Tourism Policy and Development

Developing Tourist Destinations: Economic Planning & Evaluation

Dr Gang Li

Outline
Tourism development evaluation Economic development and tourism development Economic impacts of tourism Measurement of economic impact of tourism Case studies

Tourism Development, Planning, Policy and Evaluation

Evaluation consists of any process which seeks to order preferences (Hall 1982: 288). Tourism planning: a process, based on research and evaluation, which seeks to optimize the potential contribution of tourism to human welfare and environmental quality. Getz (1987:3)
Evaluation is part of the planning process

Planning & policy: planning is the purposive process in which goals are set and policies elaborated to implement them (Cullingsworth 1997:5).
Policy is to be evaluated.

Development: a process through which a society moves from one condition to another, and also to the goal of that process (Cowen and Shenton 1996:3).

Purposes of Tourism Evaluation

Assisting decision making Planning and resource allocation Justification and Improvement of policies Continued support Determining performance for outcomes: impact assessment

Evaluation exists in any phase of tourism planning and development process

Economic Development and Tourism Development

Economic Impacts of Tourism

Interaction Both positive and negative impacts Different channels and levels of the impacts
Direct effect Indirect effect Induced effect

Principally on destinations, but also on tourism generating areas

Typical Areas of Tourism Impacts on a community

Contribution to GDP
GDP: the total money value of all final goods and services produced in an economy over a oneyear period. GDP=C+I+G+X-M
Consumption: domestic tourism or home-provided elements of an international trip Investment: by the government on infrastructure; by businesses on buildings, equipment, etc. Government expenditure: on non-market T&T services and operation eXports: expenditure on goods and services as well as transportation by international visitors iMports: the residents spending abroad

WTTCs Report 2009-2010

The contribution of Travel & Tourism economy to GDP is expected to rise from 9.2% (US$5,751 bn) in 2010 to 9.6% (US$11,151 bn) by 2020. Real growth for the Travel & Tourism Economy is expected to be 0.5% in 2010, up from -4.8% in 2009, but to average 4.4% per annum over the coming 10 years. Export earnings from international visitors are expected to generate 6.1% of total exports (US$1,086 bn) in 2010, growing (in nominal terms) to US$2,160 bn (5.2% of total) in 2020. Travel & Tourism investment is estimated at US$1,241 bn, or 9.2% of total investment in 2010. By 2020, this should reach US$2,757 bn or 9.4% of total investment

WORLD TRAVEL & TOURISM INDUSTRY/ECONOMY GDP

http://www.wttc.org/eng/Tourism_Research/Economic_Research/

WORLD TRAVEL & TOURISM INDUSTRY/ECONOMY GDP

Estimated Travel & Tourism Industry GDP

Source: WTTC, 2010; http://www.wttc.org/eng/Tourism_Research/Economic_Research/

Estimated Travel & Tourism Economy GDP

Source: WTTC, 2010; http://www.wttc.org/eng/Tourism_Research/Economic_Research/

Employment
Features of employment in the tourism industry:
Relative labour intensity Many low-wage occupations Much part-time and casual employment Seasonality

Types of employment generated by tourism

Direct: resulting from visitor expenditure and directly supporting tourism activities. Indirect: created within the tourism supply sector but not directly related to tourism activities. Induced: created as a result of tourism expenditure as local residents spend money earned from tourism

WTTCs Report
Direct employment of the Travel & Tourism industry is expected to be 81,913,000 in 2010, accounting for 2.8% of total employment. The no. of employment will rise to 104,740,000 by 2020. The contribution of the Travel & Tourism Economy to total employment is expected to rise from 8.1%, 235,758,000 jobs or 1 in every 12.3 jobs in 2010, to 9.2% of total employment, 303,019,000 jobs, or 1 in every 10.9 jobs by 2020.

WTTCs Report

Estimated T&T Industry Employment

Source: WTTC, 2010; http://www.wttc.org/eng/Tourism_Research/Economic_Research/

Estimated T&T Economy Employment

Source: WTTC, 2010; http://www.wttc.org/eng/Tourism_Research/Economic_Research/

Criticism
Long and unsociable_____ Part-time positions taken by _______and ______ people who are NOT part of working force A variety of social ________between workers

Balance of Payments
The balance of payments records all the transactions that have occurred between residents of a country and the rest of the world.
Tourism spending in the overseas destination is recorded as debits payments, while tourism expenditure by international tourists is recorded as credits receipts. Favourable balance of payments (surplus vs deficit) is important particularly for developing countries.

Economic Importance of Tourism Policies in the Balance of Payments

Tourism can attract foreign exchanges more easily and quickly. Using tourism to adjust the balance of payments can avoid retaliatory measures from trading partners. Tourism is not hampered by protectionist measures.

Examples:
In 1966 UK government limited the currency taken on trips abroad to 50 per day. Japanese government encouraged outbound travel in 1980s to reduce international trade surplus; doubled permitted value of duty-free good brought back

Negative Impacts
________: related to land, property and goods __________: the time, effort and money of developing tourism at the expense of other activities or areas of investment ________: heavy reliance on a single industry is risky in the long run. ________: repatriation of profits generated from foreign capital investment; not sourcing services and goods locally. _________income distribution and employment types Seasonality
Demand for public facilities

Ways to Mitigate Undesirable Consequences of Tourism

Interdependence between Various Impacts

Measurement of Economic Impacts

Tourism multipliers: developed based on Keynesian principles of recirculation of a proportion of income by recipients into tourism consumption spending, which then engenders further income and employment. Leakage: takes revenue out of the system at each round due to savings, taxations, expenditure abroad or on imported products. Simple multiplier =
Where MPC is the marginal propensity to consume.

The Concept of a Keynesian Multiplier

The total value=1000+500+250+125=2000

50

Different Multipliers Used in Tourism

The income multiplier:
measures the receipts generated as a result of extra tourism expenditure.

The employment multiplier:

measures the total employment created to direct tourism employment brought about by increased tourism flows.

The sales multiplier:

measures the additional direct, indirect and induced turnover generated by additional tourism expenditure.

The Range of Tourism Income Multipliers for Selected Types of destinations

Country or region Income multiplier

National economies
Small island economies US states and counties UK regions and counties UK cities and towns

1.231.98
0.391.59 0.441.30 0.290.47 0.190.40

Source: Cooper et al (2005) tourism principles and practice, 3rd edition, pp.178.

Standardised Employment Multipliers for Selected Destinations

Country Jamaica Mauritius Bermuda Gibraltar Solomon Islands Malta employment multiplier 4.61 3.76 3.02 2.62 2.58 1.99

Source: Cooper et al (2005) tourism principles and practice, 3rd edition, pp.180.

Tourism Satellite Account (TSA): A New Framework

A satellite account is a term developed by the UN to measure the size of economic sectors that not defined as industries in national accounts. The TSA is a new statistical instrument designed to measure these goods and services according to international standards of concepts, classifications and definitions. "The fundamental structure of the TSA relies on the balance existing within tan economy between on the one hand, the demand for goods and services generated by visitors and by other consumers and on the other hand, the overall supply of these goods and services. The idea is to measure the relationship between all aspects of demand and supply.UNWTO 2006

TSA
Is able to measure: Tourisms contribution to GDP Tourisms ranking compared to other economic sectors The no. of jobs created by tourism in an economy The amount of tourism investment Tax revenues generated by tourism industries Tourism consumption Tourisms impact on a nations balance of payments Characteristics of tourism human resources

Problems in Measuring Tourism Impacts

Unpaid services:
VFR tourists free accommodation and presents for the hosts. Non accounted services: Black economy, avoiding taxation, or simply for convenience.

Social costs and benefits:

social net product vs private net product

Public goods: national parks, heritage buildings.

Tourism Impact Evaluation

Be objective and critical Example: impacts of Olympic Games

Over- and Under Estimation of Event Impacts

Tourism Demand
D2 D1 D0 D0 D3 T0 T1

Time

Non-Quantitative Methods to Gage the Economic Impact of Tourism

Critical Factor Analysis: attractions/activities location facilities and services infrastructure community coordination competition

Case 1: Golden Weeks in China

Initiated on a trial basis to celebrate National Day in Oct. 1999. On the first golden week 28 million people participated in tourism activities within the country and spent $1.62 bn. The tourism industry received about 254m domestic visitors over the national-day Golden week in 2010, and the revenue reached $17.5bn. GOOD? BAD?

Case 2: A Residential Survey on Tourism Impacts in Harbin, China

The full paper about this case study is on ULearn.

Residential Survey in Harbin

Harbin in Brief
Geographical and historical background of Harbin

Harbins Tourism

Key Findings

Key Findings

Policy Implications?

Case 3: Planning a Tourism Project: Hong Kong Disneyland

Planning a Tourism Project: Hong Kong Disneyland

Economic benefits: It will provide a net economic benefit of HK$148 (or US$19) billion over 40 years. Attendance in its 1st year is estimated to be 5.2 million, rising to its full annual capacity of 10 million after 15 years. Tourist spending will amount to HK$8.3 billion in Year 1, rising to HK$16.8 billion per annum in Year 20 and beyond. About 18,400 new jobs are expected to be created directly and indirectly on opening, rising to 35,800 over 20 years.

The Government's Financial Involvement

Hong Kong Disneyland will be operated by a new jointventure company - Hong Kong International Theme Parks Ltd (HKITP) - to be formed by the Hong Kong Government and The Walt Disney Company. The government is spending a total of HK$22.45 billion:
HK$3.25 billion equity (57% of the shares) HK$5.6 billion loan to the project company, to be repaid with interest over 25 years HK$13.6 billion in land formation and infrastructure costs

From Planning to Operation

Planning: government role: policies Operation: private sector: management
Staffing marketing Capacity Public relations

Operation: public sectors monitoring and regulation Successful and sustainable development cannot be achieved without public and private sector co-operation

Summary

Policy

Planning

Policy

Planning

evaluation

Tourism development

References
Texts: Inskeep E (1994) National and Regional Tourism Planning: methodologies and case studies, London: ITBP, Chapter 6. Inskeep E (1997) Tourism Planning. New York: Van Nostrand Reinhold, Part 4. Sharpley R. and D. Telfer (2002) Tourism and Development: Concepts and Issues. Clevedon: Channel View, Part 2. Hall CM (2000) Tourism Planning: Policies, Processes and Relationships. Harlow: Prentice Hall, Chapter 4. Academic papers Roehl, W. (1999) quality of life issues in a casino destination, Journal of Business Research, Vol. 44, pp223-229. Wang, Y. G. Li and X. Bai (2005). A Residential Survey on Urban Tourism Impacts in Harbin, China Tourism Research, Vol.1, pp 116-129. Others Various tourism impact reports (e.g WTTC, UNWTO).