Measuring the Economic Impact of Tourism on Cities. Professor Bruce Prideaux James Cook University Australia
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1 Measuring the Economic Impact of Tourism on Cities Professor Bruce Prideaux James Cook University Australia
2 Outline of Presentation Aim and scope Methodology Current range of indicators The way forward
3 The Need for Indicators Global urbanization is increasing rapidly and cities are now the main generators of tourism as well as being one of the largest attractors of tourists. Being able to develop a commonly agreed upon set of indicators of the economic impact of tourism will assist cities understand the contribution that tourism makes and enable them to compare between cities A common set of indicators will also assist benchmarking by cities and assist them in planning and establishing marketing priorities Assist the public sector assess how changes in policy may affect tourism in cities Assist the private sector in making informed investment decisions and measuring daily, weekly, monthly and annual performance Measure impacts of marketing campaigns
4 Project Aim and Scope Aim Develop a methodology that facilities comparison of a range of economic indicators between cities. Scope The project will not try to reinvent the wheel but develop a catalogue of existing indicators and assess how they may be used to develop a common indicator set. The type of indicators will include statistical measures such as visitor types, origins and length of stay as well as measures of monetary impact (ie Input-Output modeling; CGE modeling)
5 Methodology Develop a tripartite working group consisting of city tourism organizations, universities and government representatives to: Examine the current range of indicators and their uses Identify a list of candidate indicators that best measure the economic impacts that cities experience through their involvement with the tourism industry. This may for example include standard statistical measures such as visitor numbers plus estimates of GDP contibution Given that a range of factors will affect yield, profitability etc the adoption of a triple bottom line approach to measure the economic impacts of socio-cultural and environmental factors could be a useful adjunct to measuring economic factors.
6 Issues to be Considered The first issue that needs to be considered is the specific uses that indicators are required for by the private and public sectors Many governments already have national reporting systems (ie Tourism Research Australia) There are a number of groups beginning to work on this issue
7 Examples of Existing Indicators Examples of indicators currently used to measure aspects of the economic impact of tourism include: Yield and various indicators of spending (ie on accommodation) Elasticity of demand Input-Output models and CGE models Multipliers Number and type of visitors Length of stay Occupancy rates Staff to visitor ratios Seasonality including length of peak and low seasons Services consumed including energy and water Measures that list consumption of facilities by tourists ie percentage of total visits to museums by tourists GDP generated by tourists measured in a number of ways (for example the total additional revenue generated by each tourist visit; total percentage of shopping generated by tourists)
8 Which Economic Indicator- CGE or Input-Output? A number of researchers advocate CGE models over Input-Output models Each has limitations CGE has a greater level of precision but is expensive to calculate A question that needs to be asked is which measure is more appropriate given the reality of limited data for many cities?
9 Multipliers and Input-Output Analysis Multiplier analysis and Input-Output analysis are commonly used to evaluate economic contribution However these techniques have limitations Input-Output analysis is often incomplete because it ignores key aspects of the economy ie it assumes there is a free, unrestricted flow of resources to all parts of the economy. Factors that impede the free flow of the economy include resource limitations, the structure of the labour market and restrictions encountered in other market are often ignored or not estimated. As a consequence many feedback effects are not captured (Dwyer, Forsyth and Spurr 2004) and produce misleading data While input-output analysis does not constitute best practice is widely used and relatively easy to compute in most economies
10 Computable General Equilibrium (CGE) Models CGE models are extensively used in Australia, the UK, US and Canada to estimate economic impacts of a wide variety of changes and policies They offer a useful alternative to traditional measures for estimating economic impact CGE models have an imbedded Input-Output model but also includes other markets and linkages Uses include impact of increased inbound tourism on economic activity, impact of an activity (a festival for example) on a city, impact of a new tax on tourism activity, impact of crisis events on tourism revenue Calculating CGE models may be difficult because it is difficult to measure elasticity but give better results
11 Measures Based on Tourism Statistics Extensive work has been undertaken on the need for standardised city tourism statistics (Wober 2000) In 1995 the Federation of European Cities Tourist Offices (FECTO) established a working group to establish a common data base on city tourism statistics. Problems identified included definitions, terminology, collection methods, missing data and need to comply with national statistical frameworks. For example some cities include day visitors and excursionists and others don t A major outcome of FECTOs work was the establishment of a tourism marketing information system TourMIS (Wober 1997) that aims to develop a common methodology for tourism statistics. That work continues and has an annual workshop.
12 The Way Forward? 1. Develop a working paper that: a. looks at the specific needs of cities and how indicators would be used this will need to consider the requirements of both the public and private sectors, b. Catalogues existing indicators including strengths and weaknesses 2. Hold an international forum to bring together the various groups working on this issue
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