tourism in developing countries essay

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The Social and Economic Effects of Tourism in Developing Countries

Typically, tourism can be considered as a bundle of services and goods combined in an appropriate proportion. The reason is that tourists cannot substitute transportation for hotels, food or other services. Most of the developed European countries, such as France, Austria, and Switzerland have improved their social and economic reforms on profits from tourism. According to the latest statistics, tourism itself employs almost one tenth of the world’s workforce and contributes to approximately 10 percent of the world’s total income (Mill 2007).

The actual and potential effect of tourism proved astounding, as many developing economies view tourism as a powerful source of foreign exchange, an approach to balance foreign trade, the industry without any manufacturing process and much more benefits. Although, tourism has proved to be a significant contributor in development of nation’s economy, there are several positive and negative aspects of tourism boom for local communities, which advocates of tourism perspective fail to consider (Britton 1982).This paper discusses whether the economic benefits and costs of tourism reach everyone in one way or another and highlight social and economic impacts of tourism at the country level.

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The Social and Environmental Impacts of Tourism

Socially tourism renders a powerful impact on the host countries. Tourism in itself can be both a source of international peace, amity, and a tool of improving relations with other countries, but at the same time a source of ecological destruction, a destroyer and corrupter of indigenous cultures, and an assault on people’s dignity, privacy and authenticity. The positive impacts of tourism:

• Tourism develops a positive attitude among nations;
• Tourism helps in learning cultures, traditions and customs of different nations;
• Tourism reduces negative beliefs, perceptions and stereotypes;
• Tourism develops pride, friendship, appreciation, mutual respect, and tolerance of culture;
• Cooperation in economic and financial assistance;
• Tourism enhances the image of the host country.

The social contacts and understanding among tourists and local communities enable mutual understanding, awareness, tolerance, family bonding, respect and positive attitudes. Residents obtain knowledge and information of events occurring in the world without leaving their country, while tourists gain knowledge of their distinctive culture. Further local communities receive benefits through contribution by tourism, such as improvement of social infrastructure, schools, health care facilities, libraries, internet cafes, hotels and restaurants, entertainment parks. Moreover, if local culture is the basis for attracting tourists, then it enables in preserving the local traditions, handicrafts and old monuments (Mathieson 1992).

For example, in several regions of Uzbekistan such as Buhara, Horezm, and Samarqand, tourists enormously contribute in the preservation of traditional handicrafts, hammered copper work, wood carving, handmade carpets and fabrics, as well as maintenance of historical and architectural monuments. Since Uzbek proclaimed its independence in the year 1991, the government initiated efforts in renovating, and preserved monuments and museums for promoting the national traditions, and acquainting the world with its culture. The increased interest in this culture and values offers the citizens proud of their cultural wealth besides survival of local cottage industry and employment.

On the other hand, tourism can accelerate hostility, tension, and suspicion, and its claim as a vital tool for peace will remain exaggerated. In fact, the evidence does not show that tourism is bringing the world together. In this context, social and economic influences on the citizens depend on how much revenue generated by the influx of tourists go to the host communities. The most of the revenue earned from tourists goes to the hotels, travelling agencies, airlines and other international companies, whereas local people and workers do not receive many benefits (Archer 1995). The unsuccessful development of resources can further lead to several negative effects, such as assimilation, conflicts, and unpleasantness among host country and tourists. While presenting a traditional culture to tourists may help to preserve the culture, it can also destroy or dilute. Negative effects from tourism occur when the influx of tourists is greater than the ability of the environment to cope with this situation within the acceptable limits of change. The conventional uncontrolled tourism leads to potential threats to several natural areas in the developing countries. It can render enormous pressure on an area that may lead to increased pollution, soil erosion, natural habit loss, discharges into sea, increased threat on endangered species and vulnerability to forest fires. Further, it often creates a strain on water resources, thereby forcing local population to compete and manage the resources for their own use (Archer 2000).

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The Economic Impacts of Tourism on Developing Countries

Tourism produces a variety of economic impacts. The host country receives a significant contribution from tourists in terms of sales, profits, tax revenues, jobs, and increased income in an area. The prime direct impacts occur within the main tourism sectors, such as transportation, restaurants, lodging, retail trade, and amusements. Through secondary impacts, tourism affects most sectors of the economy. An economic effect analysis of tourism activity usually reflects on changes in sales, employment, income in a region, occurring from activity of tourism. The effects of tourism can be described as more than the result of a certain tourist activity, facility or an event. The impacts appear as changed human behavior that originates from the interactions between the subsystems and agents of change on which they impinge. The connectivity between the various categories of tourism effects such as physical, social and economic are extremely close and difficult to measure and plan. The potential economic advantages of tourism have always been a prime attraction for developing nations due to three pro-tourism arguments. First, the increasing trend in demand for international travel continues to grow at an astonishing rate due to the travel preferences and economic stability of people in the developed countries such Europe and North America. Secondly, the income flexibility of demand for tourism points that as the incomes of people in the developed nations increase, more disposable income will move towards travel. Finally, developing nations require foreign exchange to fulfill their economic development initiatives and for satisfying the demands of their own citizens (Pleumarom 1999).

There are various categories of economic influences that are not usually included in economic impact evaluations, at least not directly. For instance:

• Changes in prices – The tourism industry has a tendency to inflate the cost of housing and retail prices in the region, frequently on a seasonal basis.
• Changes in the quantity and quality of goods and services – The tourism can lead to a wider array of products and services of either lower or higher quality than without tourism.
• Changes in housing property and taxes – The taxes covering the cost of local services may be lower or higher during the presence of tourism activity. In several cases, taxes collected indirectly or directly from tourists may result in reduced local taxes for roads, schools and rehabilitation of poor and needy. On the other hand, there can be a likelihood that the taxation on local people may increase to cover the additional infrastructure and service costs.
• Economic dimensions of environmental and social effects – There are several economic consequences of most environmental and social impacts that can be positive or negative. For instance, the traffic congestion may result in increased costs of movements for both businesses and households. Improved amenities, which attract tourists, can also encourage withdrawal or other kinds of business activities to locate in the area (Wahab 1997).

One of the most significant economic impacts is on balance of payments. The BOP account is a record of economic transactions during a certain time between residents of the host country and the rest of the world. The income a nation derives from tourism can assist to balance the nation’s BOP. This owns a significant consideration, as the nation then gains foreign currency. The impacts of BOP are the most powerful economic impacts on the tourism industry. The BOP account incorporates the value of all gifts, loans, gold, and foreign aid that comes in or leaves the nation. Tourism influences the BOP in two ways: impacts within the nation and impacts on international tourism. This is necessary to know in order to calculate foreign exchange earnings in the BOP and compare them with costs. In other terms, it helps to know if more money is leaving the country than earned from international tourism (De Kadt 1997).

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Tourism has always been regarded in most developing economies as a powerful support to other economic sectors, ranging from manufacturing to resource industries. Indeed, in the past decades of economic reforms, revenue earned from tourism remained hidden in several service categories. This paper discussed some of the social and economic impacts of tourism that results for developing countries in either loosing or gaining significant revenues. The crucial needs of maintaining tourism incomes in developing nations are necessary in order to derive the richer objectives of sustainable tourism development. For developing nations, there is a need to explore financial resources to dilute the negative social and environmental impacts occurring from tourism in the long run.

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• Published: 24 February 2024

Modeling the link between tourism and economic development: evidence from homogeneous panels of countries

• Pablo Juan Cárdenas-García   ORCID: orcid.org/0000-0002-1779-392X 1 ,
• Juan Gabriel Brida 2 &
• Verónica Segarra 2  

Humanities and Social Sciences Communications volume  11 , Article number:  308 ( 2024 ) Cite this article

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• Development studies

Having previously analyzed the relationship between tourism and economic growth from distinct perspectives, this paper attempts to fill the void existing in scientific research on the relationship between tourism and economic development, by analyzing the relationship between these variables using a sample of 123 countries between 1995 and 2019. The Dumistrescu and Hurlin adaptation of the Granger causality test was used. This study takes a critical look at causal analysis with heterogeneous panels, given the substantial differences found between the results of the causal analysis with the complete panel as compared to the analysis of homogeneous country groups, in terms of their dynamics of tourism specialization and economic development. On the one hand, a one-way causal relationship exists from tourism to development in countries having low levels of tourism specialization and development. On the other hand, a one-way causal relationship exists by which development contributes to tourism in countries with high levels of development and tourism specialization.

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Introduction.

Across the world, tourism is one of the most important sectors. It has undergone exponential growth since the mid-1900s and is currently experiencing growth rates that exceed those of other economic sectors (Yazdi, 2019 ).

Today, tourism is a major source of income for countries that specialize in this sector, generating 5.8% of the global GDP (5.8 billion US$) in 2021 (UNWTO, 2022 ) and providing 5.4% of all jobs (289 million) worldwide. Although its relevance is clear, tourism data have declined dramatically due to the recent impact of the Covid-19 health crisis. In 2019, prior to the pandemic (UNWTO, 2020 ), tourism represented 10.3% of the worldwide GDP (9.6 billion US$), with the number of tourism-related jobs reaching 10.2% of the global total (333 million). With the evolution of the pandemic and the regained trust of tourists across the globe, it is estimated that by 2022, approximately 80% of the pre-pandemic figures will be attained, with a full recovery being expected by 2024 (UNWTO, 2022 ).

Given the importance of this economic activity, many countries consider tourism to be a tool enabling economic growth (Corbet et al., 2019 ; Ohlan, 2017 ; Xia et al., 2021 ). Numerous works have analyzed the relationship between increased tourism and economic growth; and some systematic reviews have been carried out on this relationship (Brida et al., 2016 ; Ahmad et al., 2020 ), examining the main contributions over the first two decades of this century. These reviews have revealed evidence in this area: in some cases, it has been found that tourism contributes to economic growth while, in other cases, the economic cycle influences tourism expansion. Moreover, other works offer evidence of a bi-directional relationship between these variables.

Distinct international organizations (OECD, 2010 ; UNCTAD, 2011 ) have suggested that not only does tourism promote economic growth, it also contributes to socio-economic advances in the host regions. This may be the real importance of tourism, since the ultimate objective of any government is to improve a country’s socio-economic development (UNDP, 1990 ).

The development of economic and other policies related to the economic scope of tourism, in addition to promoting economic growth, are also intended to improve other non-economic factors such as education, safety, and health. Improvements in these factors lead to a better life for the host population (Lee, 2017 ; Todaro and Smith, 2020 ).

Given tourism’s capacity as an instrument of economic development (Cárdenas-García et al., 2015 ), distinct institutions such as the United Nations Conference on Trade and Development, the United Nations Economic Commission for Africa, the United Nations World Tourism Organization and the World Bank, have begun funding projects that consider tourism to be a tool for improved socio-economic development, especially in less advanced countries (Carrillo and Pulido, 2019 ).

This new trend within the scientific literature establishes, firstly, that tourism drives economic growth and, secondly, that thanks to this economic growth, the population’s economic conditions may be improved (Croes et al., 2021 ; Kubickova et al., 2017 ). However, to take advantage of the economic growth generated by tourism activity to boost economic development, specific policies should be developed. These policies should determine the initial conditions to be met by host countries committed to tourism as an instrument of economic development. These conditions include regulation, tax system, and infrastructure provision (Cárdenas-García and Pulido-Fernández, 2019 ; Lejárraga and Walkenhorst, 2013 ; Meyer and Meyer, 2016 ).

Therefore, it is necessary to differentiate between the analysis of the relationship between tourism and economic growth, whereby tourism boosts the economy of countries committed to tourism, traditionally measured through an increase in the Gross Domestic Product (Alcalá-Ordóñez et al., 2023 ; Brida et al., 2016 ), and the analysis of the relationship between tourism and economic development, which measures the effect of tourism on other factors (not only economic content but also inequality, education, and health) which, together with economic criteria, serve as the foundation to measure a population’s development (Todaro and Smith, 2020 ).

However, unlike the analysis of the relationship between tourism and economic growth, few empirical studies have examined tourism’s capacity as a tool for development (Bojanic and Lo, 2016 ; Cárdenas-García and Pulido-Fernández, 2019 ; Croes, 2012 ).

To help fill this gap in the literature analyzing the relationship between tourism and economic development, this work examines the contribution of tourism to economic development, given that the relationship between tourism and economic growth has been widely analyzed by the scientific literature. Moreover, given that the literature has demonstrated that tourism contributes to economic growth, this work aims to analyze whether it also contributes to economic development, considering development in the broadest possible sense by including economic and socioeconomic variables in the multi-dimensional concept (Wahyuningsih et al., 2020 ).

Therefore, based on the results of this work, it is possible to determine whether the commitment made by many international organizations and institutions in financing tourism projects designed to improve the host population’s socioeconomic conditions, especially in countries with lower development levels, has, in fact, resulted in improved development levels.

It also presents a critical view of causal analyses that rely on heterogeneous panels, examining whether the conclusions reached for a complete panel differ from those obtained when analyzing homogeneous groups within the panel. As seen in the literature review analyzing the relationship between tourism and economic development, empirical works using panel data from several countries tend to generalize the results obtained to the entire panel, without verifying whether, in fact, they are relevant for all of the analyzed countries or only some of the same. Therefore, this study takes an innovative approach by examining the panel countries separately, analyzing the homogeneous groups distinctly.

Therefore, this article presents an empirical analysis examining whether a causal relationship exists between tourism and economic development, with development being considered to be a multi-dimensional variable including a variety of factors, distinct from economic ones. Panel data from 123 countries during the 1995–2019 period was considered to examine the causal relationship between tourism and economic development. For this, the Granger causality test was performed, applying the adaptation of this test made by Dumistrescu and Hurlin. First, a causal analysis was performed collectively for all of the countries of the panel. Then, a specific analysis was performed for each of the homogeneous groups of countries identified within the panel, formed according to levels of tourism specialization and development.

This article provides information on tourism’s capacity to serve as an instrument of development, helping to fill the gap in scientific research in this area. It critically examines the use of causal analyses based on heterogeneous samples of countries. This work offers the following main novelties as compared to prior works on the same topic: firstly, it examines the relationship between tourism and economic development, while the majority of the existing works only analyze the relationship between tourism and economic growth; secondly, it analyzes a large sample of countries, representing all of the global geographic areas, whereas the literature has only considered works from specific countries or a limited number of nations linked to a specific country in a specific geographical area, and; thirdly, it analyzes the panel both individually and collectively, for each of the homogenous groups of countries identified, permitting the adoption of specific policies for each group of countries according to the identified relationship, as compared to the majority of works that only analyze the complete panel, generalizing these results for all countries in the sample.

Overall, the results suggest that a relationship exists between tourism and development in all of the analyzed countries from the sample. A specific analysis was performed for homogeneous country groups, only finding a causal relationship between tourism and development in certain country groups. This suggests that the use of heterogeneous country samples in causal analyses may give rise to inappropriate conclusions. This may be the case, for example, when finding causality for a broad panel of countries, although, in fact, only a limited number of panel units actually explain this causal relationship.

The remainder of the document is organized as follows: the next section offers a review of the few existing scientific works on the relationship between tourism and economic development; section three describes the data used and briefly explains the methodology carried out; section four details the results obtained from the empirical analysis; and finally, the conclusions section discusses the main implications of the work, also providing some recommendations for economic policy.

Tourism and economic development

Numerous organizations currently recognize the importance of tourism as an instrument of economic development. It was not until the late 20th century, however, when the United Nations World Tourism Organization (UNWTO), in its Manila Declaration, established that the development of international tourism may “help to eliminate the widening economic gap between developed and developing countries and ensure the steady acceleration of economic and social development and progress, in particular of the developing countries” (UNWTO, 1980 ).

From a theoretical point of view, tourism may be considered an effective activity for economic development. In fact, the theoretical foundations of many works are based on the relationship between tourism and development (Ashley et al., 2007 ; Bolwell and Weinz, 2011 ; Dieke, 2000 ; Sharpley and Telfer, 2015 ; Sindiga, 1999 ).

The link between tourism and economic development may arise from the increase in tourist activity, which promotes economic growth. As a result of this economic growth, policies may be developed to improve the resident population’s level of development (Alcalá-Ordóñez and Segarra, 2023 ).

Therefore, it is essential to identify the key variables permitting the measurement of the level of economic development and, therefore, those variables that serve as a basis for analyzing whether tourism results in improved the socioeconomic conditions of the host population (Croes et al., 2021 ). Since economic development refers not only to economic-based variables, but also to others such as inequality, education, or health (Todaro and Smith, 2020 ), when analyzing the economic development concept, it has been frequently linked to human development (Pulido-Fernández and Cárdenas-García, 2021 ). Thus, we wish to highlight the major advances resulting from the publication of the Human Development Index (HDI) when measuring economic development, since it defines development as a multidimensional variable that combines three dimensions: health, education, and income level (UNDP, 2023 ).

However, despite the importance that many organizations have given to tourism as an instrument of economic development, basing their work on the relationship between these variables, a wide gap continues to exist in the scientific literature for empirical studies that examine the existence of a relationship between tourism and economic development, with very few empirical analyses analyzing this relationship.

First, a group of studies has examined the causal relationship between tourism and economic development, using heterogeneous samples, and without previously grouping the subjects based on homogeneous characteristics. Croes ( 2012 ) analyzed the relationship between tourism and economic development, measured through the HDI, finding that a bidirectional relationship exists for the cases of Nicaragua and Costa Rica. Using annual data from 2001 to 2014, Meyer and Meyer ( 2016 ) performed a collective analysis of South African regions, determining that tourism contributes to economic development. For a panel of 63 countries worldwide, and once again relying on the HDI to define economic development, it was determined that tourism contributes to economic development. Kubickova et al. ( 2017 ), using annual data for the 1995–2007 period, analyzed Central America and Caribbean nations, determining the existence of this relationship by which tourism influences the level of economic development and that the level of development conditions the expansion of tourism. Another work examined nine micro-states of America, Europe, and Africa (Fahimi et al., 2018 ); and 21 European countries in which human capital was measured, as well as population density and tourism income, analyzing panel data and determining that tourism results in improved economic development. Finally, within this first group of works, Chattopadhyay et al. ( 2022 ), using a broad panel of destinations, (133 countries from all geographic areas of the globe) determined that there is no relationship between tourism and economic development.

Studies performed with large country samples that attempt to determine the causal relationship between tourism and economic development by analyzing countries that do not necessarily share homogeneous characteristics, may lead to erroneous conclusions, establishing causality (or not) for panel sets even when this situation is actually explained by a small number of panel units.

Second, another group of studies have analyzed the causal relationship between tourism and economic development, considering the previous limitation, and has grouped the subjects based on their homogeneous characteristics. Cárdenas-García et al. ( 2015 ) used annual data from 1990–2010, in a collective analysis of 144 countries, making a joint panel analysis and then examining two homogeneous groups of countries based on their level of economic development. They determined that tourism contributes to economic development, but only in the most developed group of countries. They determined that tourism contributes to economic development, both for the total sample and for the homogeneous groups analyzed. Pulido-Fernández and Cárdenas-García ( 2021 ), using annual data for the 1993–2017 period, performed a joint analysis of 143 countries, followed by a specific analysis for three groups of countries sharing homogeneous characteristics in terms of tourism growth and development level. They determined that tourism contributes to economic development and that development level conditions tourism growth in the most developed countries.

Finally, another group of studies has analyzed the causal relationship between tourism and economic development in specific cases examined on an individual basis. In a specific analysis by Aruba et al. ( 2016 ), it was determined that tourism contributes to human development. Analyzing Malaysia, Tan et al. ( 2019 ) determined that tourism contributes to development, but only over the short term, and that level of development does not influence tourism growth. Similar results were obtained by Boonyasana and Chinnakum ( 2020 ) in an analysis carried out in Thailand. In this case of Thailand (Boonyasana and Chinnakum, 2020 ), which relied on the HDI, the relationship with economic growth was also analyzed, finding that an increase in tourism resulted in improved economic development. Finally, Croes et al. ( 2021 ), in a specific analysis of Poland, determined that tourism does not contribute to development.

As seen from the analysis of the most relevant publications detailed in Table 1 , few empirical works have considered the relationship between tourism and economic development, in contrast to the numerous works from the scientific literature that have examined the relationship between tourism and economic growth. Most of the works that have empirically analyzed the relationship between tourism and economic development have determined that tourism positively influences the improved economic development in host destinations. To a lesser extent, some studies have found a bidirectional relationship between these variables (Croes, 2012 ; Kubickova et al., 2017 ; Pulido-Fernández and Cárdenas-García, 2021 ) while others have found no relationship between tourism and economic development (Chattopadhyay et al., 2022 ; Croes et al., 2021 ).

Furthermore, in empirical works relying on panel data, the results have tended to be generalized to the entire panel, suggesting that tourism improves economic development in all countries that are part of the panel. This has been the case in all of the examined works, with the exception of two studies that analyzed the panel separately (Cárdenas-García et al., 2015 ; Pulido-Fernández and Cárdenas-García, 2021 ).

Thus, it may be suggested that the use of very large country panels and, therefore, including very heterogeneous destinations, as was the case in the works of Biagi et al. ( 2017 ) using a panel of 63 countries, as well as that of Chattopadhyay et al. ( 2022 ) working with a panel of 133 countries, may lead to error, given that this relationship may only arise in certain destinations of the panel, although it is generalized to the entire panel.

This work serves to fill this gap in the literature by analyzing the panel both collectively and separately, for each of the homogenous groups of countries that have been previously identified.

The lack of relevant works on the relationship between tourism and development, and of studies using causal analyses to examine these variables based on heterogeneous panels, may lead to the creation of rash generalizations regarding the entirety of the analyzed countries. Thus, conclusions may be reached that are actually based on only specific panel units. Therefore, we believe that this study is justified.

Methodological approach

Given the objective of this study, to determine whether a causal relationship exists between tourism and socio-economic development, it is first necessary to identify the variables necessary to measure tourism activity and development level. Thus, the indicators are highly relevant, given that the choice of indicator may result in distinct results (Rosselló-Nadal and He, 2020 ; Song and Wu, 2021 ).

Table 2 details the measurement variables used in this work. Specifically, the following indicators have been used in this paper to measure tourism and economic development:

Measurement of tourist activity. In this work, we decided to consider tourism specialization, examining the number of international tourists received by a country with regard to its population size as the measurement variable.

This information on international tourists at a national level has been provided annually by the United Nations World Tourism Organization since 1995 (UNWTO, 2023 ). This variable has been relativized based on the country’s population, according to information provided by the World Bank on the residents of each country (WB, 2023 ).

Tourism specialization is considered to be the level of tourism activity, specifically, the arrival of tourists, relativized based on the resident population, which allows for comparisons to be made between countries. It accurately measures whether or not a country is specialized in this economic activity. If the variable is used in absolute values, for example, the United States receives more tourists than Malta, so based on this variable it may be that the first country is more touristic than the second. However, in reality, just the opposite happens, Malta is a country in which tourist activity is more important for its economy than it is in the United States, so the use of tourist specialization as a measurement variable classifies, correctly, both Malta as a country with high tourism specialization and to the United States as a country with low tourism specialization.

Therefore, most of the scientific literature establishes the need to use the total number of tourists relativized per capita, given that this allows for the determination of the level of tourism specialization of a tourism destination (Dritsakis, 2012 ; Tang and Abosedra, 2016 ); furthermore, this indicator has been used in works analyzing the relationship between tourism and economic development (for example, Biagi et al., 2017 ; Boonyasana and Chinnakum; 2020 ; Croes et al., 2021 ; Fahimi et al., 2018 ).

Although some works have used other variables to measure tourism, such as tourism income, exports, or tourist spending, these variables are not available for all of the countries making up the panel, so the sample would have been significantly reduced. Furthermore, the data available for these alternative variables do not come from homogeneous databases, and therefore cannot be compared.

Measurement of economic development. In this work, the Human Development Index has been used to measure development.

This information is provided by the United Nations Development Program, which has been publishing it annually at the country level since 1990 (UNDP, 2023 ).

The selection of this indicator to measure economic development is in line with other works that have defended its use to measure the impact on development level (for example, Jalil and Kamaruddin, 2018 ; Sajith and Malathi, 2020 ); this indicator has also been used in works analyzing the relationship between tourism and economic development (for example, Meyer and Meyer, 2016 ; Kubickova et al., 2017 ; Pulido-Fernández and Cárdenas-García, 2021 ).

Although some works have used other variables, such as poverty or inequality, to measure development, these variables are not available for all of the countries forming the panel. Therefore the sample would have been considerably reduced and the data available for these alternative variables do not come from homogenous databases, and therefore comparisons cannot be made.

These indicators are available for a total of 123 countries, across the globe. Thus, these countries form part of the sample analyzed in this study.

As for the time frame considered in this work, two main issues were relevant when determining this period: on the one hand, there is an initial time restriction for the analyzed series, given that information on the arrival of international tourists is only available as of 1995, the first year when this information was provided by the UNWTO. On the other hand, it was necessary to consider the effect of the Covid-19 pandemic and the resulting tourism sector crisis, which also affected the global economy as a whole. Therefore, our time series ended as of 2019, with the overall time frame including data from 1995 to 2019, a 25-year period.

Previous considerations

Caution should be taken when considering causality tests to determine the relationships between two variables, especially in cases in which large heterogeneous samples are used. This is due to the fact that generalized conclusions may be reached when, in fact, the causality is only produced by some of the subjects of the analyzed sample. This study is based on this premise. While heterogeneity in a sample is clearly a very relevant aspect, in some cases, it may lead to conclusions that are less than appropriate.

In this work, a collective causal analysis has been performed on all of the countries of the panel, which consists of 123 countries. However, given that it is a broad sample including countries having major differences in terms of size, region, development level, or tourism performance, the conclusions obtained from this analysis may lead to the generalization of certain conclusions for the entire sample set, when in fact, these relationships may only be the case for a very small portion of the sample. This has been the case in other works that have made generalized conclusions from relatively large samples in which the sample’s homogeneity regarding certain patterns was not previously verified (Badulescu et al., 2021 ; Ömer et al., 2018 ; Gedikli et al., 2022 ; Meyer and Meyer, 2016 ; Xia et al., 2021 ).

Therefore, after performing a collective analysis of the entire panel, the causal relationship between tourism and development was then determined for homogeneous groups of countries that share common patterns of tourism performance and economic development level, to analyze whether the generalized conclusions obtained in the previous section differ from those made for the individual groups. This was in line with strategies that have been used in other works that have grouped countries based on tourism performance (Min et al., 2016 ) or economic development level (Cárdenas-García et al., 2015 ), prior to engaging in causal analyses. To classify the countries into homogeneous groups based on tourism performance and development level, a previous work was used (Brida et al., 2023 ) which considered the same sample of 123 countries, relying on the same data to measure tourism and development level and the same time frame. This guarantees the coherence of the results obtained in this work.

From the entire panel of 123 countries, a total of six country groups were identified as having a similar dynamic of tourism and development, based on qualitative dynamic behavior. In addition, an “outlier” group of countries was found. These outlier countries do not fit into any of the groups (Brida et al., 2023 ). The three main groups of countries were considered, discarding three other groups due to their small size. Table 3 presents the group of countries sharing similar dynamics in terms of tourism performance and economic development level.

Applied methodology

As indicated above, this work uses the Tourist Specialization Rate (TIR) and the Human Development Index (HDI) to measure tourism and economic development, respectively. In both cases, we work with the natural logarithm (l.TIR and l.HDI) as well as the first differences between the variables (d.l.TIR and d.l.HDI), which measure the growth of these variables.

A complete panel of countries is used, consisting of 123 countries. The three main groups indicated in the previous section are also considered (the first of the groups contains 36 countries, the second contains 29 and the last group contains 43).

The Granger causality test ( 1969 ) is used to analyze the relationships between tourism specialization and development level; this test shows if one variable predicts the other, but this should not be confused with a cause-effect relationship.

In the context of panel data, different tests may be used to analyze causality. Most of these tests differ with regard to the assumptions of homogeneity of the panel unit coefficients. While the standard form of the Granger causality test for panels assumes that all of the coefficients are equal between the countries forming part of the panel, the Dumitrescu and Hurlin test (2012) considers that the coefficients are different between the countries forming part of the panel. Therefore, in this work, Granger’s causality is analyzed using the Dumitrescu and Hurlin test (2012). In this test, the null hypothesis is of no homogeneous causality; in other words, according to the null hypothesis, causality does not exist for any of the countries of the analyzed sample whereas, according to the alternative hypothesis, in which the regression model may be different in the distinct countries, causality is verified for at least some countries. The approach used by Dumitrescu and Hurlin ( 2012 ) is more flexible in its assumptions since although the coefficients of the regressions proposed in the tests are constant over time, the possibility that they may differ for each of the panel elements is accepted. This approach has more realistic assumptions, given that countries exhibit different behaviors. One relevant aspect of this type of tests is that they offer no information on which countries lead to the rejection of the lack of causality.

Given the specific characteristics of this type of tests, the presence of very heterogeneous samples may lead to inappropriate conclusions. For example, causality may be assumed for a panel of countries, when only a few of the panel’s units actually explain this relationship. Therefore, this analysis attempts to offer novel information on this issue, revealing that the conclusions obtained for the complete set of 123 countries are not necessarily the same as those obtained for each homogeneous group of countries when analyzed individually.

Given the nature of the variables considered in this work, specifically, regarding tourism, it is expected that a shock taking place in one country may be transmitted to other countries. Therefore, we first analyze the dependency between countries, since this may lead to biases (Pesaran, 2006 ). The Pesaran cross-sectional dependence test (2004) is used for the total sample and for each of the three groups individually.

First, a dependence analysis is performed for the countries of the sample, verifying the existence of dependence between the panel subjects. A cross-sectional dependence test (Pesaran, 2004 ) is used, first for the overall set of countries in the sample and second, for each of the groups of countries sharing homogeneous characteristics.

The results are presented in Table 4 , indicating that the test is statistically significant for the two variables, both for all of the countries in the sample and for each of the homogeneous country clusters, for the variables taken in logarithms as well as their first differences.

Upon rejecting the null hypothesis of non-cross-sectional dependence, it is assumed that a shock occurs in a country that may be transmitted to other countries in the sample. In fact, the lack of dependence between the variables, both tourism and development, is natural in this type of variables, given the economic cycle through the globalization of the economic activity, common regions visited by tourists, the spillover effect, etc.

Second, the stationary nature of the series is tested, given that cross-sectional dependence has been detected between the variables. First-generation tests may present certain biases in the rejection of the null hypothesis since first-generation unit root tests do not permit the inclusion of dependence between countries (Pesaran, 2007 ). On the other hand, second-generation tests permit the inclusion of dependence and heterogeneity. Therefore, for this analysis, the augmented IPS test (CIPS) proposed by Pesaran ( 2007 ) is used. This second-generation unit root test is the most appropriate for this case, given the cross-sectional dependence.

The results are presented in Table 5 , showing the statistics of the CIPS test for both the overall set of countries in the sample and in each of the homogeneous clusters of countries. The results are presented for models with 1, 2, and 3 delays, considering both the variables in the logarithm and their first differences.

As observed, the null hypothesis of unit root is not rejected for the variables in levels, but it is rejected for the first differences. This result is found in all of the cases, for both the total sample and for each of the homogeneous groups, with a significance of 1%. Therefore, the variables are stationary in their first differences, that is, the variables are integrated at order 1. Given that the causality test requires stationary variables, in this work it is used with the variation or growth rate of the variables, that is, the variable at t minus the variable at t−1.

Finally, to analyze Granger’s causality, the test by Dumitrescu and Hurlin ( 2012 ) is used. This test is used to analyze the causal relationship in both directions; that is, whether tourism contributes to economic development and whether the economic development level conditions tourism specialization. Statistics are calculated considering models with 1, 2, and 3 delays. Considering that cross-sectional dependence exists, the p-values are corrected using bootstrap techniques (making 500 replications). Given that the test requires stationary variables, primary differences of both variables were considered.

Table 6 presents the result of the Granger causality analysis using the Dumitrescu and Hurlin test (2012), considering the null hypothesis that tourism does not condition development level, either for all of the countries or for each homogeneous country cluster.

For the entire sample of countries, the results suggest that the null hypothesis of no causality from tourism to development was rejected when considering 3 delays (in other works analyzing the relationship between tourism and development, the null hypothesis was rejected with a similar level of delay: Rivera ( 2017 ) when considering 3–4 delays or Ulrich et al. ( 2018 ) when considering 3 delays). This suggests that for the entire panel, one-way causality exists whereby tourism influences economic development, demonstrating that tourism specialization contributes positively to improving the economic development of countries opting for tourism development. This is in line with the results of Meyer and Meyer ( 2016 ), Ridderstaat et al. ( 2016 ); Biagi et al. ( 2017 ); Fahimi et al. ( 2018 ); Tan et al. ( 2019 ), or Boonyasana and Chinnakum ( 2020 ).

However, the previous conclusion is very general, given that it is based on a very large sample of countries. Therefore, it may be erroneous to generalize that tourism is a tool for development. In fact, the results indicate that, when analyzing causality by homogeneous groups of countries, sharing similar dynamics in both tourism and development, the null hypothesis of no causality from tourism to development is only rejected for the group C countries, when considering three delays. Therefore, the development of generalized policies to expand tourism in order to improve the socioeconomic conditions of any destination type should consider that this relationship between tourism and economic development does not occur in all cases. Thus, it should first be determined if the countries opting for this activity have certain characteristics that will permit a positive relationship between said variables.

In other words, it may be a mistake to generalize that tourism contributes to economic development for all countries, even though a causal relationship exists for the entire panel. Instead, it should be understood that tourism permits an improvement in the level of development only in certain countries, in line with the results of Cárdenas-García et al. ( 2015 ) or Pulido-Fernández and Cárdenas-García ( 2021 ). In this specific work, this positive relationship between tourism and development only occurs in countries from group C, which are characterized by a low level of tourism specialization and a low level of development. Some works have found similar results for countries from group C. For example, Sharma et al. ( 2020 ) found the same relationship for India, while Nonthapot ( 2014 ) had similar findings for certain countries in Asia and the Pacific, which also made up group C. Some recent works have analyzed the relationship between tourism specialization and economic growth, finding similar results. This has been the case with Albaladejo et al. ( 2023 ), who found a relationship from tourism to economic growth only for countries where income is low, and the tourism sector is not yet developed.

These countries have certain limitations since even when tourism contributes to improved economic development, their low levels of tourism specialization do not allow them to reach adequate host population socioeconomic conditions. Therefore, investments in tourism are necessary there in order to increase tourism specialization levels. This increase in tourism may allow these countries to achieve development levels that are similar to other countries having better population conditions.

Therefore, in this group, consisting of 43 countries, a causal relationship exists, given that these countries are characterized by a low level of tourism specialization. However, the weakness of this activity, due to its low relevance in the country, prevents it from increasing the level of economic development. In these countries (details of these countries can be found in Table 3 , specifically, the countries included in Group C), policymakers have to develop policies to improve tourism infrastructure as a prior step to improving their levels of development.

On the other hand, in Table 7 , the results of Granger’s causal analysis based on the Dumitrescu and Hurlin test (2012) are presented, considering the null hypothesis that development level does not condition an increase in tourism, both in the overall sample set and in each of the homogeneous country clusters.

The results indicate that, for the entire country sample, the null hypothesis of no causality from development to tourism is not rejected, for any type of delay. This suggests that, for the entire panel, one-way causality does not exist, with level of development influencing the level of tourism specialization. This is in line with the results of Croes et al. ( 2021 ) in a specific analysis in Poland.

Once again, this conclusion is quite general, given that it has been based on a very broad sample of countries. Therefore, it may be erroneous to generalize that the development level does not condition tourism specialization. Past studies using a large panel of countries, such as the work of Chattopadhyay et al. ( 2022 ) analyzing panel data from 133 countries, have been generalized to all of the analyzed countries, suggesting that economic development level does not condition the arrival of tourists to the destination, although, in fact, this relationship may only exist in specific countries within the analyzed panel.

In fact, the results indicate that, when analyzing causality by homogeneous country groups sharing a similar dynamic, for both tourism and development, the null hypothesis of no causality from development to tourism is only rejected for country group A when considering 2–3 delays. Although the statistics of the test differ, when the sample’s time frame is small, as in this case, the Z-bar tilde statistic is more appropriate.

Thus, development level influences tourism growth in Group A countries, which are characterized by a high level of development and tourism specialization, in accordance with the prior results of Pulido-Fernández and Cárdenas-García ( 2021 ).

These results, suggesting that tourism is affected by economic development level, but only in the most developed countries, imply that the existence of better socioeconomic conditions in these countries, which tend to have better healthcare systems, infrastructures, levels of human resource training, and security, results in an increase in tourist arrivals to these countries. In fact, when traveling to a specific tourist destination, if this destination offers attractive factors and a higher level of economic development, an increase in tourist flows was fully expected.

In this group, consisting of 36 countries, the high development level, that is, the proper provision of socio-economic factors in their economic foundations (training, infrastructures, safety, health, etc.) has led to the attraction of a large number of tourists to their region, making their countries having high tourism specialization.

Although international organizations have recognized the importance of tourism as an instrument of economic development, based on the theoretical relationship between these two variables, few empirical studies have considered the consequences of the relationship between tourism and development.

Furthermore, some hasty generalizations have been made regarding the analysis of this relationship and the analysis of the relationship of tourism with other economic variables. Oftentimes, conclusions have been based on heterogeneous panels containing large numbers of subjects. This may lead to erroneous results interpretation, basing these results on the entire panel when, in fact, they only result from specific panel units.

Given this gap in the scientific literature, this work attempts to analyze the relationship between tourism and economic development, considering the panel data in a complete and separate manner for each of the previously identified country groups.

The results highlight the need to adopt economic policies that consider the uniqueness of each of the countries that use tourism as an instrument to improve their socioeconomic conditions, given that the results differ according to the specific characteristics of the analyzed country groups.

This work provides precise results regarding the need for policymakers to develop public policies to ensure that tourism contributes to the improvement of economic development, based on the category of the country using this economic activity to achieve greater levels of economic development.

Specifically, this work has determined that tourism contributes to economic development, but only in countries that previously had a lower level of tourism specialization and were less developed. This highlights the need to invest in tourism to attract more tourists to these countries to increase their economic development levels. Countries having major natural attraction resources or factors, such as the Dominican Republic, Egypt, India, Morocco, and Vietnam, need to improve their positioning in the international markets in order to attain a higher level of tourism specialization, which will lead to improved development levels.

Furthermore, the results of this study suggest that a greater past economic development level of a country will help attract more tourists to these countries, highlighting the need to invest in security, infrastructures, and health in order for these destinations to be considered attractive and increase tourist arrival. In fact, given their increased levels of development, countries such as Spain, Greece, Italy, Qatar, and Uruguay have become attractive to tourists, with soaring numbers of visitors and high levels of tourism specialization.

Therefore, the analysis of the relationship between tourism and economic development should focus on the differentiated treatment of countries in terms of their specific characteristics, since working with panel data with large samples and heterogenous characteristics may lead to incorrect results generalizations to all of the analyzed destinations, even though the obtained relationship in fact only takes place in certain countries of the sample.

Conclusions and policy implications

Within this context, the objective of this study is twofold: on the one hand, it aims to contribute to the lack of empirical works analyzing the causal relationship between tourism and economic development using Granger’s causality analysis for a broad sample of countries from across the globe. On the other hand, it critically examines the use of causality analysis in heterogeneous samples, by verifying that the results for the panel set differ from the results obtained when analyzing homogeneous groups in terms of tourism specialization and development level.

In fact, upon analyzing the causal relationship from tourism to development, and the causal relationship from development to tourism, the results from the entire panel, consisting of 123 countries, differ from those obtained when analyzing causality by homogeneous country groups, in terms of tourism specialization and economic development dynamics of these countries.

On the one hand, a one-way causality relationship is found to exist, whereby tourism influences economic development for the entire sample of countries, although this conclusion cannot be generalized, since this relationship is only explained by countries belonging to Group C (countries with low levels of tourism specialization and low development levels). This indicates that, although a causal relationship exists by which tourism contributes to economic development in these countries, the low level of tourism specialization does not permit growth to appropriate development levels.

The existence of a causal relationship whereby the increase in tourism precedes the improvement of economic development in this group of countries having a low level of tourism specialization and economic development, suggests the appropriateness of the focus by distinct international organizations, such as the United Nations Conference on Trade and Development or the United Nations Economic Commission for Africa, on funding tourism projects (through the provision of tourism infrastructure, the stimulation of tourism supply, or positioning in international markets) in countries with low economic development levels. This work has demonstrated that investment in tourism results in the attracting of a greater flow of tourists, which will contribute to improved economic development levels.

Therefore, both international organizations financing projects and public administrations in these countries should increase the funding of projects linked to tourism development, in order to increase the flow of tourism to these destinations. This, given that an increase in tourism specialization suggests an increased level of development due to the demonstrated existence of a one-way causal relationship from tourism to development in these countries, many of which form part of the group of so-called “least developed” countries. However, according to the results obtained in this work, this relationship is not instantaneous, but rather, a certain delay exists in order for economic development to improve as a result of the increase in tourism. Therefore, public managers must adopt a medium and long-term vision of tourism activity as an instrument of development, moving away from short-term policies seeking immediate results, since this link only occurs over a broad time horizon.

On the other hand, this study reveals that a one-way causal relationship does not exist, by which the level of development influences tourism specialization level for the entire sample of countries. However, this conclusion, once again, cannot be generalized given that in countries belonging to Group A (countries with a high development level and a high tourism specialization level), a high level of economic development determines a higher level of tourism specialization. This is because the socio-economic structure of these countries (infrastructures, training or education, health, safety, etc.) permits their shaping as attractive tourist destinations, thereby increasing the number of tourists visiting them.

Therefore, investments made by public administrations to improve these factors in other countries that currently do not display this causal relationship implies the creation of the necessary foundations to increase their tourism specialization and, therefore, as shown in other works, tourism growth will permit economic growth, with all of the associated benefits for these countries.

Therefore, to attract tourist flows, it is not only important for a country to have attractive factors or resources, but also to have an adequate level of prior development. In other words, the tourists should perceive an adequate level of security in the destination; they should be able to use different infrastructures such as roads, airports, or the Internet; and they should receive suitable services at the destination from personnel having an appropriate level of training. The most developed countries, which are the destinations having the greatest endowment of these resources, are the ones that currently receive the most tourist flows thanks to the existence of these factors.

Therefore, less developed countries that are committed to tourism as an instrument to improve economic development should first commit to the provision of these resources if they hope to increase tourist flows. If this increase in tourism takes place in these countries, their economic development levels have been demonstrated to improve. However, since these countries are characterized by low levels of resources, cooperation by organizations financing the necessary investments is key to providing them with these resources.

Thus, a critical perspective is necessary when considering the relationship between tourism and economic development based on global causal analysis using heterogeneous samples with numerous subjects. As in this case, carrying out analyses on homogeneous groups may offer interesting results for policymakers attempting to suitably manage population development improvements due to tourism growth and tourism increases resulting from higher development levels.

One limitation of this work is its national scope since evidence suggests that tourism is a regional and local activity. Therefore, it may be interesting to apply this same approach on a regional level, using previously identified homogeneous groups.

And given that the existence of a causal relationship (in either direction) between tourism and development has only been determined for a specific set of countries, future works could consider other country-specific factors that may determine this causal relationship, in addition to the dynamics of tourism specialization and development level.

Data availability

The datasets generated during and/or analyzed during the current study are available from the corresponding author upon reasonable request.

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Cárdenas-García, P.J., Brida, J.G. & Segarra, V. Modeling the link between tourism and economic development: evidence from homogeneous panels of countries. Humanit Soc Sci Commun 11 , 308 (2024). https://doi.org/10.1057/s41599-024-02826-8

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The widespread view of tourism as a development tool in the developing world has received a wide range of coverage, both in the tourism and the development studies literature. Many agree on the potential role of tourism as a vehicle for economic growth, job creation, and poverty alleviation. While this remains credible, there is an increasing interest in investigating the underutilized opportunities of tourism and the arguments and paradoxes associated with its potential role in the developing world. Aspirations about wealth creation, growth, and redistribution are faced with a number of bottlenecks hindering development. The complexities created by the copresence of “hosts” and “guests,” of different wealth levels in the same physical places, make tourism an epitome for the unequal relationship between the developing world and the more affluent tourist-generating countries.

Development is a highly contested term that is often equated with economic growth. The concept of development as...

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Novelli, M. (2014). Developing country, tourism. In: Jafari, J., Xiao, H. (eds) Encyclopedia of Tourism. Springer, Cham. https://doi.org/10.1007/978-3-319-01669-6_355-1

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What is the impact of tourism on development?

Image:  Passengers walk across an air bridge as they disembark a flight at Changi Airport in Singapore. REUTERS/Vivek Prakash.

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Tourism is growing, and growing fast. After surpassing 1 billion international visitors in 2012, we are expecting 1.8 billion by 2030. Tourism is growing faster than the global economy and, for the first time, the statistics for 2015 are expected to show that there were more trips taken to the developing world than to the developed world. But what does this actually mean? Growth, on its own, is not enough. Destinations and their stakeholders are responsible for ensuring that growth is well-managed; that benefits are maximized; and that any negative externalities are minimized. This requires a continuous process of planning and management that evolves and that can be measured over time. For the World Bank Group, our clients and our development partners, this process of planning and management is a central interest. How can we help these processes to deliver more and better development impact? What kinds of interventions or types of assistance will deliver the best results? How do you define the best results – for whom? – and how do we measure them? Being able to demonstrate how the tourism sector contributes to the Bank Group’s twin goals of eliminating extreme poverty and promoting shared prosperity is an imperative for all stakeholders. It’s relevant for national governments, sub-national state agencies, businesses (both multinationals and SMEs), multilateral development banks, NGOs, academics and think tanks. Moreover, it’s vital in helping guide future planning and development, gaining access to and applying for funding, and demonstrating progress to constituents at all levels.

Despite the great breadth and depth of existing impact information, however, serious concerns remain about the accuracy, complexity, gaps, comparability and sustainability of the types of the impact analyses that have been carried out. The Bank Group’s Sustainable Tourism Global Solutions Group recently convened a thought-leadership event in Washington to begin a preliminary discussion about how all stakeholders can come together to try and address some of the current shortcomings. During the “ Measuring for Impact in Touris m” event, we heard about a wide range of challenges for those working in this area and we began to map out the greatest gaps and issues. As Anabel Gonzalez, the Senior Director of the Trade and Competitiveness Global Practice, said at that conference: “We want to be better at monitoring and evaluating our impact, we want to learn from others, and we want to contribute more effectively to tourism development. I believe these are goals most of you will share. We invite you to join this discussion – and be frank, open and provocative.”The findings can be found in our report, “ Towards More Effective Impact Measurement in the Tourism Sector: Observations and Key Issues ,” which highlights a number of priorities. Some of those challenges concern the availability, quality and consistency of data; the high cost of impact measurement for SMEs; the proliferation of different systems; issues of attribution; quantifying notions of “value”; and the ability to communicate effectively to a wide range of audiences. Some key areas for immediate follow-up and further analysis were also identified. They include:

-Exploring the theory of change by examining more closely the proposition that, when tourism growth occurs, those living in extreme poverty benefit and by digging deeper into what tourism growth really means for the poor, especially in terms of employment.

-Assessing the impact value of different types of tourism.

-Assessing and developing the role of technology for data collection, impact measurement and communication.

-Evaluating the use of training for better communication – including assessing what has been tried and what has worked and considering how it could be scaled up.

-Analyzing the necessity and practicality of improving collaboration among various actors, and assessing the alignment of frameworks along with proposals for greater alignment.

-Developing ideas and proposals for the enhanced sharing and pooling of impact data.

-Developing ideas and proposals for greater inclusion of SMEs.

The Bank Group is committed to advancing this agenda . As an international organization heavily invested in the sector, with a deep motivation to deliver change for the world’s poorest people, we aim to take a leading role in a number of key areas. Other major stakeholders have also shown their support. Harvard University and the University of Sussex have asked to host follow-up events. Wyndham Hotels, the World Trade Organization, the United Nations Environment Program, the World Wildlife Fund and Sustainable Travel International have sought specific collaboration and partnership opportunities. The Bank Group will continue to convene meetings, promote dialogue, conduct research and publish relevant information – focusing our interventions on those areas where we’re well-placed to fulfill the twin goals of eliminating extreme poverty and promoting shared prosperity.

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Tourism and Competitiveness

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The tourism sector provides opportunities for developing countries to create productive and inclusive jobs, grow innovative firms, finance the conservation of natural and cultural assets, and increase economic empowerment, especially for women, who comprise the majority of the tourism sector’s workforce. Before the COVID-19 pandemic, tourism was the world’s largest service sector—providing one in ten jobs worldwide,  almost seven percent of all international trade and  25 percent of the world’s service exports —a critical foreign exchange generator.  In 2019 the sector was valued at more than US$9 trillion and accounted for 10.4 percent of global GDP.

Tourism offers opportunities for economic diversification and market-creation. When effectively managed, its deep local value chains can expand demand for existing and new products and services that directly and positively impact the poor and rural/isolated communities. The sector can also be a force for biodiversity conservation, heritage protection, and climate-friendly livelihoods, making up a key pillar of the blue/green economy. This potential is also associated with social and environmental risks, which need to be managed and mitigated to maximize the sector’s net-positive benefits.

The impact of the COVID-19 pandemic has been devastating for tourism service providers, with a loss of 20 percent of all tourism jobs (62 million), and US$1.3 trillion in export revenue, leading to a reduction of 50 percent of its  contribution to GDP  in 2020 alone. The collapse of demand has severely impacted the livelihoods of tourism-dependent communities, small businesses and women-run enterprises. It has also reduced government tax revenues and constrained the availability of resources for destination management and site conservation.

Naturalist local guide with group of tourist in Cuyabeno Wildlife Reserve Ecuador. Photo: Ammit Jack/Shutterstock

Tourism and Competitiveness Strategic Pillars

Our solutions are integrated across the following areas:

• Competitive and Productive Tourism Markets. We work with government and private sector stakeholders to foster competitive tourism markets that create productive jobs, improve visitor expenditure and impact, and are supportive of high-growth, innovative firms. To do so we offer guidance on firm and destination level recovery, policy and regulatory reforms, demand diversification, investment promotion and market access. 
• Blue, Green and Resilient Tourism Economies. We support economic diversification to sustain natural capital and tourism assets, prepare for external and climate-related shocks, and be sustainably managed through strong policy, coordination, and governance improvements. To do so we offer support to align the tourism enabling and policy environment towards sustainability, while improving tourism destination and site planning, development, and management. We work with governments to enhance the sector’s resilience and to foster the development of innovative sustainable financing instruments.
• Inclusive Value Chains. We work with client governments and intermediaries to support Small and Medium sized Enterprises (SMEs), and strengthen value chains that provide equitable livelihoods for communities, women, youth, minorities, and local businesses. 

The successful design and implementation of reforms in the tourism space requires the combined effort of diverse line ministries and agencies, and an understanding of the impact of digital technologies in the industry. Accordingly, our teams support cross-cutting issues of tourism governance and coordination, digital innovation and the use and application of data throughout the three focus areas of work.

Tourism and Competitiveness Theory of Change 

Examples of our projects:

• In Indonesia , a US$955m loan is supporting the Government’s Integrated Infrastructure Development for National Tourism Strategic Areas Project. This project is designed to improve the quality of, and access to, tourism-relevant basic infrastructure and services, strengthen local economy linkages to tourism, and attract private investment in selected tourism destinations. In its initial phases, the project has supported detailed market and demand analyses needed to justify significant public investment, mobilized integrated tourism destination masterplans for each new destination and established essential coordination mechanisms at the national level and at all seventeen of the Project’s participating districts and cities.
• In Madagascar , a series of projects totaling US$450m in lending and IFC Technical Assistance have contributed to the sustainable growth of the tourism sector by enhancing access to enabling infrastructure and services in target regions. Activities under the project focused on providing support to SMEs, capacity building to institutions, and promoting investment and enabling environment reforms. They resulted in the creation of more than 10,000 jobs and the registration of more than 30,000 businesses. As a result of COVID-19, the project provided emergency support both to government institutions (i.e., Ministry of Tourism) and other organizations such as the National Tourism Promotion Board to plan, strategize and implement initiatives to address effects of the pandemic and support the sector’s gradual relaunch, as well as to directly support tourism companies and workers groups most affected by the crisis. 
• In Sierra Leone , an Economic Diversification Project has a strong focus on sustainable tourism development.  The project is contributing significantly to the COVID-19 recovery, with its focus on the creation of six new tourism destinations, attracting new private investment, and building the capacity of government ministries to successfully manage and market their tourism assets.  This project aims to contribute to the development of more circular economy tourism business models, and support the growth of women- run tourism businesses.  
• Through the Rebuilding Tourism Competitiveness: Tourism Response, Recovery and Resilience to the COVID-19 Crisis initiative and the Tourism for Development Learning Series , we held webinars, published insights and guidance notes as well as formed new partnerships with Organization of Eastern Caribbean States, United Nations Environment Program, United Nations World Tourism Organization, and World Travel and Tourism Council to exchange knowledge on managing tourism throughout the pandemic, planning for recovery and building back better. The initiative’s key Policy Note has been downloaded more than 20,000 times and has been used to inform recovery initiatives in over 30 countries across 6 regions.
• The Global Aviation Dashboard  is a platform that visualizes real-time changes in global flight movements, allowing users to generate 2D & 3D visualizations, charts, graphs, and tables; and ranking animations for: flight volume, seat volume, and available seat kilometers.  Data is available for domestic, intra-regional, and inter-regional routes across all regions, countries, airports, and airlines on a daily, weekly, or monthly basis from January 2020 until today. The dashboard has been used to track the status and recovery of global travel and inform policy and operational actions.

Traditional Samburu women in Kenya. Photo: hecke61/Shutterstock.

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We-Fi WeTour Women in Tourism Enterprise Surveys (2019)

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Potentials for Tourism in Developing Countries Research Paper

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Introduction

Source of foreign exchange, contribution to government revenues, source of employment, improvement of infrastructures, promote positive community attitude, improvement of environment.

Tourism is a recreational or leisure-time activity where people travel and stay in places outside their usual environment for a period of time not exceeding one consecutive year. There exist three kinds of tourism. These are;

Domestic tourism-This is whereby people travel within their own country to visit some areas that are away from their home area during their free time.

Inbound tourism-This form of tourism occurs when non-residents travel into a given country to explore various natural features which are not present in their country.

Outbound tourism-This is where residents move from one country to another country. There are various reasons why people move from one place to another. These reasons include.

Most of the wealthy people, especially from western countries, travel to developing countries and other distant parts of the world to see historic buildings or other works of art. They also travel to experience new cultures, and some visit new areas to have an opportunity to learn a new language from those people living in places they visit. The movement of people from the European countries to the developing countries is very common during winter. During This cold season, many Europeans travel from their countries due to the unfavorable low temperatures and visit other countries with relatively warm weather, such as African countries (Bacheitherand Zins, 1999).

There are many benefits that are gained by developing countries due to the tourism industry. Therefore the leaders from the developing countries should integrate the tourism industry into their country in the most positive way to help them realize the benefits associated with this industry. The leaders should ensure that a county has a diverse economy. This will ensure that a country is not relying too much on the tourism industry. This is because the country can incur huge losses if the tourists fail to turn up as expected, citing various reasons such as security problems. The tourism industry, if well managed, can contribute adversely to the well being of third world countries as follows.

The export and imports of goods and services associated with tourism generate a lot of income for the host countries. This is because the local traders will get the ready market to sell their curios to these tourists. The tourists will also provide ready markets for the locally produced products such as fruits and other foodstuffs which they buy. A lot of money will be gained from the imports of some of the facilities that will be used by the tourist such as boats for the water sports which are common games for the tourists at the beaches. This money that is generated from the tourism industry can be used by the developing countries to accelerate growth in other economic sectors such as agriculture. This income will help to improve the economy of the developing countries and enable them to become self-reliant. The government can encourage the tourists to come with a certain amount of foreign currency to spend during their stay. It should not allow them to carry the money back to their countries.

Tourism earns the government revenues. This revenue can either occur directly or indirectly. The direct revenues will occur through the taxes of the employees employed by the tourism industry. It can also occur due to the taxes received from the businesses that are operated by tourists. The government will also receive some money due to the taxes levied on tourists during their departure. On the other hand, indirect taxes will be generated from the taxes levied on goods and services that are associated with tourism. This money received from the tourism industry by the government can be used to develop another government sector such as roads and schools. This money can still be used to construct more hospitals to equip them and buy drugs. (McminnandCater.1999)

The tourism industry is a major source of employment in most developing countries. The employment opportunities created by the tourism industry ranges from high-paying jobs to low-paying positions. The highly paid employees include those in management levels such as managers and directors of the tourist hotels. People working in ministerial positions are also paid highly. Hence the enhancement of the tourism industry in the developing countries will enable these people to earn their living from this industry. Similarly, the industry helps to create employment opportunities for thousands of people in low-paying jobs such as cooks, waiters, gardeners, guards, those responsible for accommodation facilities, the tourist’s drivers, and those hired in the nightclubs to entertain tourists. This industry will also create more employment opportunities for business people. This is because traders will get the ready market to sell their products such as curios, foodstuff, fruits, among many others. If their businesses perform well, these people also hire more employees. The tourism industry, therefore, helps to curb unemployment that is a dominant problem in these countries. (Travel Association of America.2004)

The establishment of this industry in developing countries will help to improve infrastructure in these countries. This is because tourists will enforce the government to construct good roads, railway networks, and airports. This is meant to ensure that the tourists have a smooth flow from one place to another. These roads will also be of much help to the local people as they travel or even when transporting their farm products to the market. This will also boost industrialization in these countries, as there will be good transport networks that enhance the transportation of raw materials to the industries. The government will ensure that it provides better water and sewage system in the country to create a positive attitude to the tourists and hence encourage them to visit the country several other times. The government also ensures the availability of electricity and telecommunication to facilitate effective communication to the tourists. In the process, the local people benefit from these facilities. The availability of electricity to the local people will be of great help to them as they can use it in their crafts work to make curios and other local products that they sell to the tourists. These facilities will help to improve the living standards of the residents (Travel Association of America, 2004).

The tourism industry helps to boost the confidence of the local residents towards the cultures of other communities. Due to the interaction between the tourists and the local residents, both parties acknowledge, respect, and learn to appreciate cultural differences within different communities. From the interest and satisfaction gained by the tourists from their admiration of the natural resources that the residents may have taken for granted, the local people acquire a sense of pride in their nation. As the tourism industry grows, it will enhance the beauty of the country and make life in these countries more and more exciting. This is because the locals will have more recreational facilities.

Areas that have natural features such as waterfalls, mountains, oceans, unique fauna, and flora are the tourist major attraction sites. Therefore tourism industry in developing countries will be of much help in the preservation and in protecting these areas from undergoing further ecological degradation. Some of the money that will be received from the visiting tourists will be used to refurbish the historical buildings and monuments in these countries. In these tourist attraction sites, there is a lot of cleanups, repairs and construction of public arts such as water fountains and monuments that make these countries more beautiful hence attracting more tourists. All these activities benefit both the local resident and the visitors. The preservation of the flora helps to sustain good climatic conditions in these areas, which is vital to the residents, who are mostly farmers. This ensures that their farm produce will remain high, as they will be assured of receiving high rainfall thought out the year. In these countries, the original species will not become extinct but will be preserved for the benefit of the future generation (Omurrgonulsen, 1990).

For a country to gain maximum benefits from the tourism industry, the leaders should come up with the most creative and strategic plans for the development of the tourism industry. The rules and restrictions in the industry should be reasonable enough so as to favor the tourists. Taxes should be regulated to avoid overtaxing tourists as this puts them off and discourages them from visiting places where they are taxed heavily. The community leaders and tourism professionals should also create awareness to the community and sensitize people against burdening the tourism industry but instead preserve the environment’s beautiful scenery. Residents should be encouraged to be friendly to the tourist instead of being hostile to them, as this will discourage them from visiting places. When all these measures are taken into considerations and implemented, the developing countries will maximally benefit from the tourism industry (Korca, 1998).

1.Bachleither, R.and A.H.Zins.1999.Cultural tourism and rural communities: the polish Experience. Journal of sustainable Tourism 6(3): 191-209.

2.Faulkner, B and C 2.Tideswell.1997.A framework for monitoring community impacts of tourism. Journal of sustainable Tourism 5(1): 3-28.

3. Economic Research: Economic Impact of Travel and Tourism. Travel Association of America.2004.

4.Mcminn, S.and E.Cater.1999.Tourist typology :Observations from Belize of Tourism Research 25(3): 675-699.

5.Korca, P.1998.Resident perception of tourism in a resort town, Leisure science 20(3) 193-212.

6.Omurrgonulsen, U.1990.Folowing the conference on tourism and environment. Anatolia I/8-9:6-10.

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IvyPanda. (2021, August 30). Potentials for Tourism in Developing Countries. https://ivypanda.com/essays/tourism-in-the-developing-countries/

"Potentials for Tourism in Developing Countries." IvyPanda , 30 Aug. 2021, ivypanda.com/essays/tourism-in-the-developing-countries/.

IvyPanda . (2021) 'Potentials for Tourism in Developing Countries'. 30 August.

IvyPanda . 2021. "Potentials for Tourism in Developing Countries." August 30, 2021. https://ivypanda.com/essays/tourism-in-the-developing-countries/.

1. IvyPanda . "Potentials for Tourism in Developing Countries." August 30, 2021. https://ivypanda.com/essays/tourism-in-the-developing-countries/.

Bibliography

IvyPanda . "Potentials for Tourism in Developing Countries." August 30, 2021. https://ivypanda.com/essays/tourism-in-the-developing-countries/.

Should we be promoting tourism sector investment?

Kusi hornberger, hermione nevill.

When most people think of tourism, they think about a vacation to a new destination, an island retreat, a beautiful vineyard, or a hike in the mountains. They rarely think of tourism as a source of inclusive poverty reduction in the developing world. 

Nkwichi Lodge in Mozambique is a good example. Investments to the projects created 75 jobs for locals supporting over 1,000 community members. It also established a community trust that built five local schools, a maternity clinic and a maize mill that provided nutrition and education to more than 350 farmers and their families. This is having a transformative impact on poverty reduction and improvements in the quality of life of some of the worlds poorest.  

The potential of the tourism sector

The tourism sector is one of the priority sectors of the Investment Climate Advisory Services for investment generation and regulatory simplification. We and institutions like UNCTAD , as well as the World Economic Forum strongly believe this sector can boost competitiveness , expand economic opportunity and provide a pathway to prosperity in client countries. Unsurprisingly, developing economies like Haiti, Mozambique , the Solomon Islands, Yemen and Zambia recently prioritized tourism as a key target to produce economic growth.

But what makes the tourism sector so attractive?

While the answer is not 100 percent clear, it is clear that the tourism sector is growing and in particular in developing in transition countries. Its total contribution to global GDP has grown by 21 percent in the last decade to$5,992 billion in 2011 (Figure 1). 

Source: World Travel and Tourism Council (WTTC) 2011  

The tourism sector has strong links to economic growth.

Economic (GDP) growth is of principal concern for all countries, particularly those engaged in poverty reduction as a means to spread wealth across the population. Empirical studies in countries as diverse as Barbados, Croatia, India, Taiwan and Turkey have shown a causal relationship between tourism development and economic growth. A cross country study by the IMF showed that an increase of one standard deviation in the share of tourism in exports leads to about 0.5 percentage point in additional annual growth, everything else being constant. Thus many governments (particularly low income economies) should view investing in its tourism industry as a means to stimulate growth over the long term and enabling the poor to share in economic gains.

Tourism investments can benefit local people

Tourism is one of the only industries in the world where the ‘good’ or ‘service’ is consumed at the site of production. For this reason, local people are both at an advantage to reap the benefits associated with the sector, but also at risk from exclusion or even the negative impacts it can bring. A well planned, regulated and responsible tourism can be an excellent mechanism of channeling resources from rich to poor - even at the large scale. Commercial tourism activities provide an opportunity for local people to participate in direct employment, in providing goods and services to tourism businesses through the supply chain, but also in direct interaction with the tourist (for example: crafts, excursions, food and beverage). The generation of earnings amongst those local people directly involved with the industry in turn stimulates indirect spend (of wages) in the local economy.

Tourism provides opportunities for economic diversification and skills upgrading

Developing countries can leverage tourism to support local companies and entrepreneurs in developing new products and exports. The tourism sector provides a means by which local entrepreneurs can experiment with new products and test them on international markets in their home country before exporting. International tourists typically create demand for products and services which may not have already existed in the local market and also demand certain quality standards. Whilst these can be a challenge to meet in the short-term, tourism creates the market and the incentive to drive the process – leading to growth and improvement over time.

Sustainably protecting environmental and cultural assets

Many developing countries have rich natural or cultural heritage assets such as national parks, coral reefs, rare species, ancient cities or monuments that are under threat. Often, states do not have the financial resources to allocate to the preservation of these areas and more creative ways of funding their protection must be sought. The revenue generated from tourism is one such solution – provided it is regulated and managed in a responsible manner.

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Tourism Essay for Students and Children

500+ Words Essay on Tourism

Tourism Essay – Tourism is a major economic activity that has developed significantly over the years. It’s an activity that can be recognized in both developed and developing nations. In general terms, tourism is the movement of a person from one place to another to visit and mesmerize the beauty of that place or to have fun. Moreover, the concept of traveling is considered a luxury and only people with higher income can afford this luxury.

The Growth of Tourism

Earlier our ancestors used to travel by sea routes as it was a convenient and most affordable medium but it was time taking. Due to, technological advancement we can now easily travel to any place without wasting time we can travel thousands of miles within a few hours. Technological advancement has shrunk the earth into a global village. Besides, the modern modes are much safer than the modes that our predecessors used.

Effect of Tourism on a Country

For any country, tourism generates a lot of money especially a country like India. Due to the Taj Mahal (one of the seven wonders of the world) every year the government raise a huge sum of revenue. Also, because of tourism other industries also bloom. Such industries include transportation, wildlife, arts and entertainment, accommodation, etc.

Moreover, this ultimately leads to the creation of job and other opportunities in the area. But there are some drawbacks too which can affect the lifestyle and cultural value of the country.

Importance of Tourism

Traveling is a tiring and difficult thing and not everyone is able to travel. But at the same time, it’s a fun activity that takes your tiredness away. Travelling adds flavor to life as you travel to different places that have a different culture and lifestyle. Also, it’s an easy way to learn about the culture and tradition of a place. Besides, for many areas, tourism is their main source of income.

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India- A Tourist Attraction

The Taj Mahal is not the only destination in India that attract tourist. Likewise, there are hundreds of tourist destination that is spread over the Indian plateau. India has a large variety of Flora and Fauna. Besides, the equator divides the geographical land of India into almost two equal halves that make India a country where six seasons occurs.

Moreover, in almost every city of India, there is a historical monument made by the rulers in their time period.

Benefits of Tourism

Tourism not only benefits the government but also the people that live in the local area. It also creates a business as well as employment opportunities for the local people which ultimately help the government to earn income.

Benefits Due to Tourism

As we know that tourism contributes a lot to the revenue of the country. Also, the government uses this income for the growth and development of the country. Likewise, they construct dams, wildlife sanctuaries, national parks, Dharamshala and many more.

In conclusion, we can say that tourism is a very productive activity both for the tourist and the government. As they support each other simultaneously. Also, the government should consider improving the conditions of the country as more and more number of tourist visit their country.

Above all, tourism is one of the fastest-growing industry in the world that has changed the scenario of the world.

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