create a relationship with local entrepreneurs such as farmers (Telfer and Wall, 1996). In other words, Lundgren contends that tourism’s evolution in an area eventually stimulates the production of local agricultural commodities and use of other local resources. A handful of similar studies have sought to explore the relationship of tourism development to sectors such as the construction industry (e.g. Bond and Ladman, 1982, cited in Shaw and Williams, 1994). Overall, however, the topic of entrepreneurial activity in tourist environments remains a research lacuna that warrants further examination (Ioannides, 1995; Dahles, 1997).
situation places the operators of lodging establishments, particularly the independent entrepreneurs of small-scale establishments, in a weak bar- gaining positionvis-à-visthe tour operators (Ioannides, 1998). By the same token, major hotel companies also commonly transfer the risk of doing business to establishments in the destination community. They achieve this by involving themselves in the hotel industry of a certain area through franchise agreements, lease or management contracts rather than practis- ing equity participation. Since they rarely own the hotels they control, these major companies can easily remove their operations from an area and find a more profitable substitute destination. The owner of the establishment in the original host community is left to rue the loss of business (Ioannides, 1994).
One topic about which there has been considerable debate is the issue of tourism multipliers. Generally, there appears to have been an overall change of heart in the manner in which tourism’s promises of economic multipliers are regarded by policy makers and academics. In the 1950s, the pervasive feeling reflected in documents like the Zinder report (1969) was that tourism-related development could induce significant income and employment multipliers in host societies. This attitude appears to have been tempered considerably since the 1970s, when more rigorous analyses of tourism’s impacts on destinations throughout the world indicated that claims concerning the sector’s multiplier phenomenon must be treated with a high degree of scepticism (Bryden and Faber, 1971). Among others, Mathieson and Wall (1982) criticized the Zinder report for not making a major allowance for leakages and assuming that the multiplier for all the eastern Caribbean islands was the same.
The measurement of multipliers is one of three principal methods available to economists for estimating tourism’s economic impact on host societies. The other two are regional input–output analyses and various impact studies at the local level (Ryan, 1991). Although the popularity of multiplier studies has waned considerably since the 1970s, partly because of the practical difficulties of measuring income flows and employ- ment creation, Ryan (1991: 70–71) argues that ‘with the emergence of tourism as a means of helping to regenerate inner city areas in both Europe and North America there has been some renewed interest in the use of such techniques’. One reason behind this resurgence of attention is that in many communities, especially in countries like the UK, local author- ities must justify the spending of taxpayers’ money for tourism-related projects.
The concept of the multiplier is based on the work of the economist John Maynard Keynes who, in the 1930s, developed the macroeconomic theory ‘that emphasizes the importance of changes in autonomous expen- ditures (especially investment, government spending, and net exports)
in determining changes in output and employment’ (Samuelson and Nordhaus, 1989: 978). According to this approach, two types of flows condition any change to the gross regional product (GRP) of a particular region: injections flowing into the region and leakages flowing outwards.
The equation for calculating the GRP is:
GRP = C + I + G + E-M
where: C = consumption; I = investment; G = local government spending;
E = exports; and M = import purchases.
Since tourism is a basic or export sector, the injection of additional tourist dollars (E) into the economy (all other things being equal) will lead to regional economic growth (Davis, 1990). If, however, the growing demands of the tourist industry for supplies (e.g. building materials or luxury items like exotic food) cannot be entirely satisfied by local producers, the need to import various goods (M) will inevitably dampen the industry’s positive impact on the economy. Take, for instance, a hypothetical seaside commu- nity that attracts luxury tourists. While these tourists bring much-needed foreign exchange into the area, money also leaks out since the expensive tastes of these individuals mean that many of the food products they demand cannot be found locally. Moreover, items such as the air- conditioners, spas and swimming pool filter systems may also have to be imported as they are not manufactured locally, leading to even heavier leakages from the local economy. In addition to imports, income taxes and the savings of the local population and institutions lead to leakages because they all cause a certain amount of money to be removed from circulation (Puczko and Ratz, 2001). This means that for tourism to contribute to the economic growth of a locality, the total amount of leakages (M) will have to be less than the sum of C + I + G + E (see equation above) (Ryan, 1991).
Generally speaking, the smaller the economic base of a region or com- munity, the higher the leakages and, thus, the multiplier will be lower (Mathieson and Wall, 1982). In other words, in a regional economy where there is a highly diversified industrial base and links between sectors are strong, it is unlikely that tourism will lead to an excessive reliance on imported goods. By contrast, an isolated agrarian community seeking to develop high impact mass tourism without diversifying the rest of the community will inevitably have to rely heavily on imported goods and services. Moreover, it is important to note that multipliers tend to be higher at the national level than they are at the community or regional levels (Murphy, 1985).
The best way to indicate how the multiplier phenomenon works in a regional economy is through a simplified example. Suppose that in a resort community the total spent by visitors amounts to US$10,000. This money will go to providers of services like lodging establishments, petrol
stations, restaurants and attractions. Of this total amount, suppose that the providers of these services all have a marginal propensity to consume (MPC)1 equal to two-thirds of their income (i.e. US$6666.67) on other goods and services. If the providers of these goods and services also have an MPC of two-thirds, they will end up spending US$4444.44 (2/3 of US$6666.67). Hypothetically speaking this process can take place until all new rounds of additional spending have been exhausted. The total value of the income multiplier in this scenario can be calculated by the equation:
IM = 1/(1-MPC) = 1/(1-2/3) = 3
where: IM = income multiplier; and MPC = marginal propensity to consume.
This means that in this case the original spending of US$10,000 by the visitors actually created a total income of US$30,000 (10,000´3) in the local economy. Obviously, then, the size of the multiplier in a certain community will depend on how large the marginal propensity to consume is. The greater the extra consumption is (and the less the propensity to save) the greater will be the multiplier (Samuelson and Nordhaus, 1989).
In all, there are three different kinds of income multiplier: direct expenditure, indirect spending and induced spending (Mathieson and Wall, 1982). Direct expenditure is the money paid directly by the tourists to the providers of visitor-related services such as hoteliers. Indirect spending arising from this initial round of expenditure is the money paid for wages and salaries to local workers of tourist-related establishments and the amount required for replacing their inventories (e.g. food, drinks, merchandise). Finally, Mathieson and Wall (1982: 65) describe induced spending in this manner: ‘As wages and salaries within an economy rise, consumption also increases and this provides an additional impetus for economic activity.’ Generally speaking a multiplier of 1.3 implies that for every dollar that is spent a further 30 cents are created through indirect and induced effects (Williams, 1998).
One of the most extensive recent studies of tourism’s economic impacts was done by Braun (1992). By examining the impact of con- ventions on Orlando, Florida, for 1989, Braun was able to estimate that the total expenditure of 1.6 million meeting attendees came to over US$1 billion. Using input–output analysis, he calculated that the income multiplier from the convention trade amounted to 1.7.
1The marginal propensity to consume (MPC) is an economic term indicating the proportion of every additional dollar a family receives as disposable income which is spent on additional consumption (Samuelson and Nordhaus, 1989).
Even though most studies pay attention to income multipliers (Williams and Shaw, 1988), there are other types of tourism multipliers2 (Archer, 1977; Mathieson and Wall, 1982). Another important multiplier that may be considered, especially in communities where tourism is intro- duced to reduce unemployment, is the employment multiplier. The most common way of measuring employment multipliers is by estimating ‘the ratio of direct and secondary employment generated by additional tourism expenditure, to direct employment alone’ (Mathieson and Wall, 1982:
65). The jobs created through visitor spending in places like hotels and restaurants can be considered direct employment. Tourism-related jobs not created directly through visitor spending (e.g. laundries and banking) are known as indirect employment. The jobs created in the rest of the commu- nity through the spending of the tourist employees’ income are described as induced employment (Puszko and Ratz, 2001).
There are numerous studies relating to employment multipliers even though researchers have focused primarily on direct employment creation.
While it is relatively straightforward to calculate the number of jobs created directly in tourism sectors like lodging establishments it is notoriously hard to estimate what proportion of jobs in other sectors like construction and transportation may have resulted because of investment in the tourist sector. Moreover, there is considerable debate concerning the accuracy of employment multipliers because different tourism activities produce a variety of jobs (from hotel porters to waiting staff and from chamber-maids to back-office personnel), some of which are more labour intensive than others. Although a luxury hotel will have a high ratio of workers per room, it is likely that the self-catered apartment sector will have a low proportion of employees to each room (Puczko and Ratz, 2001).
Most tourism employment multiplier studies relate to full-time jobs.
However, tourism is also commonly a seasonal activity often leading to the employment of a high number of part-time or seasonal workers who are hard to measure. In certain tourist environments (e.g. the Greek islands), tourist industry entrepreneurs depend heavily on their relatives to help out during periods of peak demand. It is quite usual, for instance, in some destinations to have teenage children who are home from school helping out in the family-owned hotel without receiving remuneration. Also, it is not uncommon in many communities for people who work as school- teachers or farmers during part of the year to hold a second job in the tourist sector. Often they do so as part of the informal sector, meaning that
2In addition to income multipliers arising from tourism, Mathieson and Wall (1982) discuss another three types of multiplier: employment multiplier, sales multiplier and output multiplier. Randall and Warf (1996) used an input–output matrix to estimate, among others, the output multiplier arising from American Association of Geographers’ national conferences over a 12-year period.
they are not officially registered as tourism workers and do not pay taxes and social security on their earnings.
A major criticism of tourism-related employment is that a large propor- tion of the jobs created in tourist environments are low-skilled and poorly paid, often highly feminized, and part-time. Randall and Warf’s (1996) study of the economic effects of American Association of Geographers’
(AAG) conferences seems to confirm this situation. Although the con- vention trade creates numerous employment opportunities in urban areas of the USA, many of the jobs are low quality. Thus, one has to ‘question the equity in the distribution of benefits from tourism investments’ (Randall and Warf, 1996: 282). An earlier study of tourism’s role in the British economy also revealed the questionable nature of many of the generated jobs:
a study of tourism accommodation along the East Anglia coast found that 44 per cent of all employment constituted part-time, seasonal jobs for women.
Just under 20 per cent of the total number of jobs were permanent and full time, with a further 27 per cent being seasonal full time jobs.
(Williams and Shaw, 1988: 92) The ‘good jobs versus bad jobs’ argument concerning tourism’s contribu- tion to local and regional economies will undoubtedly go on for some time.
Regardless of the outcomes of this debate, certain authors have suggested that rather than disparaging tourism for creating poorly waged jobs and other negative effects in host communities, the sector’s ‘critics would do better to insist that subsidies for tourism promotion be balanced by provisions for higher minimum wages, local participation in the supply of services, and job placement and training programs’ (Fainstein and Gladstone, 1999: 25). Moreover, analysts have to recognize that the out- come of tourism’s performance in terms of job creation in a particular locality is contingent on the way the sector is organized and structured.
Questions to be asked when examining the employment impact of tourism include: What proportion of the tourism-related jobs are union- ized? Do the tourism workers (even part-time employees) receive benefits?
How do rates of pay in tourism sectors compare to other industries like agriculture? After all, in some settings, especially in less developed regions, workers may be lured into tourism from primary sectors like agriculture and fishing precisely because the industry holds the promise of better working conditions at a higher rate of remuneration. Though in some western societies, including the USA, tourism is often looked down upon in terms of the quality of jobs it creates, it is not unusual for people in other parts of the world (e.g. the Greek islands) to make a career in the sector even in ‘lower level’ activities such as serving in restaurants. In some popular Mediterranean destinations tourism’s rapid rate of growth has led to extreme employment shortages in other sectors like farming
and construction. This situation often results in the inflation of these destinations’ wage structure and, in many cases, the need to import workers from other areas (Williams, 1998).
The apparent inconsistency in the findings of previous studies indicates that just because tourism may have minimal positive economic impacts in certain localities, this should not be an excuse for dismissing the sector as irrelevant for further attention. Ryan (1991) contends there is no guaran- tee that in areas where tourism has very low employment and income multipliers other activities (e.g. manufacturing) will be any more success- ful. ‘Weak multipliers from tourism may be no more than a reflection of deficiencies in such economic systems. If labour is comparatively unskilled, if there are shortages of assets and infrastructure, then almost by definition any economic activity will suffer’ (Ryan, 1991: 86).