The diagram illustrates how a tourist resort can develop through hotel construction, job creation and reinvestment.
Overall, resort development is a cyclical process in which new hotels stimulate employment and business activity. This generates income and tax revenue, allowing improvements that make the destination more attractive and encourage further investment. However, some money is lost through leakage.
Initially, new hotels create jobs directly and generate demand for services supplied by local businesses. Hotel development, together with these local services, also attracts other companies to the area. These businesses create additional employment indirectly, further increasing the number of people earning an income locally.
Workers then spend their earnings within the area, supporting further job creation and increasing tax revenues. In turn, the additional jobs provide more income for local spending, reinforcing this cycle. The resulting tax revenue is used to improve infrastructure, enhance the resort’s image and develop tourist services.
These improvements make the area a more popular tourist destination, increasing profitability and generating revenue for reinvestment. This encourages the establishment of further hotels, restarting the development cycle. Nevertheless, not all the money remains within the local economy, as a proportion is lost through leakage.