BML111 ECONOMIC IMPACTS by Andrew Clegg

BML111: Tourism, Events & Des6na6ons: Impacts & Sustainability

The Economic Impacts of Tourism & Events

Aims §  To consider the economic characteris/cs of the tourism

and event product / industry

§  To highlight the factors inﬂuencing the intensity of

economic impacts

§  To iden/fy the economic beneﬁts and costs of tourism and

events

§  To consider the economic impact of tourism and events in

a range of des/na/on environments

Andy’s Great Big Economics of Tourism and Events Quiz

Round 1: The Characteris?cs of the Tourism and Events Sector

Characteris6cs Q1: Which of the following are characteris?cs of the tourism and events sector? A.  It’s a vegetable B.  It’s like a jigsaw C.  It’s vola5le D.  It’s elas5c E.  It leaks F.  It’s good at mul5plica5on

Characteris6cs Q1: Which of the following are characteris?cs of the tourism and events sector? A.  It’s a vegetable B.  It’s like a jigsaw C.  It’s vola6le D.  It’s elas6c E.  It leaks F.  It’s good at mul6plica6on

The Economic Characteris6cs of Tourism and Events Key considera6ons: §  The product is perishable §  A highly fragmented sector/product, linking and aﬀec5ng other

sectors of the economy therefore making the full measurement of economic impacts a complex ac5vity

§  Pearce [1989]:

‘the objec/ve and detailed evalua/on of the economic impact of tourism can be a long and complicated task’

Understanding the Economic Characteris6cs of Tourism Key considera6ons: §  Tourism is a highly unstable export, suscep5ble to

unpredictable external forces

§  Tourism and events are highly elas5c with respect to income

and price

§  The cyclical paNern of demand for tourist goods and services

has signiﬁcant implica5ons for employment and investment

§  Low levels of customer loyalty in rela5on to des5na5ons,

products, and events oQen linked to complex tourist mo5va5ons

Understanding the Economic Characteris6cs of Tourism The Leaky Bucket Syndrome: ‘There are two ways to maintain and increase the level in a leaky bucket. One way is to increase the ﬂow. But is it the right way? Surely a more logical way is to mend the bucket and staunch some of the leaks. Staunching the leaks (in the UK context) means addi/onal support for domes/c tourism in England’ [Middleton, 2003]

✗

Nega6ve Economic Impacts: §  Leakage of Income §  Interest on foreign capital §  ‘Debt’ §  Money taken by tour operators and airlines §  Consump5on of imported goods §  Tourists oQen ‘conﬁned’ to resort with liNle interac5on

with the local economy

§  Damage to other Economic Sectors §  Lure people and resources away from other sectors of the

wide economy

✓

Enhancing Economic Impacts: Mul6plier Eﬀects §  Tourist spending is re-‐circulated in the local economy

and is therefore worth more to the area than its face value

§  £200 spent on a couple on a short-‐break in a hotel

could be worth £200*1.4 (the hotel mul5plier eﬀect for that area) = £280

§  The actual value of the mul5plier will vary from region

to region and diﬀerent sectors of the leisure and tourism industry

§  A mul5plier for a guest house is greater than a large

hotel which is part of a na5onal chain

Enhancing Economic Impacts: The Mul6plier Eﬀect

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Nega6ve Economic Impacts: §  ‘Opportunity Cost’ §  What else could resources be used for?

§  ‘Displacement Eﬀect’ §  Tourism replaces one form of expenditure and economic

ac5vity

§  Infla6on §  Infla5on effects on local economies rela5ng to land,

property and goods e.g. North Wales/Cornwall / France -‐ villages have become popular for the purchase of second homes

Round 2: Tourism, Events and the Economy

Economic Impacts -‐ GDP Q2: What is GDP?

Enter your response

Economic Impacts -‐ GDP Q3: According to the WTTC, what is the global value of tourism’s direct industry contribu?on to GDP? A.  $1,555bn B.  $1,890bn C.  $2,008bn D.  $2,225bn

Economic Impacts -‐ GDP Q3: According to the WTTC, what is the global value of tourism’s direct industry contribu?on to GDP?

$1,555bn

$1,890bn

$2,008bn

$2,225bn

Economic Impacts: Gross Domes6c Product (GDP) Factors Inﬂuencing Tourism’s Contribu6on to GDP: Bull (1991): §  The stock of resources -‐ natural resources, built facili/es,

human and ﬁnancial resources

§  The state of technical knowledge -‐ economic returns from

tourism are highest in those countries with high levels of technical exper/se

§  Social and poli6cal stability -‐ factors inﬂuencing the des/na/on

environment, visitor numbers and hence receipts from tourism

Economic Impacts: Gross Domes6c Product Factors Inﬂuencing Tourism’s Contribu6on to GDP: Bull (1991): §  A]tudes and habits -‐ views of the host community and the

individual tourists’ propensity to travel

§  Investment -‐ government and commercial investment in capital

projects, promo/on, training and business support

Economic Impacts Q4: According to es?mates what is the predicted increase in total UK GDP between 2005 and 2016 as a result of the Olympics? A.  £1.9bn B.  £2.5bn C.  £3.1bn D.  £3.4bn

Economic Impacts Q4: According to es?mates what is the predicted increase in total UK GDP between 2005 and 2016 as a result of the Olympics?

£1.9bn

£2.5bn

£3.1bn

£3.4bn

Economic Impacts Q5: According to Visit Britain sta?s?cs what is the current value of tourism to the English economy? A.  £94.1bn B.  £95.8bn C.  £96.7bn D.  £97.2bn

Economic Impacts Q5: According to Visit Britain sta?s?cs what is the current value of tourism to the English economy?

£94.1bn

£95.8bn

£96.7bn

£97.2bn

Economic Impacts Q6: How much is the heritage tourism sector worth to the UK economy? A.  £9.8bn B.  £11.2bn C.  £12.4bn D.  £13.5bn

Economic Impacts Q6: How much is the heritage tourism sector worth to the UK economy?

£9.8bn

£11.2bn

£12.4bn

£13.5bn

Economic Impacts Q7: In which country does tourism account for 67% of total economy GDP? A.  Romania B.  Brunei C.  Maldives D.  Vietnam

Economic Impacts Q8: In which country does tourism account for approximately 6% of total employment? A.  Romania B.  Brunei C.  Maldives D.  Vietnam

Economic Impacts Q9: Do visitors to the UK represent an import or export for the Balance of Payments? A.  Import B.  Export

Economic Impacts: Balance of Payments (BofP) Balance of Payments §  The ouhlow of Bri5sh money spent abroad = IMPORTS §  The inﬂow of foreign holiday-‐makers money spent in the UK =

EXPORTS

§  The value of receipts minus the total payments represents a

country’s balance of payments on the tourism account

Economic Impacts Q10: Does the UK currently have a deﬁcit or surplus on the current account for tourism? A.  Surplus B.  Deﬁcit

Economic Impacts: Balance of Payments (BofP) United Kingdom Travel Account 1976-2000 30000 25000 Earnings from Outbound Tourism (£m.)(Debit Import)

20000 15000

Earnings from Inbound Tourism (£m.)(Credit Export)

£m.

10000

Balance 5000

-10000 -15000

Year

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

-5000

1976

Economic Impacts Exchange Rates Values – Sterling v US Dollar Shopping Trip to New York (£1,500)

8th Nov 2007

1st April 2009

29th Jan 2010

30th Jan 2011

26th Jan 2012

2nd Feb 2013

2nd Feb 2014

2nd Feb 2015

27th Jan 2016

(£1 = $2.10)

(£1 = $1.36)

(£1 = $1.61)

(£1 = $1.59)

(£1 = $1.57)

(£1 = $1.64)

(£1 = $1.51)

(£1 = $1.42)

$3,159

$2,040

$2,415

$2,398.65

$2,355.73

$2,355

$2,465

$2,259.53

$2136.33

Shopping Trip to London ($1,500) 8th Nov 2007

1st April 2009

29th Jan 2010

30th Jan 2011

26th Jan 2012

2nd Feb 2013

2nd Feb 2014

2nd Feb 2015

27th Jan 2016

($1 = £0.47)

($1 = £0.73)

($1 = £0.62)

($1 = £0.64)

($1 = £0.60)

($1 = £0.66)

($1 = £0.702)

£712.05

£1100.4

£930.60

£938.03

£955.797

£960

£912

£995.78

£1053.72

Tourism and the Balance of Payments The Leaky Bucket Syndrome: ‘There are two ways to maintain and increase the level in a leaky bucket. One way is to increase the ﬂow. But is it the right way? Surely a more logical way is to mend the bucket and staunch some of the leaks. Staunching the leaks (in the UK context) means addi/onal support for domes/c tourism in England’ [Middleton, 2003]

Tourism and the Balance of Payments Key Facts: §

B of P deﬁcit ﬂuctuated around £2 to £4bn in the early 1990s but had risen to £15bn in 2001

§

2002 revealed the worst overall B of P (goods and services) since records began over 300 years ago

§

Need to recognise the value of domes5c tourism which outweighs inbound tourism by a factor of 10:1

Round 3: Visitor Expenditure

Economic Impacts Q11: According to Visit Britain sta?s?cs, 30 million inbound visits generates what level of spend? A.  £11.7bn B.  £12.5bn C.  £14.6bn D.  £16.5bn

Economic Impacts Q11: According to Visit Britain sta?s?cs, 30 million inbound visits generates what level of spend?

£11.7bn

£12.5bn

£14.6bn

£16.5bn

Economic Impacts Q12: How much does the domes?c tourism market spend on overnight trips? A.  £19.2bn B.  £21.2bn C.  £22bn D.  £23.1bn

Economic Impacts Q12: How much does the domes?c tourism market spend on overnight trips?

£19.2bn

£21.2bn

£22bn

£23.1bn

Economic Impacts Q13: What percentage of England’s Domes?c Overnight Holiday Trips are spent in the South East? A.  11% B.  14 C.  18% D.  21%

Economic Impacts Q13: What percentage of England’s Domes?c Overnight Holiday Trips are spent in the South East?

11%

14%

18%

21%

Economic Impacts Q14: What percentage of England’s Domes?c Overnight Holiday Trips are spent in the South West? A.  19% B.  22% C.  25% D.  27%

Economic Impacts Q14: What percentage of England’s Domes?c Overnight Holiday Trips are spent in the South West?

19%

22%

25%

27%

Economic Impacts Q15: How many people visit the Arun District each year? A.  2.8m B.  3.2m C.  3.7m D.  4.1m

Economic Impacts Q15: How many people visit the Arun District each year?

2.8m

3.2m

3.7m

4.1m

Economic Impacts Q16: What is the value of total visitor spending in the Arun District? A.  £187m B.  £193m C.  £196m D.  £199m

Economic Impacts Q16: What is the value of total visitor spending in the Arun District?

£187m

£193m

£196m

£199m

Economic Impacts Q17: According to ﬁgures from SQW Consul?ng (2009), what was the total direct spending generated by visitors to the Glastonbury Fes?val? A.  £39m B.  £42m C.  £48m D.  £52m

Economic Impacts Q17: According to ﬁgures from SQW Consul?ng (2009), what was the total direct spending generated by visitors to the Glastonbury Fes?val?

£39m

£42m

£48m

£52m

Economic Impacts Q18: What the total visitor expenditure at the Sundance Interna?onal Film Fes?val in 2013?

A.  $45.7m B.  $52.1m C.  $56.7m D.  $61m

Economic Impacts Q18: What the total visitor expenditure at the Sundance Interna?onal Film Fes?val in 2013?

A.  $45.7m B.  $52.1m C.  $56.7m D.  $61m

Economic Impacts Q19: According to es?mates, what was the total visitor expenditure derived from the Royal Wedding? A.  £107m B.  £110m C.  £112m D.  £115m

Economic Impacts Q19: According to es?mates, what was the total visitor expenditure derived from the Royal Wedding?

£107mn

£110mn

£112mn

£115mn

Economic Impacts Q20: According to es?mates what level of visitor spending is generated by the London marathon? A.  £27.9m B.  £30.2m C.  £31.7m D.  £32.8m

Economic Impacts Q20: According to es?mates what level of visitor spending is generated by the London marathon?

£27.9m

£30.2m

£31.7m

£32.8m

Economic Impacts Q21: How much does Las Vegas earn from gambling revenue each year? A.  $2.1bn B.  $3.5bn C.  $6.1bn D.  $8.2bn

Economic Impacts Q22: How many people a_ended the 2012 Goodwood Revival mee?ng? A.  134,562 B.  145,398 C.  148,192 D.  152,232

Economic Impacts Q23: How much did the 2012 Goodwood Revival inject into the local economy? A.  £7.5mn B.  £9.2mn C.  £10.9mn D.  £12mn

Economic Impacts Q24: How many person nights did the 2012 Goodwood Revival generate? A.  64,500 B.  75,000 C.  95,000 D.  101,000

Round 4: Economic Impacts -‐ Employment

Economic Impacts Q25: According to the WTTC, how many people does the tourism industry employ globally? A.  196,500,000 B.  238,277,000 C.  275,450,000 D.  300,600,000

Economic Impacts Q25: According to the WTTC, how many people does the tourism industry employ globally?

196,500,000

238,277,000

275,450,000

300,600,000

Economic Impacts Q26: According to the WTTC, what percentage of the global workforce is employed in tourism? A.  6.8% B.  7.5% C.  8.4% D.  9.2%

Economic Impacts Q26: According to the WTTC, what percentage of the global workforce is employed in tourism?

6.8%

7.5%

8.4%

9.2%

Economic Impacts Q27: According to es?mates, how many FTE jobs in Edinburgh are supported by the Edinburgh Fes?vals? A.  4,200 B.  4,500 C.  4,890 D.  5,242

Economic Impacts Q27: According to es?mates, how many FTE jobs in Edinburgh are supported by the Edinburgh Fes?vals?

4,200

4,500

4,890

5,242

Economic Impacts Q28: According to Visit Britain sta?s?cs, how many people work in the tourism industry in the UK? A.  0.9m B.  1.4m C.  1.9m D.  2.6m

Economic Impacts Q28: According to Visit Britain sta?s?cs, how many people work in the tourism industry in the UK?

0.9m

1.4m

1.9m

2.6m

Economic Impacts Q29: How much is tourism worth per Arun resident?

A.  £166 B.  £122 C.  £129 D.  £135

Economic Impacts Q29: How much is tourism worth per Arun resident?

£116

£122

£129

£135

✓

Economic Impacts: Employment Types of Tourism Employment: §

Direct -‐ jobs created as a result of visitor expenditure and directly suppor5ng tourism ac5vity

§

Indirect -‐ jobs created within the tourism supply sector but not as a direct result of tourism ac5vity

§

Induced -‐ jobs created as a result of tourism expenditure as local residents spend money earned from tourism

§

Construc6on employment -‐ jobs generated in the construc5on of tourist facili5es and infrastructure

✓

Economic Impacts: Employment Employment – Key Ques6ons: §

How many people are employed as a result of the tourism industry?

§

What type of job opportuni5es and job mobility exist in the tourism industry

§

What skills do people require and what returns and beneﬁts can be expected from their employment

§

What is the geographical and temporal dimension of this employment?

[Source: Wall and Mathieson, 2006, p. 127]

✓

Economic Impacts: Employment Employment – Key Ques6ons: §

What level of capital investment is required to create this employment and maintain ongoing training of human capital?

§

What is the overall economic contribu5on to na5onal, regional, and local economies of this employment?

§

What are the renumera5on levels of tourism occupa5ons compared to other sectors?

§

What are the paNerns of occupa5onal diversity in rela5on to standards of service requirements, size of the tourist enterprise, loca5on, type of client, and seasonality?

[Source: Wall and Mathieson, 2006, p. 127]

✗

Economic Impacts: Employment Key Issues: §  Employment is seasonal §  Limited career poten5al §  Unsocial hours §  Poor working condi5ons §  The local popula5on is oQen too small to fill the vacancies §  In many areas there are insufficient workers with specific

technical or managerial skills

✗

Economic Impacts: Employment Key Issues: §  Outsiders are aNracted in by high wages and the

opportunity to live and work in pleasant or exo5c surroundings

§  Immigrant workers get much of the ini5al employment

beneﬁt

Round 5: Economic Impacts – Economic Development and Regenera?on

Economic Impacts Q30: What percentage of F1 races were held in Europe in 1988?

A.  20% B.  35% C.  45% D.  62%

Economic Impacts Q30: What percentage of F1 races were held in Europe in 1988?

A.  20% B.  35% C.  45% D.  62%

Economic Impacts Q31: What percentage of F1 races were held in Europe in 2013?

A.  22% B.  28% C.  37% D.  45%

Economic Impacts Q31: What percentage of F1 races were held in Europe in 2013?

A.  22% B.  28% C.  37% D.  45%

Economic Impacts Q32: According to es?mates, how much money was spent in a 60 mile radius of Silverstone as a result of the 2008 Bri?sh Grand Prix? A.  £47mn B.  £51mn C.  £55mn D.  £61mn

Economic Impacts Q32: According to es?mates, how much money was spent in a 60 mile radius of Silverstone as a result of the 2008 Bri?sh Grand Prix?

£47mn

£51mn

£55mn

£61mn

Formula 1: Value and Impact

✓

Impacts of F1: Economic Returns: §  F1 events generate an average return of 553 per cent §  Japanese Grand Prix – government investment of $4m;

$70m local economic impact gives an es5mated 1,750 % return

§  Monaco – state funding of $3m – genera5ng $120m

spending in the country

§  Nurburgring-‐ a return of 167% (rural sewng diminishes

its economic impact)

✓

Impacts of F1: Economic Returns: §  Canadian Grand Prix (2004) – during the week of the

race: §

Spending at tourist aNrac5ons and exhibits grew 261% compared with the previous week

§

Transport receipts increased 24%

§

Spending rose 20% in sports shops, 12% in department stores and 8% in restaurants

Economic Impacts Q33: Between 2004-‐2007, what was the total economic injec?on Valencia derived from hos?ng the America’s Cup? A.  2,478m Euros B.  2,578m Euros C.  2,768m Euros D.  2,995m Euros

Economic Impacts Q33: Between 2004-‐2007, what was the total economic injec?on Valencia derived from hos?ng the America’s Cup?

2,478m Euros

2,568m Euros

2,768m Euros

2,995m Euros

Economic Impacts Q34: What is the collec?ve value of Games-‐related contracts won by more than 1,500 UK companies? A.  £2.4bn B.  £4.2bn C.  £5.0bn D.  £6.5bn

Economic Impacts Q34: What is the collec?ve value of Games-‐related contracts won by more than 1,500 UK companies?

£2.4bn

£4.2bn

£5.0bn

£6.5bn

Economic Impacts Q35: Between 2005 and 2017 what is the es?mated spend on Games-‐related construc?on? A.  £4.2bn B.  £5.0bn C.  £9.4bn D.  £11.9bn

Round 6: Tourism and Events – Economic Legacies

Economic Impacts Q36: Between 2005 and 2017 what is the es?mated spend on Games-‐related construc?on? A.  £4.2bn B.  £5.0bn C.  £9.4bn D.  £11.9bn

Economic Impacts Q37: Between 2005 and 2017 what is the es?mated increase in visitor numbers? A.  £10.8m B.  £11.5m C.  £12.3m D.  £12.9m

Economic Impacts Q38: Which is the odd one out?

Economic Impacts Q39: Where is this?

✓

Posi6ve Economic Impacts: Economic Regenera6on and Development §

Investment in infrastructure/regenera5on

§

Marke5ng and ‘image-‐making’

Economic Impacts: Economic Regenera6on and Development

✓

Economic Impacts: Legacy What is legacy?

✓

Economic Impacts: Legacy What is legacy?

✓

Economic Impacts: Legacy What is legacy? §

A review of the research literature reveals a notable degree of ‘hesitancy’ over a precise deﬁni5on of legacy

✓

Economic Impacts: Legacy What is legacy? §

Cashman (2005): The use of the word legacy is elusive, problema5c and even dangerous for a number of reasons: ‘When the term is used by organising commiWees, it is assumed to be en/rely posi/ve, there being no such thing as nega/ve legacy when used in this context. Secondly, it is usually believed that legacy beneﬁts ﬂow to a community at the end of the Games as a maWer of course’

✓

Economic Impacts: Legacy Preuss (2007) ‘Hard’ and ‘Sop’ Event Structures

‘SoQ’ Structures

‘Hard’ Structures

• Knowledge (e.g. organisa5onal, security, technological • Networks (e.g. poli5cal, sports When ‘event federa5ons, security) structures’ change • Cultural goods (e.g. cultural iden5ty, cultural ideas, common memory) the supply-‐side

characteris/cs of a des/na/on, any subsequent ac/vity based on or resul/ng • Primary Structure (e.g. sport infrastructure, from these ac/vi/es training sites) is the event legacy • Secondary infrastructure (e.g. village for athletes, technical oﬃcials and media) • Ter5ary structure (e.g. security, power plants, telecommunica5on networks, cultural aNrac5ons)

✗

Nega6ve Economic Impacts: §  ‘Net Legacy Beneﬁt’ §  Redistribu6ons -‐ the alterna5ve investment (opportunity

costs) would have created alterna5ve legacies

§  If an event pulls in an extra 10% of visitors, but average

visitor growth preceding the event has been 7% then the legacy is only an increase of 3%

§  Crowding-‐out -‐ beneﬁts that cannot be ac5vated due to

limited capaci5es have to be deducted from the event legacy; e.g. event related visitors crowding out ordinary visitors

Learning Outcomes: At the end of this session you should be able to: §  Iden/fy the economic characteris/cs of the tourism and

event product / industry

§  Discuss the factors inﬂuencing the intensity of economic

impacts

§  Iden/fy the economic beneﬁts and costs of tourism and

events

§  Discuss and evaluate the economic impact of tourism and

events in a range of des/na/on environments

Andy’s Great Economics of Tourism and Events Quiz