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THE Economie IMPACT of INTERNATIONAL TOURISM in ICELAND

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THE Economie IMPACT of INTERNATIONAL TOURISM in ICELAND • THE ECONOMIe IMPACT OF INTERNATIONAL TOURISM IN ICELAND by Oddny 61ad6tti.r Deparunent of Geography McGill UniverSIty, Montreal • October 1992 :\ theSl'<' sunmllted to the Faculty of Graduate Studies and Research in parùal fulfl1lment of the reqUlremems for the degrec of Master of Arts (c) Oddny 61ad6ttir 1992 • ABSTRACT • This theslS rcprcsent" a systcmauc allcmpt to .malysl' thl' l'CllllOnllC Impact III international tounsm ln Icclanù. Whllc (ounsm has long Pl'l'Il Sl'l'Il as an lI11portant ~lllllL'l' III forclgn exchangc anù cmploymcnt lor the country very httll' lktaliL'd 1IllllllllatllH} I~ :\\,,111.lhk on the roll' that the Inùustry plays 1ll the nal1onalecnnol11v To fill thlS 'InformatIon gap' two 4ueMwnn<llrl'S Wl'Il' lI~~'d (n ,!!,lIhl'l d,II.\ (Ill (l\1I11~1 cxpenditurc charactenstIcs and thc l'ost and fl~\'l'nuc ~lructurl'S 01 \'all01l~ IllllIl~fl1 hll~IIlI'~~l'''' This data was th~n analysed llSlng a slInpltfll'd IllUlliphel mode!. A M'IICS III l\l1dlll)!" ,Ill' prcsented. mcludmg: the CCOnOlTIlC lI11pacL" a:-,soclatcd \VIth val HHI" '(oum( tvpl' ... ·, tlll' ,tlHIII\' of different tourism businesses and scctors to gcneratc local III co 1IH' ,md l'mploYllIl'lI1. .IIHI. the links that eXlst bctween the industry and the rcst or thc CCl\Ilomy. P,lCh 01 Ihl'~l' d,lia h.l~l'''' is then used to provldc an nvcrvlcw of future poliey optlOIlS laclI1g t!ll' ILdaIllhc gllVl'II\IIH'nt The research rcvcals that mternatIonal toun~rn plays a 1\1i1101 wll' !Il thl' kl'l,lIldll economy and IS potcntta1ly an Important tool for rcglOnal developmcllt. l'he data provldl'~ .11I Important foundation llpon wluch future tounsm ùcvelopmcnt ~lrateglcs .\lld Il'Sl':uch L'an hl' based. • • RÉSUMÉ La présente thè.\e constltue la rremlère tentatIve sy~témauque d'analyse de l'impact • t!conomlque du rourJ\me mtcrnauonal en blande. BIen que le tounsme ~()It depUIs longtemps une Ilnponante ..,()llrCe lj'~chaI1ge IlltematlOnal et d'cmrlOl pour le pays, JI cxislt:! très peu t.!'ll1fonnatlOn d61:t111~e ~ur le rôlc quc Joue l'lI1dll~tne Jan~ l'économIe natIOnale. Afin de lomhler ll~ttc "lacune do('urnent..lJrc», deux ljue"uonnmre\ ont fKTml<; de ra.\~emhlcr des données sur Ic~ caractén~t1ljuc~ de consommatIon dr:~ toun~te., ,un .... t lJue ~ur le.., ~,tructules de revenus ct de coûts des diverses entrepnscs de l()tJf1~me Ces d()nn~c~ onl r:mUltc été analysées il l'aide J'un modèle de multiplicateur .... llJ1phllé Une .... énc d'()h .... r:rvaLJ()n~) Mlnt présentées, notamment· l'impact économIque assoclé aux dIvers «lype." de lOun ..,tes», l'aptitude des dIfférenL" sccteurs et entrepnses tOUrIstiques :i générer des emplOIS cl de." revenus régIOnaux ct les lIens qUI eXistent entre l'industne ct le leste de J'éconorl1le. Chacune de ces hases de donn6es sert ensuite à élalJorcr une vue d'cnsemhlc des futures opllon<., politIques auxquelles Ic gouvernement 1~landaIs dcvra faire lace. L 'étudc rév(~lc qùe Ic tnumme InternatIOnal Joue un rôle cs~cntIel dans l'économic dc l'Islande el constllllc UB ouul important de développement régIonal éventuel. Les données lourmsscnl un Imp(Jrlanllondernent sur lequel on pourra établIr les futures étudcs et strategies de développement tounstlque. • • 11 CONTENTS • page ABSTRACT .............................................................................. .. RESUME ..................................................................... '" '" Il CONTENTS ............................................................................. .. .................. III LIST OF FIGURES.. .............. ........................ ...................... ...... ..... ....... ... ....... ...... v LIST OF TABLES..... .............................................................. ....... .... ..... ...... .. .... ..... VI ACKNl)'.- TLEDGEMENTS ............................................................................................ VIII CHAPTER 1 INTRODUCTION 1.1 Objecuvcs of the Study .................................................................................... 1.2 The Structure of the Thesis.............................. .............. .... .............. ......... .......... 5 1.3 Iceland's Changmg Economy......................................................................... ... 6 lA The Potcntial RaIe of Tounsm ................................................................................ 12 • CHAPTER 2 ICELAND'S INTERNATIONAL TOlJRISM INDllSTRY 2.1 The Tourism Product............ .......... .................... .................. .......... .............. ......... 15 2.2 Tourisnl -The Dcmand Sldc ................................................................................. 17 2.2.1 The Slgnificance of 'New' Form.\ of Demand.. ....... .. ........................... ... 25 2.3 Tounsm -The Suppl Y Sidc... ............. ............ ...... .. .. .... ......... ... .... ...... ..... ... 27 2.4 Policy and PlannIng..... .... .. .................... ...................... .......... .................... 11 2.5 Summary ................................................................................................................. 15 CHAPTER 3 THE ECONOMIe IMPACT OF TOlJRISM: A MODE OF ANAI..YSIS 3.1 The Multiplier In Tounsm Rescarch ................................................................. 16 3.2 Survcy Samplc and MultiplierAnalysls ......................................................... 4') CHAPTER 4 TOU RIST CHARACTERISTICS AND EXPENDITlJRE PATTERNS 4.1 Occupation, Purpo .... e ni Vistt and Length 01 Sl:ly .................................... 51 4.2 Age and Choice of Accommodation ................................................................. 5X 4.3 RegIonal Travel............................. .. ................................................................. 60 4.4 TouristExpenditure ............................................................................................... 62 4.5 Total Tourist Expenditurc In 1990.................................... .. ................................ m 4.6 PossIbilities for Future Rcscarch .......................................................................... 7 J • 4.7 Summary .............................................................................................................. 72 Iii f'JJAPTER 5 THE ECONOMIe IMPACTS OF TOURISM: THE BUSINESS SURVEY 5 1 Scctoral Incomc and ErnployrncnL Gcncrallon (Dlrect) ....................................... 74 52 rrhe Accomnl0daLJon Sector ................................................................................ 76 • 5.2.1 Farn11lol1day'" . .... .. .................................................................. 78 5 ~ Rc~tauranL.., .. .................................................................................... 80 54 SouvenIr and (Jill Stores ..................................................................................... 81 5 5 Tran~rortatlOn (car rcn tal. coach tours, charter tlights) ........................................ 82 56 InduMry ()wnen,htr Structure ................................................................................. 84 57 Sumrnilly ............................................................................................................ 85 CIIAI»TER () TIIE ECONOMIe SIGNIFICANCE OF TOURISM 6.1 The Tounst Multlpher - DIrect Leve!... ................................................................. 87 6.2 DaJly Income. Ernploymcnt and Governrnent Revenue GeneratIon ...................... 90 6.3 TIlC Overall Impact 01 Tounst Expenditurc ........................................................... 94 CIIAPTER 7 CONCLUSIONS - THE PLANNING AND POLICY IMPLICATIONS 7.1 'nle Overall Economlc Impact of Tourism ............................................................. 99 7.2 Policy lInpltcations .............................................................................................. 100 7.2.1 MaXlmt/lng Tourh t Revenuc .............................................................................. 100 7.2.2 RegIOnal DevcIopment and EconomIe Linkages .................................................. 10 1 7.2.3 The Roll! ur Small Flrms ....................................................................................... 103 7.2.4 The Envirnnmental DimcnslOn ............................................................................. 105 • 7.2.5 Sllmnlary ofPohcy Issues .................................................................................... 106 7.3 Future Rescarch ReqUlrcmcnLS ................................................................................ 107 BIBLI()(iRAPI-IY ............................................................................................................... 109 /\PPENDICES ......................................................................................................................... 117 ,\PPENDIX A: Surveys ..................................................................... " ..................................... 118 ."-PPENDIX B: Mllluplicr Modcl. ............................................................................................. 123 APPENDIX C: MI.'>ccllancous Tables ....................................................................................... 127 • IV LIST OF FIGURES • 1.1 Iceland in the Nonh-AtlantIc ............................................................ 1.2 Iceland's PopulatIon DistrihutlOn - 1988. ........................................ .. 2.l Iceland's ReglOns and MaJor Natl'ral Attractwns..... .. .......... .. .......... 2.2 Foreign Visltors Amving to Iccland 1900-90......................
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