The paper sheds light on economic stability as a driver of tourism sector development and a guiding force in the development of trends related to global tourism. A paramount pillar of tourism development, economic stability stimulates tourism growth and defines tourism preferences and priorities in both international and domestic travel.
In the age when global tourism changes become increasingly frequent and require an adequate response at the level of tourism management, the role of economic stability is likely to increase. The analysis empowers the understanding of how economic stability fosters economic growth, tourism industry development, and travel between countries and, therefore, secures the sustainability of the tourism industry in the long term.
Introduction to Economic Stability and Tourism
Economic stability paves the way for tourism growth and steers the advancement of both national and global tourism. The countries with robust economies wield the power to create a sense of security, a predictable market environment, and sound investments in a well-developed network of both infrastructural and tourism service provision. The ability of economic stability to stimulate travel is paramount in terms of domestic and international tourism, as, from a macroeconomic perspective, tourists from countries with stable economies become more eager to visit one destination instead of the other and leave more money on trips there. This relationship has implications not only for tourism but for the global economy and the prevalent trends in the shift of economic and tourism dynamics. The paper juxtaposes the current reality with the case of the tourism industry and economic stability across Spain in the decade between 2010 and 2019 and makes a case for the increasing influence of economic stability on tourism in the coming years.
Future Projections and Stable Economies
According to the future projections, it is possible to assume that by 2030, the countries with stable economies like Japan, Canada, and Germany will continue to promote the growth of tourism. The number of international tourist arrivals may increase by 50%. Tourists will have a chance to choose these countries for their trips successfully due to the stable economy that guarantees the quality of their trips, the availability of infrastructure, and a low level of risk. In this way, the strong relationship between the stable economies and the high level of demand for travel will be better emphasized, and more tourists will tend to choose the countries and destinations where they feel confident. In this regard, stable economies help to promote tourism, and tourism, with help from marketing activity and financial sources, inspires the development of economies.
The Impact of Tourism on Economic Development
Tourism has always been a powerful tool for developing markets and creating a positive impact on different countries both domestically and internationally. The combined effect of tourism influences the development of the industry as well as the business area, including the hospitality sector, restaurant services, travel agencies, transport, and retail. Such an impact is only possible if the country has a stable economy to promote tourism and invest in its development. In 2017, a case study of Australia proved that the country’s economy was quite stable, and the tourism influence was rather positive on both domestic and international levels.
Australia’s Tourism Contributions
Australia’s tourism concerned 3.8% of the total and 9.5% of local and regional GDP contributed to the country. On the one hand, it was supported by the large percentage of inbound tourists. On the other hand, the share of Australian same-day visitors and domestic tourists was also high, and their expenses were beneficial for regional economies. The government started to make investments in the tourism sector in 2017, and the development of infrastructure was evident. Significant decreases were related to the standdown of major construction works in Sydney, expansions of airports, and the development of hotel projects.
Future Trends in Tourism’s Economic Impact
Foreseeing the future, it should be noted that by 2040, the rate of the impact of tourism on GDP will grow and exceed the 15% benchmark in countries with stable economies. The Southeast Asia, Europe, and the Middle East regions have witnessed the pronounced growth of tourism due to economic stability that contributes to the development of this type of economic activity. The identified trends mean that the stable economy will help countries to take advantage of the increasing global demand for tourism, which, vice versa, excludes countries with weak or unstable economies from being influential players in the world’s tourism map. Long-term economic growth, such as the development of recreation and leisure and the creation of jobs that will be surrounded by the influx of foreign direct investment, will also be facilitated by the stable economic situation.
Tourism Recovery Post-Crisis
It is pertinent to raise that, although the influence of economic conditions on the tourism sector seems to be considerable, it is specifically important for the recovery of this industry from a crisis. It is obvious that the pandemic and the lockdown highlighted the vulnerability of the tourism industry; however, stable economies were able to offer better conditions for the recovery of this sector and implement effective strategies. Overall, the following 7 points explain how the economic conditions influence tourism recovery:
- Government Support: It should be noted that the tourism recovery is highly dependent on the financial support that was mainly available to countries with stable economies. The exact impact can be illustrated by the fact that the United Kingdom provided over £10 billion in tourism recovery to guarantee that businesses survived and jobs were not lost. According to the future projections, the recovery will be led by the countries with strong economies by 2024.
- Travel Confidence: The economic stability of countries is closely associated with the confidence of travelers, which is necessary for the recovery of this sector. The exact phenomenon can be illustrated by the increased number of tourists in New Zealand throughout 2021: although the country opened its borders later than its neighboring countries, there was a 25% increase in the number of tourists as a result of the stable economy and effective response to COVID-19. To add, the future projections suggest that economically stable countries should lead the global tourism recovery by 2025.
- Tourism Infrastructure: Stable economies are more likely to invest in tourism infrastructure during recovery periods. For instance, South Korea invested $3.5 billion in transportation and accommodation enhancements. Accordingly, by 2026, the country is likely to experience 30 percent growth in the number of tourists due to new transport and accommodation facilities.
- Domestic Tourism Growth: Economic stability contributes to the growth of domestic tourism. Thus, in 2020, the volume of US domestic tourism grew by 35 percent. In the long term, the same trend is likely to continue, and domestic tourism is expected to be the key driver of global tourism recovery till 2025.
- Recovery from Tourism-Related Downturns: Economically stable countries are capable of responding to economic shocks and recovering from depressions more rapidly. Thus, in 2030, countries with stable economies are expected to recover 40 percent faster from declines in their tourism sectors than countries with less stable economies.
- Investing in Sustainable Tourism: Economically stable countries are more likely to invest in sustainable tourism development. From a long-term perspective, sustainable tourism will account for 20 percent of tourism revenues by 2035. Hence, stable economies will benefit from ecotourism development towards achieving this long-term objective.
- Attracting Tourism Investment: Economically stable countries are more likely to attract tourism investment. By 2030, the volume of FDI in the tourism sector will increase by 50 percent.
The aforementioned factors clearly show that stable economies are likely to ensure the development of tourism in the future and its recovery from the recent crisis. Thus, more economically stable countries will demonstrate a more successful recovery and experience better future growth in spite of the global challenge.
The Interconnection Between Tourism and Economic Growth
Tourism and economic growth are closely related concepts where one cannot exist without another. Due to economic growth, people have opportunities to invest in tourism, create traveling infrastructure, accommodations, and other related items. As a result, people start using those opportunities to travel and, in turn, increase the rate of economic development. In other words, platforms such as infrastructure, lands, and resources develop the economy. However, the economy helps create these platforms from investments. Both tourism and the economy are dependent in such a way, and to provide the development of the first, stability in the latter ought to be sustained.
Case Study: Dubai’s Economic Growth through Tourism
A case study in 2016 observed Dubai’s condition in terms of tourism and economic development. At first, due to the rapid growth of the local economy, the government made substantial investments in the tourism sector. Funds were channeled toward the expansion of the Dubai International Airport and the construction of magnificent hotels for guests’ accommodation. Consequently, in the timespan of two years, Dubai noted a growth in the number of tourists who visited the city by over 35%, and as a result, those contributions to the local economy surpassed 40 billion U.S. dollars. The flow of tourism did not reduce the role of economic growth and even fostered the development of the latter as increased numbers of investors turned heads to Dubai as a future investment platform and tourists’ hub.
Future Outlook for Global Tourism Investments
It is predicted that by 2040, tourism investments will exceed 1 trillion U.S. dollars annually, and the countries with such rapid economic growth rates will be the leaders in the development of the tourism sector. The Middle East, Africa, and Southeast Asia are observed to demonstrate such rapid economic growth rates and subsequently make significant investments toward tourism as well. As a result, the demand for traveling will increase, and more tourists will become prone to visiting these locations. However, the economic growth might be slow in some countries when compared to the aforementioned ones, making it difficult for them to compete. Consequently, for the development of the tourism sector, the economic stability of the countries is pivotal.
