Hospitality's Contribution to Promote Socio-Economic Growth and Development
By Hicham Jaddoud Senior Director of Hospitality, North Star Mohican Casino Resort | May 2020
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Hospitality has become a major industry and one of the most important social phenomena in the United States over the past two decades. Hospitality sector currently accounts for over 11% of global GDP. The greatest perceived socio-economic impacts of the hospitality sector are increased employment, improved living standards, greater tax revenues to State and local governments, and growth in local retail sales.
Hospitality sector encompasses many subsectors: lodging, food services, gaming, cruise lines, travel, etc. There is an overlap between hospitality and tourism. Some existing literature view the two sectors as two separate industries. For the purpose of this article, we will discuss the contribution of the hospitality and tourism as one single holistic industry combining hotels, food service outlets, casinos, travel, entertainment and tourism-related activities. Hence, hospitality is not only important to customers, and employees, but also to economies, and local communities.
The hospitality industry generates substantial direct and indirect revenues for local and regional economies. Directly, is when consumers spend money to receive value in accommodations, F&B, and entertainment. Indirectly, is when these businesses purchase goods and services from other suppliers and retailers.
In addition to the Direct and Indirect impact, arguably, hospitality has a Fiscal and Induced impact. Fiscal impact includes federal, state, and local taxes that are collected from the operations of the business (sales taxes on revenues and payroll taxes). Additionally, some local governments collect lodging taxes and other business fees, i.e.: Sellers Permit and State license. Whereas Induced impact refers to the benefits on the contractors, and suppliers through the jobs created and income generated by vendors that supply goods and services to the hospitality firms. In other words, Induced impact is when the household income/wages of employees and suppliers is re-spent on consumer product in the community stimulating the economy further.
By providing employment and contributing to the improvement of local infrastructure, the hospitality industry is one of the main drivers in the growth of local societies, enhancement of living standards and decrease of crime rates in communities where it conducts business.
In a broader sense, hospitality expenditures are vendor purchases, wages paid, and taxes and fees. These expenditures not only increase the tax revenues of local communities, but also reduces the number of unemployed and welfare recipients in the community. And if we take one step back, we should also include the substantial amount of capital spent on the construction or expansion of the hospitality facility. All these expenses and revenues are injected back in the community in the form of household expenditures and infrastructure.
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