The general term “tourism,” which has been adopted in many different forms and is used all across the world, covers both supply and demand. The activities that tourists engage in are fundamentally referred to as international tourism or the visitor economy. All activity that takes place within the visitor economy is included in the tourism sector.
This includes actions that the visitor personally engages in, such as booking a hotel room, placing a food order, or visiting a tourist site. Additionally, it covers indirect activities like the delivery service that brings the food to the eatery where the tourist eats or the laundry service that has a contract with the hotel to launder bed linens.
It is largely due to the indirect contributions to tourism, that defining and measuring the tourism industry is so difficult!
Tourism is a phenomenon with no universally accepted definition, owing to the complexity and individualism of the travelers themselves and the activities that they choose to undertake.
The most widely utilized definition of tourism, proposed by the World Trade Organisation (WTO) and United States (UN) Nations Statistics Division (1994), prescribes that in order to qualify as a tourist one must travel and remain in a place outside of their usual residential environment for not more than one consecutive year for leisure, business or other purposes.
Mathieson and Wall (1982) on the other hand, do not impose a timeframe, simply stating that one must travel to a destination temporarily.
Leiper (1979) believed that defining tourism is more complex than this, proposing that there are three approaches that can be taken. The economic stance focuses on tourism as a business, the technical stance focuses on the tourist in order to provide a common basis by which to collect data, and the holistic stance attempts to include the entire essence of the subject.
The Cambridge Dictionary defines tourism quite simply as; ‘the business of providing services such as transport, places to stay or entertainment for people who are on holiday’. As there is no universal definition for the term ‘international tourism’, for the purposes of this article I will define it as follows:
‘International tourism is the act of traveling to another country other than where you live for no more than one year for purposes of leisure or business’.
Why is international tourism important?
Value to the economy
International tourism can help economies to bring in money in a number of different ways. Below I have provided some examples of the positive economic impacts of tourism.
- Foreign exchange earnings
The importance of international tourism is demonstrated through foreign exchange earnings. Tourism expenditures generate income to the host economy. The money that the country makes from tourism can then be reinvested in the economy.
How a destination manages its finances differs around the world; some destinations may spend this money on growing their tourism industry further, some may spend this money on public services such as education or healthcare and some destinations suffer extreme corruption so nobody really knows where the money ends up!
Some currencies are worth more than others and so some countries will target tourists from particular areas. Currencies that are strong are generally the most desirable currencies. This typically includes the British Pound, American, Australian and Singapore Dollar and the Euro.
Tourism is one of the top five export categories for as many as 83% of countries and is a main source of foreign exchange earnings for at least 38% of countries.
- Contribution to government revenues
The importance of international tourism is also demonstrated through the money that is raised and contributed to government revenues. Tourism can help to raise money that it then invested elsewhere by the Government. There are two main ways that this money is accumulated.
Direct contributions are generated by taxes on incomes from tourism employment and tourism businesses and things such as departure taxes.
According to the World Tourism Organisation, the direct contribution of Travel & Tourism to GDP in 2018 was $ 2,750.7 billion (3.2% of GDP). This is forecast to rise by 3.6% to $ 2,849.2 billion in 2019.
Indirect contributions come from goods and services supplied to tourists that are not directly related to the tourism industry.
There is also income that is generated through induced contributions. This accounts for money spent by the people who are employed in the tourism industry. This might include costs for housing, food, clothing and leisure Activities amongst others. This will all contribute to an increase in economic activity in the area where tourism is being developed.
- Employment generation
The importance of international tourism can be demonstrated through employment generation. The rapid expansion of international tourism has led to significant employment creation. From hotel managers to theme park operatives to cleaners, tourism creates many employment opportunities. Tourism supports some 7% of the world’s workers.
There are two types of employment in the tourism industry: direct and indirect.
Direct employment includes jobs that are immediately associated with the tourism industry. This might include hotel staff, restaurant staff, or taxi drivers, to name a few.
Indirect employment includes jobs that are not technically based in the tourism industry, but are related to the tourism industry.
It is because of these indirect relationships, that it is very difficult to accurately measure the precise economic value of tourism, and some suggest that the actual economic benefits of tourism may be as high as double that of the recorded figures!
- Contribution to local economies
The importance of international tourism can be further seen through the contributions to local economies. All of the money raised, whether through formal or informal means, has the potential to contribute to the local economy.
If sustainable tourism is demonstrated, money will be directed to areas that will benefit the local community most. There may be pro-poor tourism initiatives (tourism that is intended to help the poor) or volunteer tourism projects. The government may reinvest money towards public services and money earned by tourism employees will be spent in the local community. This is known as the multiplier effect.
- Overall economy boost
International tourism boosts the economy exponentially. This is partly because of the aforementioned jobs that tourism creates, but also because of the temporary addition to the consumer population that occurs when someone travels to a new place.
Just think: when you travel, you’re spending money. You’re paying to stay in a hotel or hostel in a certain area – then you’re eating in local restaurants, using local public transport, buying souvenirs and ice cream and new flip flops. As a tourist, you are contributing to the global economy every time you book and take a trip.
For some towns, cities and even whole countries, the importance of international tourism is greater than for others. In some cases, it is the main source of income.
For example, according to the World Travel and Tourism Council, tourism accounts for almost 40% of the Maldives’ total GDP. In comparison, it’s less than 4% in the UK and even lower in the US! In the Seychelles the number is just over 26% while in the British Virgin Islands, it is over 35% – so tourism is vastly important in these nations.
Benefits of Studying International Business Management
Studying global business management courses has a number of advantages. The advantages of the international business management course are listed below for students.
1. Diversity at World Marketplace
One of the benefits of studying business management is the exposure to the diverse nature of the global marketplace. International business is substantially unique and dynamic owing to variations in ‘environmental conditions’ and ‘operational structure’ amid an expansion of the domestic industry. The experience made the domestic economy globally, safer, and more comfortable. Therefore, it is essential to recognize the prevailing conditions in a given country wherein investment is now to be produced and where the exchange is to take place with other nations.
It is a small world, and it is only getting smaller with ever-evolving technology. The economy is globalized today. When corporations are faced with more foreign transactions and acquisitions than ever before, employers are continually searching for staff with the expertise to handle these transactions. Whether you are majoring in international business or following a global specialization in management through a general business program, you will be able to have international business management on your degree – and your resume.
2. Growing Portion of the World’s Business
The term Globality was adopted at the annual meeting of the World Economic Forum in Davos, Switzerland, in 1999. It refers to the consequences of the globalization process. An international company forms a significant and growing part of the market world over. Global disasters impact all forms of businesses that perform abroad, as well as domestically.
Whether engaged in a foreign business or not, the management of the company needs to be aware of what is happening internationally in its markets and its industry. This growing need for talent in this topic in companies ensures the demand for international business management courses.
No nation, while drawing its economic policies, can ignore the foreign sector. Most issues apply to foreign policy and also to international trade, investment, and finance. One of the reasons given when the VAT (Value Added Tax) was implemented in India was that it was in effect in 123 countries around the world.
3. Range of International Financial Transactions
One of the benefits of studying for a degree in international business management like an MSc in International Business is that the business enterprises can recognize the mode of financial transaction suited for them. All transactions are risky business. A good entrepreneur can manage to escape or reduce risk, at least. The risk basket associated with a foreign transaction is likely to be different from domestic Indian trade. Not only are the risks different but also variations in attempts to mitigate the risk. It is also worth bearing in mind that such risks fluctuate continuously.
The characteristics of the risk can differ by form of transaction. Financial transactions are categorized into four categories- exports imports, business purchases, authorizing, and foreign direct investment. The combinations of one or more of the four different categories are a franchise, joint partnership, and counter-trade. One of the main benefits of international business management courses is that companies must determine which mode of transaction or process to use when conducting international business.
4. Getting to know the External Environment
Working knowledge of basic social sciences such as politics, economics, psychology, geography, or others is also needed to draw your conclusion by observing the external environment to do international business. Having an understanding of the external environment is very important in the business and it proves the international business management scope.
The political ecosystem will inform us how and why it affects elected officials and how it regulates foreign business. The legal environment (both domestic and international) will tell us all kinds of laws that business companies have to work by. The cultural climate will inform us about the essential perceptions, values, and opinions of entrepreneurs.
The economic environment will inform us about the hosting nation’s economic structure, which may (or may not) be different from the traditional country. It will also describe the factors (such as level of growth, human resources, GDP, and consumption) that determine a firm’s ability to do business. Geography will inform us about the place, size, and nature of the resources in the world.
One of the most important international business course benefits is that you will be able to take a look at international borders, commerce, global economies, and how to deal with different cultures, you can research the global challenges that businesses face.
5. The Business Philosophy
Any company is always in the look to expand as part of its economic objectives. The domestic market is likely to populate and then develop further; the only alternative may be regional liquidity outside the domestic market. It should be remembered that all the major corporations in developing countries are foreign. Opportunities for internationally trained business professionals are abundant in the corporate, non-profit, and public sectors. You may find work with a corporation or organization as a cultural adviser.
You may even find a job as a community developer or diplomatic associate with a government agency. Many foreign business students do business in the corporate world, managing tasks surrounding global growth and activities, or international trade. Some also use their international business experience as a basis for a degree in law school. So, one of the international business management benefits is the understanding of various business philosophies.
6. Large Small and Medium-Sized Enterprises
Another importance of international business management courses is that a significant number of small and medium-sized enterprises (SMEs) are also active in the foreign market. The dimensions are not necessarily a constraint. Only small businesses reported the fastest growth in exports. Mid-size companies have an acceptable combination of scale and agility.
The importance of the small and medium-sized enterprise sector varies according to country. SMEs are expected to develop rapidly in the years to come. In a country like India, it is impossible to ignore the position of SMEs. The mentality has fully globalized with the advent of liberalization.
Many small businesses import their supplies from China, Taiwan, Thailand, Singapore, and other countries, which has become a new phenomenon today. Studying international business can help you understand various cultures, different economies, and other geographies. When it comes to business problems and their solutions, it will help you see the big picture while enabling you to make essential business decisions.