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The 27th of September is the UNWTO’s World Tourism day. In the School of Economics a number of our academics are closely involved in tourism economics research along with our colleagues of th research area: Tourism Research in Economics, Environs and Society (TREES). Our blog has a page dedicated to tourism month where we have been sharing our research results.

Linking tourism and Economics

The obvious link between tourism and Economics is large contribution that tourism activities make to the economy. Globally, the tourism sector is expected to grow by 4-5% in 2012, reaching one billion tourist arrivals. In South Africa the sector contributes approximately 7% of GDP. In contrast, mining contributes about 9% and manufacturing around 15%. The sector employs more that 1.1 million people.

Our research is concerned with different aspects of tourism and economics. The work presented at the forecasting workshop showed that tourism demand can be sensitive to changes in prices and income. Prof Egon Smeral showed that the business cycle is important. When an economic slowdown puts pressure on consumers’ budgets, people swap foreign trips for domestic vacations. In a recovery this can quickly switch around as people raise their expenses to their former levels, “vacationing with the Joneses”.The issue of the price competitiveness of South African destinations was raised by Dr Lindie du Plessis. Local tourists can easily be priced out of the market and SME entrepreneurs in the accommodation market find it hard to survive. The results of her research suggest significant price disparities exist, with a spread of 95% between the grading levels of 2-star, 3-star, 4-star and 5-star Hotel establishments. She argued that managers in the accommodation market need greater understanding of the  grading status of establishments and other factors that play a role in setting prices that promote profitability and sustain competitiveness.

Other work by Profs Andrea and Melville Saayman has shown that visitors to South Africa are not only interested in tourist experiences, but also in shopping. Shopping tourism, as opposed to tourists’ shopping, means travelling to a country with the explicit aim to buy goods that are unavailable or difficult to find in one’s home country. These goods will be bought either for personal consumption or for reselling back home. Their analysis of the spending patterns of African tourists to South Africa show that spending on capital goods and shopping for resale account for more than 60% of total average expenditure, while spending on accommodation and other “typical” tourism products is less than 20% of total spending. A better understanding of the shopping behaviour of these visitors is a prerequisite for reaping full benefits.

Though it is clear that tourism generates economic value, it is not clear that it will create jobs for the unemployed or benefit the poor. Computable general equilibrium analysis by Profs Saayman, Rossouw and Krugell shows that lower-income black households may not benefit from a tourism expansion. Low levels of education and lack of skills limit the benefits that they can share. A rigid labour market means that low-skill, low-wage insiders are protected from competition for jobs from the poorest of the poor.

Our final bit of South African analysis fits with the sustainability theme of World Tourism Day. Travel and tourism has an environmental impact and research by Profs Krugell and Saayman examined people’s willingness to pay to mitigate their carbon footprint. In fact, on the 27th, we are hosting a “green” tourism economic seminar on campus. You can get the PPT slides here: Green tourism seminar

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