There is a close relationship between demand for leisure and demand for recrea- tional products and services that would include those provided to the tourist and leisure traveler. Demand for business travel services would be similarly related to overall business conditions as measured through growth of the economy and corporate profits. For either consumers or businesses, though, demand for travel is derived largely from the needs and desires of people to dootherthings. As Button (2010, p. 416) explains, travel is “one of a whole range of complementary and competitive activities operating in a sequence of events in time and space. . .people trade time to move location.”
National Income and Product Account (NIPA) data classify spending on transpor- tation and on recreation as subsets of total personal-consumption expenditures (PCEs) and are shown in Table1.5. This table is particularly important because it allows comparison of the amount of transportation and leisure-related spending to the amount of spending for shelter, food, clothing, national defense, and other items.28 A summary of the approximate (and slow-to-change) percentages of all PCEs allo- cated to selected main categories in 2014 were:
0.0 0.2 0.4 0.6 0.8 1.0
2 4 6 8 10 12 14 16 18 20
airport passengers Fraction of top rank
theme park attendance hotel rooms
casino sq. ft.
number of hotels city pair traffic
Rank
Fig. 1.13 Power laws in action: Airport arrivals, origin-destination, theme park attendance, and hotel rooms operated, 2013. Indexed global rankings for airport traffic, casino size, city pair traffic, hotel rooms, number of hotels, and theme park attendance, 2012 or 2013, withx-axis direction from previous Fig.1.12reversed. Various industry ranking sources
28The complete PCE tables include much greater detail than is shown here.
1.4 Personal-Consumption Expenditure Relationships 25
Housing 18.2 %
Health care 16.7
Food (excl. alcohol bev.) 7.4
Recreation services 3.7
Clothing 3.1
Transportation services 2.9
Casinos 0.8
Hotels and motels 0.7
Airlines 0.4
However, if indirect spending for restaurant meals, private-car gasoline, and other related items are also to be included, total spending on travel as a percentage of personal consumption expenditures is actually much larger than what appears in these categories. Indeed, total expenditures for travel and tourism including such items has been estimated by the United States Bureau of Economic Analysis to amount to approximately 5 % of United States gross domestic product (GDP) and 3.3 % of employment.29In other developed countries, these percentages are apt to be proportionally similar.
Table 1.5 PCEs for travel and transportation, selected categories, in billions of current dollars, 1980–2014
1980 1990 2000 2014
PCE total 1,755.8 3,835.5 6,830.4 12,930.3
PCE on all transportation services 55.4 126.4 263.5 344.9
Transport services % of total PCE 3.2 3.3 3.6 2.9
Motor vehicle services 35.1 87.2 189.3 246.4
Purchased local transportation
Mass transit systems 3.0 7.1 10.9 19.8
Taxicab 1.9 2.6 3.1 5.7
Purchased intercity transportation
Intercity railways 0.6 0.7 0.6 1.3
Intercity buses 0.9 0.6 1.4 1.2
Airlines 12.8 25.9 49.2 52.6
Total recreation services 40.8 121.8 255.5 444.6
Hotels 8.1 22.3 45.7 89.2
Net foreign travel 1.7 10.3 16.5 54.4
Foreign travel by US residents 13.3 42.7 84.3 134.1
Source: U.S. Bureau of Economic Analysis, available at:www.bea.gov
29The estimate of 4.6–5.3 % for 1992 appears in Okubo and Planting (1998, p. 9). It was also found that value added in travel and tourism represented 1.9–2.2 % of GDP, with hotels and lodging generating the highest value added.
Another way to visualize the longer term shifts in spending preferences is provided in Fig. 1.14 in which it can be seen that spending for transportation services as compared to some other categories has held to a fairly stable percentage of all PCEs, whereas the percentages spent on medical services clearly has risen and that on clothing and food have declined.
Yet because travel is a composite activity involving elements of both transpor- tation and recreation, the close-up view provided in Fig.1.15is, in some respects, more revealing. It is interesting to also see that the percent of PCEs spent on intercitytransportation—the component of total transport services that practically defines travel—has recently declined slightly.
Measurement of real (adjusted for inflation)per capitaspending on total trans- portation and recreationservicesprovides another long-term view of how Ameri- cans have allocated their travel-related dollars. Figure1.16illustrates the start of a steeper uptrend in spending for travel and recreation services, both of which have
- 6 12 18
80 90 00 10
Transportation services
%
All recreation Food
Clothing Medical services
Fig. 1.14 Trends in percent of total personal
consumption expenditures in selected categories, 1980–2014
- 1.5 3.0 4.5
60 70 80 90 00 10
%
Recreation services Total transportation
Intercity Fig. 1.15 Transportation
services (total and intercity) and recreation services as a percent of total PCEs, 1960–2014
1.4 Personal-Consumption Expenditure Relationships 27
mostly moved similarly.30The time around 1980 appears to be pivotal for recrea- tion spending while also reflecting the price-lowering effects of global airline deregulation, declining oil prices, and the introduction of wide-bodied planes (i.e., new technologies).
Still, various travel industry sectors will have markedly different responses to changing conditions: Travel-sector time series comparisons against components of gross national product or gross domestic product (GDP) accounts are fairly limited in what they can convey about the degree of recession resistance or cyclicity of travel relative to that of the economy at large.31
What can be asserted with virtual certainty, however, is that the positive relation between income and travel is seen globally. As Schafer and Victor (1997) note:
throughout the world, personal income and traffic volume grow in tandem. As average income increases, the annual distance traveled per capita by car, bus, train or aircraft. . .rises by roughly the same proportion. The average North American earned $9600 and traveled
0 150 300 450 600 750
60 70 80 90 00 10
Transportation
Recreation
$
Fig. 1.16 Real per capita PCE on transportation services and recreation services, 1960–2014
30However, the entertainment services series as a percentage of total recreation spending has demonstrated considerable volatility since 1929. This series hit a peak of nearly 50 % in the early 1940s, when there were relatively few consumer durables available. Then, for a dozen or so years ending in the late 1970s, the percentage had been confined to a fairly narrow band of 33–36 %.
31GNP measures output belonging to U.S. citizens and corporations wherever that output is created, whereas GDP measures the value of all goods and services produced in a country no matter whether that output belongs to natives or foreigners. In actuality, in the United States the differences between the values of the two series have been slight.
Critics of National Income Accounting, for example Cobb et al. (1995), argue that GDP measurements allow activities in the household and volunteer sectors to go entirely unreckoned. As a result, GDP measurements mask the breakdown of the social structure and are grossly misleading. As they put it, “GDP does not distinguish between costs and benefits, between productive and destructive activities, or between sustainable and unsustainable ones. The nation’s central measure of well-being works like a calculating machine that adds but cannot subtract. . .The GDP treats leisure time and time with family the way it treats air and water: as having no value at all.” (pp. 64–67) See also Uichitelle (2006) and Zencey (2009), who say that the “basic problem is that gross domestic product measures activity, not benefit.” Stiglitz et al. (2010) discuss additional problems in viewing economic activity through GDP metrics.
12,000 kilometers (7460 miles) in 1960; by 1990 both per capita income and traffic volume had approximately doubled.32
In addition to a budget for income there is also a budget for time, and at the aggregate level, as Button (1993, p. 40) suggests, “time expenditure on travel per head increases roughly proportionally to income budgeted for travel.”
Although not the same as Schafer and Victor’s (but still validating their point), Fig. 1.17 indicates that, since 1950, growth of per-capita passenger-miles—a measure of the quantity of transportation services demanded—has risen at a compound annual rate of approximately 2.2 %. In other words, the average Amer- ican of the early 2000s each year traveled more than 10,000 miles by air, rail, bus, and private automobile as compared to 3000 miles a half a century ago. Of this recent total, however, only around 1800 miles were by public carriers. Americans now not only drive a lot more than they used to but each person is also on the average taking more trips and longer trips. An international perspective is later provided by Fig.2.4with respect to airline travel.