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What is understood by the multiplier effect in tourism?

What is understood by the multiplier effect in tourism?


1 Answer

The employment and income effects of tourism are very closely inter-related and have common source, tourist expenditure. Income in general comes from wages and salaries, interest, rent and profits. Tourism gives rise to numerous demands for goods and services like accommodation, food and drinks, long distance and local transport, entertainment. shopping, guides for sight-seeing etc. Thus the tourist expenditure not only provides direct income to ail these different services but also generates employment in hotels, restaurants, transport operators, travel agents and their employees, owners of entertainment houses and those who work there bearers, artists and many other like craftsmen and souvenir makers. And this generation of income and direct or indirect employment depends on the volume of the tourist traffic.

  • Amount of tourist expenditure and
  • Pattern of their spending.

Thus tourism generates an immense volume of indirect employment and income with a multiple effect. Apart from direct recipient of money there are many who become beneficiaries. If we take into account the demand for goods and services being generated by those who receive gainful employment through tourism that will open up yet another dimension. The additional consumption demand arising indirectly out of tourism generate more employment income and once again generate a further multiplier effect through chain of transactions. This multiplier effect will be greater if the tourism industry buys goods or services from local market sectors. If the tendency is to import goods and services, the multiplier decreases.

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September 29, 2018