MACRO

PERSPEC
TIVE OF

PSU VISION

“AN INTERNATIONALLY RECOGNIZED UNIVERSITY THAT PROVIDES RELEVANT

AND INNOVATIVE EDUCATION AND RESEARCH FOR LIFELONG LEARNING AND
SUSTAINABLE DEVELOPMENT.

PSU MISSION

“THE PALAWAN STATE UNIVERSITY IS COMMITTED TO UPGRADE THE PEOPLE’S

QUALITY OF LIFE BY PROVIDING EDUCATION OPPORTUNITIES THROUGH
EXCELLENT INSTRUCTION, RESEARCH AND INNOVATION, EXTENSION,
PRODUCTION SERVICES AND TRANSNATIONAL COLLABORATION

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 CORE VALUES:
E – Excellence in Service;
Q – Quality Assurance;
U – Unity in Diversity;
A – Advocacy for Sustainable Development
L – Leadership;
I – Innovation;
T– Transparency;
Y- Youth Development

COURSE DESCRIPTION

This course is designed to give a clear and whole overview of tourism and hospitality as an ecosystem and goes
beyond the usual closed concept of tourism. It introduces the concepts and terms that are common throughout
the different sectors. It also intends to develop, update and maintain local knowledge as well as tourism industry
knowledge. It shows the structure and scope of tourism as well as the impact of tourism as an industry in relation
to the world economy and society.

It also illustrates the effects of the convergence of tourism with the other local industries and let students
appreciate its multiplier effect in various fronts. It discusses the major factors that influence history and future of
tourism in the world and in the Philippines.

It also introduces the sustainable goals of tourism and discusses, among others, how to develop protective
environments for children in tourism destinations: to observed and perform risk mitigation activities; etc. the
students will also learn to appreciate the key global organizations and the roles they play in influencing and
monitoring tourism trends.

COURSE NUMBER: THC 2H

UNITS: 3 Units
GOOGLE CLASSROOM:

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 COURSE REQUIREMENT AND INSTRUCTIONS:

1. All students who will be taking the course shall be officially enrolled in PSU Quezon Campus.

( Registration Form shall be sent to the GC as proof)

2. Computation of grades shall be composed of work output 40 % and Performance Task 60 %.

All written activities shall be part of work output and other activities will be in the performance
task.

3. Modules will be uploaded through Google classroom and messenger whenever necessary.

4. Submission of the activities (written) and Performance tasks (video/ etc.) Shall be made
through GC, EMAIL, or PM to the subject instructor.

5. All concerns shall be raised directly to the subject instructor. Consultation with your instructor
should be at least twice a week observing the class hours using these channels.

Gmail – [email protected]

Phone no: 09064667174

Facebook: Salome burlas –lampon

FB messenger account - (Class GC)

GRADING SYSTEM

This will be our Grading System.: 40% for midterm; and 60% for finals

Written Output 40 %

Performance Based 60 %

Total 100%

MACRO PERSPECTIVE OF TOURISM AND HOSPITALITY

Macro Perspective of Tourism and Hospitality

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 (2nd semester SY-2021-2022)

MODULE 4: Unit -4 The Economics of Tourism and Hospitality, The Role of Tourism and Hospitality in
Economic Development
,

Overview

Tourism’s economic impacts are touted by the industry for a variety of reasons. Claims of tourism’s economic
significance give the industry greater respect among the business community, public officials, and the public in
general. This often translates into decisions that are favorable to tourism and hospitality industry. Community
support is important for tourism and hospitality, as it is an activity that affects the entire community. Tourism and
hospitality businesses depend extensively on each other as well as on other businesses, government and
residents of the local community.

Economic benefits and costs of tourism and hospitality reach virtually everyone in the region in one way or
another. Economic impact analyses provide tangible estimates of these economic interdependencies and a
better understanding of the role and importance of tourism in a region’s economy. Economic impacts are
therefore an important consideration in state, regional and community planning and economic development.
Economic impacts are also important factors in marketing and management decisions. Communities therefore
need to understand the relative importance of tourism to their region, including tourism and hospitality’s
contribution to economic activity in the area.

Learning Outcomes

At the end of this unit, students will be able to:

1) Explain the role of tourism and hospitality in economic development;

2) Analyze the economic impact of tourism and hospitality on a destination area;
3) Differentiate the direct effects from the secondary effects of tourist expenditures on the
economy of the host area;
4) Elucidate the meaning of tourism multiplier and its effect on the economy of the host country;
5) Describe the undesirable effects of the economic aspects of tourism and hospitality; and
6) Identify the strategies which can maximize the economic effects of tourism and hospitality.

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 Topic 1: the Role of
Tourism and Hospitality
in Economic Development

Several developing countries have used tourism and hospitality development as an alternative to help economic
growth. The reasons for this are: first, there is a continuous demand for international travel in developed
countries; second, as income in developed countries increases, the demand for tourism and hospitality also
increases at a faster rate; and third, developing countries need foreign exchange to aid their economic
development.

The organization for Economic Cooperation and Development (OECD) has concluded that tourist and hospitality
provides a major opportunity for growth to countries that are at the intermediate stage of economic development
and require more foreign exchange earnings.

Tourism and hospitality is an invisible export which differs from international trade in many ways.

1. In tourism and hospitality, the consumer collects the product from the exporting
country, thereby eliminating the freight costs for the exporter except in cases in which
the airline used are those of the tourist-receiving country.
2. The demand for pleasure travel is largely dependent on non-economic factors, such as
local disturbances, political unrest, and changes in the fissionability of resorts/countries
created mostly by media coverage. At the same time, international tourism and
hospitality is both price elastic and income elastic. This means that changes in price
and income will also change the demand for pleasure travel.
3. By using specific fiscal measures, the exporting or tourist-receiving country can
manipulate exchange rates so that those for tourists are higher or lower (normally the

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 latter is implemented in order to attract large numbers of tourists) than those in other
foreign trade markets.
Also, tourists are allowed to buy in domestic markets at the same prices as the local
residents (the exceptions are the duty-free tourist shops operated in many Caribbean
islands and elsewhere).
4. Tourism and hospitality is a multifaceted industry that directly affects several sectors in
the economy, such as hotels, shops, restaurants, local transport firms, entertainment
establishments, handicraft producers, and indirectly affects many others, such as
equipment manufacturers and utilities.
5. Tourism and hospitality brings many more non-monetary benefits and costs than other
export industries, such as social, cultural, and environmental benefits and costs.

Economic Impact

When travelers outside the destination area spend on goods and services within the destination,
tourism and hospitality acts as an export industry by bringing in revenues from outside sources. Tourist
expenditures also increase the level of economic activity in the host area directly.
Many countries have utilized tourism and hospitality as a means to increase foreign exchange earnings
to produce investment necessary to finance economic growth. The tourism and hospitality industry’s
economic impact on a destination area can be immense since it provides a source of income,
employment, and foreign exchange.

Direct and Secondary Effects

In order to measure the economic impact of tourism and hospitality on the destination area, it is
important to know the direct and secondary effects of visitor expenditures on the economy of the area.
Tourist expenditures received as income by businesses such as hotels, restaurants, car rentals, tour
operators, and retail shops serving tourists have a direct effect on the economy of the host area. The
term “direct” means that the income is received directly. Indirect or secondary effects mean that the
money paid by tourists to businesses are, in turn, used to pay for supplies, wages of workers, and other
items used in producing the products or direct services bought by tourists.

Tourism Multiplier

The term “multiplier” is used to describe the total effect, both direct and secondary, of an external
source of income introduced into the economy. The tourism multiplier or multiplier effect is used to
estimate the direct and secondary effects of tourist expenditures on the economy of a country.

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 Increased
Personal Spend
Local Tour Income
Operator
Seed
Fertilizer
Income Save Import
Handicrafts (Leakage)

Tourist Purchase of
Supplies Raw
Materials
…
Hotelier …
Wages
Wages

Services(e.g. Rent
Taxi) Food
Savings

Figure2. Multiplier Effect

A tourist makes an initial expenditure into the destination. This expenditure is received as income by local tour
operators, handicrafts store owners, hoteliers, and taxi drivers. In the first round of transactions, hotelier may use
some of the money received to buy some supplies, pay some wages, and retain some profits. The income in the
second round may be spent or saved, while the employee who has received payment for services rendered may
spend some of it on rent and some on food, and may put some into savings.

The money spent on supplies in the third round of spending goes for such things as seed, fertilizers, and
imported raw materials. Any income spent on imports has leaked out of the local economy. This process
continues until the additional income generated by a new round of spending essentially becomes zero. Leakage
is the value of goods and services that must be imported to service the needs of tourism and hospitality. To
estimate the total economic impact on an area, imports must be subtracted from the income generated by
visitors.

The formula for tourism multiplier is:

K=

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Where:

K = the multiplier

y = the change in income generated by E

E = the change in expenditure (the initial sum of money spent by the tourist)

The size of the multiplier depends on the extent to which the various sectors of the economy are linked to one
another. When the tourism and hospitality sectors buy heavily from other local economic sectors for goods and
services, there will be a smaller tendency to import and the multiplier will be greater than if the reverse were
smaller tendency to import and the multiplier will be greater than if the reverse were true.

A simplified formula for tourism multiplier is:

1-L

K=

1-(c-cj-tic) (1-td= b + m)

Where:

K = the multiplier

L = the direct first-round leakages

c = the tendency to consume

cj = the proportion of that propensity spent abroad

tic = the indirect tax

td = the value of direct deductions (income tax, national insurance, and so-on)

b = the level of government benefits

m = the value of imports

Most developing economies have an income multiplier ranges between 0.6 and 1.2, while developed economies
have a range between 1.7 and 2.0.

Cost-Benefit Ratio

Those concerned with developing the tourism and hospitality industry, whether a government or a private
individual, would like to know the extent of potential benefits and their costs. Benefits divided by costs equal the
cost-benefit ration. To arrive at these ratios, the following procedures are used:

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 1. Determine where the tourist money is spent;

2. Determine what percentage of each expenditure leaves the local economy;

3. Derive a “multiplier effect” a ratio applied to income that reflects multiple spending within an economy;

4. Apply the multiplier effect to the tourist expenditures to arrive at the total benefits of tourist expenditures
in dollars;

5. Derive a cost-benefit ratio expressed as dollars received/dollar spent; and

6. Derive a cost-benefit ratio to tourist expenditures to provide estimates of income and costs of tourist
business to a community, for both the private and public sectors.

The Positive and Negative Impacts of Tourism and Hospitality

Undesirable Economic Aspects of Tourism

Some undesirable economic aspects of tourism and hospitality are higher prices, and economic instability.
Because of additional demand and/ or increased imports, tourist purchases may result in higher prices in a
destination area. This would mean that local residents would also have to pay more for products and services.
Since pleasure travel is a discretionary item, it is subject to changes in prices and income. These fluctuations
may result in economic instability.

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 How to Maximize the Economic Effect of Tourism and Hospitality

Growth Theories Some economic growth theories have been proposed to maximize the economic effect of
tourism and hospitality within a destination area. These are the theory of balanced growth and the theory of
unbalanced growth. Proponents of the theory of balanced growth suggest that tourism and hospitality should be
viewed as an important part of a broad-based economy. This theory states that tourism and hospitality needs the
support of other industries.

Its objective is to integrate tourism and hospitality with other economic activities. To obtain maximum economic
benefit, tourism and hospitality goods and services should be locally produced. Supporters of the theory of
unbalanced growth see tourism and hospitality as the spark to economic growth. While the proponents of the
theory of balanced growth stress the development of supply, supporters of the theory of unbalanced growth
emphasize the need to expand demand. As demand is increased through the vigorous development of tourism
and hospitality, other industries will move to provide products and services locally.

Economic Strategies

The key to maximizing the economic effects of tourism and hospitality is to maximize the amount of revenue and
jobs developed within the region. To attain this objective, some economic strategies have been adapted, such as
import substitution, incentives, and foreign exchange.

Import Substitution

It imposes quotas or tariffs on the importation of goods which can be developed locally. It also grants subsidies,
grants, or loans to local industries to encourage the use of local materials. Its objective is to minimize the leakage
of money.

Incentives

The wise use of incentives can encourage the influx of capital, both local and foreign, necessary to develop
tourism and hospitality supply. The most common forms of incentives are:

1. Tax exemptions/reductions on imported machinery, materials, and the like;

2. Reduction in company taxation by means of favorable depreciation allowances on investment, or

special treatment in relation to excise taxes, sales taxes, income taxes, turnover taxes, profit taxes, or
property taxes;
Macro Perspective of Tourism and Hospitality
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 3. Tax holidays (limited period);

4. Guarantee of stabilization of tax conditions (for up to 20 years);

5. Grants (for up to 30% of total capital costs);

6. 6. Subsidies (guaranteeing minimum level of profit, occupancy, etc.);

7. Loans at low rates of interest;

8. Provision of land freehold at nominal or little cost or a low rents;

9. Free and unrestricted repatriation of all or part of invested capital profits, dividends, and

10. interest subject to tax provisions; and

11. Guarantees against nationalization or appropriation;

Before implementing an incentive strategy, a destination should:

Before implementing an incentive strategy, a destination should:

1. Examine the performance of the schemes of other countries in light of their resources and development
of objectives;

2. Research the actual needs of investors;

3. Design codes of investment concessions related to specific development objectives with precise
requirements of investors; and

4. Establish targets of achievements and periodically monitor and assess the level of realization of such
targets.

Foreign Exchange
Foreign Exchange

Many countries have placed restrictions on spending in order to maximize foreign exchange earnings. They have
limited the amount of their own currency that tourists can bring in and take out of the destination to ensure that
foreign currency is used to pay bills in the host region. Tourists may be required to pay hotel bills in foreign
currency. Visitors may be required to show that they have enough money for their stay before they are permitted
to enter the country or they may even be required to enter with s specified amount of foreign currency for the
duration of their visit.

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 I. Direction: Site an event that shows positive impacts of tourism and hospitality in the economy.

(Use separate sheet for answering. You can send your answer through messenger by taking
a photo of your answer sheet and send it to me on a private message.)

____________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

I. What economic impacts does tourism and hospitality have?

____________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

Did the topic of this unit help you to widen your knowledge about
economic impacts in tourism and hospitality industry?
____________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

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 RUBRIC: FOR ASSESSMENT

3 2 1

(5pts) (3pts) (2pts)

Explanation A complete response with Good solid response with Explanation is unclear
detailed explanation clear explanation.

Writing Well written and organized, clear, Adequately written and Poorly written and
easy to follow. organized, clear, reasonably organized, unclear, hard
easy to follow. to follow.

Grammar and spelling No grammar or spelling errors. One grammar or spelling Many grammar and
errors spelling errors

References:
https://studylib.net/doc/25398285/thc11-macro-perspective-of tourism-and-hospitality-new

List of Open Educational Resources:

Chan, B., Mackenzie, M. (2013). Tourism and Hospitality Studies

http://uru.ac.in/uruonlinelibrary/Hospitality_Management/Hospitality%20Industry.pdf

Csapo, J., and Kasimoglu, M. (2012). Strategies for Tourism Industry-Micro and Macro Perspectives
https://cdn.intechopen.com/pdfs/35715/InTech The_role_and_importance_of_cultural_touris
m_in_modern_tourism_industry.pdf

Timur, S. (2012) Best Education Network: Networking for Sustainable Tourism; Sustainable Tourism
Networks
https://pdfs.semanticscholar.org/957b/e8b52054b1f0d0bda60f53e8abdf8f89c2af.pdf

Walker, J. (2009). Introduction to Hospitality Industry (Fifth Edition).

https://nanopdf.com/download/chapter-1-5afafefa052d5_pdf

Walden, A. (2006). Tourism Studies and the Social Sciences

https://shora.tabriz.ir/Uploads/83/cms/user/File/657/E_Book/Tourism/Tourism%20Studies% 0 and
%20the%20Social%20Sciences.pdf

The Supply of Tourism

http://cw.routledge.com/textbooks/9780080969329/data/Further-web-reading.pdf

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