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Economic Effects of Tourism: Analysis at the Subnational Level in Iceland

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Economic Effects of Tourism: Analysis at the Subnational Level in Iceland Economic effects of tourism: Analysis at the subnational level in Iceland Lilja B. Rögnvaldsdóttir Faculty of Life and Environmental Sciences University of Iceland 2016 Economic effects of Tourism: Analysis at the sub-national level in Iceland Lilja B. Rögnvaldsdóttir 90 ECTS thesis submitted in partial fulfilment of a Magister Scientiarum degree in Tourism Studies Advisors: Cristi Frenţ Edward H. Huijbens Faculty Representative Anna Dóra Sæþórsdóttir Faculty of Life and Environmental Sciences School of Engineering and Natural Sciences University of Iceland Reykjavík, 1 June 2016 Economic Impacts of Tourism: Analysis at the sub-national level in Iceland 90 ECTS thesis submitted in partial fulfillment of a Magister Scientiarum degree in Tourism Studies Copyright © 2016 Lilja B. Rögnvaldsdóttir All rights reserved Faculty of Life and Environmental Sciences School of Engineering and Natural Sciences University of Iceland Askja Sturlugötu 7 101 Reykjavík Iceland Telephone: 525 4000 Bibliographic information: Lilja B. Rögnvaldsdóttir, 2016, Economic Impacts of Tourism: Analysis at the sub-national level in Iceland. Master’s thesis Faculty of Life and Environmental Sciences, University of Iceland, pp. 339. Reykjavík, Iceland, 1 June 2016 Abstract This study explores the availability of regional statistical data on the tourism industry in Iceland and analyses the economic effects of tourism in the Þingeyjarsýslur region. This was done by gathering regional data from fieldwork in situ consisting of company interviews and visitor surveys in Þingeyjarsýslur during the period of 2013-2015. The method used in this study considered the principles of the Nordic Model as well as the Tourism Satellite Account: Recommended Methodological Framework 2008 and its applicability at the regional level. The report demonstrates the development of visitor numbers in the area as well as the development of regional accommodation statistics. The main economic findings are the total turnover by detailed industries directly related to tourism in the region as well as internal tourism consumption and tourism employment figures. The indirect effects measured in this study are partial and represent only the first round effects of tourism in the area based on purchases and other operating expenses of tourism companies in the region. Municipal tourism revenue sources are analysed and municipal income tax from the tourism industry is also calculated. The applicability of the internationally established frameworks of tourism economic impact analysis in the Icelandic regional context are discussed in this study where it emerges that due to the limited availability of regional tourism data in Iceland, methods such as the Input-Output model, Computable General Equilibrium model and tourism multipliers could not be applied in this study. Útdráttur Í þessari skýrslu eru kynntar niðurstöður rannsóknar á efnahagslegum áhrifum ferðaþjónustu í Þingeyjarsýslum. Markmið verkefnisins var að kanna svæðisbundið framboð gagna í ferðaþjónustu sem og að meta efnahagsleg áhrif atvinnugreinarinnar með hliðsjón af alþjóðlegri forskrift ferðaþjónustureikninga og hins norræna líkans um mat á áhrifum ferðaþjónustu. Niðurstöðurnar byggja á viðtölum við ferðaþjónustuaðila í Þingeyjarsýslum sem og ferðavenjukönnunum meðal erlendra ferðamanna á svæðinu á tímabilinu 2013-2015. Helstu niðurstöður verkefnisins eru heildarvelta í ferðaþjónustutengdum atvinnugreinum á svæðinu, neysla erlendra ferðamanna, fjöldi starfsmanna í atvinnugreininni, launavelta og greining á tekjum sveitarfélaga vegna ferðaþjónustu. Þróun í fjölda ferðamanna og gistinóttum á svæðinu er einnig lýst. Tekjustofnar sveitarfélaga í ferðaþjónustu fá sérstaka umfjöllun og útsvarstekjur vegna atvinnugreinarinnar eru áætlaðar. Notagildi alþjóðlegra viðurkenndra aðferða við útreikning á efnahagslegum áhrifum ferðaþjónustu er greint þar sem í ljós kemur að vegna svæðisbundins gagnaskorts í ferðaþjónustu er ekki hægt að byggja útreikninga á aðfanga- og afurðagreiningu, Computable General Equilibrium módelinu eða margföldurum nema að mjög takmörkuðu leyti. Table of Contents Acknowledgements ..................................................................................................... v Introduction ............................................................................................................. 1 1.1 Research Aims and Objective ........................................................................ 3 1.2 Research Questions ........................................................................................ 3 1.3 Thesis Outline................................................................................................. 3 Literature Review .................................................................................................... 5 2.1 Tourism multipliers ........................................................................................ 5 2.2 Input-Output Model ........................................................................................ 8 2.3 Computable general equilibrium model ....................................................... 10 2.4 Tourism Satellite Accounts .......................................................................... 11 2.5 The Nordic Model ........................................................................................ 13 2.6 Literature related to the economic impact of tourism and its connected activities in Iceland ....................................................................................................... 14 Research design and key findings ........................................................................ 19 Conclusions ............................................................................................................ 23 Discussion .................................................................................................................. 25 Bibliography .............................................................................................................. 27 Appendix A ........................................................................................................... 1-106 Appendix B ............................................................................................................. 1-65 Appendix C ............................................................................................................. 1-72 Appendix D ............................................................................................................. 1-35 List of tables Table 1. Total tourism turnover in Þingeyjarsýslur 2013 (m. ISK) ........................... 20 Table 2. Tourism employment numbers in Þingeyjarsýslur 2013 ............................. 20 Table 3. Total tourism operating cost spent within regions of study (‘000 ISK) ...... 21 Table 4. Estimated inbound tourism consumption in Húsavík and in the region of Lake Mývatn in 2013 ............................................................................... 22 iii iv Acknowledgements This study was made possible through the generous contribution of a number of individuals. Firstly, the author would like to thank all the representatives of tourism companies in Þingeyjarsýslur who gave their valuable time to participate in this research. Also, I would like to acknowledge the time and efforts of my supervisors, Dr. Cristi Frenţ and Dr. Edward H. Huijbens who guided me through this work and provided much valued assistance. Dr. Anna Dóra Sæþórsdóttir deserves special thanks for her guidance and good advice as well as Dr. Rögnvaldur Ólafsson, and Óli Halldórsson for their support and assistance. I am also especially grateful to Statistics Iceland for important regional data and their valuable service as well as the Directorate of Internal Revenue for guidance. I also thank the Northeast Iceland Development Agency for information and guidance, the Húsavík Academic Centre for providing querists and assistance and lastly I thank numerous other experts for answering my questions and giving advice. To name a few: Dr. Sigurður Jóhannesson, Dr. Vífill Karlsson, Dr. Kristinn Hermannsson, Gyða Þórhallsdóttir, Jón Þorvaldur Heiðarsson and Jón Óskar Pétursson. v vi Introduction Tourism has experienced significant growth in Iceland during the last decades. This growth has exceeded trends registered in other countries and in 2015, the number of inbound visitors almost reached 1,3 million according to the Icelandic Tourist Board (ITB) counts. This is more than a doubling of the number of visitors since 2011 (Icelandic Tourist Board, n.d.). Tourism has therefore emerged as an important pillar of the Icelandic economy in the wake of the financial meltdown of 2008. It has generated numerous jobs and entailed positive regional development even during these times of economic recession (Ministry of Industries and Innovation & Icelandic Travel Industry Association, 2015). With the enlarged scope of tourism, the need for detailed and improved statistics of the industry has risen. Statistical data is crucial when it comes to strategic planning, decision making and implementation of tourism policies, as in any other activity or industry. The quality and interpretation of this data directly effects the efficiency of such work. With the purpose of evaluating the availability of regional statistical data in the tourism industry as well as estimating the tourism’s regional economic effects in Iceland, a study has been carried out by the Icelandic Tourism Research Centre (ITRC)
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