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Sophisticated Modelling Tools of the Economic Analysis of Tourism

Research Paper (undergraduate) 2017 25 Pages

Tourism

Excerpt

Table of Contents

Abstract

1. Introduction

2. Nature and Importance of TSAs
2.1. TSAs identify ‘tourism’ and ‘tourist’
2.2. TSAs identify a tourism ’industry’
2.3. TSAs measure the key economic variables
2.4. TSAs measure tourism’s interrelationship with other industries
2.5. TSAs support inter-industry comparisons
2.6. TSAs support international comparisons
2.7. TSAs can provide a base to develop different measures of tourism performance.
2.8. TSAs give ‘credibility’ to estimates of the economic contribution of tourism
2.9. TSAs provide a tool for tourism research and policy analysis

3. Direct Contribution of Tourism using a TSAs: Australia

4. Limitations of TSAs as a Policy Instrument

5. CGE modelling as a tool of economic impact analysis
5.1. Model Database
5.2. Model Closures

6. Structure of a Tourism CGE model with TSAs data

7. Application of a Tourism CGE model: The case of Queensland, Australia
7.1. Sectoral Results

8. Conclusions

9. References

Abstract

Economic impact refers to the changes in the economic contribution resulting from specific events or activities that comprise ‘shocks’ to the tourism system. Tourism Satellite Accounts (TSA) are a statistical tool. They are used to report how much the tourism sector has contributed to an economy and how important the tourism sector is compared to other sectors in the economy. Computable General Equilibrium (CGE) tourism model can provide more realistic analytical recommendations to policy makers. More specifically, the model can be used to measure economy-wide yield for tourism destinations. The paper first outlines the nature and importance of TSAs as a measure of the economic contribution of tourism to an economy. TSAs based estimates of the direct contribution of tourism in Australia are provided to illustrate the use of this tool. The paper then discusses the importance of developing TSAs at the regional level and the approaches that can be employed (bottom up, top down, mixed), as well as the limitations of TSAs as a policy instrument. It then discusses CGE modelling as a tool of economic impact analysis providing CGE based estimates of the economic impacts of increased inbound tourism to Queensland to illustrate the use of this technique. The analysis is expected to enhance stakeholder understanding the separate roles that TSAs and CGE modelling can play in determining the economic significance of tourism to an economy.

1. Introduction

Tourism has grown substantially over recent decades as an economic and social phenomenon. Tourism differs from many other economic activities in that it makes use of a diverse range of facilities across a large number of industrial sectors. The problem with measuring the economic significance of tourism spending is that ‘tourism’ does not exist as a distinct sector in any system of economic statistics or of national accounts. While all the products and services that are produced and consumed in meeting tourism demand are included in the core accounts, they are not readily apparent because 'tourism' is not identified as a conventional industry or product in international statistical standards (ABS 2007). While the largest proportion of this expenditure is allocated to sectors typically associated with tourism such as accommodation, transportation, car hire, duty free purchases, restaurants, tours, and attractions, tourists also spend money in other sectors when they gamble, buy hats, clothes, gifts, newspapers, sunglasses, cinema tickets, and such like. Since it is not possible to identify tourism as a single "industry" in the national accounts, its value to the economy is not readily revealed. Tourism activity is “hidden” in other industry activities.

There is a recognised need for improved statistical bases for tourism analysis and policy (TSA 2008; IRTS 2008). Many nations, both developed and developing, typically have emphasized agriculture, mining and manufacturing as the key sectors driving economic growth, failing to appreciate the size and significance of tourism and service industries in general. Tourism data tend not to be well incorporated in the complex system of official statistics, and often do not receive the full attention they deserve. Within most existing statistical systems, it has been extremely difficult to adequately document the full scale and scope of tourism-related economic activities. Therefore, any attempt to examine the economic contribution of tourism by indirectly using data on tourism-related sectors in the system of national accounts is very unlikely to give an accurate measure the economic significance of the tourism sector.

Comprehensive and reliable statistics are essential for policy-makers to make effective decisions about resource allocation. Only with sufficient and adequate data that generate credible statistics is it possible to compare the performance of tourism with other industry activity. Besides measuring tourism’s economic contribution to a country, tourism statistics are necessary for designing and evaluating marketing strategies, strengthening inter-institutional relations, and evaluating the efficiency and effectiveness of management decisions to support tourism development.

Furthermore, as tourism comprises of a wide range of outputs of many industries in the economy, changes in demand for tourism will affect other industries significantly. Conversely, changes in demands for outputs of other industries, higher export for example, will also affect resources in the economy required by the tourism sector. This requires a modelling framework that can capture explicitly the relationship between tourism and the rest of the economy for the tourism impact analysis tasks.

Unfortunately, in many countries, the development of statistical concepts and frameworks for tourism has not kept pace with the changes in the nature and significance of tourism worldwide and its potential for future growth (Fernando, 2017a). In response to the need for improved tourism statistics and modelling techniques, in recent years we have seen the development of a Tourism Satellite Accounts (TSAs) as well as the incorporation of TSAs in economic modelling technique, in particular the Computable General Equilibrium (CGE) framework. This Paper has several aims:

I. To set out the nature and importance of TSAs as a measure of the economic contribution of tourism to an economy. TSAs based estimates of the direct contribution of tourism in Australia are provided to illustrate the use of this tool
II. To discuss the importance of developing TSAs at the regional level and the approaches that can be employed (bottom up, top down, mixed)
III. To discuss the limitations of TSAs as a policy instrument
IV. To discuss CGE modelling as a tool of economic impact analysis. CGE based estimates of the economic impacts of increased inbound tourism to Queensland are provided to illustrate the use of this technique.
V. To understand the separate roles that TSAs and CGE modelling can play in our understanding of the economic significance of tourism to an economy.

2. Nature and Importance of TSAs

Satellite accounts allow an understanding of the size and role of activities which are not separately identified in the conventional national accounting framework. They allow an expansion of the national accounts for selected areas of interest while maintaining the concepts and structures of the core accounts. In TSAs, all of the tourism associated economic activity is identified in a separate but related account, that is, an account which is a satellite of the core national accounts. TSAs are compiled using a combination of visitor expenditure data, industry data, and Supply and Use Tables (SUT) in the system of national accounts. The SUT for an economy provides the framework in which data for visitor expenditure (demand) and industry output (supply) are integrated and made consistent in the TSAs. The best known supply and use tables, input-output tables, capture the interdependence that exists between sectors of the economy. Through a matrix table, they describe how one sector’s output becomes another sector’s input, showing the input-output flows (the exchange of intermediate goods) between various sectors of the economy. As such, they are used to estimate the effects of changes in one industry on output, income and employment in other industries. TSAs provide detailed production accounts of the tourism industries, including data on employment, and linkages with other productive economic activities. They enable the relationships between tourism and other economic activity to be explored within the national accounts framework, extracting all the tourism-related economic activity which is included in the national accounts but not identified as tourism.

Because TSAs are derived from the overall system of National Accounts structure, they enable tourism to be compared with other industries in the economy using consistent and internationally endorsed national accounting principles. Tourism accounts for a proportion of the outputs of a range of industries which are explicitly recorded in the national accounts. The basic procedure in satellite accounting is to claim a "share" of sales of each commodity or industry to tourism. TSAs use these estimates of tourist expenditure and then allocate tourism expenditure to different industries. For example, if tourism accounts for 80% of “Accommodation” consumption, 90% of “Air Transport”, 25% of “Ground Transport” and say, 12% of “Retail Trade”, and so on for other industry sectors, then these proportions of these industry outputs attributable to “Tourism” are calculated and aggregated to obtain an estimate of the output of “Tourism”. The result is a set of accounts documenting output, value added, employment and so forth for the tourism industry, consisting of the sum of the various parts of other industries which are attributable to tourism. TSAs provide information as to where tourists spend, the extent to which different sectors benefit from tourist spending, and the extent to which individual sectors are dependent upon tourism.

TSAs can be viewed from two perspectives (TSA: RMF 2008, para. 1.17). First, as a statistical tool that complements those concepts, definitions, aggregates, classifications, already presented in the International Recommended Tourism Statistics (IRTS 2008) and articulates them into analytical tables. Second, TSAs can also be considered as the framework to guide countries in the further development of their system of tourism statistics, the main objective being the completion of the TSAs, which could be viewed as a synthesis of such a system. TSAs provide a framework of monetary flows which can be traced from the tourism consumer to the producing unit or supplier within the economy and have now become the unifying framework of most of the components of the System of Tourism Statistics (UNWTO 2008). As a consequence of the limitations of existing accounting systems, increasing numbers of countries have developed or are developing TSAs consistent with the "Tourism Satellite Account: Recommended Methodological Framework" (TSA: RMF, or just RMF for short hereafter). This framework has been developed by the Commission of the European Communities, the Organization for Economic Cooperation and Development (OECD), the United Nations World Tourism Organization (UNWTO) and the World Travel and Tourism Council (WTTC), and approved by the United Nations Statistical Commission (RMF, 2008).The RMF presents 10 tables, recommending that only eight of them (Tables 1-7 and Table 10) should be prepared at the present time in order to achieve international comparability of results.

The advantages associated with TSAs can be summarised as follows:

2.1. TSAs identify ‘tourism’ and ‘tourist’

TSAs concepts of ‘tourism’ and ‘tourist’ are based on the approved international recommendations for tourism statistics (IRTS 2008). For purposes of the TSAs, ‘tourism’ is more limited than ‘travel’ since it refers to specific types of trips: those that take a traveller outside his/her usual environment for less than a year and for a main purpose other than to be employed by a resident entity in the place visited. Individuals when taking such trips are called visitors (IRTS 2008 paras. 2.6. to 2.13.). In the TSAs ‘tourism’ is not restricted to what could be considered as typical tourism activities such as sightseeing, sunbathing, visiting attractions, etc. Travelling for the purpose of conducting businesses, for education and training, etc. can also be part of tourism if the conditions that have been set up to define tourism are met (IRTS 2008 para. 3.17.).

2.2. TSAs identify a tourism ’industry’

TSAs define and identify the various tourism ‘industries’ or groups of suppliers which produce or import the goods and services purchased by visitors. This is a critical first step to measuring the industry and its economic contribution, and is a tool for strengthening the identity of the tourism industry. TSAs identify tourism’s component products and industries through the concepts of Tourism Characteristic and Tourism Connected products and industries (RMF 2008; IRTS 2008).

Tourism characteristic products are those that represent an important part of tourism consumption, or for which a significant proportion of the sales are to visitors (for example, accommodation and air transport). They are those products, that, in most countries, it is considered, would cease to exist in meaningful quantity or those for which the level of consumption would be significantly reduced in the absence of visitors.

Tourism connected products are those that are consumed by visitors in volumes which are significant for the visitor and/or the provider but are not included in the list of tourism characteristic products. The ‘tourism industry’ comprises all establishments for which the principal activity is a tourism-characteristic activity (IRTS 2008). While allowing for some differences between countries adherence to these definitions improves the international comparability of tourism statistics.

2.3. TSAs measure the key economic variables

TSAs bring together basic data on the key economic variables that describe the size and the economic contribution of tourism, presenting them in a consistent and authoritative way using internationally endorsed concepts and definitions (Frechtling, 1999). By highlighting tourism within the national accounting framework, TSAs allow the tourism industry to be better included in the mainstream of economic analysis. Headline variables include Tourism expenditure, Tourism Consumption, Tourism Output, Tourism Gross Value Added (TGVA), Tourism Gross Domestic Product (TGDP), and Tourism Employment.

2.4. TSAs measure tourism’s interrelationship with other industries

By identifying the sources of gross value added generated across the economy in order to satisfy visitor demand, TSAs make it possible to examine the inter-relationships between tourism and other industries and to answer questions such as which industries in the economy rely most heavily on tourism and to what extent they do so.

2.5. TSAs support inter-industry comparisons

TSAs allow tourism activity to be compared for its importance with other major industries in terms of size, economic performance, employment, and contribution to the national economy. For example, tourism’s share of GDP and employment, the relative importance of identified tourism components to overall tourism activity, and their contribution to other non-tourism industries can all be examined. The Canadian TSAs, for instance, has been linked to the future development of benchmarking tools and micro-economic tourism indicators allowing private sector operators to compare their performance with industry norms in terms of productivity, growth, and earnings (Libreros et al. 2006).

2.6. TSAs support international comparisons

TSAs allow for valid comparisons between regions, countries or groups of countries. In making these estimates comparable with other internationally recognized macroeconomic aggregates and compilations, TSAs also facilitate comparisons of the scale, scope and performance of one country’s tourist industry with those in other countries. Caution is needed in cross-country comparisons, however, because a number of variations exist in the implementation of TSAs standards, including the extent of coverage of all forms of visitor consumption and tourism supply as well as differences in the interpretation and treatment of certain key concepts such as business travel, value added, and gross domestic product. Presently, inconsistent definitions limit the comparability of TSAs results between countries.

2.7. TSAs can provide a base to develop different measures of tourism performance.

Measures of performance for the tourism industry include tourism yield, tourism productivity and tourism's carbon footprint Tourism yield: A focus on ‘yield’ is an important aspect of both business strategy and public policy to maintain and enhance the returns from tourism in destinations world-wide. Yield is a term which refers to the gain, in financial or economic benefits which a destination achieves from attracting particular tourist market segments eg. by origin, by type (holiday, VFR, Business) or by niche market ( eg. convention visitor, honeymooner). A growing number of destinations now emphasize ‘high yield’ as a primary objective of tourism policy. Measures of tourism yield (eg. contribution to tourism expenditure, tourism industry profitability, tourism GDP, tourism value added and tourism employment) can be estimated for each type of visitor (Salma and Heaney 2004). However, these are only direct impacts on the tourism industry. Unlike CGE analysis, TSAs based measures do not incorporate the economy wide effects of tourist expenditure after allowance is made for inter-industry effects of the injected expenditure resulting from changes in prices, exchange rates in the presence of factor constraints.

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Details

Pages
25
Year
2017
ISBN (eBook)
9783668511866
ISBN (Book)
9783668511873
File size
689 KB
Language
English
Catalog Number
v373752
Grade
Tags
sophisticated modelling tools economic analysis tourism

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Title: Sophisticated Modelling Tools of the Economic Analysis of Tourism