Egon Smeral Prof. Dr. Egon Smeral
Austrian Institute of Economic Research and Modul University, Vienna [email protected]
Introduction
Although tourism plays a significant role in many economies, its economic importance was typically underestimated in the past. One major reason for this was that, unlike output-defined industries such as the construction industry or the car industry or oil production, tourism production activities – which are mostly demand-defined – do not show up in the national accounts as a separate sector. In other words, the widely-used term "tourism industry" is misleading because there is no such thing as a tourism industry.
Experts faced with the problem of measuring the economic importance of tour- ism as well as its contribution to GDP proposed creating so-called Tourism Satellite Accounts (TSAs) and using this tool to prevent tourism from being dismissed as a minor economic player. It took many years of research efforts to find a generally accepted methodological framework for building and imple- menting a TSA (Delisle 1999; Frechtling 2009; Heerschap et al. 2005; Meis 1999; Nordstrom 1996; Paci 1998; OECD 2000; Rivera 1999; UN et al. 2001 and 2010).
A crucial assumption for developing the TSA was the supposition that the tour- ism system is based on a "satellite" that has only producers delivering their goods and services directly to the tourists and in this sense is not indirectly linked to other sectors. All leakages from the tourism satellite are counted as imports from other "satellites" or "planets".
In the TSA world tourism is seen as demand-defined and only those effects are considered that are generated by the direct economic relationship between guest and producer (Barber-Dueck and Kotsovos 2003; Gaillard, Rütter and Berwert
H. Pechlaner, E. Smeral (Eds.), Tourism and Leisure, DOI 10.1007/978-3-658-06660-4_5,
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2003; Kass and Okubo 2000; Meis 1999; Smith and Wilton 1997). In other words, it does not appear necessary to consider inputs from other sectors needed for tourism consumption. As the focus of the TSA is directed solely at the eco- nomic effects resulting from the direct relationship between consumer and pro- ducer it is difficult to compare the demand-side-measured tourism-related GDP to the overall GDP. Such a simple division/relation would lead to an underesti- mation of the impact of tourism activities, because the overall GDP also in- cludes indirect effects caused by economic inter-linkages. Expressed in a differ- ent way, the tourism value added captured on the basis of pure TSA definitions does not count the indirect value-added effects generated by deliveries made by industries such as agriculture, food and beverage production, banking or insur- ance to the touristic producers (e.g. hotels, restaurants). As a consequence, cap- turing tourism activities based on their contributions to GDP would make sense only if the tourism-related value added triggered by indirect effects were con- sidered as well. The same problems would occur if we captured the tourism- generated employment effects based only on the effects of the direct relationship between tourists and producers. Or to put it more succinctly: many countries introduced a TSA in order to avoid underestimating tourism as a major econom- ic phenomenon and in this way managed to solidify their underestimation of tourism’s economic importance in terms of value added and employment ef- fects. To the best of the author’s knowledge, there are only two countries (Aus- tria and Germany) which consider the indirect effects generated by tourism (Bundesministerium für Wirtschaft und Technologie (BMWi) 2012; Laimer, Ehn-Fragner and Smeral 2013).
A further, albeit minor, problem is that the TSA assumes that expenditures by residents on business trips are part of the final demand. However, intermediate consumption such as business trips by residents is not considered in the GDP calculations so the TSA value added overestimates the impact of the sector in relation to GDP.
After a short description of the core concept underlying the TSA the paper shows that in order to properly measure the impact of the tourism industry on the national economy (including the indirect value added and employment ef- fects) it is necessary to adjust the basic TSA results for indirect effects and in- termediate consumption such as business trips. Using the case of Austria and Germany, the paper demonstrates the extent to which tourism’s impact on GDP and employment is underestimated when only its direct effects in terms of the TSA definitions are considered. The paper concentrates only on the important overall impact measurement; allocation of tourism budgets to the various spend- ing items and products as well as the related detailed value-added and employ- ment effects are not considered and should be part of another paper. Neither does the paper deal with an extensive description of the TSA framework, which could be studied along the related basic literature.
A brief summary of the principles of the TSA techniques
The TSA is a method to measure and analyse tourism as an economic phenome- non in terms of national accounts and other statistics. The framework for im- plementing the TSA is the national accounts. Yet the TSA is much more than merely a subsystem of the national accounts, mainly because additional infor- mation may be added as required.
The purpose of a TSA is (Frechtling 2009) "to analyze in detail all the aspects of the demand for goods and services associated with the activity of visitors; to observe the operational interface with the supply of such goods and services within the economy; and describe how this supply interacts with other economic activities".
The TSA design spans three production sectors: the "tourism-specific" sector, the "tourism-related" sector and the "non-tourism-specific" production sector.
They respectively produce "tourism-specific", "tourism-related" and "non- tourism-specific" goods and services. Therefore, tourism consumption compris- es "tourism-specific" (e.g. accommodation, travel agencies, and cableways),
"tourism-related" (restaurants) and "non-tourism-specific" (e.g. retail trade) goods and services. The latter are those that are supplied or rendered mostly to non-tourists, especially residents.
Basically, the TSA concept in its core area refers to, i.e. primarily hotels, restau- rants, travel agencies, tour operators, culture, entertainment, transportation and travel insurance – in other words: the tourism-specific and the tourism-related sectors. Although calculations of the value-added effects also consider the non- tourism-specific sectors, employment effects are calculated based only on the tourism-specific and the tourism-related sectors.
Adjusting the TSA in a macroeconomic context
The TSA considers only direct tourism demand, which includes spending by (or on behalf of) the visitor on goods and services prior to, during and after a jour- ney and made in connection with the journey (Smeral 2006). In order to meas- ure the economic importance of tourism in the TSA context, it is therefore nec- essary to focus on the direct link between the (spending) tourist and the (receiv- ing) supplier: based on these definitions, the TSA shows up these links and the value added generated from them (Smeral 2005).
Because of the narrow tourism definition of the TSA concept which considers only direct physical and economic links, many indirect effects caused by eco- nomic inter-linkages are neglected, so that it fails to capture the true economic importance of tourism and the subsequent employment effects. As a result, the
national TSA-based economic impact in terms of value added and employment can be compared only with the TSA results of other countries/regions or with satellite accounts computed in a similar manner for other sectors. Expressing the tourism value added and the employment effects of tourism measured only through TSA techniques as a percentage share of overall GDP and overall em- ployment is conceptually limited, with the result that the missing indirect effects of tourism down-bias the total impact of tourism.
The direct and indirect effects generated by tourism demand as well as the effect of tourism on the overall national economy can be described through an in- put/output analysis. This method allows computing indirect value-added and employment effects in addition to direct ones.
The basic concept underlying the input-output model is that demand for prod- ucts of a given industry determines more than just its own (net) output and the connected employment effects; it also indirectly influences production and em- ployment in the delivering industries. This indirect generated output and em- ployment in turn results in inputs from other industries which in their turn expe- rience employment effects. Moreover, these delivering industries require prod- ucts from other industries for their own production, resulting in demand and employment cycles. To summarise: an autonomous increase in demand results in a multiplier process which creates direct and indirect value-added and em- ployment effects. The smaller the direct and indirect leakages (imports of the country) the greater are the domestic effects from an increase in demand.
The TSA concept treats business trips as part of final tourism demand so that they contribute to the value-added level. When relating the TSA value-added data to the national value added, an adjustment is therefore necessary, as the intermediary demand generated by the business trips of residents needs to be seen as intermediary consumption in a macroeconomic view. For this reason the value-added and employment effects related to residents’ business trips need to be deducted from the results in accordance with the TSA context.
TSA results and extensions – the cases of Austria and Germany
In the case of Germany, the latest TSA results are available for 2010: the entire direct and indirect tourism value added amounted to € 156.5 billion or 7.1% of GDP. Of this, € 97.0 billion or 4.4% of GDP are allocated to the direct effects and € 59.5 billion or 2.7% of GDP are generated by indirect value-added effects (BMWi 2012). As these calculations also contain the expenditures by Germans for domestic business in Germany, an adjustment is necessary to highlight the macro-economic relevance of the impact. Own estimations showed that the true value-added effect of tourism in Germany seems to be around 6¾% of GDP.
In evaluating the tourism-generated value added effects in Germany the induced effects of tourism were quantified as well, separately capturing the value-added effects of expenditures based on the direct and indirect earned incomes of work- ers, which produced a figure of a magnitude of additional 2.6% of GDP (BMWi 2012). However, taking into account that the GDP does not contain induced effects, such a perspective would mean that the impact of tourism is overesti- mated.
In Austria the whole direct and indirect value added in 2012 amounted to € 22.7 billion (excluding business trips by Austrians in Austria; 2010: € 21.2 billion).
Of this, € 16.9 billion or 5.5% of GDP are allocated to direct effects and € 5.8 billion or 1.9% are generated by the indirect value-added effects (Laimer, Ehn- Fragner and Smeral 2013). The total amounts to 7.4% of GDP (excluding busi- ness trips by Austrians in Austria; 2010: 7.4%).
In Germany, direct and indirect effects of tourism in 2010 produced an employ- ment figure of a magnitude of 3.83 million persons or 9.4% of the total em- ployment in the overall economy (BMWi 2012). Like the value-added effects, this figure contains the effects generated by the spending by Germans on busi- ness trips in Germany and therefore requires a correction: own estimations found that, realistically, tourism contributes about 8¾% to total employment.
In Austria the direct and indirect employment effects of tourism amounted to 0.33 million persons or 9.2% of the overall employment in terms of full-time equivalents. Austrian figures are difficult to compare with German results as for Germany the employment effects are calculated on the basis of employed per- sons without considering the hours effectively worked (BMWi 2012; p. 12).
Conclusion
Countries measure economic activities – GDP, employment, demand – on the basis of internationally agreed standards for National Accounts. As part of the national economic system, tourism is already taken into account in the National Accounts: the commodities produced and purchased by visitors are considered in the core accounts. Because tourism is not identified as a separate activity, the relevant goods produced and consumed are not recognisable as separate statisti- cal items but are hidden in other elements of the core accounts. The TSA is a tool to create tourism-related statistics which provides a framework for the anal- ysis of issues related to tourism economics, for model building and tourism growth analysis as well as for measuring employment and productivity.
The existence/availability of quantitative information about the macroeconomic impact of tourism and its contribution to the overall value added and employ- ment is a crucial parameter for economic policies and especially for tourism
policy. In order to properly calculate the total economic impact of tourism it is necessary to correct the TSA results for indirect effects generated by tourism, as the pure TSA concept considers only direct value-added and employment effects based on the direct economic relationship between consumer and producer. To avoid an underestimation of tourism, inherent in the TSA framework, as a major contributor to value-added and employment creation this later correction helps to perceive tourism activities and their impact on the overall economy from an unbiased perspective. Moreover, for an overall economic perspective and a proper calculation in the context of the macroeconomic framework it is neces- sary to exclude business trips by residents within their own country in order to get correct impact figures as well as avoid double accounting.
Calculations for Germany and Austria showed that by additionally capturing the indirect effects the total impact figures could be raised significantly: In terms of tourism value added the indirect effects make up more than one third (Germany) and about one quarter (Austria), respectively, of the total effects. In terms of tourism employment, the indirect effects amounted to around one quarter (Ger- many) and one fifth (Austria) of the overall impact, respectively.
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