The services sector is very important to the Gambia's economy. It contributed about 64 percent of GDP in 1998, but engaged only 15 percent of the labor force. The tourist sector is second only to the groundnut industry as the most important source of foreign exchange. Tourism contributed about 10 percent of annual GDP in the early 1990s and employed about one-third of the workers in the formal sector at the same time.
The tourist industry took off in the 1970s and focused mainly on the promotion of beach holidays. The highest levels of growth were recorded in the 1980s and 1990s when the number of visitors rose to 100,000 a year. The international response to the coup of 1994 and its aftermath had a severe impact on the sector, although it recovered strongly from 1996 onwards. The industry registered 80,000 tourists and generated US$22 million (9.6 percent of exports of goods and services) in 1997, and 92,000 tourists in 1998. The industry is centered in Banjul where there is a 5-star hotel with conference facilities, and several other high-quality hotels. The majority of the tourists are from Northern Europe.
The government has expressed intentions of further exploiting the country's potential as a transit point for regional trade and also as a center for regional finance and telecommunications. According to IMF figures, re-exports contributed about 84 percent of the value of total merchandise exports in 1998. The GDP of the services sector increased at an annual average rate of 3.7 percent between 1990-98 and growth in 1998 was estimated at 5.8 percent.