Importance of Tourism in the Economy - Research Paper Example

?Importance of Tourism in the Economy Introduction Tourism is a major foreign exchange earning industry in many countries. Tourism in a broader perspective covers various activities which include lodging, catering, travel, sightseeing, recreation, sports, convalescence and event management as it has become the part of lifestyle in several social groups. The economic importance of tourism has grown exponentially over years due to globalization phenomena intensively pursued by various countries. This paper seeks to study tourism in relation to the following questions: Why tourism is important in an economy? What are the strategies important for the development of tourism industry? What are the factors that may influence the growth tourism industry? Literature review Economic importance of tourism industry According to UNWTO (1) “In 2011, international tourism receipts exceeded US$ 1 trillion for the first time, up from US$ 928 billion in 2010.” Tourism industry as a growing service sector is diversified and includes hotels, airlines and other transportation, resorts, parks, shopping malls, motels and entertainment venues. It could be observed from the World Tourism Barometer furnished by UNWTO (2), that the growth of tourism industry in BRIC countries has been phenomenal during the year 2011 with Brazil at 29.5% (Rank from 18 to 12), Russia at 22.1% (9 to 7), India at 32.9% (24 to 22) and China at 32.2% (no change) with US and Euro zone though positive with less than 10% growth. Growth of tourism is largely linked to recent economic growth in these economies. For some small countries like Singapore, Dubai and Fiji, tourism industry is the major source of foreign exchange. Tourism sector plays an important role in employment generation. UNWTO (3) stated “Participants at a major United Nations Conference on Trade and Development (UNCTAD XIII) have underscored the role of tourism as a vital service sector, contributing to GDP and employment in developed and developing countries alike.” Stability and growth in earnings in this sector would lend flexibility in management of balance of payments position of a country, if the potential of this industry is recognized and necessary initiatives taken by the government for its growth. Development of tourism industry The growth in international trade and businesses due to globalization is closely linked to the development of tourism industry. The tourism industries of emerging economies like China and India have been benefited greatly by industrial developments. However, marketing in respect of individual companies in the industry should be backed up with effective planning and establishment of standards and communication facilities for sustainable future growth. The standards adopted in the industry and the categorization of customers or services offered underwent significant changes over time. Sharpley and Telfer (2008, p. 27) stated “Approaches to tourism development, then, have evolved over time from traditional, modernist economic growth models through to sustainable approaches that attempt to balance tourism as a profit-driven, resource-hungry activity with the developmental needs of destination environments and communities.” Diversity in workplace is very important for meeting the demands of the customers with different cultural and social backgrounds. The unique feature of this industry is that the languages spoken and customs, habits and behaviors of the customers vary significantly. Also, the types of services offered are multifarious from catering and lodging to recreation, health, sports, travelling and event management. Therefore, role of HRD in recruitment, placement and training is very important. Retaining and attracting talents to businesses is a challenge to the industry. The tourism industry has successfully weathered the European financial crisis. Economic growth in the developing countries is expected to help industry’s growth. Convergence of technology and emergence of social networks have acted as a catalyst for the business growth by increasing global awareness among people. Therefore, the companies need to be proactive in introducing changes in line with the technological developments taking place in a rapid pace. Worldwide educational conferences, sports events and medical tourism have made the industry deep and wide and diversified. High cost of or surgery or medical care in developed countries has made countries like India, Malaysia, Singapore, South Korea and Turkey attractive medical travel destinations due to availability of facilities at par with developed nations at reasonable cost. People who come for treatment visit the tourist spots of these countries for taking a rest or sightseeing that increases the business of hospitality industry. Factors influencing the growth of tourism industry The growth of the industry is heavily influenced by the policies of the government. Infrastructure development of the country is very important for the growth of the industry. The facilities required for growth of the industry are multifarious. There are several departments of the government involved in policy making. Investment in hotels, resorts and international parks hinges on highly developed airlines, airports, seaports, inland rail and road transport and communication facilities. For example, if coordination among various departments of the government is ensured for developing infrastructural facilities, the investors will come forward to set up quality hotels to meet the demands of various types of tourists. In the USA Travel Promotion Act of 2009 (TPA) has “established the Corporation for Travel Promotion, a new public-private partnership in travel and tourism. The alliance between the U.S. government and the U.S. travel and tourism industry enhances the distribution of information on U.S. entry policies and promotes leisure, business, and scholarly travel in and to the United States” (Select USA). Such agencies can play an important role in promotion of tourism in the country by interacting with the government and the companies in the industry relating to the issues which affect growth of the industry. The infrastructural developments will also attract foreign direct investments in hospitality sector. Safety and security of the foreign tourists in a country are very important to send right signals to the international tourists and travelers. Social instability and terrorism in the third world countries are viewed with concern by the tourists. Regulations of the governments in respect of immigration act as a hurdle to growth and development of the industry. For instance, visa regulations with regard to qualifications prevent employment of skilled personnel like chefs from the developing countries like China and India. Similarly, taxation policies of the governments should be streamlined to avoid multiple-taxation on tourists. Apart from the taxes and duties for import of equipment or various other corporation taxes imposed on the businesses, taxes such as entry taxes relating to visas, charges at airports, VAT, sales tax, taxes on food and beverage and various other taxes charged at tourist centers will affect the tourists flow. This will be detrimental to the growth of the industry in the long run. A company’s brand value in the industry is influenced by several factors. For establishing and managing brands under intense competition in the industry, development of managerial skills within the organization is very important. According to Weissenberg (2012) “Heightened competition in a multi-channel environment, the pressing need for brand differentiation, and emerging market opportunities and challenges highlight strategic considerations that companies in the THL sector face in the evolving marketplace.” Establishing brand value especially in hotel industry is related to maintaining high quality of service and high level of customer satisfaction since lifestyle and social identity study are the corners stones of the hospitality services. Therefore, apart from providing excellent facilities and comforts, brand affiliation and tie-ups with internationally reputed groups are very important for development of the business in hospitality sector. Results and Analysis Sustainable development in tourism industry depends upon the sound and balanced approach to planning by the governments. The policy should be consistent with the long term needs of the people residing in various regions and the needs of the industry. There is scope for increasing the scale of operations internationally in tourism industry. While developing the infrastructural facilities the government should also coordinate the activities relating to environmental conservation, preservation of ecology and restoration of historic monuments at all levels. Good employer-employee and customer relationships are the fundamental factors for the growth of the industry. Retention of talented employees with specialized skills and adoption of sophisticated customer relationship management techniques are very important for sustainability in the business. Restructuring of IT infrastructure on a continuous basis in tune with the technological developments based on the size and operations of the business is very important in view of the latest trends on online booking and convergence of technology. Tourism department of a country needs to create awareness among public and government officials at all levels about the importance of tourism in economy and the responsibility of the country to ensure safety, welfare and protection of tourists at all times for establishing positive image of the country internationally. Conclusion The industry associations need to play crucial role in interacting with the government in resolving the statutory hurdles or other issues that may affect industry’s growth. Training and development is an important function of HRD in this industry since the people in service to the customers need to be trained on continuous basis. Application Customer Relationship Management (CRM) technique is essential to keep pace with the developments taking place in the industry and maintain relationship with the customers or customer groups. Investment in IT infrastructure and upgrading of the information services is essential to ensure excellent customer service and enhanced customer satisfaction. Creating awareness among public about the social and economic importance of tourism industry is essential for ensuring better treatment and good experience of the tourists in the country. References Select USA (n.d.). The Travel, Tourism and Hospitality Industry in the United States. Retrieved from http://selectusa.commerce.gov/industry-snapshots/travel-tourism-and-hospitality-industry-united-states Sharpley, R. and Telfer, D. J. (2008). Tourism and Development, Routledge, New York. UNWTO (2012) (1). International tourism receipts surpass US$ 1 trillion in 2011, PR 12027, 7 May 2012. Retrieved from http://media.unwto.org/en/press-release/2012-05-07/international-tourism-receipts-surpass-us-1-trillion-2011 UNWTO (2012) (2). World Tourism Barometer. Retrieved from http://dtxtq4w60xqpw.cloudfront.net/sites/all/files/pdf/worlds_top_sounce_markets.pdf UNWTO (2102) (3). Tourism can stimulate trade and development, agrees UN Conference, PR 12022, 24 April 2012. Retrieved from http://media.unwto.org/en/press-release/2012-04-24/tourism-can-stimulate-trade-and-development-agrees-un-conference Weissenberg, A. (2012) 2013 Outlook on Travel, Hospitality and Leisure. Deloitte. Retrieved from http://www.deloitte.com/view/en_US/us/Industries/travel-hospitality-leisure/38b4fa3b5791b310VgnVCM2000003356f70aRCRD.htm Read More