The economic performance of a region is commonly viewed from its economic growth. The better the economic growth of a country shows an increase in people's ability to meet the needs of various types of goods with economic value. According to [1] an increase in output or a state income is closely related to the rise in people's income. The total number of output and the number of the population are the two most crucial aspects in determining the per capita output. Another determining element is long-term economic growth, which is a condition that shows that per capita output increases across the years [2] Economic development is influenced by growth in economic sectors, such as the tourism sector.

Tourism is a dominant sector in increasing the economic growth of a region. Even the tourism sector has become a sector of concern for global economic development. In Indonesia, tourism is one of the industries that provide income for the country and absorbs a lot of labor. With the presence of tourists in a host country, it will create a demand for various tourist needs, such as hotels or residential houses, food and souvenirs. In addition, tourists also encourage economic activities for the communities around tourist sites. This, of course, opens opportunities for the community to meet the needs of tourists, so that many restaurants, hotels, transportation or vehicles are rented out privately or used for tourism purposes. In summary, the tourism sector contributes to the economic growth of the community [3]

Aceh is a province in Indonesia that has tremendous tourism potential because of its natural views, which have attractive panoramas, such as sea and beaches, mountains and lakes with natural nuances. Banda Aceh City is one of the areas visited by many tourists who want to enjoy tourist objects. This is what encourages foreign and local tourists to visit the region. Banda Aceh has many exciting places that can be visited and enjoyed as tourism icons. The city of Banda Aceh has Ulee Lheu Beach as a tourist location, a tsunami museum that provides an overview of the tsunami events that occurred in Aceh in 2004, and the Aceh museum which has stories about Acehnese customs and culture. No less impressive is the Baiturrahman Grand Mosque, which is the main icon of Banda Aceh City. 

Previous researches documented that the development of the tourism sector is primarily determined by the availability of tourism facilities, such as hotels, restaurants and transportation. Without the support of adequate tourism facilities, attractive tourist objects, tourists are less interested in visiting these tourist areas. This, of course, will cause the tourism sector to be unable to drive economic growth. Researches conducted by [4,5] found that the number of restaurants and hotels had a significant positive effect on the development of the tourism sector and economic growth. The same result is also found by [6], where the number of hotels and tourist objects determines the development of the tourism sector, which has an impact on increasing economic growth. In contrast to previous research, [7] found that the tourism sector has an insignificant effect on regional economic growth. 

The results of previous studies showed mixed findings; some found a positive effect of tourism on the economy, while others found an insignificant effect. In other words, the tourism sector was found to be capable and unable to support economic growth. Encouraged to offer the latest empirical results, this study aims to examine the contribution of the tourism sector to the economic growth of Banda Aceh City, Indonesia. More specifically, this study examines and analyzes the influence of the number of foreign and domestic tourists, the number of hotel occupancy, and the number of tourist objects on the economic growth of Banda Aceh City, Indonesia during the period 1998-2017. The results of this study are expected to become a reference for the formulation of policies for the development of the tourism sector so that it can play a positive role in regional economic growth.

The rest of the study is structured in the following sequences. Section 2 reviews the relevant theories and existing literature. Section 3 provides the data and research framework, followed by the discussion of the findings in Section 4. Finally, Section 5 concludes the paper.

Tourism and Economic Growth

Tourism and economic growth are closely connected. According to the United Nations World Tourism Organization (UNWTO), the tourism sector opens up opportunities, especially for marginalized areas with several export options. Tourists who are interested in cultural values ​​and assets in the country, for example, culture in developing countries promote tourism through the preservation of heritage values. This allows the poor to increase their income through the culture and assets they have [8]. Tourism is also an export sector where people can sell goods to foreign tourists. Besides, tourism can create jobs and contribute to increasing people's income [9]

Furthermore, [10] explains the impact of tourism and on macroeconomic conditions. Tourism has a direct effect on the economy, including on job creation, income redistribution and strengthening the balance of payments. Tourist spending, as an alternative form of export, contributes in the form of foreign exchange earnings (balance of payments) and the income derived from tourism expansion. Foreign exchange earnings from tourism can also be used to import capital goods to produce goods and services, which in turn lead to economic growth. In addition, tourism has an induced impact on the market for certain products, the government sector, taxes and also an imitation effect on the community. One of the main benefits expected of local communities from tourism is that it contributes significantly to the regional economy, primarily increased income and new jobs in the region. Business people in the areas, of course, benefit directly from tourist spending. Because business operators pay workers and because businesses and workers spend their increasing wealth, the whole local community also enjoys benefits so that the money spent by tourists is additional new money in the regional economy, not the previous assets that are recycling. 

In general, the impact of tourism is measured in two stages, namely the direct and indirect effects on the economy. The immediate effect is measured, among others, by the level of tourism foreign exchange spending and its impact on employment. Meanwhile, the indirect implications include measuring the impact on national income. In the long term, the impact of tourism on increasing economic growth can be identified through several six channels [11], namely:

1. Tourism is a relatively large foreign exchange earner, which is available for the payment of imported essential goods or raw materials used in the production process. 

2. Tourism plays a vital role in encouraging investment in new infrastructure and competition between local companies and companies in other tourist countries. 

3. Tourism stimulates other industries, either directly, indirectly or stimulating effects.

4. Tourism contributes to creating jobs and increasing income.

5. Tourism can lead to positive exploitation of the economies of scale of national companies

6. Tourism is an essential factor for the diffusion of technical knowledge, stimulation of research and development, and accumulation of human capital. 

However, tourism also has two negative implications for the host country and the local community [12]. First, the occurrence of import and export leakages causes a decrease in workers' income and local business revenue. Import leakage includes import expenditures for equipment, food and beverages, and other products that cannot be met by the host country, which comply with international tourism standards. Export leakage is the outflow of profits earned by foreign investors who finance resorts and hotels. Foreign investors transfer tourism revenues or profits out of the host country. Second, there are limitations to benefits for local communities that occur because services to tourists are entirely inclusive. The existence of 'all-inclusive' tourism packages in the tourism industry where everything is available, including all expenditures defined by international tourist measures and provides fewer opportunities for local people to benefit from tourism. 

Previous Related Studies

Research related to the effect of tourism income on the economy has been previously studied in both developed and developing countries, including Indonesia. For example, [13] found that the tourism sector contributed positively to the economy in Iran. [14], in his research in 10 European countries during the period 1995 - 2012, found that the tourism sector is one of the critical sectors that support economic growth. [15] show that a 10% increase in tourism productivity has increased the added value of the tourism sector by 4.11% and led to the economic growth of 0.61% in Spain. The contribution of the tourism sector to the economy was also found in Malaysia by [16]. Therefore, policy initiatives that promote tourism are necessary so that the tourism sector can make a significant contribution to the country's economic growth. 

In Indonesia, [5] found that the number of tourists, the number of restaurants, and the number of hotels had a significant positive effect on the economic growth of the city of Padang, West Sumatra, Indonesia. [4] also found that the number of domestic tourists and the number of non-star hotel rooms has a significant effect on the economy. Likewise, [6] found that hotel investment and the number of foreign tourists had a considerable impact on the economic growth of East Java, Indonesia. The number of tourist attractions and the number of hotels was found to affect increasing economic growth [17]. However, the results of this study contradict Kamila's (2016) research which shows that the tourism sector does not affect regional economic growth. 

Furthermore, [18] found that the number of tourist visits and hotel occupancy rates has a positive and significant effect on local revenue, while the length of stay of tourists has no impact on local income in regencies/cities in Bali Province. Regional original opinion as a mediating variable in the relationship between the number of tourist visits, length of stay of tourists and hotel occupancy rates affect the welfare of the community. The results of this study are the same as found by [3] where the number of foreign tourist visits has a significant positive effect on the regional economic growth of Sabang City, Aceh, Indonesia.

Based on the explanation above, this research will focus on three tourism factors that affect economic growth. First, the number of domestic foreign tourists, which are a person who travels from his place of residence without settling in the place he is visiting, or only temporarily resides in the place he is visiting. Those who are considered tourists are people who enjoy pleasure, for health reasons and so on. It also includes people who travel for meetings or in their representative capacity (scientific, administrative, diplomatic, religious, athletic and business reasons [19]. Theoretically, the longer a tourist stays in a tourist destination, the more money is spent in the tourist destination. With the existence of consumptive activities from both foreign and domestic tourists, it will increase the income from the tourism sector in an area. Therefore, the higher the flow of tourist visits, the higher the payment of the tourism sector in an area [12]. 

Second, the number of tourism objects. A tourism object place is a place or natural condition that has built and developed tourist resources so that it has attractiveness as a place visited by tourists. A good tourist destination should offer something exciting and unique to see, to buy, and to do, which are all different from the other tourism objects [20] 

Finally, the hotel occupancy rate, which the percentage of the rooms of the hotels' occupation also influences economic growth.  Hotel is a business that uses a building or a part of it that is specially provided, where everyone can stay and eat and get services and other facilities with payment. Hospitality has a role as a driver of regional development; it needs to be appropriately developed so that it can drive industrial income, absorption of labor and business expansion. With the availability of adequate hotel rooms, tourists will not hesitate to visit an area, especially if the hotel is comfortable to stop by and feel safer, more comfortable to stay longer in tourist destinations. Therefore the tourism industry, especially activities related to lodging, namely hotels, the longer the tourists stay, the higher the revenue earned by hotels.

This study explores the effects of the number of foreign and domestic tourists, tourism objects, and hotel occupancy on the economic growth of the Banda Aceh City, Indonesia over the period from 1998 to 2017. Economic growth is measured by changes in the gross domestic product, while the foreign and domestic tourists, tourism objects, and hotel occupancy are measured in the number or monetary unit. The data are gathered from the Central Statistic Bureau of the Aceh Province. 

In this study, four variables are investigated, namely, economic growth (dependent variable), the number of foreign tourists, domestic tourists, tourism objects, and hotel occupancy (independent variables). To measure the effects of the number of foreign and domestic tourists, tourism objects, and hotel occupancy on the economic growth of the Banda Aceh City, Indonesia, the following multiple linear regression analysis is estimated. 

ECG = b₀ + b₁FRT + b₂DTR + b₃NTO + b₄HOR + e ……....(1)

where ECG is the economic growth, FRT is the number of foreign tourists; DTR is the number of domestic tourists; NTO is the number of tourism object; HOR is the hotel occupancy rate, b_i is the estimated regressors, and e is the error term.

FINDINGS AND DISCUSSION

The number of foreign tourist visits to Aceh has continued to increase over the last decade. For example, in 2007, only 6,299 foreign tourists had increased to 16,274 people in 2017. Likewise, domestic tourists have increased from 92,078 in 2007 to 272,079 in 2017 [21] The increase in domestic tourists visiting Banda Aceh City is indeed more much compared to the arrival of foreign tourists. This is an essential point for the government to be able to formulate a more effective strategy in attracting foreign tourists. 

In terms of tourism objects, it had also increased from 13 units in 2007 to 28 units in 2017. Similarly, the number of hotels has also increased from 17 units to 45 units in 2017. However, their quality is of the utmost importance to attract more tourists to stay longer in the city. More attractive and unique tourism objects and comfortable hotels should be provided so as the tourists would feel like in their homes and have the intention to revisits. The gross domestic product of the city has increased from IDR2,558 trillion in 2007 to IDR16,808 trillion in 2017. To what extent an increased in the city gross domestic products has been contributed by the tourism sector? The findings of the estimated multiple regression reported in Table 1 provides the answer.

Table 1. Findings of the effect of the tourism sector on economic growth 

Note: ^*** indicates significance at the 1% level.

As illustrated in Table 1, all variables are found to have a significant positive relationship to economic growth. Specifically, the constant is found to have a positive effect on the economic growth with the estimated value of 4.424 at the 1% significance level. This shows that without the presence of tourists, tourism objects, and hotels, the growth of the economy occurs at 4.424% annually. This is contributed by economic sectors other than tourism. However, the presence of tourism sector could enhance further the existing economic growth. 

As for the tourism visits, the number of foreign tourists and domestic tourists has a positive effect on the economic growth with the estimated values of 0.354 and 0.130 at the 1% significance level, respectively. These findings show that a 10% increase in the number of foreign and domestic tourists’ visits have, respectively, contributed to the rise in economic growth by 3.54% and 1.30% annually. It not surprising that the presence of foreign tourists as compared to the domestic tourists' visits has contributed more to economic growth. This could be partially due to the higher number of income spent by foreign tourists to purchase foods and services, including souvenirs considering cheaper local prices. These findings imply that to promote economic growth, the government should attract more foreign tourists by enhancing tourism promotion and providing complete tourism facilities as well as a conducive tourism environment. 

Furthermore, the number of tourism objects has a positive effect on economic growth with the estimated values of 0.403 at the 1% significance level. This finding shows that a 10% increase in the number of tourism objects has contributed to an increase in economic growth by 4.403% annually. More attractive and unique tourism objects should be provided so as the tourists would feel like in their homes and have the intention to revisits, and this consequently improves economic growth.

Finally, Table 1 shows that the hotel occupancy rate has a positive effect on the economic growth with the estimated values of 0.340 at the 1% significance level. This finding indicates that a 10% increase in the hotel occupancy rate has contributed to the rise in economic growth by 4.403% annually. A more comfortable and access hotels equipped with standardized facilities should be made available to make tourists feel like in their homes and stay longer. They more and longer tourists remain in the host country, the more the spending and causing a higher economic growth of the city.

The estimated findings of our study are free from model misspecification, as shown by the significance of the coefficient of determination at the 1% significance level (F-Stats = 57.228 and F-Sig = 0.000).  The coefficient of determination of Adjusted- R² of 0.922 shows that the variations in economic growth are explained 92.20% by the changes in the number of foreign and domestic tourists’ visits, tourism objects, and hotel occupancy rate. In contrast, only 7.80%of changes in economic growth in the city are predicted by other variables excluded in our estimated model. 

Overall, our findings are supported by many previous studies. For example,  [5] found that the number of tourists and the number of hotels had a significant positive effect on economic growth. Similarly, [4] also documented a significant positive impact of the number of domestic tourists and hotel rooms on economic growth. [6] and [17] found that the number of foreign tourists and hotels had a significant effect on economic growth. [18] also found that the number of tourist visits and hotel occupancy rates has a positive and significant impact on domestic economic growth.

Our findings suggest the critical role of the tourism sector in promoting economic growth of the Banda Aceh City, Indonesia. The government should design a proper strategy to attract more tourists, mainly from abroad by creating more attractive and unique tourism objects and ensure the availability of hotels that equipped with standardized facilities. These government programs should get supports from the public to welcome and entertain tourists warmly as their visitors. This is in line with the local wisdom "peumeulia jamee adat geutanyoe” (glorify tourists as our tradition guests)[22].

This study empirically explored and analyzed the impact of the tourism sector on the economic growth of the Banda Aceh City, Indonesia over the period from 1998 to 2017. Using the multiple regression analysis, the study documented that the number of foreign and domestic tourists' visits, tourism objects, and the hotel occupancy rate has positively and significantly contributed to economic growth. These findings suggest that to attract more tourists internationally and domestically, the availability of tourism objects and hotels should be made attractive, accessible, and comfortable. This would attract tourists to feel like in their homes and stay longer, thus spending more to buy goods and services in the city. This, in turns, enhances the contribution of the tourism sector to economic growth. 

To enhance the contribution of the tourism sector to the economic growth of the Banda Aceh City, the relevant government authorities are expected to improve aspects that support the development of the tourism sector, such as adequate tourism facilities, comfortable accommodations, and restaurants that meet the needs of tourists domestically and internationally. These government programs should get supports from the public to welcome and entertain tourists warmly as their visitors. 

To provide more comprehensive findings on the contribution of the tourism sector to the economic growth, future studies are suggested to explore the contribution of the tourism sector to poverty, unemployment, and income disparity reduction as well as price stability. Comparing the contribution of the tourism sector across cities in Indonesia nationwide would also enrich the existing empirical findings.

The authors declare that they have no conflict of interest

No funding sources

The study was approved by the Universitas Syiah Kuala, Indonesia.

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