Page 119 - Tourism The International Business

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Multipliers vary greatly by country. Most island economies have income multipliers between 0.6 and 1.2,
whereas developed economies have a range between 1.7 and 2.0. The income multiplier for the Cayman Islands, for
example, is 0.650, and that for the United Kingdom anywhere from 1.7 to 1.8. The output or sales multiplier for the

United States is 2.96.
Tourist Motel 40 on 10 on 20 on Saves 10
spends: owner employees, groceries imported
spends: who spend: shoes
100
20 on
(USD)
imported
foods

20 on local 10 on Saves 10
foods from imported
farmer who feed
spends:

Saves 20

Exhibit 37: Multiplier effect of tourism
Employment multiplier. Increased spending as a result of tourist spending creates jobs. This results in an

employment multiplier. The employment multiplier for the United States is 2.23. This means that, for every person
directly involved in a tourism job (hotel receptionist, tour guide, etc) an additional 1.23 jobs are created in other
industries.
Payroll multiplier. This results in another multiplier, the payroll multiplier. The payroll multiplier is the
wages generated by these additional jobs. Again, for the United States, it is estimated that the payroll multiplier is
3.4. This is higher than the employment multiplier because, while many tourism jobs are low paying, tourism
generates other jobs in higher-paying industries.

Economic benefits
Tourism contributes to foreign-exchange earnings, generates income and jobs, can improve economic structures
and encourages small business development.

Foreign-exchange earnings
The balance of payments for a country is the relationship between its payments to the rest of the world and the
money received from the rest of the world. When one country buys something from another country it is an import;
when one country sells something to another country it is an export. Countries strive to achieve a positive balance
of payments. Because most have trouble doing this, attracting tourists (who are regarded as "exports") is

encouraged as a way of helping the balance of payments. On the other hand, when residents of a country vacation
abroad, that is regarded as an import (because money leaves the home country). Some countries work to attract
foreign tourists while keeping their own. For example, in 1969 the British government would allow people to take a
maximum of only GBP 50 spending money out of Great Britain.
Effects on the economy are either direct or indirect. The direct effect is the actual expenditure by the tourists.
Indirect, or secondary, impact is what happens as the money flows through the economy. Tourist spending creates

Tourism the International Business 119 A Global Text