2009 National Extension Tourism Conference
The Tourism Connection: Sustaining People, Places and Communities
July 14 – 17, 2009
July 14 Park City, Utah
Nancy M. Hodur
N
M H d
F. Larry Leistritz
MEASURING TOURISM’S ECONOMIC EFFECTS: A COMPARISON OF METHODOLOGIES AND THEIR APPLICATIONS
Master of the Obvious
International Peace Garden
ƒ Tourism is an important domestic industry.
ƒ Interested parties are highly motivated to substantiate claims of economic benefits of tourism and tourism attractions.
ƒ Claims of economic benefits often met with healthy dose of skepticism
Ok, here we go.
Medora Musical
ƒ Nationwide travel expenditures of $700 billion ƒ
ƒ
ƒ
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in 2006.
The ND State Tourism Department reports $2 billion in travel expenditures in 2006.
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What counts as an expenditure?
Heritage and cultural tourism visitors spent $623 per trip compared to $457 per trip for other travelers.
What is considered a trip?
Here we go continued.
Here we go continued
Lewis $ Clark Intrp. Ctr.
ƒ Travel and tourism industry supported 7.5 million jobs in 2006. How was that estimated?
ƒ Visitor spending contributed $3.7 billion to NDs economic base. What’s the economic base? What is visitor spending?
h
d
ƒ The economic impact of heritage and cultural tourism in ND is $22.4 million, the economic contribution is $38.1 million. What’s the diff
difference between an economic impact and an b t
i i
t d economic contribution?
What exactly did those last two slides mean?
ƒ Different methodologies are difficult to Diff
h d l i diffi l compare, contrast estimates ƒ What exactly is being measured not apparent
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b
d
ƒ Many impediments to transparency à Proprietary interests
à Model assumptions
à Poorly defined terms à Lacking definitions
Bully Pulpit GF, Medora
à Incomplete explanation of methodologies
Objectives: Examine some frequently used methodologies
ƒ If have a basic understanding we can fill in the blanks:
à Identify key assumptions and definitions
à Examine exactly what is being measured
à How are the estimates made
H th ti t d
ƒ Specifically look at:
à Tourism Satellite Accounts à Economic Base Estimates
à Economic Impact Assessments
E
i I
t A
t
Lake Sakakawea
Tourism Satellite Accounts (TSAs). What is it?
FARGODOME, Fargo
ƒ Model was created because there is no “tourism” sector in standard economic accounts. Tourism sector in standard economic accounts
Tourism sector made up of many different industries. ƒ Tourism sector made up of many different p
y
industries. ƒ Travel Industry Association’s TEIM (Travel E
Economic Impact Model) is one of the more i I
t M d l) i f th recognizable tourism satellite tourism accou t g ode s
accounting models.
ƒ TIA’s model is proprietary
Tip of the iceberg metaphor
lodging food retail entertainment transportation
printing
furnishing suppliers beverage supply textiles resort development
How does it work?
White Cloud, Buffalo Museum,
Jamestown
ƒ TIA uses 16 travel categories including lodging, food, retail, public transportation, auto transportation, and amusement/recreation. They identify business that fall into those categories by NAICS code.
ƒ The model assumes business receipts for the various business types in the 16 travel categories ,less sales and excise tax, equals travel spending. di ƒ Estimate employment and wages by estimating the ratio of employment to business receipts and applying that ratio to the volume of business receipt generated by travelers.
ƒ Use similar methods for estimating wages and salaries and tax revenues.
Key assumptions.
Theodore Roosevelt Nat’l Park
ƒ Travel/trip: Activities associated with all activities related to overnight and day trips to destinations 50 miles away one way and all trips associated with paid accommodations.
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p
ƒ Travel Expenditures: Payments for any
activity while on a trip. ƒ Economic Impact: Spending, employment, payroll, business receipts and tax receipts generated by traveler spending. What does it include?
ƒ Includes expenditures related to all business and leisure travel with no consideration for f
motivation for travel. ƒ Includes nearly all travel. Anything over 50 miles and anything associated with paid accommodations. p
Lewis & Clark reenactment, Ft. Mandan
What does it exclude?
ƒ Doesn’t include purchases made prior to the ttrip in preparation for the trip.
i i ti f th t i
ƒ Doesn’t include purchase of consumer d bl l t d t th t i (
durables related to the trip (e.g. boat, b t campers, golf clubs, etc.)
ƒ Consultants never omit what the model C
l
i h h d l excludes!?!!?
What do we have?
ƒ Very broad based estimate of expenditures related to travel.
related to travel
ƒ State tourism offices often contract with S
i ffi f i h consultants to estimate tourism number using To rism Satellite Acco nts ND contracts ith Tourism Satellite Accounts. ND contracts with Global Insight.
ƒ T IA reports require subscription.
Also, not all TSAs are exactly the same.
Birding near Carrington
ƒ TIA reports domestic travel expenditures in 2005 in North Dakota to be $1.4 billion.
ƒ Global Insight reports tourism expenditures in l b l
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d
ND in 2006 to be $2.23 billion.
ƒ There is likely something in the models that account for the differences, but precisely what is ,
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y
difficult to determine. Often the “methods” section of reports from consultant firms are a little thin little thin. Economic Base Estimates
What is it?
ƒ Base sector activities are those that bring g
money into the state through the export of a good or service – “new money”.
ƒ Examples: agriculture commodities, manufactured goods, tourism.
g
,
ƒ Purchases by out of state residents for a g
good or service consumed in North Dakota are considered exports. Wheat harvest
How is it estimated?
ƒ Different methods are used to estimate sales for final demand for different sectors.
à Agriculture: NASS
à Households: Federal Transfer Payments
à Coal Mining: Office of ND State Tax Commissioner
g
ƒ Retail Trade
à Tourism expenditures used to estimate sales for final demand.
à Estimates provided by ND Dept. of Tourism until 1988, a Estimates provided by ND Dept of Tourism until 1988 a consultant group until 1998
à In ND Larry and Randy have developed a model indexes last p
published estimates
à Model used hotel occupancy rates, park attendance figure, airport boarding figures, restaurant taxes, lodging taxes, etc.
What does it include? ƒ Base sector estimates for retail trade included all expenditures for any good or service by non‐residents. à Visitor expenditures for lodging, food, entertainment, transportation, etc. while traveling in North Dakota
à Also includes retail purchase for household products made by residents in border communities communities. Dickenson
What does it exclude?
Red River
ƒ Does not include expenditures made by residents that make trips to other parts of the state for either business or leisure that represent “new money” to host community. ƒ This spending clearly does not represent p
g
y
p
“new money” to the state, but it is “new money” to the local economy of the attraction.
What do we have?
United Tribes Powwow,
Bismarck
ƒ Important measure of the state’s economy. ƒ These figures are also used in North Dakota Th fi
l d i N th D k t to estimate gross business volume (ND I/O Model)
ƒ These figures can help track and quantify the gro th of the state’s econom and its major growth of the state’s economy and its major components, e.g. tourism, agriculture, manufacturing manufacturing. Economic Impact Assessments
What is it?
ƒ An estimate of the change in economic A i
f h h
i i activity as result of some economic disruption
à
à
à
à
New agriculture processing facility
New entertainment venue
Change in public policy
Visitor expenditures
TR National Park
ƒ Can quantify economic activity either with or q
y
y
without economic disruption
à Closure of a processing facility
à Lack of an entertainment event or attraction
How is it estimated?
ƒ Primary or secondary data on economic disruption, e.g. visitor expenditure related to g
their trip, an event or attraction.
ƒ Determine visitors motivation for visiting the area.
ƒ Multiply per person expenditures by the total number visitor that indicated the attraction was the primary motivation for visiting
ƒ Use input‐output model to estimate total p
p
economic impacts, direct and secondary impacts
Key Concepts
ƒ Visitor motivation. Was the event the primary reason for visiting?
ƒ Direct Economic Impact. Estimate oof total expenditures made in the local area by those that indicated attraction was primary motivation
ƒ Secondary Economic Impact. Input direct d
d
impacts into I‐O model, estimates “multiplier effect”
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ƒ Total Economic Impact. Direct plus secondary impacts.
What does it include? ƒ Visitor expenditures that are specifically attributable to an event or attraction.
à
Takes into consideration substitution factors by eliminating “casuals”, y
g
,
“time‐switchers”
à Often a very conservative estimate, but sometimes conservative can mollify distractors
ƒ Depending on what is being assessed, may include operating expenditures, such as the case of an event venue.
(FARGODOME)
ƒ Direct impacts and direct and secondary impacts‐‐‐multiplier effect.
ƒ Can estimate secondary employment
What doesn t it include?
What doesn’t it include?
ƒ Visitor expenditures when the event or attraction was not the primary reason for visiting.
ƒ While these expenditures do not meet the definition of a “direct economic impact”, they definition of a “direct economic impact”
they are still important to local economies, especially in small rural communities.
especially in small rural communities
Devils Lake
What do we have?
ƒ A very specific estimate of economic impacts on defined local.
f
ƒ If using an input‐output model have an estimate of secondary impacts. Those can be a small an area as a county (RIMMS II), statewide (ND I‐O Model), or even a multi‐
state area. Examples and more
d t il d di
detailed discussion of i f economic impact assessments State capital, Bismarck
ƒ Hodur, Nancy M. F. Larry Leistritz, and Kara Wolfe. 2004. “Characteristics and Expenditures of Participants in the Potholes and Prairie Birding Festival”, Agribusiness and Applied Economic Staff Paper No 4004 Department of Agribusiness and Applied Paper No. 4004. Department of Agribusiness and Applied Economics, North Dakota State University, Fargo. Available at http://ageconsearch.umn.edu/handle/23658, viewed December 4, 2008.
ƒ Hodur, Nancy M., Dean A. Bangsund, F. Larry Leistritz, and John T. Kaatz. 2006. “Estimating the Contribution of a Multi‐Purpose Event Facility to the Area Economy , Tourism Economics, 12(2): 303 306.
Facility to the Area Economy”, Tourism Economics, 12(2): 303‐306.
ƒ Hodur, Nancy M., and F. Larry Leistritz. 2006. “Estimating the Economic Impact of Event Tourism: A Review of Issues and Methods”, Journal of Convention & Event Tourism. Vol. 8, No. 4, pp. f
63‐79.
Let’s go back to g
where we started. Norsk Hostfest Minot
Norsk Hostfest, Minot
ƒ Nationwide travel expenditures of $700 billion in 2006. TIA 006
TEIM Tou
ourism Satellite Account
s Sate te ccou t
ƒ The ND State Tourism Department reports $2 billion in travel expenditures in 2006. Global Insight Tourism Satellite Account
ƒ Heritage and cultural tourism visitors spent $623 per trip compared to $457 per trip for other travelers. TIA definition of a trip?
Where we started, continued
Painted Canyon, TRNP
ƒ Travel and tourism industry supported 7.5 million Travel and tourism industry supported 7 5 million jobs in 2006. How was that estimated?
ƒ Tourism contributed $3.7 billion to NDs economic base. What do economic base estimates represent?
ƒ The economic impact of heritage and cultural tourism in ND is $22.4 million, the economic tourism in ND is $22
4 million the economic contribution is $38.1 million.
ƒ What the difference between an economic impact and an economic contribution?
Disclaimer
ƒ This is far from a comprehensive examination of methodologies used to estimate tourism’s of methodologies sed to estimate to rism’s economic effects.
ƒ There is no good or bad measurement,
just different.
just different
ƒ Each method measures ƒ different things.
Fargo Theater, Fargo
How is this useful to extension professionals
ƒ Often discussion of economic impacts can get Of di
i f i i
quite heated.
ƒ Don’t need to be a methodological geek to d b
h d l
l
k
interpret numbers.
ƒ By correctly interpreting number you can provide information and educational support t to your constituent groups
tit
t ƒ Perhaps even thwart a few heated di
discussions?
i ?
Questions to ask
ƒ What is being measured?
ƒ What is included in the estimate?
TR National Park
ƒ What are the key assumptions and definitions?
ƒ Is this the appropriate method for measuring what I want to measure?
ƒ Who did the assessment?
Questions?
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Nancy Hodur and Larry Leistritz can be reached at:
phone
701‐231‐7441 fax
701 231 7400
701‐231‐7400
e‐mail: [email protected]
[email protected]
ƒ Reports from NDSU Dept. of Agribusiness and Applied Economics are available on the Internet at http://agecon lib umn edu/
http://agecon.lib.umn.edu/