The Multiplier Effect In Tourism | What Is It? How Does It Work? Why Does It Matter?

Dr Hayley Stainton

21 Oct 202109:00

Summary

TLDRIn this informative video, Dr. Haley Stainton explains the concept of the multiplier effect in tourism, highlighting its significance in boosting local economies. She breaks down five types of tourism multipliers, including sales, output, income, employment, and government revenue, illustrating how tourism can create jobs, increase income, and stimulate economic growth. However, she also addresses the issue of economic leakage, emphasizing the importance of sustainable tourism practices to ensure that benefits are retained within the destination.

Takeaways

🌐 The multiplier effect in tourism is a significant economic concept, amplifying the benefits of tourism spending in an area.
👩‍🏫 Dr. Haley Stainton is the host of the channel, focusing on teaching travel and tourism concepts.
💡 Tourism has the potential to create jobs, generate income, and support essential needs for communities around the world.
🌍 The multiplier effect is not limited to developed countries; it's a global phenomenon that can uplift economies everywhere.
📈 The concept of the multiplier effect is broken down into five categories by Dickerish and Jenkins in 1997.
🏨 The sales or transaction multiplier refers to increased sales directly and indirectly related to the tourism industry.
📊 The output or production multiplier is about the increase in goods and services produced and offered for sale due to tourism.
💰 The income multiplier highlights how tourism can increase personal income, leading to more spending in the local economy.
🔑 The employment multiplier indicates that increased tourism leads to more jobs and, consequently, more economic activity.
🏛 The government revenue multiplier involves official figures showing revenue from tourism, which can be reinvested in public services.
💸 However, not all tourism revenue is officially recorded, suggesting the actual economic benefits might be higher than reported.
🔄 The tourism multiplier effect works through direct, indirect, and induced expenditures, impacting various sectors of the economy.
🌳 The importance of the tourism multiplier effect lies in its potential to bring opportunities and revenue, but it must be managed sustainably to prevent economic leakage.

Q & A

What is the multiplier effect in tourism?
-The multiplier effect in tourism refers to the way in which the economic benefits generated by tourism are multiplied, leading to increased sales, production, income, employment, and government revenue.
Who is Dr. Haley Stainton and what does she teach?
-Dr. Haley Stainton is the host of the channel that provides education on travel and tourism. She teaches various aspects of the tourism industry.
Why is the multiplier effect significant in the context of developing countries?
-The multiplier effect is significant in developing countries because it can provide jobs, income, and essential funds for local communities, which may not be as privileged as those in the Western world.
What are the different types of multipliers identified by Dickerish and Jenkins in 1997?
-Dickerish and Jenkins identified five types of multipliers in tourism: sales or transaction multiplier, output or production multiplier, income multiplier, employment multiplier, and government revenue multiplier.
How does the sales or transaction multiplier work in tourism?
-The sales or transaction multiplier works by increasing the number of sales directly and indirectly related to the tourism industry, such as hotel rooms, tours, and even goods produced by local farmers supplying the tourism sector.
Can you explain the output or production multiplier in tourism?
-The output or production multiplier in tourism refers to the increase in the production of goods and services that are offered for sale, such as additional hotel rooms or tickets for shows, which may not always be sold but contribute to the economy.
What is the income multiplier in tourism and how does it impact individuals?
-The income multiplier in tourism occurs when the income of individuals involved in the tourism industry increases due to growth in tourism, allowing them to spend more in the local economy, thereby multiplying the economic benefits.
How does the employment multiplier in tourism contribute to the local economy?
-The employment multiplier in tourism contributes to the local economy by creating more jobs both directly and indirectly related to the industry, which in turn increases the income of workers who then spend more in the local economy.
What is the government revenue multiplier and how can it benefit a country?
-The government revenue multiplier is the official figures that demonstrate the revenue generated from the tourism industry. Governments can use this revenue to reinvest in public services like hospitals and schools, although not all revenue may be officially recorded.
Why is sustainable tourism management important in relation to the multiplier effect?
-Sustainable tourism management is important to ensure that the economic benefits from tourism are retained within the local economy, preventing economic leakage and maximizing the positive impacts of tourism on the community.
What is economic leakage in the context of tourism, and how can it be mitigated?
-Economic leakage in tourism occurs when money spent by tourists leaves the local economy, often due to foreign ownership of businesses or the purchase of imported goods. It can be mitigated by promoting local businesses and products to keep the money circulating within the local economy.

Outlines

00:00

🚀 Introduction to the Multiplier Effect in Tourism

This paragraph introduces the concept of the multiplier effect in tourism, emphasizing its significance in the industry. Dr. Haley Stainton, the host, explains that tourism has the potential to create jobs and improve the economy. The paragraph sets the stage for a deeper dive into the multiplier effect, which is presented as a key economic impact of tourism. It also mentions that there are various types of multipliers within the industry, first identified by Dickerish and Jenkins in 1997, and invites viewers to learn more about them in the video.

05:01

🌐 Types of Multipliers in Tourism

This paragraph delves into the different types of multipliers in tourism, starting with the sales or transaction multiplier, which involves an increase in sales directly and indirectly related to tourism. The output or production multiplier is next, highlighting the increase in production of tourism-related goods and services. The income multiplier is explained as the increase in income for individuals due to tourism growth, leading to more spending and a ripple effect in the economy. The employment multiplier is discussed as the creation of more jobs, both directly and indirectly related to tourism. Lastly, the government revenue multiplier is introduced, which is the official figures showing revenue from tourism that can be reinvested in the community, though it notes the issue of unreported revenue and the potential underestimation of tourism's economic benefits.

💰 Understanding the Tourism Multiplier Effect

The paragraph explains how the tourism multiplier effect works through three main types of expenditures: direct tourism expenditure where tourists spend money on tourism activities, indirect tourism expenditure which includes government spending on infrastructure used by tourists, and induced tourism expenditure resulting from increased spending by individuals who have more disposable income due to tourism. The paragraph also discusses the importance of the multiplier effect in bringing opportunities and economic growth to an area, but warns of the challenges of economic leakage, where money spent on foreign-owned businesses or imported goods does not remain in the local economy. The video concludes by encouraging viewers to support sustainable tourism practices to maximize the local benefits of tourism.

Mindmap

Keywords

💡Multiplier Effect

The multiplier effect is an economic principle where an initial amount of spending leads to increased economic activity overall. In the context of the video, it refers to how the money spent by tourists can generate additional income and economic benefits in the local economy, beyond the initial expenditure. The script explains that this effect can be observed through different types of multipliers within the tourism industry.

💡Tourism Industry

The tourism industry encompasses all services and businesses that cater to tourists, including travel agencies, hotels, restaurants, and attractions. The video script highlights the industry's potential to create jobs and contribute to local economies, emphasizing its importance in generating the multiplier effect.

💡Economic Impact

Economic impact refers to the effects that an industry or event has on the economy of a region or country. The script discusses both positive and negative economic impacts of tourism, with the multiplier effect being a significant positive aspect that can lead to increased jobs, income, and government revenue.

💡Sales Multiplier

The sales multiplier is one of the types of tourism multipliers identified in the script. It occurs when the number of sales related to tourism increases, both directly, such as hotel rooms and tours, and indirectly, like the sales of local produce to supply restaurants. The script uses this concept to illustrate how tourism can stimulate additional sales and economic activity.

💡Output Multiplier

The output multiplier is another type of tourism multiplier that the script mentions. It is related to the increase in production to meet the demand from tourists, such as more hotel rooms or show tickets being available. Even if not all rooms are booked, the increased production represents an output multiplier effect in the tourism industry.

💡Income Multiplier

The income multiplier in the script is explained as the increase in income for individuals due to the growth in tourism. For example, a part-time hotel waiter might be able to work full-time because of increased tourism, thus multiplying their income. This, in turn, can lead to more spending in the local economy.

💡Employment Multiplier

The employment multiplier is a concept in the script that describes how tourism can lead to more jobs in an area. These jobs can be directly related to the tourism industry or indirectly related, such as construction workers building hotels. The multiplier effect here is the increased employment leading to more spending and economic activity.

💡Government Revenue Multiplier

The government revenue multiplier, as discussed in the script, refers to the official figures that demonstrate the revenue generated by the tourism industry. This revenue can then be reinvested by the government in other areas such as infrastructure or public services. However, the script also notes that not all tourism revenue may be officially recorded.

💡Economic Leakage

Economic leakage is a term used in the script to describe the loss of economic benefits from a country or region when money spent by tourists does not remain within the local economy. Examples given include staying at international hotel chains or purchasing imported goods, which send revenue back to the companies' home countries instead of benefiting the local economy.

💡Sustainable Tourism

Sustainable tourism is a concept mentioned in the script that emphasizes the need for tourism to be managed in a way that balances economic, social, and environmental benefits over the long term. The script points out that not managing tourism sustainably can lead to economic leakage and other negative impacts.

💡Induced Tourism Expenditure

Induced tourism expenditure is a part of the multiplier effect explained in the script. It occurs when the income generated from tourism leads to additional spending in the local economy, such as a waiter using their increased income to buy crayons for their child. This type of expenditure is a result of the initial tourism spending and contributes to the overall economic activity.

Highlights

The multiplier effect in tourism is a significant concept that can greatly benefit economies.

Dr. Haley Stainton introduces the concept of the multiplier effect in the context of tourism.

Tourism has the potential to create jobs, provide income, and support essential needs in communities.

The economic impacts of tourism can be both positive and negative, with the multiplier effect being a key positive example.

The multiplier effect is conceptually simple, involving the multiplication of economic benefits from tourism.

Different types of multipliers in tourism were identified by Dickerish and Jenkins in 1997, categorizing them into five distinct groups.

The sales or transaction multiplier involves an increase in the number of sales directly and indirectly related to tourism.

Indirect sales from tourism can affect industries like agriculture and fishing, which may not be directly part of the tourism industry.

The output or production multiplier is exemplified by the increase in offerings such as hotel rooms or tickets for shows.

The income multiplier in tourism refers to the increase in income for individuals due to growth in the tourism sector.

Employment multipliers in tourism indicate the creation of more jobs as a result of increased tourism activity.

The government revenue multiplier reflects the official figures on revenue generated by tourism, which can be reinvested in public services.

Not all revenue from tourism is officially recorded, potentially underestimating the true economic benefits.

The tourism multiplier effect works through direct, indirect, and induced tourism expenditures.

Sustainable tourism management is crucial to prevent economic leakage and maximize the multiplier effect.

Economic leakage occurs when money spent on tourism leaves the local economy, such as through foreign-owned hotels or imported goods.

Supporting local products and services can help keep tourism revenue within the local economy, enhancing the multiplier effect.