Economic Value of Travel and Tourism Industry



Travel & Tourism Industry and its Value Chain

We all know that travel and tourism is about travelling and visiting places as tourists and travelers for leisure, recreation and business purposes. What the first interesting fact about it is that it has no proper definition as an industry. Rather tourism is the total of what a tourist or a traveler spends while consuming various services and products through the period of his or her travel and stay. The tourist expenditure for various services and products collectively forms travel and tourism industry. You can read about Tourism in more detail in my article 'Tourism Industry: Meaning, Structure and its Components' at TravelenTour.


It basically comprises of tourist or business traveler spend on travel, stay, hotels, food, transportation, entertainment, visiting places, etc., and in that way this industry is directly generating or resulting in revenues in airlines; railways; transport services like buses, taxis, cabs, etc.; hotels and restaurants, various food outlets, takeaways, food chains, etc; entertainment places like cinemas, parks, etc.; and various tourist places. This is also what can broadly be called as the value chain of travel and tourism industry.

Travel & Tourism Value Chain



This is another unique aspect of tourism where it gives this sector such a wide impact globally on so many diverse industries ranging from hotels to food and transportation. But there is even more to it, areas where it makes its largest impact. This sector even goes beyond these industries.


Travel & Tourism going beyond its Value Chain

Having discussed the direct services of tourism e.g. hotel, food transportation, etc., let us now look at what other services, industries and infrastructure tourism effects. The impact of travel and tourism is not limited to the above discussed few industries which derive part of their revenues from it.


″Travel and tourism effects, and requires contribution from, whole lot of industries beyond its value chain, the society and the political environment as well.″ This sector also consistently brings in new consumers for these industries as well.


The Travel & Tourism Competitiveness Index (TTCI) of the World Economic Forum is one perfect example to indicate towards the impact of travel and tourism sector on industries beyond its value chain.


The TTC index, which covered 140 countries for its 2013 report, measures their competitiveness on three key areas which are, regulatory framework; business environment and infrastructure; and human, cultural, and natural resources. These 3 key sub-indexes collectively measure competitiveness of each country on 14 key parameters. These are, policy rules and regulations; air transport infrastructure; ground transport infrastructure; tourism infrastructure; price competitiveness in the T&T industry; ICT infrastructure; prioritization of travel and tourism; human resources; safety and security; health and hygiene; environmental sustainability; affinity for travel and tourism; natural resources; and cultural resources.


Thus, the direct or indirect impact of improvement in the infrastructure and services for support of tourism sector and to attract tourists a country will be on a number of industries from aviation, airlines, airports, electronics; roads; rails; hotels, restaurants and related services; electricity and power; construction, basic metals and related sectors like steel, cement, mining; automobiles and related services; telecommunications; banks and ATMs; travel related services like ticketing, travel agents; healthcare and industries & services related to providing better health and hygiene; and more. The employment sector will get a big boost and this is a sector where results may start showing early.


Global Standards in Tourism infrastructure and services

The other important observation about the travel and tourism sector which we want to highlight is that the consumers of this sector are global and act accordingly when it comes to perception and consumption of tourism and related services as a whole. This observation or characteristic of this industry is what further strengthens its influence over the above discussed range of industries.


Let us now look at this second reason. For that let us first answer why a tourism consumer is truly global. Because he or she is a traveler, meaning, they travel to various places for business and leisure. What does this imply? This has a critical implication, among other things, affecting from both demand and supply sides. Looking from the demand side this implies that travelers (the consumers) have consumed almost the same set or bundle of services at various destinations and event venues globally, and so at the point of consuming these services, presently or in future, they would compare these at a global level. This demand side implication will prompt the country or region looking to attract tourists to induce quality and global standards in the infrastructure and tourism services they are providing.


The supply side of the same implication is that these services are available at various countries and places (which are event venues and destinations) and they can choose it from anywhere. So, the traveler evaluates and compares the infrastructure and services related to tourism, at any given point of time, at a global level. This prompts service providers to be more competitive and add more value to their services and bring innovation and ideas.


Hence, the provider of the infrastructure and services will have to adhere to global standards and not just be content with only serving their consumers.


Let us add here, in case of business tourism and MICE tourism, the expectations; the standards or parameters; the services and the infrastructure; and the quality levels, all are little high. Hence, tourism industry, apart from being so wide, also has wide and deep impacts, not only on the industries it involves but also on other several industries, the infrastructure and economy of country, and also its social, cultural and political environment. And yes, your consumer group is international. Hence, the standards or parameters of evaluation are international. Therefore your service level to your consumer group needs to be of international level.


Benefits of Tourism and Conclusion

To further strengthen this argument, we would like to quote Mr. Mutyandasvika, general manager of The Elephant Hills resort as telling The Sunday News of Zimbabwe in an interview, that hosting conferences and meetings significantly contributed to the hotel revenues but Mice business in general is helping in the branding of that place's destination, employment creation and infrastructure development.


Tourism brings people from everywhere in the world. It is connecting places with people; places with places; and people with people. This sector brings the developed, growing, developing and emerging economies, all on single platform, thus driving them to become competitive globally and improve on their level of services, at least to be tourism competitive. It even drives countries to have a stable and sound political environment and also have a more developed society.


Thus travel and tourism can give boost to the economy in terms of consumer spending, job creation and more. For developing, emerging economies or where growth is slow, this sector can provide a great push as the travelers are from all over the world for example, from developed and mature countries with better spending powers. The currency differences can also boost travel to developing countries with depreciated currencies.


This sector is driving growth in industries, in fact pushing those industries and economies to do better. This uniqueness of travel and tourism and its impact can be said to be more pronounced in the business travel segment. Thus, tourism as a while and within it MICE or business events are, or could be, a significant factor in developing world-class infrastructure and level of services.