Efficiency and sustainability of the tourism industry in Latin America

Abstract

The tourism industry is economically very important. According to the World Travel Tourism Council, in 2019, the tourism industry accounted for a quarter of all new jobs created worldwide, 10.3% of all jobs, and 9.6×10¹² USD of the global gross domestic product. This study aimed to calculate the tourism efficiency index for different Latin American countries from 2010 to 2021 using data envelopment analysis, which analyzes the relationships between input variables (including the number of employees in the tourism industry and the number of hotel-type establishments) and output variables (including tourism expenditures in other countries and public social expenditures in recreation and culture per capita). Additionally, this study aimed to identify the countries with greater tourism development and the factors that may affect the development of the tourism industry through the stochastic frontier production function. The results of the tourism efficiency index for Central America (including Costa Rica, Dominica, El Salvador, Honduras, Mexico, and Panama) and South America (including Argentina, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, and Uruguay) exhibited different trends. However, after the global health crisis, the tourism industry recovered, showing new opportunities to promote sustainability. The results of the stochastic frontier production function demonstrated that countries with higher levels of inbound and outbound tourism, contribution of tourism to the economy, natural resources, and literacy rate exhibited more efficient tourism industry, whereas countries with higher pollution levels exhibited less efficient tourism industry. The findings of this study could allow us to formulate suitable public policies to promote tourism, maintain natural resources, and diversify these sectors with more inclusive programmes that can facilitate growth and benefit vulnerable communities.