but just enjoy and to
make sure that costumer are enjoy too.
__________________________________________________________________________________

GOOD JOB!
You have come to an end of Module 7.
OOPS! By the way, you still have an assignment to do. Here it is…

VII. ASSIGNMENT:
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Name: GUILING, JENNILYN Year and Section: BSHM-1139

1. Is it better to have a higher or lower multiplier effect and why?

-If banks are lending more than their reserve requirement allows then their multiplier will be
Higher creating more money supply .why? If banks are lending less, then their multiplier will be
Lower and the money supply will also be lower.

2. Choose a career in the hospitality and tourism business and give a brief overview of what your
responsibilities would be.

Hotel MANAGER
You will need excellent interpersonal skills, experience in the hospitality industry, and
a number Of years’ experience in managing employees.

After your long journey of reading and accomplishing the module, let us now
challenge your mind by answering the evaluation part of this module.
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VIII. EVALUATION:
Name: GUILING, JENNILYN Date:
Year and Section: BSHM-1139 Score: ____________________

MULTIPLE CHOICE: Encircle the letter of the correct answer.

1. C It refers to the resulting effect of a service or amenity creating further wealth or positive effects in
an area.
A. Direct Expenditure
B. Output Multiplier
C. Multiplier Effect
D. Leakage

2. B A type of expenditure wherein there is an increased consumer spending resulting from the
additional personal income generated by direct expenditure.
A. Indirect
B. Induced
C. Induced + Indirect
D. Secondary

3. B A multiplier that indicates the internal leakages which exist between various sectors of the
economy, but do not relate income generated to extra sales.
A. Sales
B. Income
C. Ratio
D. Employment

4. B It is based on identifying streams of income and employment which are generated in “rounds”
which diminish in geometric progression because of leakages at each round.
A. Base Model
B. Keynesian Model
C. Input Model
D. Output Model
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5. A It is a demanding, yet high energy career working in hotels, resorts and conference centers
setting up rooms and servicing events.
A. Banquet and Conferences
B. F&B Management
C. Catering Services
D. Room Service
6. D A condition wherein local people will be forced to move away from the area that tourism is
located due to real estate demand of increasing building cost and land values.
A. Relocation
B. Allocation
C. Immigration
D. Gentrification

7. C It refers to the jobs which are not technically based in the tourism industry.
A. Direct employment
B. Indirect employment
C. Regular
D. Contractual

8. A Which among the activities that can cause direct degradation of marine ecosystem such as coral
reefs?
A. Anchoring, Scuba diving, Cruising
B. Skiing, Mountaineering, Hiking
C. Camping, Tour Guiding, Trekking
D. Travelling, Car racing, Cable riding

9. D Which fact about the economic importance of the tourism industry globally is not true?
A. The tourism economy represents 5 percent of world GDP.
B. Tourism contributes to 6-7 percent of total unemployment.
C. The tourism industry is valued at USD 1trillion a year.
D. 1.4 billion international tourists were recorded in 2018 (UNWTO).

10. C He conceptualized the employment multiplier in 1931 when he discussed the favorable effects
of public investment on aggregate employment.
A. Prof. Keynes
B. William Martin
C. Prof. R. F. Kahn
D. Jan Carlsson
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CONGRATULATIONS on reaching the end of this module! You

may now proceed to the next module. Don’t forget to submit all the
exercises, activities, portfolio, etc. during face to face.