1 PROGRAMA SECTORIAL DE TURISMO 203-208, DIAGNOSTICO
4.2 Evaluación y Formulación de Proyectos de Inversión
Since recognition of the economic importance of tourism industry, in researches various methods, approaches have been used for estimating the economic impact of tourism on the counties economies, in macro and micro levels. As a sequence of lack of data, sometimes researchers facing limitation for the method choice, the choice of the analysis methodology often rely on the available dataset. In the tourism economic impact analysis studies, most frequently used methods, approaches are economic multipliers general equilibrium models, which includes Money Generation Model; I-O model with economic multipliers, Tourism Satellite Account、etc. Some general assumptions and methods are discussed below.
Tourism-based development is playing a pivotal role by contributing significantly to the GDP of developed and developing economies. Besides, it also receives a wide-spread recognition because of its ability to eliminate the disparities in the balance of payment (BOP) conditions by contributing positively to the services account of the BOP. The continuous expansion of the tourism sector made it possible to recognize it as the largest and fastest growing industry, considering either in a country specific or an aggregate global
perspective (Mazumder et al., 2012) .
Economic impact studies in travel and tourism are undertaken to determine the effects of specific activities in a given geographic area on the income, wealth and employment of that area's residents. They are conducted for cities, counties, states, provinces, nations, and for individual facilities (e.g., museums) and events (e.g., Olympic Games). They often relate to an annual period, although seasonal and event impact studies are not unknown.
The results indicate the contribution or cost of tourism activity to the economic well-being of residents of an area, usually in monetary terms (Frechtling, 1994).
The facts that tourism creates jobs and that tourist spending generates not only direct but also indirect and induced effects, and it is in strong interrelation with various sectors in the economy makes its development extremely beneficial for the countries’ economic development.
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Tourism business depends extensively on each other as well as on other businesses, Government and residents of the local community. Economic benefits and costs of tourism reach virtually everyone in the region in one way or another. Economic impact analysis provides tangible estimates of these economic interdependencies and a better understanding of the role and importance of tourism in the region’s economy (Malviya, 2005, vol1).
According to the tradition of tourism economic studies, “the economic impact of tourism”
is a term that covers one, some or all of the following economic changes resulting from the presence of visitors in an area, their activities or their expenditures (Frechtling&Smeral, 2010):
Business receipts
Value added contribution to gross domestic or regional product
Employment (jobs, persons employed)
Labor earnings
Other factor earnings (dividends, interest, rent, profits)
Government tax revenue
Other government revenue (e.g., user fees, fines, receipts of government enterprises)
Distribution of income
Government spending
Externalities and public goods
Multiplier effects on transactions, output, income, employment or government revenue
New business formation
Real property and other asset values
Business investment in plant and equipment
Price levels
Interest rates on borrowed funds or return on capital
Foreign exchange rates
Imports and exports
International Balance of PaymentsSimply triple effects of tourism spending are:
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1. Direct: the spending of tourists in tourist destinations, example; in restaurants: food, beverages, etc.
2. Indirect: payments (profit) made to suppliers: food, beverages etc.
3. Induced: the sending’s (profit) generated from the indirect effect spending.
Many scholars defined tourism spending triple effect:
The most direct effects occur within the primary tourism sectors - lodging, restaurants, transportation, amusements, and retail trade. Through secondary effects, tourism affects most sectors of the economy. An economic impact analysis of tourism activity normally focuses on changes in sales, income, and employment in a region resulting from tourism activity (Stynes, 1997).
Rátz and Puczkó (2002) made a visual explanation of direct, indirect and induced effects of tourism (see Figure 4.1). How does the tourist spending circulate in the economy and generate taxes for the local/country government.
Figure 4.1: Model of the Economic Impacts of Tourism Tourism Spending
Income from tourism received by enterprises (direct impact)
Tax revenues received by local authority (e.g.municipality) Purchases Employment&Wages Induced income from
tourism Income from tourism received by
suppliers (indirect impact) Purchases Employment &
Wages
Income from tourism received by suppliers and their suppliers (purchases, employment & wages) (induced impact)
Source: Rátz and Puczkó, 2002 in Ardahaey,2011
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Styne’s (1997) definition for the triple effects and the outcomes of those triple effects in the economy are:
Direct effects are production changes associated with the immediate effects of changes in tourism expenditures. For example, an increase in the number of tourists staying overnight in hotels would directly increase room sales in the hotel sector. The additional hotel sales and associated changes in hotel payments for wages, salaries, taxes, supplies and services are direct effects of the tourist spending.
Indirect effects are the production changes resulting from various rounds of re-spending of the tourism industry's receipts in backward-linked industries (e.g. industries supplying products and services to hotels). Changes in sales, jobs and income in the linen supply industry, for example, represent indirect effects of changes in hotel sales. Businesses supplying products and services to the linen supply industry represent another round of indirect effects, eventually linking hotels by varying degrees to most other economic sectors in the region.
Induced effects are the changes in economic activity resulting from household spending of income earned directly or indirectly as a result of tourism spending. For example, hotel and linen supply employees supported directly or indirectly by tourism, spend their income in the local region for housing, food, transportation, and the usual array of household product and service needs. The sales, income, and jobs that result from household spending of added wage, salary, or proprietor’s income are induced effects.
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The indirect economic contribution occurs when firms that sell goods and services to visitors purchase inputs from other firms and these other firms (suppliers) purchase inputs from other firms (suppliers). In other words tourism expenditure generates direct, indirect and induced effect in particular destination (Dwyer et al., 2010).
Economic impacts associated with tourism arise as a result of the demand and supply relationships in the industry, the associated visitor and investment expenditure patterns that they stimulate, and the structure of the economy. The demand/supply factors influence the number of visitors, their length of stay, and their expenditure patterns while the economy’s structural characteristics determine its propensity to re-circulate those expenditures internally. The more rounds of circulation generated within the economy, the greater the multiplier effect of the initial stimulus (Antigua and Barbuda Tourism Development Programme, 2003, cited in Ardahaey, 2011).
4.1.1 Visitor Consumption and Visitor Consumption Expenditure (receipts) Visitor Consumption
The components of visitor consumption are shown in Figure 4.2 There are four main categories:
1. Visitor final consumption expenditure in cash 2. Visitor final consumption expenditure in kind 3. Tourism social transfers in kind
4. Tourism business expenses
Visitor final consumption expenditure in cash covers what is usually meant by ‘‘visitor expenditure’’, and is part of the final demand in input –output terms. It always represents the most important component of total consumption. Here, special attention should be paid to consumer durable goods. With respect to tourism, a distinction should be made between
‘‘tourism single-purpose goods’’, which are goods used exclusively on trips (e.g. skiing equipment, camping equipment, and luggage) and ‘‘multipurpose consumer durable goods’’, which are used on holidays, within usual environment (such as cameras and cars).
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Figure 4.2: Components of Visitor Consumption.
Source: Vanhove, 2011
In the framework of the TSA convection, different treatment of both categories of durable is seen. Tourism single-purpose durable goods are always included, whether purchased before, during or after a trip, or even outside the context of a specific trip. Multipurpose consumer durables are only included if purchased during a holiday.
Visitor Consumption Expenditure (receipts)
Preliminaries Economic statistics on total tourism demand, comprising those related to the amount of visitor consumption expenditure are among the most important indicators required by the tourism industry, in particular for policy makers, marketers and researchers.
They are used for monitoring and assessing the impact of tourism on the national economy and on the various sectors of the industry. Visitor consumption expenditure (VCE) is the basic component of total tourism demand. It is defined as the total consumption expenditure made by a visitor or on behalf of a visitor for and during his/her trip and stay at destination. This definition is generally recommended for the collection of data and their subsequent incorporation into tourism economic related statistics (i.e. Tourism Satellite Accounts). Visitor consumption expenditure, apart from intermediate consumption of enterprises, will thus conform to the concept of "final consumption" in the system of National Accounts (NA), regardless of type of consumer. There are various methodological
Tourism
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differences related the definition of VCE taking into account Recommendations on Tourism Statistics (RTS) or Tourism Balance of Payments (TBoP) concepts (International Workshop on Tourism Statistics, 2006).
Simply, tourist expenditure refers to the amount paid for the acquisition of consumption goods and services, as well as valuables, for own use or to give away, for and during the trip. It includes expenditures by visitors themselves as well as expenses that are paid for or reimbursed by others (Statistics of Norway, 2002).