How Tourism Affects the Economy

The tourism industry is one of the most important factors and signs of a strong and prosperous economy. This widespread industry generates substantial benefits to the economy of the country. In developing countries, the growth of the tourism industry is one of the main causes of economic growth.

How Tourism Industry Affects the Economy

In UK alone, tourism contributes over £35.6 billion to the British economy annually. Even though after Brexit things might change a little, tourism will continue to stay at a high level in the Island. Countries like France, US, China, Spain and Turkey have over 50 million tourists annually. In 2014, US had earnings of $144 billion out of tourism alone.

Tourism is a very important industry and has been found the main promoter of poverty alleviation ( There is no doubt that the tourism industry contributes positively to the economy of a country. However, as with any other massive industry, tourism brings along both positive and negative consequences.

Positive Impacts of Tourism on the Economy

– Generation of foreign exchange earnings: the tourism expenditure income can stimulate investors to target new economic sectors. Many countries seek to accelerate the economic growth and to bring in more investors by requiring tourists to bring foreign currency.
– Direct and indirect contribution to the government: while tourism influences the economy directly by generating taxes from touristic businesses and employment, it also grows government revenues by requiring taxes on goods and services offered to tourists.
– Employment generation: the expansion of tourism in a country leads to employment creation. For example, the hotel sector alone provided over 25 million jobs last year.
– Infrastructure investment: countries with huge tourism benefits have also invested a lot in infrastructure, including but not limited to building highways, roads, rails and other infrastructure improvements such as telephone, public transport networks, sewage systems and electricity.
– Improves the country brand: ultimately, tourism has a direct impact on a country’s brand image. For instance, we have all heard of Hawaii or Bora Bora because of their strong image. This positive image was mainly promoted by the tourists who went there and had the experience of their lives.

Negative Impacts

– Leakage: most all-inclusive deals to a tourist destination go directly to hotels, airlines and other few privileged companies that get rich overnight. Few local businesses and workers will actually benefit of tourism. To dive a little deeper, we could state that poor countries can’t reap the advantages of tourism as much as rich countries can.
– Infrastructure cost: another negative impact on the economy could be the high infrastructure costs. For instance, countries that want to grow their tourism sector need to invest billions of dollars on infrastructure. That is why countries like Romania and Bulgaria have not invested so much in the infrastructure.

The Bottom Line

All in all, tourism could prove to be a gold-mine in the long run. However, developing countries and poor economies could find it hard to sustain this industry. It all depends on how the governments tackle this industry and how good they are to attract foreign investors and retain them.