May 16, 2023

Tourism and the Economy

The Impacts of Tourism on a Country’s Economy and Its Residents

Tourism, or travel for leisure purposes, has grown in popularity all around the world. People flock to areas that draw large numbers of visitors to take in their culture, history, and attractions. With rapidly changing global trends, tourism has become one of the largest industries in our society. While a tourism boom can be incredibly beneficial to the economies of local regions, it is not without its drawbacks. This article explores the impacts of tourism on local economies and the people who live in tourist destinations.

Examining Tourism

The tourism sector is difficult to define since, unlike other industries, there is no single product. Many industries are included, including accommodation, transportation, entertainment, tour operators, and more. Tourism is described in its broadest sense as when individuals travel and stay in areas other than their regular surroundings for less than one year for leisure, business, health, or other purposes.

As the tourism industry is so far-reaching, it can bring many economic benefits to countries. In 2020, the direct contribution of travel and tourism to global GDP was estimated to be over 4.7 trillion US dollars. The United States contributed the most with 1.1 trillion dollars. Tourism also provided 330 million jobs worldwide, which roughly equates to one in every ten jobs being in the tourism sector.

It is abundantly clear that tourism has enormous economic benefits for a country. It has direct and indirect effects on numerous businesses and is one of a country's most important sources of employment and foreign exchange profits.

The Dark Side of Tourism

While tourism brings innumerable benefits to countries, it is not without its challenges. Many popular tourist destinations across the world are dealing with the advent of overtourism, which happens when a destination receives an excessive number of visitors. While the number of tourists that constitutes “excessive” is subjective, the effects of overtourism are felt by local inhabitants, hosts, and business owners. Some effects of overtourism include increased rental costs that drive out locals to make space for vacation rentals, small highways getting clogged with tourist cars, and vulnerable environments becoming destroyed due to strained resources, for example.

Mallorca, the largest of Spain's Balearic Islands, has struggled with the effects of overtourism for the past couple of decades. In 2019, 11.8 million tourists visited Mallorca, dwarfing the island's population of under a million. The rising expense of living has been exacerbated by the conversion of family houses into vacation rentals, and the environmental consequences of overtourism in Mallorca have been severe. Tourism has pushed water consumption to the limit, and air pollution from airlines and massive fleets of rental cars forced some residents to wear masks even before the coronavirus pandemic began. Pre-pandemic, planes flew through Mallorca's Son Sant Joan airport at a record-breaking rate of one every 90 seconds in July 2017.

To help curb the negative impacts of mass tourism, officials in Mallorca announced a doubling of the tourist tax to €4 ($4.64) per person per day, which visitors are required to pay when checking out of hotels. These funds are intended to support a sustainable model so that tourism to the islands benefits local communities.

The Impact of the Coronavirus on Tourism

The coronavirus pandemic had a significant impact on the tourism industry across the world. National and international tourism came to a halt as countries adopted strict travel restrictions to combat the spread of the virus. The tourism industry's global revenue dropped by an estimated 42 percent in 2020. When looking at tourism revenue by country, the United States saw the largest decline in revenue, while the Asia Pacific area saw the biggest drop in international visitor arrivals. However, there have been pockets of activity, and as the pandemic fades, opportunities for businesses in the tourism industry are emerging.

As the world starts to open back up and more people resume national and international travel, it is important to understand the pros and cons of tourism in local economies.

The Benefits of Tourism for Local Economies

Creates Jobs

The tourism industry's most significant contribution to any country or region is the immediate generation of new jobs. Tourism creates numerous jobs in a wide variety of industries. These jobs are not limited to the tourism industry; they can also be found in peripheral industries such as agriculture, communications, health, and the educational sector, for example. Many travelers visit other countries to learn about the culture, traditions, and cuisine of the hosting country. Therefore, local eateries, shopping malls, and retailers benefit greatly. To illustrate, tourism has a significant impact on the population of Melbourne, Australia. It has a population of roughly 4 million people, and the tourism industry employs around 22,000 of them.

Improved Infrastructure

Tourism-dependent governments invest much in their country's infrastructure. They want more tourists to visit their country, which necessitates the provision of safe and advanced facilities. As a result, new roads and highways are built, parks are created, public places are upgraded, and new airports are built - all of which benefit local communities. Furthermore, residents benefit from increased opportunities for economic and educational advancement.

Brings In Foreign Exchange

When tourists visit a country, they invest much-needed foreign currency, bolstering the financial reserves of the host country. A well-developed tourism industry can generate large annual foreign exchange earnings. Aside from that, the tourism industry aids in the promotion of direct foreign investment in local tourist destinations, which benefits local economies even more. According to CEIC data, Germany's tourist sector earned $41 million in foreign exchange in 2019.

The Drawbacks of Tourism for Local Economies

Rising Cost of Living

Mass tourism has the negative impact of significantly increasing the cost of living for locals in popular tourist destinations. Take Barcelona for example. Approximately 30 million people visit Barcelona annually, which has created serious challenges for residents, including a 50 percent rent increase over the past five years. A 24-year-old receiving the average wage currently pays 114 percent of their monthly paycheck in rent.

Barcelona has the largest density of tourist apartments in Europe, with 12 for every 1,000 people, compared to 10 in Rome and 7 in London. Tensions among the locals are high as residents are upset about rising housing costs and rental rates. Despite its best efforts, the city is unable to restrict the spread of Airbnb and related services which are central to the problem.

Environmental Damage

One of the most common concerns about overtourism is its environmental impact. Excess pollution, habitat degradation, and the extinction of rare flora and animals can all result from too many tourists and insufficient laws. Maya Bay, for example, the magnificent Thai hideaway made famous by the film "The Beach," starring Leonardo Di Caprio saw nearly 2.5 million tourists in 2018, with an average of about 4000 visitors per day. The crowds and boats devastated large sections of the coral reefs, resulting in the extinction of most of the area's unusual sea life. The Thai government blocked this beach for a few years and only reopened it in 2021 to allow the coral reefs to heal and prevent the bay from eroding.

Overloaded Infrastructure

Unregulated tourism has significant negative environmental consequences, including local natural resource depletion, pollution, and waste issues. Overconsumption of natural resources is also a common problem due to mass tourism, especially in places where resources are already scarce.

Mass tourism places a huge strain on local land use and has the potential to deplete the environmental resources that locals rely on. After years of uncontrolled tourism, Boracay Island in the Philippines has been closed to restore the ecosystem. The waste problem is also a major issue in Bali, which is attempting to address it with the Zero Waste Bali concept.

The Verdict

Tourism brings a host of benefits to countries, such as job creation, improved infrastructure, and increased revenue. However, it is important for countries that heavily rely on tourism to put measures in place to mitigate the negative impacts of tourism on their local communities. The drawbacks of tourism on local economies and residents include rising costs of living, environmental damage, and overloaded infrastructure. Governments need to implement measures to protect their countries from the drawbacks of tourism, and tourists must be respectful of the local environment and cultures which they are visiting.

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Is Canada Really in a Recession?

23 Dec, 2023

Context A CBC News article discussed the possibility of the Canadian economy heading into a recession, or whether the country has already passed that threshold. The article discussed this possibility based on slowed growth, high inflation, and the Bank of Canada’s continued interest rate hikes. Analysis A recession is a significant reduction in economic activity that occurs over a length of time, usually months or years. One of the most accepted definitions of a recession comes from the economist Julius Shiskin in 1974, who identified the threshold to an economic recession as two consecutive quarters of declining GDP, although economists often argue about the comprehensiveness of this measure. The causes of a recession can be quite complicated and have many contributing factors. Some common examples include a sudden economic shock such as the recent COVID-19 pandemic, excessive debt, asset bubbles, inflation, deflation, or large technological changes. One major factor influencing the probability of an economic recession includes rising interest rates from the Bank of Canada, which has implemented the highest hike in the shortest amount of time in all of the bank’s history, raising the rate over eight times since 2022. The Bank of Canada increased interest rates in order to curb inflation since rising interest rates discourage taking on debt and spending. This further encourages companies to lower prices or slow inflation to increase demand. Currently, the Bank of Canada is keeping at the 5.0 percent rate but has said that further hikes are not off the table as inflation may continue to exceed acceptable rates. Increases in interest rates can certainly contribute to or precede a recession. In fact, the Bank of Canada has raised interest rates three times to slow inflation since the 1960s and all three times this action led to an economic recession. Current fears of a looming economic depression are also not unique to Canada, as following the COVID-19 pandemic, the global inflation rate increased to 8.73 percent in 2021. This was due to supply chain issues, as well as the effect of the Russia-Ukraine War creating rising food and energy prices, as well as general fiscal instability. A majority of the World Economic Forum’s lead economists agreed earlier this year that we could see the beginning of a global recession starting in 2023, which would certainly affect the Canadian economy. The article also discusses the Canadian economy’s slowed economic growth, as the GDP has stagnated in the second quarter of this year. However, it suggests other factors may explain the decrease, including striking port workers in British Columbia, and the resulting negative effect on economic activity. An RBC report mentions how on a per-person GDP basis, there has already been a decline for four straight quarters despite a surge in population growth, and concludes overall predictions for GDP growth do not look promising despite local factors including Canadian wildfires and strikes. They also point to a 0.5 percent increase in the unemployment rate over the past few months, which has historically tended to indicate a looming recession.

Ottawa Mayor and Lansdowne Park

21 Dec, 2023

Context The City of Ottawa Mayor, Mark Sutcliff released a statement about a revised plan for the redevelopment of Lansdowne, an urban public park containing historic landmarks and commercial venues. The project includes the demolition of a sports arena complex, stadium stands, and the building of a new event center, residential units, and retail space. Despite suggesting the new plan has addressed the concerns of residents, many issues remain. Analysis The City of Ottawa and the Ottawa Sports and Entertainment Group (OSEG) have been in partnership to develop Lansdowne since 2012 and finished an original redevelopment of the park back in 2014. A few years later in 2019, the financial sustainability of the park came to the city council’s attention, and in 2020 the partnership was extended another 10 years with direction to develop a new plan to revitalize Lansdowne. Consultation with community members started in 2020, with the original concept released last year in 2022, and a revised version released this month. Community feedback was acquired through various platforms including public information sessions, an open email for feedback, and public surveys. A summary report of that feedback was published on October 6th, which highlighted the six most common themes of community residents’ concerns. The first concern was related to the size and number of the multiple high-rise apartments which were designed to exceed 30 floors. In the new plan , they have removed one of the three planned buildings, with fewer total units in each, and only one tower with the potential to be built at 40 stories. Residents were also concerned about the loss of greenspace due to the new event center construction. Many people suggested they wanted that greenspace allocated elsewhere, or alternatively, an accessible greenspace roof on the event center. Although in the original plan the city had conceptualized a greenspace rooftop on the event center, this was scrapped in the new plan as it was deemed too expensive to maintain. Respondents wanted a restriction of vehicles to the premises to promote pedestrian safety, a concern that has existed since Lansdowne was first renovated back in 2014. They also wanted more public transportation infrastructure to and from the park, whether that is the local city buses, trains, or cycling infrastructure to reduce congestion on connecting roads. Relatedly, residents also desired more accessible public use space from washrooms to water fountains to usable and free space for people to occupy. The new plan has reduced the number of parking spaces for the residential buildings to meet the Bylaw limit of 0.4 spaces per unit, down from 739 to 336 spaces, while they added 36 new spaces for the event center. In terms of accessible public space, the new plan includes 27,000 square feet of space originally earmarked for the third residential building, now available for an unspecified “public realm.” Residents also wanted more local and less corporate or big-box businesses, to reflect the unique local community better. The new plan does suggest the amount of retail space has been reduced from 108,000 square feet to 49,000 square feet but does not directly address the desire to attract smaller, local businesses. Finally, there was also a concern about financial transparency of how the project is being funded and the resulting impact on the City. The Federation of Citizens Association (FCA) which represents over 70 community groups voted unanimously to oppose the new plan, which comes with a very costly price tag of $419 million, increased from $332 million of the first plan. They cite that the debt comes at a time when the transit system is facing major issues, and the city is struggling with a housing affordability crisis.

Danielle Smith - Conflict of Interest

20 Dec, 2023

Context Newly elected Premier of Alberta Danielle Smith has defended her cabinet which is coming under fire over conflict-of-interest concerns. Environment and Protected Areas Minister Rebecca Schulz’s husband, Cole Schulz , may be lobbying the government in the areas that the Minister works in. Cole Schulz's firm is working on removing the protection of a threatened caribou range to make room for the oil and gas industry – which has raised concerns over who has Minister Schulz’s ear. Analysis The company that Cole Schulz is a partner with, Garrison Strategies, was hired by the Explorers and Producers Association of Canada and is working to influence the government on the issuing of reclamation certificates for oil and gas sites. The lobbyists are working to gain more access to protected caribou habitats to expand the oil and gas industry. They are hoping to “ address the moratorium on tenure in caribou regions ” which would effectively give them better access to land and investments. The Little Smoky and A La Peche herds in northwest Alberta were protected by a moratorium in 2013 which stopped the granting of new energy leases in this area. At the time, 95 percent of the herd’s range was heavily damaged. Phillip Meintzer of the Alberta Wilderness Association found that though records show that Garrison didn’t contact Environment and Protected Areas directly, the firm’s causes are “ too close for comfort ”. Meintzer also notes that as Garrison works on opening the protected caribou land for Alberta Energy, Environment and Protected Areas should be working on a protection plan for the federally and provincially designated threatened animal . Minister Schulz is working closely with the ethics commissioner, however, Danielle Smith confirmed that “ the ethics commissioner has looked at it, given guidance and there’s no violation [of the Conflicts of Interest Act]”. Cole Schulz also indicated that his firm wasn’t aware that Minister Schulz breached the Act at any time. Meintzer suggests that this situation “ calls for a further look ” from a third party. Sources https://globalnews.ca/news/9988998/alberta-premier-danielle-smith-rebecca-schulz/