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Approaches to Estimating the Economic Impacts of Tourism; Some Examples

The purpose of this bulletin is to present examples of different approaches to estimating the economic impacts of tourism. In a previous bulletin (Stynes 1997), I summarize economic impact concepts and methods as they apply to tourism. Here we apply the methods to illustrative cases in order to demonstrate some practical approaches. Three specific examples are presented. These represent a range of alternatives for estimating the economic impacts of visitor spending. The techniques covered range from methods based largely on judgement, to methods that utilize secondary spending data and published multipliers, to the use of visitor surveys and input-output models. A third bulletin in this series discusses survey methods for measuring visitor spending and includes sample spending instruments. While the construction and operation of tourist facilities also has economic impacts, we will restrict our attention here to the impacts of visitor spending.

Review of Basic Approach and Levels of Analysis

The economic impact of visitor spending is typically estimated by some variation of the following simple equation:

Economic Impact of Tourist Spending = Number of Tourists * Average Spending per Visitor * Multiplier

This equation suggests three distinct steps and corresponding measurements or models:
(1) Estimate the change in the number and types of tourists to the region
(2) Estimate average levels of spending (often within specific market segments) of tourists in the local area.
(3) Apply the change in spending to a regional economic model or set of multipliers to determine the secondary effects.

The three steps and corresponding information typically involve distinct methods, models and information sources. Each component of the equation may be estimated via expert judgement, from secondary sources, through primary data collection, by means of a model, or through some combination of these methods. Table 1 from the earlier report summarizes the alternatives and is repeated here for the readers convenience. The approaches for each step may be mixed in a given study. For example, the number of tourists may be estimated using judgement, spending via a visitor survey, and multipliers from a published secondary source. Or, an input-output model may be applied to spending estimates derived from tourist spending averages and visitation numbers taken from secondary sources.

As one moves from judgement to secondary data to primary data and formal models, the methods become more complex and the time and expense of the study increases. The added cost is hopefully associated with estimates that are both more accurate and more detailed, although this isn’t always the case. In some cases good judgement or existing data may be more accurate than a new visitor survey, particularly if the survey has a low response rate, small sample size, and measurement and sampling procedures that do not guarantee a representative sample or reliable measurements.

Methods based on judgement typically yield highly aggregate estimates, while estimates derived from formal models may estimate spending within several categories and impacts within as many as 500 distinct economic sectors. Which method is preferred depends on the intended uses of the results, the accuracy and detail that are required, and the time, money and expertise available.

Follow the green link to download the full report written by Daniel J. Stynes and updated January 1999.

This article is quoted from Tourism ROI Newsletter published on 2010-03-30.

This article is uploaded by Majbritt Thomsen, administrator on ‘Views On Tourism’.

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