The case for tourism promotion: An economic analysis

Among the various factors influencing tourists to visit an overseas country is that of promotion/marketing activity by tourism operators and government tourist commissions in the destination country. The effects of tourism promotion have not previously been subjected to rigorous economic analysis however. The paper firstly shows how the standard economic justifications for government support of industry in circumstances of market failure, ie externalities/non appropriability of benefits, risk and uncertainty and indivisibilities, can be employed in the context of overseas tourism promotion to present a prima facie case for government support. It then provides an analysis of the benefits and costs of tourism promotion which is applicable to all countries. A model of tourism demand and supply is presented which enables consideration of the effects of tourism promotion in an economy with no distortions and an economy with distortions. The final section addresses issues in evaluating promotion and attempts to assess circumstances in which tourism promotion generates positive net benefits to an economy. Although the data apply to Australia, the results are generalizable. The framework of assessment can be used to assess the benefits and costs of tourism promotion in both developed and lesser developed countries.