Tourism and the Less Developed Countries
Department of Economics
4700 Keele St.
Key Words: International Tourism, Tourism, Economics, LDC
This paper is concerned with two questions; the role of
international tourism in Less Developed Countries (LDC) and
the economic consequences of international travel on their
economies. This paper offers some suggestions on how the
LDCs can make themselves more attractive to the
international tourist. The last section summarizes the
paper and provides some conclusions.
Tourism has become the most dynamic sector of most
countries’ economies. It is also the most important
tradeable sector of their economies. The business value of
tourism exceeds that of oil exports, food products and
automobiles. Table 1 shows how world tourism grew between
1950 and 2006. The number of international tourist arrivals
reached 846 million. (WTO, 2006) This was an increase of
5.4% over the previous year. Worldwide international travel
receipts reached U.S. $680B in 2005. (UNTWO, 2006)
Specializing in tourism is an option opened to less
developed countries (LDC). It is often viewed as a means of
overcoming the economic problems of these countries. Is it
a good option? A paper by Lanza and Pigliaru examined this
question. (Lanza and Pigliaru) The authors compared the
relative growth rates of 14 tourism countries from a sample
of 143 countries over the period 1980 to 1995.
They found that countries that specialized in tourism
grew faster than the other countries in their sample. Based
on data in the World Tourist Organization’s (WTO) news
release for 2006, Africa experienced a 9% growth rate
between 2005 and 2006. Growth rates in Asia and the Pacific
averaged 7.6 over the same period. (UNTWO, 2006)
The World Tourism Organization.
The World Tourism Organization (UNWTO) is a specialized
agency of the United Nations. It is the leading
international agency in tourism. It also serves as a global
forum for tourist policy issues. UNWTO promotes the
development of tourism in less developed countries. It
encourages the implementation of a Global Code of Ethics
for tourism to ensure that its member countries, tourist
destinations and tourist businesses maximize the positive
economic benefits from tourism. It also encourages member
countries to minimize the negative social, cultural and
environmental effects on their economies. (UNWTO website)
UNWTO has a membership of 160 countries and more than
350 affiliated members that represent the private sector,
educational institutions, and local tourism authorities.
Direct action that strengthens the efforts of the national
tourism administrations are carried out by UNWTO’s
regional representatives in Africa, the Americas, East Asia
and the Pacific, Europe, the Middle East and South Asia
from its headquarters in Madrid. UNWTO is also the
principle source of international statistical information
From 1950 to 2006 international tourist arrivals
increased at an annual rate of 6.5% per year. (Table 1) The
income generated by tourist arrivals grew at a faster rate
and it reached US$680 B in 2005. (UNTWO, 2006)
UNWTO’s long-term forecast predicts that international
tourist arrivals will reach 1.6 B by 2020 and that
international tourist receipts will reach US$200 B in the
same year. The regions that are expected to receive the
largest number of tourists are Europe (717 million), East
Asia and the Pacific (397 million) and the Americas (282
Tourist arrivals in these areas are expected to grow
at 5% per year compared with the world average of 4.1%.
The more mature regions, Europe and the Americas are
expected to show lower than average growth rates. (Ibid.) A
recent paper by Lee and Chang found that tourism had a
larger impact on GDP in non-OECD countries than it did in
OECD countries. (Lee and Chan, 22)
A report by the Secretary-General of the World Tourist
Organization to the Fifteenth Session of the World Tourist
Organization in 2003 provided a number of important points
about the Tourist Industry. (WTO, Madrid, September, 2003)
The Secretary-General stressed that all countries
benefit from the development of tourist exports. Third
world countries, which are the net beneficiaries of
international tourism, generate balance of payment
surpluses with the industrialized countries. The surpluses
can be used to finance their development and reduce their
foreign debt. Tourism also increases employment in the
tourist industries. The multiplier effects lead to
increased employment in related industries. The increased
employment helps to reduce poverty in the recipient
countries. In addition, tourism leads to increased foreign
direct investment in the tourist-related industries.
Policies to encourage tourism include promoting the
country by advertising in the media and on the internet.
Other measures include enhancing public health and safety,
reducing environmental pollution, increasing human
resources development and training, and increasing
infrastructure capacity in tourist related industries, such
as roads, harbours and airport facilities.
Tourism clusters also appear to be important in
attracting tourists. A tourism cluster is an agglomeration
of natural, historical and social attractions in one
location. Tourism clusters create an incentive for local
and foreign companies to develop the area as a tourist
attraction. (Ghafele, 2007, 2)
Tourism’s potential to reduce poverty in developing
countries was the subject of a United Nation’s World Trade
Organization (UNWTO) report presented to the Third United
Nations Conference on Least Developed Countries (LDC) in
September of 2006. LDCs account for only 1.2% of
international tourist arrivals and 0.8% of receipts in
2005, but the growth rate in these countries has exceeded
the world average since 2000. UNTWO data show that tourist
arrivals were up by 48% compared with 17% for the world and
tourist receipts were up by 76% compared with 40% for the
world. (UNTWO, 2006)
The World Bank web site provides information about the
impact of tourism in Africa. Tourism accounts for more
money moving from rich to poor countries than governments
give in aid. Tourism is significant in Africa. It accounts
for over 10% of the total exports of African countries. It
is also a major service industry for less developed
countries. The World Bank has been slow to develop and
implement pro-tourism strategies and even slower in
reporting what it is doing. (World Bank, 2006)
Tourism provides many benefits to the LDCs. It can
reduce poverty by providing new employment opportunities.
The increased flow of foreign exchange can used by
governments to improve access to services such as a clean
water supply and sanitation. It could also lead to
increased access to education. The flow of income can be
used by governments to expand the infrastructure required
by tourism, including transportation, communications, and
health services. The infrastructure improvements also
benefit the residents of the less developed countries.
The less developed countries have a number of
advantages over the more developed countries in attracting
tourism. These include local culture, art, music, natural
landscapes and wildlife. At the same time, the LDC’s have
to deal with the fact that tourism leads to a high
proportion of leakages out of the local economies. A second
problem is the insufficient awareness among national and
international financial authorities on the real potential
of tourism. There is also a lack of coordination in the
tourism development process in the domestic private sector.
The concept of Community Benefit Tourism Initiatives
(CBTI) was introduced in a paper by Simpson. (Simpson, 2).
CBTI involves the transfer of benefits to the community
regardless of the location, instigation, size, level of
wealth, involvement, and ownership and control of the
tourist initiative. (ibid) Community participation and
control is desirable to ensure that the delivery of
benefits go to the community.
The involvement of the community may be difficult. It
may cause problems in achieving the goal of benefit
delivery because of internal conflicts and creating
unrealistic expectations. (ibid)
The benefits have to be weighed against the costs.
Tourism is often viewed as a destroyer of local culture and
social norms. Tourism can increase inflationary pressures
because of the rising cost of infrastructure development to
service the tourist industries. It can create pressures on
some countries’ limited supplies of natural resources, such
as water and food. The countries also face reduced access
to the limited supplies of energy and health resources.
Tourism can have a negative impact on the domestic
enjoyment of the environment. In addition, tourism leads to
an outflow of foreign exchange to non-resident owners of
the tourist facilities. The way to reduce the leakages is
to encourage the domestic production of the goods and
services demanded by tourists. This will also increase the
rate of economic growth in the tourist destination.
In developed and developing countries most government
agencies have not been involved in the operation of the
tourist industry. As a result, any benefits derived by the
communities from the tourist industry have been received
more by accident than design. More recently, governmental
agencies have taken greater interest by committing funds
and time to collaborative projects and playing an important
role in the planning, development and management of tourist
initiatives to maximize the benefits for the local
The data in Table 1 show that tourism is growing in
importance. World Bank data show that tourist receipts grew
by 6% in Africa, and by 7-14% in Central and South America
between 1995 and 2006. Growth rates were high in other
areas as well. (UNTO, 2007)
Improvements in transportation infrastructure are of
major importance to the tourist industries. The improved
transportation gives tourists access to the sites they want
to see. These include historical, cultural and
A World Tourism publication provided two different
definitions of cultural tourism.(WTO web site, 2005) The
first involves the movement of people to cultural
attractions in cities and in countries that are not their
normal place of residence. They travel with the intention
of gathering new information and experiences and to satisfy
their cultural needs. The second definition involves all
movements of people to specific cultural attractions such
as world heritage sites, artistic locations, cultural
manifestations, and arts and drama in cities that are not
their normal country of residence.
The problem with the two definitions is that they are
limited to cities in foreign destinations. They do not
include domestic destinations. Domestic tourism, which is a
significant share of tourism, is excluded from the WTO
study. (WTO, 2005, 3) Moreover, the focus of their study
is limited to cities and towns and not villages or the
Another problem involves the definition of cultural.
Cultural tourism includes traditional cultural heritage,
such as heritage sites, museums, the performing arts and
the city’s historic buildings. It also includes the way of
life of people living in other countries and their
traditional way of life, their cuisine, their beliefs,
their dress and customs. (Ibid.3)
The WTO study used four data sources to provide a
comprehensive view of tourists visiting European cities. A
comparison of the four data sources is difficult because
each is based on different methodology and data sources.
The TiurMis System makes use of official statistics
from city tourist offices. (ob.cit.9) The IPK international
and Atlas Data are derived from surveys. The IPK
international data are based on surveys in the countries of
The Atlas Cultural Tourism Research Program
The Atlas data are collected in the country of destination.
The IPK data cover only city trips and exclude visits to
cities made as part of a touring holiday. The Atlas data
are the only data that specifically address cultural
tourism. All of the studies use different definitions and
different methodology in collecting their data. Given the
different data sources the one that is the most appropriate
for this study is the Atlas data.
The European Association for Tourism and Leisure
Education (ATLAS) is an international association of
universities and other organizations whose goal is to
develop transnational education and research in tourism and
leisure areas. The “Cultural Research Programme” was
started in 1991. Financial support is provided by the
European Commission. (ob.cit.18) Atlas has 300 members
worldwide across 70 countries. However, most of their
member countries are in Europe.
Four rounds of surveys were conducted at cultural
attractions across Europe and other countries between 1991
and 2001. A fifth survey was conduced in 2004. (ob.cit.18)
A large majority of the respondents in the Atlas survey
showed that European cities will face an increasing demand
for cultural tourism, mainly from Asia over the next 5 to
10 years. There was no consensus on the growth in demand
for European Tourism from other areas.
The respondents also expected that European cities
will experience more competition from cities in Asia, and
in North and South America. (ob.cit.37) Most respondents
expected that tourism will grow faster in other areas than
in Europe. Within Europe, the respondents expected that
cities in Central and Eastern Europe will experience faster
growth rates than those in Western Europe.
Too many tourists can create negative externalities.
The increased crowding can reduce the hospitality level, an
important factor in attracting incoming tourists. Increased
tourism can also make it difficult for local residents to
have access to their own cultural and natural attractions.
Overcrowding and a reduced level of hospitality can
discourage tourists from coming to the cities.
Cities can offset the increased crowding by employing
visitor management. Visitor management is a process of
reconciling the needs of the visitors and the host country.
Visitor management should be an integral part of tourist
policy because it affects traffic control, parking,
signage, marketing and the attractiveness of the country to
their tourist attractions. (ob.cit.41)
Marketing City Tourism and Culture
The majority of cities are aware that marketing a city
as a cultural destination is effective in increasing the
number of visitors. The use of the media is important to
promote a city as a potential attraction. Using cities as
backdrops for films, television and videos exposes the
city’s cultural attractions to a wide audience and this
encourages people to visit the city. (ob.cit.46)
The internet can also be used to promote a city’s
attractions from a city’s web page. (ob.cit.45) Festivals
and cultural events are an important part of marketing
cultural tourism. They provide an additional incentive for
visiting a city over and above the city’s other cultural
attractions. (Cameron, 1993)
Cultural tourism is not always the prime mover for
LDCs. The concentration of museums, art galleries,
theatres, and historic sites are important in attracting
visitors to these countries. This can lengthen their stay
and enrich their experience of visiting these counties. The
problem of negative externalities also arises in these
countries. These include the wear and tear on the cultural
site and environmental degradation of their natural
Ecotourism is a form of tourism that appeals to the
ecologically and socially conscious tourist. Ecotourism
focuses on local culture, wilderness adventures, personal
growth and learning new ways to live on our planet. It
typically involves travel to destinations where flora,
fauna and cultural heritage are the primary attractions.
(WTO, 2005, 3)
Ecotourism minimize the impact on the environment and
respects the environmental and cultural sites. It provides
visitors with a positive experience and it provides the
host country with a direct financial benefit from
conservation. It is also sensitive to the host countries’
political, environmental and social climate.
Ecotourism has the following characteristics:
1. It is a nature-based form of tourism in which the main
motivation is the observation and appreciation of nature as
well as the traditional cultural practices in the natural
2. It contains educational and interpretation features of
the area visited.
3. It is in general, but not exclusively, organized for
small groups by specialized and small local operators in
the host countries.
4. It minimizes the negative impacts on the natural and
socio-cultural environment of the host country.
5. It supports the practices of the natural areas by
generating economic benefits to help conserve the natural
environment. It creates jobs and income opportunities for
the local communities. It also increases the awareness
among the local population and the tourist on the need to
conserve the natural environment and cultural life of the
countries visited. (WTO, Canadian Ecotourism Market, 2002,
Youth travel is one of the fastest growing sectors of the
tourist industry. Youth travel represents an estimated 20%
of all international arrivals. (UNWTO, press release, 2008)
Young travelers today stay longer and spend more than other
tourists. Since 2002, the average amount spent per trip
increased by 40% to 1,912 Euros in 2007. Seventy per cent
of youth travelers travel to learn a language, to
volunteer, work or study abroad.
Most of the world’s tourism authorities have
identified this sector as being important or very important
to the future of the tourist industry. An increasing number
of countries are seeking to attract this market. The
destination countries provide youth budget accommodation,
cultural routes, information services, web portals, tour
packages and discount programmes. Australia, France and the
U.S.A are currently the most popular youth destinations.
The value of student travel has lead many countries to
ease visa restrictions on working holidays. Australia and
New Zealand are favorite destinations for youth travelers.
The U.K. continues to be the most important language
travels destination. New destinations are Australia and
China. Japan, Spain, and Germany are currently the most
important source market for language travel.
The Effect of the Cost of Energy on International Tourism
In the United States, the cost of a gallon of gasoline
has increased by 57.3% over the period May, 2007 to May
2008. Over the same period, diesel fuel has increased by
169.4%. (Energy Information Administration, web site)The
same increases have occurred in other countries.
The increasing cost of fuel has increased the cost of
traveling by car, bus, train and airplane. Some tourists
have a high price elasticity of demand for travel. The
rising price of fuel has reduced their demand to travel.
These tourists are seeking lower cost ways to travel and
many are taking short trips within their own countries.
Other tourists have a low price elasticity of demand for
travel and they are still planning to travel in other
The increased cost of oil and the anticipation of
reduce travelers by car, buses, ships and airplanes is
showing up in the falling prices of the shares of cruise
lines and airlines. An article in the Globe and Mail
reported that the shares of Carnival Corp. have fallen by
4.6% and the shares of Royal Caribbean Cruises Ltd. have
fallen by 6% because of the fear that the increasing fuel
costs will reduce the number of travellers. (Heinzl, 2008)
The same fear has caused the shares of car rental
companies to fall. Hertz Global Holdings has fallen 5% and
Avis Budget Group has fallen by 6.2%. The airline stocks
have been hit harder. The shares of AMR (American Airlines)
have fallen by 24.5% after the airline announced flight
reductions, layoffs, and increased customer fees to cope
with the increased cost of jet fuel prices. In Canada, the
shares of West Jet have fallen by 4.9% for the same
Summary and Conclusions
Tourism is the leading sector of most countries’ economies.
It is growing faster than the rest of their economies.
Tourism can take four forms: recreational, cultural,
ecotourism, and youth tourism. Recreational tourism is the
most common form of tourism and it involves tourists going
to resorts or taking cruises.
Cultural tourism is the next most important form of
tourism. It involves tourists going to countries with
important historical or natural attractions. Ecotourism is
the fastest growing form of tourism. It involves tourists
travelling to see the natural environment of a country.
Youth travel is one of the fastest growing sectors of
the Tourist Industry. It accounted for 20% of all tourist
arrivals in 2007.
Tourism can create both benefits and costs for the
host countries. By providing increased employment
opportunities, it can help reduce poverty. It can also
provide an increased flow of foreign exchange which can be
used to enhance a country’s educational resources, its
health services and improve its infrastructure.
There are also negative effects from increased
tourism. These include the crowding out of local access to
the countries’ roads, medical facilities, infrastructure
and social and culture attractions. It can also create
inflationary pressures from the demand for new
infrastructure, and a shortage of skilled labour to build
the new infrastructure. Most of the LDCs face an outflow
of foreign exchange to buy the goods and services that the
tourist industry needs. If the goods and services can be
produced locally, this would increase the growth rate
associated with the tourist industry.
The negative externalities offset some of the benefits
of increased tourism for the LDCs. Most LDCs consider the
negative externalities to be less important than the
employment and foreign exchange benefits and have been
actively promoting their country’s attractions. Countries
also have to provide an environment where tourists feel
save to travel. Tourism will continue to be the fastest
growing sector of the LDC’s economies. As the countries
become richer, domestic tourism will also become important
to the local economy.
In 2008, Tourism faces a major problem. The increasing
cost of energy has raised the price of traveling to
domestic and international locations. The increasing cost
of oil raised the prices of gasoline, diesel fuel, and jet
fuel. Traveling by automobile, bus, ship and airplane have
all decreased significantly.
Some tourists are sensitive to the increased cost of
traveling and they are seeking out the lowest cost of
traveling. The price elasticity of demand is high for these
tourist and they are either not travel or traveling in
there own countries. To offset the increasing cost of
energy, countries will have to spend more to promote their
tourist attractions in order to convince foreign travelers
that their country is worth seeing.
International Tourist Arrivals by Destinations , 1950-2005
World Africa Americas Asia and Europe Middle
the Pacific East
1950 25.3 0.5 7.5 0.2 16.8 0.2
1960 69.3 0.8 16.7 0.9 50.4 0.6
1965 112.9 1.4 23.2 21.1 83.7 2.4
1970 165.8 2.4 42.3 6.2 113 1.9
1975 222.3 4.7 50 10.2 153.9 3.5
1980 278.1 7.2 62.3 23 178.5 7.1
1981 278.6 8.1 62.5 24.9 175.5 7.6
1982 276.9 7.6 59.7 26 175.3 8.3
1983 281.8 8.2 59.9 26.6 179.6 7.5
1984 306.8 8.9 67.4 29.5 193.4 7.7
1985 320.1 9.7 65.1 32.9 204.3 8.1
1986 330.2 9.4 70.9 36.8 206.2 6.9
1987 359.7 9.9 76.6 42.1 223.9 7.2
1988 385 12.6 83 48.7 231.6 9.1
1989 410.1 13.9 86.9 49.4 250.7 9.2
1990 439.5 15.2 92.8 56.2 265.6 9.6
1991 442.5 16.3 95.3 58 263.9 8.9
1992 479.8 18.3 102.2 65.8 282.2 11.3
1993 495.7 18.9 102.2 72.3 290.8 11.4
1994 519.8 19.3 105.1 80.1 303.1 12.1
1995 540.6 20.4 109 82.4 315 13.7
1996 575 22.2 114.5 90.4 332.1 15.8
1997 598.6 23.2 116.2 89.7 352.9 16.7
1998 616.7 25.6 119.1 89.4 364.6 18
1999 639.6 27 121.9 98.7 370.5 21.5
2000 687 28.3 128.1 110.5 395.9 24.2
2001 686.7 29.1 122.1 115.7 395.2 24.5
2002 707 30 116.7 124.9 407 28.5
2003 694.6 31.6 113.1 113.3 407.1 29.5
2004 765.1 34.5 125.7 144.2 424.4 36.3
2005 803 37.3 133.2 155.3 438.7 38.3
2006 846 40.7 135.9 167.2 460.8 41.8
Source: World Tourism Organization database, November 2006,
WTO web site and WTO, News release, 2006.
World's Top Tourism Destinations
Ranked By Country, 2004
Rank Arrivals (millions)
1. France 75.1
2. Spain 52.4
3. United States 46.1
4. China 41.8
5. Italy 37.1
6. United Kingdom 27.8
9. Germany 20.1
10. Russian Federation 19.9
11. Austria 19.4
12. Canada 19.2
13. Malaysia 15.7
14. Ukraine 15.6
Source: World Trade Organization, web. site, 2007
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