Republic of the Philippines

Sorsogon State University

Sorsogon City, Main Campus
School Year 2023 – 2024

SUBMITTED BY:

Esplana, Ronielyn
Estur, Arjay
Fontilar, Hershey Francine
Frilles, Sherry Joy
Fulgosino, Jessa
Gestole, Kiara Adelene
Gregory, Rupert

SUBMITTED TO:

Ma. Bernadette S. Mirate

I. INTRODUCTION

The importance of tourism on the economy cannot be over-emphasized. It is one of the

very few industries that have identified as a cornerstone of the Philippine economy. Under Section
2 of Republic Act 9593, also known as the Tourism Act of 2009, this declares “tourism as an
indispensable element of the national economy and an industry of national interest and importance,
which must be harnessed as an engine of socio-economic growth and cultural affirmation to
generate investment, foreign exchange and employment…”

II. LEARNING OUTCOMES

At the end of this chapter, you should be able to:

1. Differentiate the difference among direct, indirect, induced and dynamic impacts of
tourism on the economy;
2. Identify the positive and negative impacts of tourism on the economy;
3. Discuss the factors that determine the direction and degree of the economic impacts; and
4. Suggests ways to maximize the economic benefits from tourism and minimize the costs.

III. LECTURE NOTES

A. DIRECT, INDIRECT AND DYNAMIC IMPACTS

According to the United Kingdom’s Overseas Development Institute (2007), tourism

contributes to the economy along three “pathways.” These are direct, indirect and dynamic effects.
For the World Travel and Tourism Council (WTTC), besides direct and indirect effects, travel and
tourism also produces induced effects.

❖ Direct Effects

According to WTTC in 2015, these are produced when tourists spend for such commodities
as accommodation, transportation, entertainment and attractions. Such spending benefits industries
that are involved in accommodation services, food and beverage services, retail trade,
transportation services, and cultural, sports and entertainment services.
 The main sources of tourism-related spending are residents’ domestic travel and tourism
spending, the business sectors’ domestic travel spending, visitor exports and individual
government travel and tourism spending.

Visitor exports refer to spending by international tourists in a country. Such spending is

considered as export because the visitors who are from other countries spend for goods and
services that are produced in the country being visited.

Invisible exports when the buyers are the ones who come to the country instead of the
goods and services being shipped out of the country.

According to ODI’s research, direct effects in terms of formal-sector jobs can range from
10% to 80% of income of poor people. Several thousands of poor people gain access to the tourism
industry through the informal sector (livelihood and businesses which are not registered). As a
labor provider, it was also found that tourism is generally more labor-intensive than other sectors
except for agriculture. Tourism is able to provide work for more women and unskilled workers.

The direct effect comes from the actual money spent by a tourist at a destination. A tourist
pays 12,000 pesos for a two-night stay in the hotel he/she stayed in, therefore, the 12,000 pesos
has a direct economic impact.

❖ Indirect Effects

The indirect contribution of tourism to the economy comes in the form of investments in
tourism, government spending in tourism and the effect of purchase from suppliers. Non-tourism
suppliers could be farms for food products, utility companies for water and electricity, and schools
for human resource needs (WTTC, 2015).
Senator Bam Aquino, author of entrepreneurship laws in the Philippines, speaking at a
youth entrepreneurship convention at San Sebastian College, Manila on September17, 2015, cited
the case of Boracay. He said that while the tiny island of Boracay generates 50% of the total
revenue of the whole province of Aklan, only 5% of the raw materials needed by the establishments
in Boracay are sourced within from Aklan itself. That means that there is a high leakage, which
suggests that a very small portion of the tourism-generated income is re-spent in the province,
thereby, limiting its multiplier effects.
 Multiplier effect refers to the number of times tourism is re-spent across sectors within
the local economy. The higher the multiplier, the bigger the impact on the local economy.
Indirect effects boost the economic impact of Tourism by 50% to 90% in small, poor
countries. Linkages have important poverty-reducing potential such as among food and craft
industries.

For example:
Indirect effects occur as the impact of the original 12,000 pesos is felt on the economy. The
hotel owner might take the 12,000 pesos and use some of it to pay for food supplier of the restaurant
in the hotel and some of it to pay the wages of the hotel's employees. The food supplier, in turn,
will pay the farmer for the crops while the employee might buy a pair of shoes. The impact of the
original 12,000 pesos is increased. The money will continue to be spent and re-spent until one of
two things happen: The money is saved instead of spent or the money is spent outside the
community. In both cases "leakage" occurs. When money is saved it is taken out of circulation as
far as the generation of income is concerned.
Similarly, when a hotel in Sorsogon pays for steaks imported from the Philippines, the
economic impact is felt in the Philippines and not in the Sorsogon. The more that a community
can cut down on imports resulting from tourism, the greater will be the economic impact of tourism
on that community. The 12,000 pesos spent by the original tourist is re-spent by the hotel owner,
the employee and the farmer to generate income in the local economy of more than 12,000 pesos.
Conversely, money spent on imports or money that is saved is removed from the local economy.
❖ Induced Effects
These are the collective spending by direct and indirect employees on food and beverage,
recreation, clothing, housing and household goods (WTTC, 2015).

For example:

The employees of the hotel spend the income they earn on housing, utilities, groceries, and
other consumer goods and services. This generates sales, income, and employment throughout the
region’s economy.
 ❖ Dynamic Effects
Refers to the longer-term macro-level effects, such as general enhancement of skills within
the economy, provision of better social services (health, education, security) and infrastructure
(road, airports, internets).
Infrastructure can stimulate non-tourist growth. Tourism often pays significant share of
tax. However, tourism also has potential negative impacts on agricultural exports. Tax revenues
from tourism come from travel tax, value-added tax (VAT) and income tax paid by business
owners and tourism employees. The government also generates income from the payment of
business registration, airport terminal fees and highway toll fees.

B. POSITIVE IMPACTS OF TOURISM ON THE ECONOMY

According to Swarbrooke (1999), the main beneficial impacts of tourism on the economy
are job creation, livelihood generation, tax revenues, and economic regeneration.

Through the commerce of hotels, restaurants, nightclubs, taxis, and souvenirs, as well as
indirectly through the provision of goods and services required by tourism-related enterprises,
tourism can create jobs directly and indirectly. Approximately 7% of global employment is based
on tourism.

❖ Jobs

Tourism generates jobs, with the most optimistic estimate being one job created for every
tourist received by the country. There are several jobs available in the tourism industry.

For example, in hotels, entry level jobs include front desk clerks, porters, concierges, room
attendants, waiters or waitresses, and kitchen staff. More advanced positions include guest service
supervisor, housekeeping supervisor, front desk supervisor, kitchen manager, restaurant manager,
and executive chef. Several more work behind the scenes, such as accounting supervisor, account
clerks, accounts supervisor, corporate controller, directors of various departments, night auditor,
payroll accountant, and several others. In the airline sector, there are flight attendants,
administrative support staff, such as secretaries, data entry workers, receptionists, communications
and public relations specialists, human resources department staff, operations agent, avionics
technicians, flight dispatcher, ground attendant, reservation sales agent, airline ticket agent, and
many more (AirlineJobFinder 2015).

Tourism is a highly labor-intensive industry. It depends very much on a large number

people with various levels of skills and activities (e.g., waiters, Tour guides, hotel managers, etc.).
In general, tourism industry has a greater capacity to provide more job opportunities than any other
industries.
 There are 2 main types of employment generated by tourism: direct and indirect.
➢ Direct Employment
Direct employment is generated directly from the consumption or spending of visitors and
government.
For examples:

• Accommodation and catering (hotels)

• Tourist attractions and business facilities (exhibition and convention centres)
• Tourism promotion and information (travel agencies or tourist boards)

➢ Indirect Employment
Indirect employment include professionals working in sectors like transport,
accommodation management, marketing, event planning, and government agencies responsible
for policy development.
For examples:

• Taxi drivers
• Shopkeepers
• Factory workers manufacturing bedroom furniture for sale to hotels

Sectors which may employ the most employee in the tourism industry are:

• Food services
• Accommodation
• Transportation
• Entertainment
• Travel agencies and tour operators
Employment is generated throughout the tourism value chain. The value chain refers to
the suppliers of needed inputs for tourism operations, as well as the other entities that benefit
indirectly from tourism development. With the respect to suppliers, we can imagine the thousands
of materials and services that’s a hotel needs to function.

At the planning stage, they would require architects, landscape architects, and interior
decorators, and many other experts. During construction, building materials such as, cement, steel,
paint, tiles, fixtures, glass, elevators, escalators, tools, heavy equipment, and so on will be needed.
Construction contractors and workers like engineers, masons, plumbers, painters, and carpenters,
will also be required. Airlines would need aircraft and airports. Aircraft is supplied by aircraft
manufacturer which depend on a host of suppliers for the thousands of parts that are needed to
assemble an airplane. To appreciate the scope of operations of an aircraft manufacturer, you may
find that the list of suppliers of Airbus is 56-page long, with each page containing approximately
60 suppliers from all over the world. These suppliers, in turn, employ hundreds of people. Airports
are also complicated operations that involve thousands of people. There are personnel for security,
customs, quarantine, and immigration. Manila Ninoy International Airport concessions include
barks (with foreign exchange), post office, and telephones. There are also several restaurants,
coffee shops, and bars. There are also taxi and car for hire services that operate at the airport.

Tourism establishments also need office supplies, equipment, and furniture. In all phases,
people need to eat, so caterers, canteen operators, restaurants, and coffee shops will also make
money. Thus, manufacturers and distributors of these products benefit from tourism business
operations and expansion. Furthermore, these entities also rely on their own supply chains for their
business operations. Schools also benefit because when tourism is booming, enrollment in tourism
and hospitality programs increases. These courses sometimes become the read and butter of some
universities. Utility companies that supply water, electricity, and telecommunication services also
benefit from increased demand caused by increased tourist arrivals.

Data from the World Travel and Tourism Council show that in 2015, tourism directly
supported 284 million jobs, or one in every eleven jobs worldwide, and directly created over 107
million jobs (3.6% of all employment, or 3% of total GDP). These numbers are anticipated to rise
to 136 and 370 million employments, respectively, by 2026, accounting for one in nine of all jobs
globally.

Many individuals find work in the tourism sector, which is primarily labor intensive. They
include highly qualified professionals as well as a significant number of workers who are having
trouble finding work elsewhere, such as recent immigrants (young people and migrants), women
with family responsibilities who can only work part-time, and individuals with low levels of
qualification in general. Working people benefit financially and professionally from tourism,
which also advances their social integration and personal growth.

Due to the lack of reliable information, the world of work in tourism is typically not well-
known. Meaningful data on employment in the tourism industries are only available from a small
number of nations. It will be possible to obtain reliable and consistent information on employment,
occupational structure, qualifications, skills, working conditions, pay and remuneration, etc. by
improving statistical data collection methods and expanding the population of people employed in
the tourism industry. It is crucial to ensure that the expansion and development of this industry is
socially responsible, sustainable, and generates sufficient opportunities for employment.

❖ Livelihood Generations

According to Swarbrook(1999), one of the main beneficial impacts of tourism on the

economy are the livelihood generations. In livelihood generations, tourism provides economic
opportunities for other industries. The concept of livelihood, on the other hand, refers to the
capabilities, assets, and activities required for making a living and the sustainable livelihoods
approach advances understanding of the livelihoods of the underprivileged communities (Serrat,
2017). Rural communities are highly dependent on traditional livelihood strategies such as
agriculture, fishing, forestry, livestock rearing, and handicrafts. But sustainable livelihood requires
diverse livelihood portfolios that are recurrently observed as a determinant component of
household economies in developing nations (Cinner & Bodin, 2010).

➢ Agritourism
• Farming communities can venture into agritourism that usually offer farm-related
experiences to tourist. It allows travelers to see, experience and participate in some
agricultural activities which add more value to the overall experience of the place. With
agritourism, travelers visit farms for the purpose of enjoyment, education and engagement
with local people. The income from tourism can help the farmers’ families tide it over
during the lull period between planting and harvesting season.
• Nowadays, a lot of parents and educators recognize the value of teaching kids where their
food originates from. Furthermore, a lot of folks want to get back in touch with their roots.
A farm set up for tourism offers excellent real-world educational opportunities. Farming
communities can develop educational tours, letting students experience planting rice in the
field of how to milk cows: they can also sell their produce and operate eateries and
homestay facilities.
• Some private farms and livestock raisers make money by teaching retirees and hobbyists
on organic farming, composting, raising native pigs, and cultivating high- value fruits.

➢ Fishing
• In Puerto Princesa City where one of the popular pasalubong is seafood, the vendors have
devised a system to make bringing seafood by air by domestic tourists convenient. Fish
and other seafood brought from the wet market are packed tightly in Styrofoam boxes so
they could be safely checked in the plane.
• In most public beach resorts, like Puerto Galera in Mindoro, one will find vendors of ice
drops and trinkets, tattoo artists, friendship band makers, and women who do pedicure and
manicure, and even massage by the beach. There are also men offering boat rides in an
hourly basis.

➢ Vendors
❖ The growth of tourism and tourism development affects the urban poor positively. They
have more opportunities to find jobs in the tourism sector or increase their income when
their jobs are related to tourism. They can also be the beneficiaries of pro-poor tourism
projects.
• Tourism and travel-related businesses support an ecology of several other smaller
operations. When you take the bus to some destination, notice the number of vendors who
boards the vehicle at certain points throughout your journey, peddling various items. The
vendor usually sells chicharon (pork skin crackling), empanada, fruits in season, water
sotfdrinks, sandwich, peanuts, native delicacies like tupig in ilocos, pili nuts in bicol,
pastillias in bulacan and buko pie in laguna.
 • Travelling to bayombong, Nueva Vizcaya: the author counted at least three stops. In each
stop most passenger will buy snacks or have a full meal.
❖ Hometown’s Share of Tourism Income

Tourism’s economic impact is not restricted to the destination alone. The tourists’ places
of origin and transit routes, which include areas used as pit stops by travelers, take sizeable chunk
of travel and tourism – related expenditure. Whenever people travel, their hometowns share the
benefit.

In a simple class exercise, the author asked the 30 students in his Tourism Principles class
to identify things and services they bought in relation to a trip. The students listed many items
bought at their places of origin prior to the trip and upon coming back from the trip. These included
rubbing alcohol, medicines (antihistamine, Bioflu, Biogesic, Bonamine, Diatabs), toiletries
(deodorant, hand sanitizer, liquid body soap, napkin, shampoo, Silka, tissue, toothbrush,
toothpaste), food items and candies (McDo ricemeal, meat, cereals, potato chips, choco chips,
cookies, crackers, chocolate, marshmallows, Mentos, Clover chips, Piattos, V-cut, water, yakult,
coffee, soft drinks, Smart C, milk, Minute maid, condiments, cup noodles, Quacker Oats, fish)
phone, cap, book, charger , camera, clothes, gas, hotel reservation, load, plane ticket, raincoat, rash
guard, slippers, sunblock, sunglasses, swimming short, swimsuit, underwear, and Ziploc bags. On
the way back, the students made some residual spending for some more food, gas, taxi, and
laundry.

At the destination, the students paid for accommodation, food and pasalubong (bagnet,
buko pie, bulalo, fruits, hotdog, inihaw na baboy, kesong puti, milk, lechon, palabok, peanut butter,
pesto, pineapple, macaphno candy, ice pop, rice, seafood, spaghetti, spam, suman, taho, fart, ube,
water), activities (releasing of turtle hatchlings, surf board rental, banana boat, island hopping,
horseback ride), hotel, pasalubong items (keychain, ref magnet, stuffed toy, windmill, T-shirt),
museum ticket, and theme park ticket. At the transit zones pe pit stops, the student’s spent for fast-
food meals (Chowking, Jollibee, McDonald’s, KFC, Mister Donut), banana chops, coffee,
Starbucks, Arizona tea, bread, cup noodles, buko pie, ice cream, milk, Milo, pandesal, longganisa,
cornik , dinuguan, noodles, empanada, Cobra Energy Drink, T-shirt, gas, toilet fee, walis (broom)
and toll fee.

One of the main benefits of tourism for a destination are the economic benefits. Tourism
can bring a lot of income to a destination. Travelers spend money on accommodations, food,
transportation, souvenirs and activities, creating jobs and supporting local businesses. This
economic boost can contribute to infrastructure development, public services and overall economic
growth.
 ❖ Taxes and Fees

How does the government earn from tourism? There are several sources of tourism-related
revenues for the government. These includes passport processing fee, fees for National Statistics
Office (NSO), certificates required for securing a passport, travel tax, documentation fee for travel,
travel exemption, airport terminal fee, airport space rental fees, and parking fee. The government
also collects value-added tax from tourism related business establishments, business permit fees,
barangay clearance, and taxes paid by employees in tourism establishments.

Taxation of tourism has important economic impacts, such as GDP, investment, price level,
consumption, trade balance, etc… So normally the local and national government should consider
these decisions. Tax system can generate income from fees and improve income distribution.

Money from the tourism then often goes into improving local infrastructure, and
sustainable management and protection of natural wonders that attract visitors. Better
infrastructure and services have a positive impact on the environment. They revolve around
consumption of resources and their management.

C. NEGATIVE IMPACTS OF TOURISM IN THE ECONOMY

Tourism’s drawbacks lie in leakages, opportunity costs, poor quality of jobs,

overdependence on tourism, and inflation of prices of food, land, houses, and services. There are
many hidden costs to tourism, which can have unfavorable economic effects on the host
community. Whilst such negative impacts are well documented in the tourism literature, many
tourists are unaware of the negative effects that their actions may cause. Likewise, many
destinations who are inexperienced or uneducated in tourism and economics may not be aware of
the problems that can occur if tourism is not management properly.

Below, is the outline of the most prominent negative economic impacts of tourism.

❖ Leakage

Tourists look for products that they have been accustomed to consuming or using. Many
such products and services cannot be sourced locally. As such, some money is used to pay for such
goods and services. Examples are wine, certain cheeses, some fruits like kiwi, certain vegetables
like Brussels sprout, wagyu beef, and many more. Chefs for Japanese or French cuisines also need
to be imported, as well as high-level hotel managers. This money constitutes leakage. Leakage
also happens when there is very loose or non-existent linkage in the tourist value chain. To repeat
Sen. Bam Aquino’s example, although Boracay contributes 50% of the total revenue of the Aklan,
only 5% of the raw materials needed by the establishments on the island are sourced from within
the province itself. In other words, 95% of the spending is leaked outside of the province.
 Leakage refers to the phenomenon where a significant portion of the money generated by
tourism in a particular destination flows out of that destination’s economy, thereby having a
negative impact on the local economy. There are several ways in which leakage occurs:

➢ Imported Goods and Services: Tourists often bring with them or demand goods and
services that are not produced locally, leading to the importation of these products. This
means that money spent by tourists goes to businesses and suppliers outside of the
destination, reducing the economic benefit to the local community.
➢ Foreign-Owned Businesses: If many of the businesses in the tourism industry are owned
by foreign companies or individuals, the profits generated by these businesses may leave
the destination, contributing to leakage.
➢ Expatriate Workers: In some cases, tourism businesses may employ expatriate workers
who send their earnings back to their home countries, rather than spending them in the
local economy.
➢ Franchise Fees and Royalties: If international hotel chains or other franchises operate in
a destination, they often require local businesses to pay franchise fees and royalties, which
can contribute to leakage.
➢ Seasonality: Many tourist destinations experience seasonal fluctuations in tourism, with a
significant portion of revenue concentrated in a few months of the year. This can make it
challenging for local businesses to sustain themselves year-round.
➢ Lack of Linkages: If there are limited linkages between the tourism industry and other
sectors of the economy, such as agriculture or manufacturing, the economic benefits of
tourism may not spread throughout the local economy.

To mitigate the negative impact of leakage, destination management organizations and

governments often implement strategies to encourage local ownership of tourism businesses,
promote the purchase of local goods and services, and invest in diversifying the economy to reduce
dependence on tourism alone.

Leakage is considered a negative impact of tourism on the economy for several reasons:

➢ Reduced Economic Benefits: When a significant portion of the money spent by tourists
exits the local economy, it means that the destination does not fully realize the economic
potential of its tourism industry. This reduces the direct economic benefits that local
communities receive from tourism.
➢ Limited Local Job Creation: Leakage often means that fewer jobs are created within the
local community, as some businesses may be foreign-owned or employ expatriate workers
who send their earnings elsewhere. This can hinder local employment opportunities and
wage growth.
➢ Inequality: Leakage can exacerbate economic inequality within a destination. The benefits
of tourism may primarily flow to a few foreign-owned businesses or individuals, while
many local residents do not see significant economic improvements.
 ➢ Dependency on Tourism: When a destination becomes overly dependent on tourism as
its primary source of income, leakage can make the economy vulnerable to fluctuations in
the tourism industry. Seasonal variations or external factors can lead to economic
instability.
➢ Limited Economic Diversification: High leakage can discourage diversification of the
local economy. If most businesses cater exclusively to tourists and rely on imported goods
and services, it can hinder the development of other sectors, such as agriculture or
manufacturing.
➢ Weakened Cultural Authenticity: Leakage can also affect the preservation of local
culture and heritage. If businesses prioritize catering to tourists’ expectations rather than
showcasing authentic local experiences, this can erode the unique character of the
destination.

Overall, leakage is considered negative because it reduces the positive economic impact
that tourism could have on a destination. To maximize the benefits of tourism, it’s important for
destination managers and policymakers to implement strategies that minimize leakage and
promote sustainable tourism practices that benefit the local economy and community.

❖ Poor Quality of Jobs

Tourism creates jobs. The job to tourist ratio has been put as high as 1:1. By that measure,
there should be about 4.8 million workers in the tourism industry. Assuming that this is true, critics
of tourism argue that workers in tourism suffer from low wages, unpaid overtime pay, lack of
security of tenure, and seasonality. These problems may be attributed to outsourcing and
contractualization by some tourism establishments. These labor practices are tolerated by
government because of the high unemployment rate. To be fair, these issues are not unique to
tourism as far as the Philippines is concerned. Malls also practice the said strategies in order ‘to
minimize costs. The poor quality of jobs within the tourism industry can be viewed as a negative
impact on the economy for several reasons:

➢ Low Wages: In many tourism-related jobs, especially in the hospitality and service sectors,
wages can be relatively low. This can lead to financial insecurity for workers and their
families, making it challenging to cover basic living expenses.
➢ Seasonal and Temporary Employment: Tourism often brings seasonal fluctuations in
demand, resulting in temporary employment for many workers. Seasonal jobs typically
lack stability and benefits, such as health insurance and retirement plans.
➢ Lack of Career Advancement: Many tourism jobs offer limited opportunities for career
advancement or skill development. This can trap workers in low-wage positions without
the chance to acquire new skills or progress in their careers.
➢ Exploitative Practices: Some employers in the tourism industry may engage in
exploitative labor practices, such as long working hours, inadequate safety measures, or
failure to provide fair wages. These practices can negatively affect workers’ well-being.
 ➢ Limited Job Security: Tourism jobs may be susceptible to economic downturns, natural
disasters, or other disruptions that can result in job losses. Workers in these sectors often
have limited job security, which can lead to financial instability.
➢ Seasonal Migration: In some cases, workers may need to migrate seasonally to tourist
destinations for employment, leaving their families behind. This can strain social and
family relationships.
➢ Dependence on Tips: In many service-oriented tourism jobs, workers depend on tips from
tourists to supplement their income. This reliance on tips can lead to income variability and
uncertainty.

To address the negative impact of poor-quality jobs in the tourism industry, it’s crucial for
governments, businesses, and labor organizations to work together to improve labor conditions,
increase wages, and provide training and education opportunities for workers. Sustainable and
responsible tourism practices should also be promoted to ensure that tourism benefits both the
local economy and the workforce in a more equitable and sustainable manner.

The poor quality of jobs in the tourism industry is considered a negative impact on the
economy for several important reasons:

➢ Low Income Levels: Many jobs in the tourism sector, particularly entry-level positions,
often come with low wages. Workers in these roles may struggle to earn a livable income,
which can lead to financial instability and difficulties in meeting basic needs.
➢ Limited Job Benefits: Workers in tourism-related jobs frequently lack essential benefits
such as health insurance, retirement plans, paid leave, and job security. This lack of benefits
can place additional financial burdens on employees.
➢ Seasonality and Instability: Tourism-driven economies often experience seasonal
fluctuations in demand for services, leading to temporary or part-time employment. This
seasonality can result in job insecurity and income variability for workers.
➢ Limited Career Advancement: Many tourism jobs offer limited opportunities for career
advancement and skill development. This can trap workers in low-wage positions with few
prospects for upward mobility.
➢ Exploitative Labor Practices: Some employers within the tourism industry may engage
in exploitative labor practices, such as long working hours, inadequate safety measures, or
failure to provide fair wages. These practices can negatively affect workers’ well-being.
➢ Dependency on Tips: In service-oriented tourism jobs, workers often rely heavily on tips
from tourists to supplement their income. This dependence on tips can result in income
uncertainty and disparities among workers.
➢ Social and Family Impact: Some tourism jobs require seasonal migration or separation
from families, which can strain social and family relationships.
➢ Overall Economic Inequality: A large portion of the tourism industry’s revenue may go
to a relatively small number of businesses or individuals, exacerbating economic inequality
within a destination.
 ➢ Limited Local Economic Development: When tourism jobs are characterized by poor
quality, there may be limited reinvestment of income into the local economy, hindering the
development of other sectors and long-term economic growth.

Addressing the poor quality of jobs in the tourism industry is crucial to ensure that tourism
contributes positively to the overall economy. Policies and practices that promote fair wages,
benefits, job security, and opportunities for skill development can help create a more equitable and
sustainable tourism workforce, ultimately benefiting both workers and the broader economy.

❖ Price Increase

Tourists represent additional demand for goods and services available in a destination.
When tourists come too suddenly, the local economy is not able to respond by augmenting the
supply of goods and services. This creates a situation of shortage, which results in price increase.
Beside the price of goods and services, land and housing units also become more expensive. This
is partly because some international visitors tend to buy real property, through their spouses or
friends.

One of the most obvious economic impacts of tourism is that the very presence of tourism
increases prices in the local area. Increasing demand for basic services and goods from tourists
will often cause price hikes that negatively impact local residents whose income does not increase
proportionately. 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, known as gentrification.

Taking measures to ensure that tourism is managed sustainably can help to mitigate this
negative economic impact of tourism. Techniques such as employing only local people, limiting
the number of all-inclusive hotels, and encouraging the purchasing of local products and services
can all help.

❖ Overdependence

Tourism, because of its attractiveness as a business venture, tends to encourage investment

in tourism-related business, sometimes causing a shift from livelihood activities to tourism.
Overdependence on tourism increases the vulnerability of the local population to natural as well
as man-made shocks. The devastating impact of the US pullout from Subic in 1991, after the Mt.
Pinatubo eruption on the owners and employees of souvenir shops is one example. The buyers of
Capiz macramé, woodcarvings, and other native decorative items were basically the US
servicemen, so when the Bases closed, the market for such souvenirs disappeared. Boracay
residents were also affected by the slowdown in arrivals when its beaches were contaminated by
E. coli bacteria in the late 1990s.
 Another one of the major economic impacts of tourism is dependency. Many countries run
the risk of becoming too dependent on tourism. If for some reason tourism begins to lack in a
destination, then it is important that the destination has alternative methods of making money. If
they don’t, then they run the risk of being in severe financial difficulty if there is a decline in their
tourism industry.

Other issues that could result in a decline in tourism includes economic recession, natural
disasters and changing tourism patterns. Over-reliance on tourism carries risks to tourism-
dependent economies, which can have devastating consequences.

• Opportunity Cost

Another dark side to tourism is that investing in tourism development requires billions of
pesos for infrastructure alone, such as airports, roads, and terminals. For example, the Bacolod-
Silay International Airport which was inaugurated in 2007 had a price tag of $4.3 billion (News
Today 2007). When local government units allocate funds for tourism development, a huge amount
is diverted from the provision of social services, such as health, education, and security. The $4.3
billion is enough to pay for the tuition fees for four years (at 60,000 per year) of almost 18,000
college students, or the annual salaries of more than 25,000 entry grade police officers. In this
manner, tourism-related financial outlay constitutes opportunity costs.

Another one of the negative economic impacts of tourism is the cost of infrastructure.
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. Money spent in these areas may reduce government money needed in other critical
areas such as education and health.

D. DETERMINANTS OF ECONOMIC IMPACT

According to Messerli (2011), the determinants or the factors of economic impact are the
Backward & Forward Linkages, Seasonality & Quality of Human Resources. These main
determinants in tourism are what affects the economy and may lead to both positive & negative
economic impact.

❖ Backward & Forward Linkages

A linkage refers to the interactions, relationships and functions between service providers,
product suppliers, organizations & departments in the tourism industry to provide the needed
resources and ensure that a particular tourism related business can fully operate and cater to the
needs and wants of its consumers. Aside from this, a linkage also aims to support and facilitate the
development of the distribution of locally sourced products and services from tourism related
entities and create jobs for the people. The Backward Linkages are directed towards the suppliers
while forward linkages are directed towards the consumers. Backward linkage is when an industry
forms an interconnection with suppliers with the goal of acquiring raw materials in order to create
a product while forward linkage is linking and transacting with other industries with the objective
of selling the industry’s final product.

❖ Seasonality

Seasonality refers to a specific time in a year where seasonal patterns of tourist visitation
are experienced and can last from days to months where the number of tourists to a particular
tourist destination becomes larger than usual and may cause overcrowding during the peak seasons
and it may lead environmental problems (e.g. air pollution, sewage disposal problem, noises,
and/or crime). Seasonality is dictated by occasions, climate, & vacation times. It is also considered
as the busiest time of the year where fluctuations of demand or supply in the tourism industry
increases. During peak seasons service providers are advised to have a higher supply in terms of
accommodation, manpower & other resources in order for them to fully benefit on peak seasons
by providing quality & efficient services and also gain more in terms of income.

❖ Quality of Human Resources

Quality of Human Resources can be considered as an intangible asset that can help a
business to gain organizationally competitive advantage in terms of workforce, skills &
experiences from their human resources which can be difficult for their competitors to imitate. In
order to provide quality products and deliver quality services, creating a great team behind the
business who makes the operation flow smoothly and handles the day-to-day tasks is essential.
One of the ways to increase tourism sector performance is by improving the quality of their human
resources through human resource upgrade, this can be achieved through supporting &
empowering Micro Small and Medium-sized Enterprises (MSMEs) in the tourism sector so that
MSMEs are able to meet the needs and satisfaction of tourists and at the same time attract more
tourists to visit a particular destination. MSMEs play a vital role in increasing in the number of
domestic as well as foreign tourists, with this, the condition will significantly impact on
communities’ welfare.
 E. REFERENCES

Chung, J. Y. (2009). “Seasonality of Tourism.” e-Review of Tourism Research (eRTR), Vol. 7,

No. 5, 2009. Retrieved from https://ertr.tamu.edu/files/2012/09/578_seasonality-in-tourism.pdf

Connecting the dots between the industries: Linkages. Retrieved from

https://www.singstat.gov.sg/-/media/files/visualising_data/infographics/economy/connecting-
the-dots-between-
industries.ashx#:~:text=An%20industry’s%20backward%20linkage%20provides,increase%20in
%20the%20industry’s%20output

Cruz, R. G. (2019). “Tourism Impact on the Economy.” Sustainable Tourism, 54-66.

Economic Impacts of Tourism. Retrieved from

https://www.opentextbooks.org.hk/ditatopic/37004

GK Today (2015). “Forward and Backward Linkages in Food Processing Industry.” Retrieved
from https://www.gktoday.in/what-are-forward-and-backward
linkages/#:~:text=For%20an%20industry%2C%20backward%20linkages,These%20constitute%
20its%20backward%20linkages.

Positive and Negative Economic Impacts of Tourism. Retrieved from

https://www.studocu.com/ph/document/ama-computer-university/business-and-marketing/w4-
module-004-positive-and-negative-economic-impacts-of-tourism/62904753