Section 2: Disciplines and Areas of Study
10. Non-monetary indicators
The development of a country’s TSA is a fairly complex and costly process. To record the various economic aggregates, it is necessary to have detailed information about the behaviour of tourists, busi- nesses and the government. These data are gener- ally obtained from different sources, including official records, sample surveys and estimates.
A TSA usually relies on numerous earlier statistical surveys. Nevertheless, the importance of the infor- mation compiled by the TSA causes many countries to try to create such an account. According to the WTO, 60 countries had developed TSAs by 2010 (WTO, 2010).
Operationalizing
Australia has developed the most detailed and accurate TSA. Results for the fiscal year ending in June 2013 indicated that, based on a total tourism consumption of A$109,993 billion, this activity annually generates wealth worth A$42,225 billion, an amount representing 2.8% of GDP.
The detailed results of this research are presented in Fig. 30.
Tourism Satellite Account 103
Exercise
Search the Internet for TSA data from two dif- ferent countries and compare the share of tour- ism in each economy. Also compare the methodology used by each study, paying atten- tion to differences in information sources and how the results are aggregated. Examples of websites that provide a TSA are Statistics New Zealand (New Zealand): http://www.stats.govt.
nz/browse_for_stats/industry_sectors/Tourism/
tourism-satellite-account-2014.aspx#; the Office for National Statistics (UK): http://www.ons.gov.
uk/ons/dcp171776_386386.pdf; and the Census and Statistics Department (Hong Kong): http://
www.censtatd.gov.hk/hkstat/un/curinterest/
tourism_satellite_account/index.jsp.
References
Australian Bureau of Statistics (2013) Tourism Satellite Account: 2012–2013. Available at: http://www.abs.
gov.au/AUSSTATS/[email protected]/MF/5249.0 (accessed 8 September 2016).
United Nations (2008) International Standard Industrial Classification of All Economic Activities: Revision 4.
United Nations, New York.
United Nations System of National Accounts (2009) System of National Accounts 2008. European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations and World Bank, New York.
Department of Economic and Social Affairs, United Nations (2010) Tourism Satellite Account: Recommended Methodological Framework 2008. United Nations, World Tourism Organization, Commission of the European International tourism
consumption
$26,962
Domestic tourism consumption
$83,031 Companies and government
$13,830
Internal tourism consumption
$109,993
Internal tourism consumption at basic prices
$94,430 Cost of marketing national products sold directly to
visitors
$17,993
Direct touristic product
$76,437
Indirect effects on the production
chain
Intermediary consumption of touristic
activities
$37,654
Direct value added from tourism
$38,783
Direct net taxes on
tourism
$3472
Gross domestic product of tourism
$42,255
Indirect net taxes on
tourism
$5241 Cost of marketing
imported products sold directly to
visitors
$6850
Net taxes on tourism
$8713 Families
$69,201
Fig. 30. Summary of Australia’s TSA for the years 2012–2013. Values are given in AUS$. (Adapted from the Australian Bureau of Statistics, 2013.)
104 Chapter 2.13 Communities, and Organisation for Economic Co-
operation and Development, Luxemburg/Madrid/
New York/Paris.
WTO (2010) TSA around the World: Worldwide Summary.
World Tourism Organization, Madrid.
Further Reading
Dwyer, L., Forsyth, P. and Dwyer, W. (2010) Tourism Economics and Policy. Channel View Publications, Bristol, UK.
Frechtling, D.C. (1999) The tourism satellite account: foun- dations, progress and issues. Tourism Management 20, 163–170.
Frechtling, D.C. (2010) The tourism satellite account: a primer. Annals of Tourism Research 37, 136–153.
Jones, C. and Munday, M. (2008) Tourism satellite accounts and impact assessments: some considerations. Tourism Analysis 13, 53–69.
Libreros, M., Massieu, A. and Meis, S. (2006) Progress in tourism satellite account implementation and develop- ment. Journal of Travel Research 45, 83–91.
Rutter, H. and Berwert, A. (1999) A regional approach for tourism satellite accounts and links to the National Account. Tourism Economics 5, 353–381.
Smeral, E. (2006) Tourism satellite accounts: a critical assessment. Journal of Travel Research 45, 92–98.
Spurr, R. (2006) Tourism satellite accounts. In: Dwyer, L.
and Forsyth, P. (eds) International Handbook on the Economics of Tourism. Edward Elgar, Cheltenham, UK, pp. 283–300.
WTO The TSA Project. World Tourism Organization, Madrid. Available at: http://statistics.unwto.org/en/
content/tsa-project (accessed 10 May 2016).
105
© G. Lohmann and A. Panosso Netto 2017. Tourism Theory (G. Lohmann and A. Panosso Netto) The revenue generated by inbound tourism flow-
ing into a country, region or location is an injec- tion of new resources into the economy. The direct effects of this revenue are experienced by the pro- viders of tourist goods and services, generating income for various economic agents and directly increasing the gross domestic product (GDP) (see
‘Tourism satellite account’). Business owners receive profits, workers receive wages and the gov- ernment receives indirect taxes levied on the goods and services sold. However, the economic effects do not stop there. Because the economy is a dynamic system, new rounds of transactions are performed with the resources that were initially collected. Two primary types of effects can be iden- tified: indirect and induced.
Indirect effects derive from intermediate con- sumption by suppliers of tourism goods and ser- vices. To market a pizza, for example, the restaurant must first acquire flour, tomatoes, toppings and wood for the oven. In the same way, an airline company needs aircraft and fuel. The sale of these intermediate consumption goods and services, in turn, provides revenue for suppliers, resulting in income for the economic agents involved. These suppliers also consume their own inputs, leading to new rounds of indirect impacts along the pro- duction chain.
In contrast, the income of workers and business owners provided by tourism revenue is spent acquiring different goods and services, leading to what are called induced effects. For example, a hotel employee who spends part of their salary paying for their children’s school generates income for the economic agents involved in educational activity. The same may occur with the workers or owners of companies that do not sell anything directly to tourists but that have been indirectly impacted by tourism revenue.
The indirect and induced impacts of the first round of transactions lead to second-round effects,
and so on. Thus, round after round, the impacts reach further and further. However, in each new round, the impacts tend to become weaker because of leakages. Three types of leakage have been identified:
● Taxes: the resources collected by the govern- ment through direct (paid by individuals) and indirect taxes leave circulation, reducing the purchasing power of individuals and businesses.
Consequently, taxes reduce indirect and induced impacts from one round to the next.
● Savings: part of the income of workers and busi- ness owners is saved and is not used to consume goods and services. This money leaving circula- tion decreases the induced effects.
● Imports: a portion of companies’ and individu- als’ expenditures is allocated for purchasing imported goods and services. The resources used to pay for these items leak from the economy towards other countries, failing to generate new rounds of national impacts.
The end result of the resource injection caused by tourism leads to an expansion of GDP through vari- ous rounds of transactions. The total income gener- ated may be larger or smaller than the initial revenue based on the different leakages that are present. If the leakages are large, every dollar that enters the economy might result in a final income of less than US$1. If the leakages are small, the result- ing income may be greater than the initial tourism revenue. Thus, tourism’s economic impacts can be multiplied by its indirect and induced effects. In other words, the tourism multiplier effect is the multiplication of the economic impacts that occur because of the numerous rounds of transactions encouraged by the injection of tourism revenue into the economy. This concept is illustrated in Fig. 31.
Various policies can be adopted to increase the tourism multiplier effect. Generally, these policies consist of seeking to reduce leakages in the economy.
2.14 The Tourism Multiplier Effect
G
laubere
duardodeo
liveiraS
antoS106 Chapter 2.14 The primary strategy for achieving this goal is to
encourage the development of the local production chain, thus avoiding the need for imports.
In numerical terms, the tourism multiplier effect is defined as the ratio of total economic impact to tourism revenue:
Tourism multiplier effect = Total economic effect Tourism reveenue In practice, this value can be calculated using three principal methods. The first method refers to the original ideas of British economist John Maynard Keynes. According to this method, the multiplier effect can be calculated using the follow- ing formula:
Tourism multiplier effect = 1 1+ + +S T I
where S is the portion of an individual’s income intended for savings, T is the taxable portion and I is the portion spent on imports. The greater the value of each type of leakage, the smaller the equa- tion’s result. It should be noted that several varia- tions of this formula have been developed to address various analytical objectives, with different sets of information available for calculation.
The Keynesian multiplier shows only a limited and simplified perspective on tourism’s economic impacts. A more complex and informative way of calculating and presenting these impacts is through an input–output matrix. This matrix provides detailed information about the income and expenses of each economic activity and agent. For example, the matrix can indicate the expenditure
structure of a hotel business, including the amounts allocated to intermediate consumption, profits, wages and indirect taxes. Similarly, the input–output matrix shows the structure of individual and gov- ernment spending. Thus, based on these data, the tourism multiplier effect can be calculated in a much more precise manner than when using the Keynesian formula.
However, even the process of calculating the tourism multiplier effect through the input–output matrix has important restrictions (Dwyer et al., 2004). First, this matrix considers the spending pat- tern of each activity and agent to be constant.
Therefore, the impact of tourism revenue on prices is ignored. The input–output matrix assumes, for example, that the industry always spends a fixed portion of its revenue on fuel. However, because tourism is an activity that consumes proportionally more fuel, it is likely that tourism revenue will raise the relative price of that item. Consequently, it is likely that, over time, the industry will replace part of its fuel consumption with other energy sources, such as electricity.
Another restriction of the input–output matrix is that it does not consider the operation of all of the markets that make up the economy. The operation of the labour, capital, monetary and exchange mar- kets is either wholly or partially ignored. This model also does not consider the balance of gov- ernment finances, implicitly assuming that public collection and expenditures have no relationship to each other.
As a solution to the restrictions of the input–output model, a series of new economic analysis models were created, based on equations and parameters representing the operation of the economy overall.
These instruments are called computable general equilibrium models and are widely used today.
Estimation of the parameters that comprise the numerous equations of these models generally requires a large amount of statistical information and substantial computing power. As a result, com- putable general equilibrium models can provide very sophisticated estimates of the tourism multi- plier effect.
Operationalizing Operationalizing 1
Singh (2010) estimated the tourism multiplier effect for 17 countries in Latin America based on Tourism
consumption
Source of direct impacts
Imports Taxes Companies
Source of induced impacts
Individuals Imports
Taxes Savings
Source of indirect impacts
Fig. 31. Direct, indirect and induced impacts of tourism.
(From Santos and Kadota, 2012.)
The Tourism Multiplier Effect 107 the Keynesian method. The study considered only
the leakages represented by savings and imports, omitting leakages related to taxation. According to the estimates, Argentina had the highest tourism multiplier effect among the countries studied. In that country, each dollar of tourist revenue led to an increase of US$2.08 in GDP. At the other extreme, countries such as El Salvador, Guatemala, Mexico and Venezuela had multiplier effects below 1, a result caused primarily by the high levels of imported goods and services in those countries. As an example Singh’s calculation for Brazil appears below and Table 10 presents the estimates of the multiplier effect for each of the 17 countries studied.
Tourism multiplier effect in Brazil
= 1
1+ S + I= 1
1+0.264+0.265= 11.89 Operationalizing 2
Dwyer et al. (2003) used a computable general equilibrium model to analyse the economic impacts of tourism in Australia. This study indi- cated that, in the short term, an increase in inter- national tourism revenues of AUS$1 million would result in an increase of AUS$1.289 million in the country’s GDP. Therefore, the estimated income multiplier is 1.289.
Exercises